More than 1,600 advisors with National Planning Holdings broker-dealers face a wrenching decision: Join LPL Financial or take their practices elsewhere, with little time to make the choice.
LPL
Brokers who want to join a new BD must do so by Nov. 3, at which point the memo says NPH will terminate their registration. If they don’t move out their accounts by Oct. 5 — 29 days earlier — their clients will receive so-called negative consent letters notifying them of the looming transfer to LPL.
LPL
MassMutual’s acquisition of MetLife’s Premier Client Group forced a similar four-month decision process last year for advisors, who had to choose whether to stay or go between the announcement of the deal at the end of February and its closure in July.
In contrast, advisors with the former Deutsche Bank Wealth Management’s U.S. Private Client Services Unit became Alex. Brown advisors last September some
Experts point out that LPL and former NPH parent Jackson National Life Insurance have
“We understand that LPL either has reached out to you (or soon will) to discuss your opportunities and to provide you with additional details concerning affiliation with its firm,” says the memo.
“In order to facilitate the transition for you and your clients, we encourage you to meet with LPL to discuss how you will benefit from the scale, strength and stability of a firm that understands the needs of advisors like you and will create better economics for you and your clients.”
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Bill Morrissey, who is leading the effort, described the firm's rapid, multipronged approach.
September 18 -
Experts say firms that clear through Pershing have an advantage in the looming recruiting fight.
August 28 -
The nation’s largest broker-dealer must convince thousands of NPH advisors to make the transition.
August 16
Regional brokerages and firms that assist breakaway advisors have been picking off top talent at the wirehouses.
‘NOT LIKE TURNING ON A SWITCH’
Advisors who leave NPH but don’t resign by the deadline will receive a termination filing on their permanent Form U5, according to the memo. Clients will receive the negative consent mailing whether their advisors intend to leave or not, and advisors need clients’ approval to move their assets elsewhere.
Some see the situation as fruitful for advisors in soliciting competing bids from firms. Recruiters have quickly pounced on the fast timeline, noting that Securities America has
“You need several weeks to a month to get ready, to transition. It’s not like turning on a switch,” says recruiter Mark Elzweig, noting the Nov. 3 cutoff date for two of the four NPH firms. “That doesn’t sound very realistic. It sounds almost like they’re strong-arming them to stay.”
A spokeswoman for National Planning Holdings declined to comment on the memos, while a spokesman for LPL referred to
“I don’t want to be presumptuous. All these advisors need to make a choice, and we want to help them make the right choice,” Morrissey told FP last week after meeting with NPH advisors. LPL has agreed to pay Jackson National up to $123 million in contingency pay based on the level of retention.
WINNERS AND LOSERS
The four NPH firms, which disclosed $909.4 million
On the other hand, Securities America makes up the ninth largest IBD. Advisors with the new practices, one of which
The firm’s potential size after the deal makes it a turn-off for NPH advisors, according to recruiter Jon Henschen, who arranged the Securities America poaches. LPL’s technology will make the transition easier for advisors, but the firm is “speeding it up because reps are starting to leave,” Henschen says.
“The loser is Jackson because they’re only getting a portion of the money up front,” he says. “If they let things drag on a bit until the beginning of the year, I think they’ll find that has a negative impact on retention.”
Henschen adds that he’s watching closely to see if Jackson threatens to cut advisors’ trailing pay on annuity contracts, a step he says MetLife took to penalize advisors who left before the transition to MassMutual earlier this year. A MassMutual spokesman referred questions to MetLife, where a spokeswoman did not immediately respond to requests for comment.
“MetLife communicated compensation changes to third-party firms in the same time-frame at the end of June 2017. While MetLife is unable to discuss the compensation paid to a firm under a specific agreement, it is the company's goal to maintain consistency in its approach to compensation it pays to third-party firms,” spokeswoman Judi Mahaney said in a statement.
Acquisitions always touch off maneuvering between firms and advisors, according to consultant Tim Welsh of Nexus Strategy. Savvy advisors will extract the best possible terms for themselves and their clients from LPL through the process, he says.
“That’s the game that has been played forever,” Welsh says, noting LPL also faces a difficult task in coming months. “From a business point of view, you absolutely have to move fast and lock advisors down.”