OSJ adds 80 advisors in the wake of LPL’s Waddell & Reed deal

When LPL Financial acquired Waddell & Reed’s wealth manager earlier this year, the deal not only pushed the company over the $1 trillion mark in assets under management. It also brought in 100 financial advisors and employees for one of its largest offices of supervisory jurisdiction.

After the $300-million acquisition closed in April, LPL directed Olympia, Washington-based Financial Advocates and its other OSJs to back off from recruitment of Waddell & Reed’s more than 900 advisors. Nearly all of those advisors opted to take on supervision from LPL itself. About 80 advisors and another 20 staff members managing $7.5 billion in client assets — likely the largest haul of any OSJ — landed with Financial Advocates based on recommendations from former colleagues.

Financial Advocates boosted its headcount by nearly a third and its client assets by almost two-thirds after the deal. In an interview, CEO Angela Vlach said that’s because advisors who had earlier left Waddell & Reed and joined Financial Advocates were able to vouch for the company to the advisors that came over in the LPL deal.

At nearly 300 advisors and $20 billion in assets, Financial Advocates is LPL’s largest OSJ in the Pacific Northwest and fourth-largest overall. The networking began after LPL and Australian investment bank Macquarie Group unveiled the Waddell & Reed deal late last year, Chief Growth Officer Elvis Medica said.

“It wasn't through the course of our normal recruiting process,” Medica said. “[LPL] didn't want OSJs just blanket emailing and cold-calling everyone and adding confusion to the deal, which we can appreciate….That referral network has been very, very strong.”

In the deal, LPL retained $69 billion in client assets, or 98% of Waddell & Reed’s total count, as well as tacking on at least $85 million to its annual EBITDA, according to its second quarter earnings. Hundreds more advisors with $30 billion in additional client assets have come to LPL this year, too, through a pair of big recruiting moves by bank programs. The firm didn’t make any executives available for an interview about OSJ recruiting after the Waddell & Reed deal.

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“We congratulate Financial Advocates for growing its network of quality advisors,” LPL spokeswoman Shannon Greene said in an emailed statement. “We are proud to be their partner and support their growth.”

Not every single advisor from Waddell & Reed ended up with LPL and Financial Advocates. For starters, other independent broker-dealers recruited a few teams from the incoming group. Advisor Jason Hatch of Madison, Wisconsin-based Tranquil Lakes Investment Advisors and his team spanning four other advisors and $150 million in client assets went to Ameriprise’s independent channel rather than remain with LPL through the transition.

“When we saw our firm was going to be acquired, we took the chance to carefully evaluate the marketplace,” Hatch said in an email. “We looked at many firms, conducting due diligence to see how each one could help us better and more efficiently serve our clients.”

Other OSJs at LPL attracted a few ex-Waddell & Reed teams. Another of the largest and perhaps the best known hybrid RIA and OSJ at LPL, Private Advisor Group, grabbed six advisors from the acquired firm.

“We believe that in addition to the services they will receive from their affiliation with LPL, Private Advisor Group’s cultural alignment, strong history and track record of compliance as an LPL OSJ, and our ability to solve for their unique needs, were important decision criteria,” Head of Advisor Growth Frank Smith said in a statement.

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Charlotte, North Carolina-based Independent Advisor Alliance added two practices with five advisors through referrals in its own hybrid RIA-OSJ network, CEO Robert Russo said in an interview. Other than contacts between firms and advisors that had a relationship prior to the deal, LPL executives asked OSJs not to reach out to the practices, Russo said. The incoming advisors chose between the “default” option of home-office supervision or an OSJ, he said.

“A lot of the value in large enterprises is going to be on that hybrid side — a vast majority of the Waddell & Reed advisors really wanted to stay on the corporate platform,” Russo said. “LPL was very successful in terms of making sure that they retained the Waddell & Reed advisors.”

Financial Advocates makes ample use of LPL’s corporate platforms, with more than 95% of the assets under management in its hybrid RIA served by LPL’s custodial arm and about two-thirds of its overall business on LPL’s corporate RIA, according to Vlach. The firm has three different RIAs and a limited purpose broker-dealer of its own, Financial Advocates Securities, as well. Its relationship with LPL dates to its founding in 1996 by Chief Strategy Officer Gary Campbell.

Prior to the sale of Waddell & Reed, the firm had aimed to make its wealth management arm more competitive by moving away from its legacy model as the distribution arm for its proprietary funds. The series of changes undertaken by Waddell & Reed left an impact on the advisors’ practices, Vlach said.

“The majority were in a really good position for this transition,” she said. “Those changes the last few years at Waddell & Reed did make a significant difference and had them very prepared for the transition.”