November 9, 2022
Louis Diamond Quoted
by Lisa Shidler
LPL Financial will pay $140 million to go bigger in mass-market retail advice in 2023 after it scrapped Nestwise in 2013 amid OSJ howls and a slow start.
The broker-dealer, with offices in San Diego and Fort Mill, S.C., is buying Financial Resources Group Investment Services, also headquartered in Fort Mill, and keeping CEO Bruce Miller, 69, in place to lead the charge.
The $40-billion office of supervisory jurisdiction (OSJ) – currently an IBD client – will become a hub to roll up OSJs nationally to further its retail strategy and grab more bank customers.
LPL is unlikely to face as much flak from channel conflict this time around as it enters into potential competition with its IBD clients, says Louis Diamond, president of Diamond Consultants.
“Ten years ago, OSJs were the lifeblood of LPL,” he says.
Since then, a series of OSJ breakaways have thinned the ranks. In 2016, Ron Carson left with $2.6 billion, and in 2018 Bill Hamm’s IFP, which at one point had $9.5 billion in AUM, announced it was leaving in 2018.
LPL no longer needs to walk on eggshells with OSJs not only because it has fewer, but also because it can replace the revenues in-house, says Phil Waxelbaum, founder and Principal at Masada Consulting, LLC.
“Ten years ago, LPL didn’t have the service model,” he says. “LPL has grown its service capabilities and can now provide a direct service relationship that is competitive to these OSJs.”
Diamond agrees.
“A lot of the resources that OSJs provided, LPL can provide cheaper,” he says.
“As the industry has evolved, OSJs are becoming less and less important to the organization. By buying one of the largest groups, they’re bringing more business onto their corporate platforms.”
LPL’s purchase of the in-house OSJ comes with a giant perk – the retention of the OSJ’s assets, Diamond says.
“If they can retain the business, then they don’t risk it leaving,” he adds.
