LPL Forms Subsidiary to Serve the 99-Percenters

LPL Financial is apparently now courting financial advisors interested in serving the lower end of the market—those unable to invest more than $250,000.

The huge broker-dealer announced today that a recently formed subsidiary of LPL Financial Holdings designed to provide the mass market with access to “high-quality and affordable personal financial advice” intends to acquire Veritat Advisors, Inc.—“Veritat” for short.

RIA Serves Mass Market

Veritat is a full-service registered investment advisory (RIA) firm using a proprietary online financial planning platform designed to support financial advisors who serve the mass market. Kent Smetters, Ph.D., a professor at the Wharton School at the University of Pennsylvania, co-founded the company in 2008.

RIABiz put its own spin on the announcement, explaining, “It was only three months ago that we found out that veteran LPL Financial exec Esther Stearns was taking the unusual step of jumping to an adjacent lily pad the firm set up to try tapping a $7-trillion market."

Made-at-Wharton Technology

Essentially, “the big broker-dealer is buying Veritat Advisors, renaming it NestWise, and using the made-at-Wharton technology to crack the case of managing multi-hundred-client practices,” RIABiz reports, which added Veritat served financial advisors whose clients were investors with an initial investment of less than $250,000.

“NestWise LLC” is to be the new name for LPL New Venture LLC, LPL announced, saying the name reflects the company's focus on the recruitment and development of new-to-the-industry financial advisors committed to providing high-quality and affordable personal financial advice for the mass market.

Cost of Serving Mass Market

NestWise is scheduled to launch later this year. Industry members have expressed concern about the cost involved in providing any real fiduciary oversight to the mass market. However, Stearns has been quoted saying that the market is large enough and the technology is sophisticated enough to make it work.

RIABiz says that the business model in question “takes a page from some of the methods used by turnkey asset management programs"—though with some key differences, according to Wharton’s Smetters.

Namely, advisors will work under NestWise’s RIA as investment advisor representatives and will be limited to selling LPL-packaged products that will consist of portfolios bundled together by the broker-dealer specifically for NestWise.