LPL backs off lucrative recruiting deal

The independent broker-dealer is moving away from an offering that pumped up its recruiting numbers

Nov 14, 2019 @ 2:31 pm

By Bruce Kelly

LPL Financial is dialing back on a lucrative recruiting offer, reducing the transition assistance package by at least 20% to potential recruits, according to a memo sent this week to recruiters.

The largest independent broker-dealer, LPL recently has been reporting strong recruiting numbers, along with client assets. In large part, that has been spurred by LPL selectively offering advisers since April 2018 a bonus in the form of a five-year forgivable loan. That loan pays an adviser at least 50 basis points on assets transferred to LPL's corporate registered investment adviser, a potentially far more lucrative structure for the adviser than traditional recruiting deals.

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Recruiting bonuses are typically called forgivable loans in the brokerage industry; while they are structured as loans, the adviser does not pay the firm back out of his pocket. Rather, he works the loan off over time by meeting certain productivity goals and in exchange, the firm "forgives" the loan.

For the 12 months ended in September, LPL recruited more than $33 billion in client assets.

LPL generates more income from assets at its own corporate RIA rather than those held in custody at a competitor like Fidelity or the Charles Schwab Corp.

According to the company memo, LPL's "tier 1" recruiting campaign will expire after Dec. 20.

Going forward, a standard deal for reps moving to LPL from an independent broker-dealer would range from 30 basis points to 40 basis points for assets moved to LPL's corporate RIA, which includes its highly popular SAM or strategic asset management investing programs. For advisers moving to LPL from wirehouses, a recruiting package could pay 20 basis points to 30 basis points.

The memo stresses that this is "guidance only" to LPL's recruiters; recruiting deals are individually focused and could vary significantly.

"We extend various offers throughout the year to capitalize on disruption in the industry," wrote Kenny Hullings, senior vice president for business development, in an email. "Once this particular offer ends, transition packages for independent advisers return to our standard range, and LPL's standard offer is consistently a more robust package compared to the marketplace."

"The highest-end recruiting deals always had an expiration date," said Casey Knight, executive vice president and managing director at ESP Financial Search, a recruiting firm. "LPL has recruited waves of advisers the past couple years, and the firm [now] wants to focus its offer more on its service and technology. I think LPL wants the pitch to be about more than the money."

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