Independent broker-dealer giant LPL Financial plans to launch a new private wealth affiliation program in 2023, a major push to compete with high-end wealth managers including Rockefeller Capital Management.

Rich Steinmeier, the managing director and divisional president of business development at LPL, said in an interview Friday that the model would aid high net worth advisors with clients who have at least $2 million of investable assets, and in some cases at least $5 million, offering them stronger capabilities in estate planning, capital markets and specialized lending. Earlier in the week at an investor day, Steinmeier and other executives unveiled plans to expand into services for the private wealth market. 

The firm is growing rapidly from a steady stream of recruited advisors and acquisitions in recent years, most recently by purchasing its $40 billion independent branch Financial Resources Group earlier this month. Coming out of the third quarter, it reported a record number of advisors and more than doubled profits year over year.

Under Steinmeier, a wirehouse veteran with experience at UBS and Merrill Lynch who joined in 2018, LPL has also added new affiliation models like Linsco, which appeals frequently to ex-wirehouse advisors by offering W-2 employment while letting them run their own business. Other options include an RIA model, a hybrid RIA, independence, a support structure for wirehouse breakaways, and partnership with LPL as a bank or credit union-based advisor, according to the firm’s website. 

“Our aspiration is to be the largest wealth management player in the advisor-mediated market. So we want to be the number one firm supporting financial advisors, [a] pure play wealth management firm,” Steinmeier said. 

Richard Steinmeier, LPL
Rich Steinmeier, managing director and divisional president of business development at LPL.

LPL Financial

Steinmeier said the private wealth channel would be part of the firm’s larger strategy in 2023 of recruiting more advisors specializing in high net worth clients. 

“They’re going to have clients with more sophisticated needs, more complex needs, more centered around estate planning, tax planning, complex intergenerational wealth,” he said. 

“They may need access to capital markets through investment bankers. They will have needs around specialized lending — so watercraft lending, aircraft lending, art lending.” 

LPL has created partnerships with investment banks for these affluent clients to access such lenders, he said, who can help clients with special property and casualty needs.

“It allows you to enter a marketplace that is largely the territory of boutique broker dealers like Rockefeller, First Republic, as well as the wires and some of the regionals,” Steinmeier said of the new affiliation model. 

Steinmeier added that the move will position LPL to eventually cater more not only to high net worth clients, but also to ultra-high net worth. “If we look at the marketplace and as we build capabilities, I think those naturally become available to us over time,” he said. While LPL already has “hundreds of advisors that are serving ultra-high net worth clients,” it would take time to build the capacity to target that segment more systematically. “As you think about markets like that, there often are international exposures that you have to think through… to be able to be full throated in entering that market more expressly,” Steinmeier said. 

LPL didn’t respond immediately to emailed follow-up questions about how the affiliation will be branded, what its official name would be, when it would launch and whether advisors in the program will be W-2 employees or 1099 contractors. 

Louis Diamond, an industry recruiting consultant who frequently works with advisors who are joining new firms, said in an interview that it was likely the new model would be an employee channel, similar to the former PBIG at Merrill or UBS Private Wealth Management. A slide in the investor day presentation appears to bear that out, describing the new private wealth push as part of the firm’s efforts “to scale our employee channel.”

Diamond added that the move was “very smart and self-aware” for LPL. 

“They look at it like, what are the objections that certain advisors would have about LPL?” Diamond said. “LPL isn’t known reputationally to be a destination for ultra-high net worth clients. So this is them trying to try to figure that out and trying to expand their capabilities to appeal to new advisors.” 

He compared the move to Raymond James’ acquisition of the private wealth unit of Deutsche Bank in 2016, which it rebranded as Alex Brown

“Both LPL and Raymond James have many high net worth clients, and they attract advisors that have higher net worth clients. But I’d say that the bread and butter [client] is probably more retail in nature,” Diamond said. “And objections that I think both firms got were, ‘Well, do you have the capabilities to service my ultra-wealthy clients?’ So I would say it’s probably analogous to that.”  

Read More: LPL to launch private wealth advisor channel in 2023

2022-11-19 00:01:21

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