LPL's Acquisition of Fortigent Could Lure a Few Financial Advisors at Large Banks

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The impending acquisition of Fortigent LLC by LPL Financial LLC should be of great interest to would-be breakaway financial advisors seeking independence from large banks.

LPL’s plan to buy Fortigent—a provider of customized services including investment research, proposal generation and technology for financial advisors and their wealthy clients—comes at a time when a survey finds nearly half (45 percent) of all financial advisors at big banks thinking about severing ties with their employers over the next year and a half or so. This major chunk of in-house bank brokers expressed more than a 25 percent likelihood of acting on their plans, said an Aite Group study.

And shortly, there’ll be someplace new to go, offering the unique combination of LPL’s Registered Investment Advisory muscle and Fortigent’s technological expertise.

LPL is the nation’s largest independent broker dealer with about 12,800 registered reps and advisors. Fortigent “offers mostly customized software and tools” for advisors, Dave Moran, managing partner at Experienced Advisors Recruiting in South Florida, told eFinancialCareers.

Currently, TD Ameritrade, Schwab and Fidelity stand out as the “Chrysler, Ford and GM” of the RIA universe, says Moran, adding that “a lot of broker dealers were trying to nibble their way into that market.”

A big gun in its own right, LPL has starred in terms of its clearing and back office support. Now that LPL is marrying its broker-dealer clout with Fortigent’s technological prowess, Moran observes, it will be vying for the number four spot, and breakaway brokers from the Merrills and Morgan Stanleys of the world will be thinking seriously about moving on to LPL, he says.

More than anything else, the newly announced deal is an effort by LPL to expand its channel distribution strategy further into the RIA market, Charles “Chip” Roame, managing principal of California-based financial institutions consultant Tiburon Strategic Advisors tells eFinancialCareers.

“LPL has done a terrific job over the past five to seven years of moving from being a one-dimensional firm serving about 2,000 IBD reps, to one serving about 12,000 of those same IBD reps, plus RIAs, retirement plan advisors, banks, clearing clients and other channels,” says Roame. “This spreads LPL's bets across many business models, which is a solid strategy for a public company.”

RIABiz reports that the merger is expected to close in the first quarter of 2012 and “could further serve the Boston- and San Diego-based broker dealer’s bid to make itself as much of a force with high net worth—and even ultra-high net worth—investors as it is with the mass-affluent crowd. Many of [LPL’s] advisors have books of $15 million or less and their clientele consists of people investing $500,000 or less—a common definition for mass affluent.”

And let’s not forget that from a careers perspective, the powerhouse merger just happens to be taking place at a time when top producers with big books of business are feeling freer to break their retention agreements—which have been one means of keeping advisors locked in at their firms over a multi-year period.

Bank specialists may also be lured by the fact that LPL has a platform for banks, designed to help wealth management firms within banks compete in the advisory space, Moran notes.

Larger producers with high-end support requirements will be particularly interested, he says:

Someone at a bank handling perhaps $150 million in assets under management, and thinking of leaving the cocoon of their organization because they want to offer more independent, objective advice and “to brand their own firm—not the Mother ship’s”—will be most likely to consider a move to the newly combined firm, says Moran.

RIAs are weighted down with a lot of reporting and compliance obligations, including the requirement for a full-time compliance officer. But if you work with an independent broker dealer like LPL, you can have that and also have access to the tools and technology a company like Fortigent brings to the table.

Investment News reports that even before LPL announced the Fortigent acquisition this week, LPL Financial executives and advisors were saying that the firm was working on technology upgrades including new and improved reporting and trading capabilities, as well as a mobile application for advisors and their clients.

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