Since taking over as a managing director and the divisional president for business strategy and growth at LPL Financial nearly six years ago, Rich Steinmeier has produced results.
The firm is reaching record headcounts of financial advisors every quarter, with the number
In a conversation this week with FP Chief Correspondent Tobias Salinger, Steinmeier discussed the Prudential move, the firm's approach to AI and
The following conversation with FP has been lightly edited for length and clarity.
Financial Planning: Prudential is likely going to be the biggest recruiting move in wealth management this year. How long ago did LPL and Prudential begin talking about this? And what do you think were the main factors that led them to pick LPL?
Rich Steinmeier: I remember the first conversations were in mid-2021. We have a deep relationship with Prudential that we've had for decades through product relationships. And so we have good relations between the two firms. And we began a broader conversation about potential partnerships and opportunities. As they explored how to accelerate growth in their firm, how to build a world-class operating system for their advisors, I think they explored many different pathways to fulfill that and landed with what is ultimately going to be this great partnership.
I think the logic behind it was to think about giving advisors a tremendous way to operate both on the insurance side as well as the wealth side in an integrated fashion, how to make that more efficient, how to give them access to easy, basic money movement account opening, trading, transactions, world-class advisory platforms in an integrated fashion, plus be partnered with a firm that is making continual outsize investments to advance the state of our offerings and capabilities. And I think we both had a very strong alignment in culture. We believe in the power of advice delivered through an independent financial advisor. And we believe in promoting those advisors and the relationships, not demoting them. And so we started from a place of real strong cultural alignment. They are deeply committed to advisors. We are as well. And that came together nicely through really strategic conversations at first with their leadership. And then there's a lot of nuts and bolts to figure out and a lot of development on our side to build a platform that actually works across wealth and insurance. So that'll be a new set of capabilities that we'll build to support all of our clients.
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FP: At the individual advisor and practice level, every advisor's move is a huge deal to them and to their team. But it is always noticeable to see these huge, impactful moves that are going to LPL, as LPL continues to set a record for the number of financial advisors working with the firm in some capacity. What would you say is the likelihood of an even bigger recruiting move or M&A deal incoming to LPL this year?
RS: If you talk about very large deals, quite often, it's hard to make predictions. They're opportunistic in nature. They almost always start from an initiation of a firm that needs to do something different. Recruiting — individual advisor recruiting — a lot of those conversations get initiated from us because we talked to them about the state of capabilities. And so that's a little bit easier to predict. There are also a lot of moves, and so you have a good sense as to what's going to change from one year to the next.
It is very hard — there are so many different dimensions that come into either M&A or large partnership models that we have — to predict. They have very long lead times, certainly. When you're going to see either large partnerships or M&A events, we stay connected in the marketplace, we do our best to tell our story in those different forums. And so you're telling that story at industry trade events, and trying to stay connected where there are executive leadership forums, to be thought leaders there and represent our capabilities and what a partnership might mean. But those are much harder to figure out what's going to happen in any given period of time.
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FP: Shifting gears a little bit, thinking about technology, artificial intelligence is one of the most important topics shaping every industry right now. What applications do you see for LPL's recruiting efforts? And to what extent have they been implemented across your recruiting teams?
RS: We think of AI a little more broadly as a firm. So we think about, where will we be using large language models against our proprietary data to build unique insights through tools? So, kind of uniquely built capabilities — we think about, where will we take third-party capabilities that are embedded in technology that we ingest into our ecosystem, and how will we make sure that we feel comfortable with the AI there.
And then we think about ways that we have regular development that's going on inside of our broad portfolio. And we have built specialization and [hired] AI specialists to see if there are alternatives to what we may have done through our straight dev into considering AI and AI solutions into a better solution building straight into a portfolio. And that's kind of how we're thinking about the development that would apply into the recruiting team. And so that will apply into ways that we will think about one identification of good fits in the marketplace.
And, for advisors and/or institutions that we should be prioritizing, you can think about that extending into the way that we will follow up in many cases. Even individual advisors, you're talking about multiple months, and sometimes a multiple-year engagement strategy. And so keeping regular in that engagement, I think are ways that we will think about the pathways that AI can help us personalize communications and make sure that we are staying in that regular engagement cycle. And there are a couple of other things that we thought about that are a little more advanced and applied. But I think for us, this is about getting out pilots that we are learning into, making sure that there's a very strong governance model, and then taking those learnings and building to — we call them "lane one" and "lane two" solutions. And so we're focused at this moment on lane one solutions. It's the application of AI into processes that exist today. And then lane two is the transformation of processes that exist today. And so we are building a portfolio of lane one solutions that we think will allow us to learn into what we call lane two solutions.
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FP: Another trend that seems to be really important right now for large wealth management firms is the intersection of wealth management and tax services. What opportunities is that creating for LPL out there in the marketplace, and how is the firm trying to tap into them?
RS: I think there are two ways to think about that intersection. I think you're right. I think it's an astute insight that there is a lot more seeming crossover. The first is actually providing tax services to — I'd probably start at high net worth, it doesn't exclusively have to be high net worth. But you think about that center of gravity, that probably works its way down the wealth spectrum.
So that is the ingestion of the ability to have tax software investments, to have tax loss-harvesting that is directly in your advisory platforms. I think that is tax planning, so that you can minimize exposure to taxes, not just in the investments, but broadly in the way that you're structuring a plan for a client. And then there's tax preparation. Those are a set of capabilities that you would think about building and, in-house, we have three of those capabilities. And we're actively considering how tax prep — whether we should have a partnership there or how we should think about that.
No one is upset when they minimize their taxes. Right? If you're speaking to a client, and it is helping them minimize exposure legally to Uncle Sam, I think that is found money. And I think advisors are rewarded in their relationship. And so getting that tax set of offerings and tax-ware investing, tax planning, etc. is a really important component of delivering a holistic experience to the client.
Then there's the other side of the equation, which I think you see other people really starting to explore, which is CPAs. Is there ability to have an integration with a CPA firm? A lot of successful RIAs and advisors do this. And is there a crossover there between clients who may be a client of the CPA who become a client of the wealth management firm, or vice versa. Most advisors pursue that today through COI [centers of influence] relationships. And they just form those locally. I think firms are considering going through M&A and putting those two together. You've seen that across any number of firms. I think that's an intriguing opportunity in the space where we're trying to help our advisors participate, in that we have become much more adept at liberalizing some of the constraints we had in the ecosystem around where you as an advisor or a client of ours would own both of those. And so we've been intentional about making this a much more receptive environment to support advisors pursuing that strategy.
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FP: What, if any, misperceptions do you think there are about LPL among some financial advisors or wealth management professionals out there? And how would you respond to them?
RS: I think the thing that we are trying to work through is that the legacy perception of our firm is that of an independent broker-dealer. And that is the genesis of our firm. I think the delivery of advice to Americans through an independent financial professional still is one of the cores of our ethos of how we deliver our business. However, we are much bigger than that independent broker-dealer, maybe, the foundation that we were built on.
We are a full-service wealth management firm. I mean, we have a private wealth offering, we have a W-2 offering, we have really unique supported independence offerings in the marketplace. We serve institutional clients. We serve large banks. We already alluded to Prudential. We have the capability set that I would argue is the leading capability set in the marketplace. And the challenge is — and we're working through this — is that a lot of advisors still will see us for the firm that we were five, 10, 15, 20 years ago. I understand that I still have perceptions of places that I formed years and years ago. And so we're working hard to help them understand.
We are the most advisor-centric firm in the marketplace. We have leading capabilities, we out-invest almost everyone in the marketplace on our capability sets. And so this firm is better today than it was yesterday. And it will be better tomorrow than it is today. And so it's not even just being in a culturally aligned firm that thinks that the advisor is the center of gravity, that promotes the adviser, has no conflicts, but also is getting better every single day. And I think we have the ability to be a great long-term partner, for advisors and for institutions.
And we're trying to help people understand that the firm is much more capable than maybe they perceived it to be whenever they last took a look at it. So we're hopeful that it's playing out. But that is part of the thing that we need to work through. We're even reimagining our brand. I think we'll come forward with a reimagined, refreshed brand over the course of the next year, and we're trying to help people understand and just give us a chance to have conversations with them. Because, when we do have conversations with them, usually we have really incredibly productive conversations and they usually, not always, but a lot of times they end up joining here because it's a place that really is aligned with how they want to run their business.
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FP: Lastly, what else should financial advisors know about LPL's approach to the marketplace right now?
RS: We believe advisors are absolutely entrepreneurs who are taking the risks on themselves. And that — as they are doing that — they should own their business, as we believe they do, they should own their clients, as we believe they do. They should be treated as the small-business or large-business owner that they are from their partner, which means that their partner's job is to make them successful. Our job every day when we come to work is to make our clients successful.
And if we keep that singularity of purpose, it should show through. And I think it does in the way we serve them. But it is our job to serve them, not the other way around. We are here to make them successful. And it is only through their success that we actually can have successes in the marketplace. And I think that's the grounding and the orientation of this firm. And if that's something that's appealing to advisors, we have an open door to have conversations and sometimes it's a bridge too far to make the transaction. As you said, there's a lot of anxiety, there's a lot of emotion and there are a lot of unknowns. And so we try to make it as easy as possible and try to take some of those unknowns and make them known and try to take down the anxiety. But we're hopeful that a lot of advisors will explore whether LPL can be their partner or not. That's what my team does and tries to show up to do every day in the marketplace.
