Prudential moving 2,600 financial advisors, $50B in client assets to LPL

LPL Financial will add 2,600 more financial advisors to its record headcount next year after securing an agreement from Prudential Financial to be its wealth custodian, brokerage and RIA.

The massive transition slated for the fourth quarter of 2024 will carry onboarding costs of $125 million, but the move by Prudential Advisors and its $50 billion in client assets will eventually add $60 million per year to LPL's earnings before interest, taxes, depreciation and amortization, an Aug. 24 announcement and investor presentation stated. The recruiting win for LPL came only days after the firm's Institution Services unit completed the transition of $4.7 billion in client assets from Commerce Bank's wealth program and a few weeks after the firm said its headcount grew by a net 1,071 advisors year over year to 21,942 in the second quarter.

"LPL's best-in-class platform will significantly improve capabilities to help our advisors serve clients and grow their practice even faster," Prudential President of Retail Advice and Solutions Brad Hearn, who had been an LPL executive nearly 10 years prior to joining the Newark, New Jersey-based insurer, retirement plan and wealth management firm in 2018, said in a statement. "With this agreement, we are further investing in our Prudential Advisors business, while streamlining and reducing back-office resource demands."

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An influx of business to LPL will mean losses for other custodians and competitors currently working with Prudential and its registered investment advisory and brokerage arms. Its primary brokerage, Pruco Securities, currently maintains referral or introduction agreements with Cambridge Investment Research, The Leaders Group, Centaurus Financial and Equitable Advisors, according to its detailed FINRA BrokerCheck file. The firm lists a clearing and custody subsidiary of Fidelity Investments, National Financial Services, as another vendor. 

Prudential's pick of LPL for brokerage, RIA and custodial services follows decisions by many banks and insurance firms in recent years to spin off their wealth management divisions through M&A deals or to outsource tasks to external service providers. LPL has emerged as one of the main beneficiaries of the strategic shifts, alongside some other rivals among industry giants. Prudential's asset mix includes about 25% advisory assets, 75% brokerage holdings and client cash sweep balances of $1 billion.

"The partnership-oriented spirit of this agreement between LPL and Prudential is a significant milestone in our mission to offer sophisticated wealth management capabilities to more enterprise firms and their advisors," Ken Hullings, LPL's executive vice president of enterprise business development, said in a statement. "Prudential has a revered reputation of being a pillar of the financial services industry. They have also been a valued partner of LPL's since 1989 in the life and annuity space. We look forward to our expanded relationship and welcoming Prudential Advisors to our platform."

UPDATE
Read our in-depth coverage: Prudential's LPL move to test firms' advisor retention strategy and fit