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Jumping Ship?

Derrick Friedman, president and founder of Atlanta-based recruitment firm Broker Dealer Change, says in some cases the payout under this channel could be reduced “up to 50% or more” compared to the independent broker-dealer channel, but that is the trade-off for not having to deal with overhead expenses. And it’s a trade-off some advisors are willing to make.

By Mrinalini Krishna May 28, 2019

Jumping Ship? What to Look for in LPL’s Independent Employee Channel. . .

Financial Advisor IQ Reported LPL Financial announced it would introduce an independent employee model, taking attributes from both the independent broker-dealer model and the traditional employee model in a bid to attract another class of advisors who do not want to run their own business. LPL CEO Dan Arnold spoke of it as “the next generation” of the independent model; however, he did not share many details about the new offering.

LPL is not the first player in the industry to offer an in-between advisory position between the two traditional channels. Recruiters say Raymond James’ Advisor Select and Wells Fargo’s Profit Formula offerings have had a head start and, in the case of Raymond James, considerable success. Here’s what recruiters say advisors should be looking for when evaluating this model.

Danny Sarch, recruiter and president of White Plains, N.Y.-based Leitner Sarch Consultants, says the term independent employee could itself be misleading and not indicative of how much independence the advisors in this channel may have.

Referring to the acquisition of Allen & Company that LPL said was the first step towards this model, Sarch says, “The terminology is so deceptive because … you see ‘independence’ but LPL purchased somebody. If those advisors don’t have freedom of movement, and they’re captured, it strikes me as how do you say that they’re independent? Other than they’re on the independent platform, but that’s a platform that’s provided to all different types of people.”

Other recruiters say clarity regarding the ownership of the book is the first thing advisors should look for.

“Are they still going to be able to own their client relationships like they would if they were independent? Or does LPL own the relationship similar to like the wirehouses do the client? That would be a big one,” says Louis Diamond, executive vice president and senior consultant at Diamond Consultants.

Arnold spoke about how this model could offer advisors higher compensation compared to the traditional employee route, and recruiters agree.

Frank LaRosa, founder and CEO of Moorestown, N.J.-based Elite Consulting Partners, says advisors moving to this channel could earn higher payouts compared to the 35-42% range at wirehouses, but lower than what they would make on the pure independent broker-dealer platform.

“If LPL or any other firm, for that matter, comes up with this model where they can take down office space, give those advisors the opportunity to be on the independent platform, run their own business where they want to run their own business, and give them a 65% payout (so it’s not the 90% payout or 85% payout that a regular independent guy would get) … It’s almost a double in compensation, because a lot of these advisors today aren’t getting any help and support from their firms or their branch managers anymore,” says LaRosa.

Derrick Friedman, president and founder of Atlanta-based recruitment firm Broker Dealer Change, says in some cases the payout under this channel could be reduced “up to 50% or more” compared to the independent broker-dealer channel, but that is the trade-off for not having to deal with overhead expenses. And it’s a trade-off some advisors are willing to make. READ MORE >

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