Just a day before his firm’s completed purchase of Commonwealth Financial Network, LPL CEO Rich Steinmeier said there’s been nothing surprising in the small number of advisors who’ve decided to take their practices elsewhere.
LPL Financial, the largest independent broker-dealer by a number of measures, closed Friday on its plans to buy longtime industry rival Commonwealth Financial Network for $2.7 billion. That transaction officially set in motion LPL’s plans to retain at least 90% of the $285 billion in client assets and 2,900 advisors Commonwealth had when the purchase plans were announced in March.
In the ensuing four months, at least 110 advisors have left Commonwealth to join rival firms or start independent advisory practices. Steinmeier told analysts Thursday that the departures have been in line with expectations and that he and his colleagues see no reason to revise their 90% retention goal.
Steinmeier said LPL has spent a great deal of time since March meeting with Commonwealth advisors and executives, explaining how the acquisition will result “in a firm with the scale, the experience and the permanent capital needed to serve and support their growth for decades to come.
“In the end, we continue to feel confident about our ability to capture 90%, which does mean we understand that 10% of the advisors will make a different choice and go somewhere else,” Steinmeier said. “All that being said, there’s nothing that’s been surprising in terms of competitive response or advisor decisioning.”
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LPL’s track record with recent M&A deals
The comments came during an earnings call in which Steinmeier and LPL Chief Financial Officer Matthew Audette reported results for a quarter that saw the firm’s advisory and brokerage assets up by 28% year over year to $1.9 trillion. The tally was boosted in the April-to-June period by $20.5 billion in asset inflows.
LPL’s total revenue surged by 30% year over year in the second quarter to just over $3.8 billion, driven in large part by higher collections of advisory fees and sales commissions. With expenses subtracted, LPL’s quarterly net income rose by 5% year over year to $273 million.
In expressing confidence in their Commonwealth retention goals, Steinmeier and Audette pointed to other recent M&A successes. In particular, Steinmeier noted LPL’s recent acquisition of Atria Wealth Solutions in a deal initially valued at just over $800 million.
When the purchase plans were announced in early 2024, LPL set a goal of retaining at least 80% of Atria’s then $100 billion in client assets and 2,400 advisors. Steinmeier said Thursday that LPL completed its absorption of Atria in July, which he deemed “no small feat” given that Atria consists of seven independent brokerages including CUSO Financial Services and Sorrento Pacific Financial.
“As for retention, we’re still finalizing results, but anticipate asset retention landing at approximately 82%, ahead of our initial target of 80% now,” he said.
LPL’s continuing charm offensive for Commonwealth advisors
Audette said on the earnings call Thursday that the transfer of Commonwealth assets over to LPL is now set to be completed by the fourth quarter of 2026. That plan “has moved out slightly from our original time frame, as we’ve begun to scope the tech and operational work required to ensure advisors have an exceptional experience at close,” he said.
Steinmeier listed various steps he and others are taking to keep Commonwealth essentially intact, including its brand and general ways of doing business, while also bringing it into the LPL fold. Commonwealth CEO Wayne Bloom is retaining his title and joining LPL’s management committee as a managing director.
Steinmeier said 27 Commonwealth employees recently attended LPL’s “summer bash” in Fort Mill, California.
“We send emissaries from LPL up to Commonwealth’s annual wing-eating contest and cornhole tournament,” he said. “And in just over a week, we’ll have 70 Commonwealth advisors and home-office staff join our annual focus conference.”
Asset inflows from Wintrust, outflows from departing OSJs
LPL’s $20.5 billion in net new assets for the second quarter included $100 million brought on from LPL’s winning in early 2024 the institutional business of the wealth management units of Chicago-based Wintrust Financial. Those divisions, Wintrust Investments and the private client unit of the other subsidiary Great Lakes Advisors, had $16 billion in client assets when the deal was announced.
At the same time, LPL’s net asset inflows were weighed down again by the departure of a couple of large advisory practices technically known as offices of supervisory jurisdiction, or OSJs. The OSJs Wealth Enhancement Group and Merit Financial Advisors both confirmed last year that they’re leaving LPL, taking about $20 billion in client assets with them.
About $4 billion under management by those firms left in the second quarter, Audette said. Of the $20 billion eventually expected to go out the door with the departing OSJs, “there’s $7 billion more to go,” he said.
Steinmeier noted that LPL plans to start providing various support services to the wealth management arm of Memphis-based First Horizon Bank’s wealth management business in the third quarter. That deal, announced in April, is expected to bring as much as $17 billion in client assets over to LPL, he said.
“Turning to overall asset retention, it remains industry leading at 98% for the second quarter and over the last 12 months,” Steinmeier said.
Steinmeier lists reasons to think twice about leaving to start an RIA
In announcing their plans to buy Commonwealth, LPL executives have gone out of their way to insist they’ll keep intact everything that had made their former rival distinct. The appeal has been largely aimed at appealing to advisors who joined Commonwealth specifically because of its small size among independent broker-dealers.
LPL ended the quarter with just over 29,000 advisors, roughly 10 times Commonwealth’s headcount when LPL’s purchase plans were announced. Commonwealth’s reputation for being accommodating to advisors and employees has been reflected in various prominent industry surveys. The research and consulting firm J.D. Power reported earlier this month that Commonwealth ranked No. 1 in advisor satisfaction at independent firms for the 12th year in a row.
Industry recruiters and other experts have predicted most Commonwealth advisors will end up making the move to LPL, at least initially to see if they can be happy there. Among those most likely to leave are advisors who have long been thinking about setting up their own practices and view the LPL purchase as an impetus to move forward with those plans.
Several Commonwealth teams have indeed filed paperwork to set up their own RIAs. Yet, Steinmeier said on Thursday that he believes many advisors who dream of casting off any affiliation with a larger firm often end up thinking twice after they realize how difficult it would be to go it alone without a partner.
“You know as an RIA, they’re responsible for their own regulatory compliance and risk management, in addition to running the responsibilities of small business like tech and HR,” he said.
Dip in recruiting isn’t sign of a larger trend
Steinmeier said LPL, which has its own channel for advisors who want to affiliate with it as RIAs, continued to see strong recruiting results in the second quarter, despite a steep year-over-year drop in assets expected from advisors pulled in from other firms. LPL’s recruited asset tally was down 24% year over year to $18 billion in the April-to-June period.
Steinmeier said recent market turmoil was largely to blame. He said many advisors are hesitant to devote energy to changing firms at a time when clients expect them to be closely managing their money.
“That doesn’t mean you’re going to see overall movement down over the long term,” he said. “You’ll just see a pushing out until we get to a more stable environment.”
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