Following recruiting gains, LPL moves to stem hybrid RIA losses

LPL Financial’s size helped it lure a practice with $520 million in client assets from rival Cambridge Investment Research, and the firm could also boost its retention of hybrid RIAs following the rollback of a major policy change.

Jeff Johnston and Brock Renner of Premier Investments of Iowa left Cambridge, a rival to LPL and the No. 7 independent broker-dealer by annual revenue, for the No. 1 firm. The Cedar Rapids, Iowa-based practice includes six other advisors and six support staff members.

LPL’s recruiting has been a mixed bag this year. The firm has unveiled an array of new recruits in recent weeks, but it has also lost several hybrid RIA practices to other IBDs after enforcing new corporate RIA requirements for incoming advisors at the beginning of 2018.

The firm reduced its corporate RIA mandate on new advisors from $50 million in assets under management to at least $25 million, according to a memo sent on Oct. 22 by Andy Kalbaugh, president of LPL’s national sales and consulting division, and obtained by Financial Planning.

Premier Investments is joining LPL’s corporate RIA, but the IBD’s ability to further fuel growth through acquisitions, recruiting, and marketing wooed the practice into its ranks, according to Johnston.

“The opportunity presented itself to be in a bigger pool of advisors and staff, a bigger think tank of people, who can help support us with technology, research and marketing,” says Johnston. “We’re very aggressive with our TV and radio marketing, but we hope to get even better at that through working with LPL and the technology they offer, such as their ClientWorks portal, is really impressive.”

Cambridge spokeswoman Cindy Schaus confirmed Premier’s departure in an emailed statement.

“Being independent business owners means making decisions based on distinct business objectives; and we respect the importance of choice in terms of independence for advisors,” Schaus said.

LPL dedicated four full-time staff members to Premier in the first week of their move, resulting in 75% of the assets being transferred by the time they formally switched IBDs, according to Johnston. The ease of transition also helped convince his team after about three months of deliberation, he adds.

The practice opened in 1989, and Johnston spent 10 years with Cambridge following six years with National Planning and 11 years with Locust Street Securities, according to FINRA BrokerCheck. Renner had a 22-year tenure in the field at those three firms before their Aug. 10 affiliation with LPL.

“I’ve been in competitive situations with LPL in the past for talent and lost recruiting battles to them, and now that we’re part of LPL we’re hoping it will help enhance our marketability to advisors,” Johnston says.

LPL rolled out higher recruiting offers earlier this year, but its hybrid RIA losses have amounted to at least nine practices. Under the rollback, the firm will simply collect an administrative fee of up to 5 basis points if incoming advisors have less than $25 million in AUM on the corporate RIA, Kalbaugh says.

The policy put in place at the beginning of the year “did not contribute to growth as originally hypothesized,” Kalbaugh said in the memo.

“We’re committed to your business and to achieving mutual success through a strong partnership, and this change serves as another step in helping us grow together,” he said. “Moving forward, we’ll continue to invest in both platforms and we remain committed to analyzing the business while listening to your perspectives.”