It has been exactly a year since David Reich left the role of head of LPL’s Retirement Partners Group, and since the firm announced plans to fundamentally reorganize the retirement-focused portion of its business.
At a high level, Reich’s duties overseeing LPL’s extensive retirement business were handed to Steve Lank, who took on the role of “executive vice president of operations within service, trading and operations.” Lank was tasked with building and leading a new, integrated team that would work to present one centralized place for LPL advisers serving retirement plans to access the various solutions and services LPL provides.
LPL leadership at that point told PLANADVISER the internal changes would create “a new, unified strategy that aligns our teams supporting specialized clients, including retirement planning, high-net worth, insurance, and trust businesses.” Previously, LPL has structured these businesses in a way that delivered siloed support to advisers serving these niche markets. Moving forward, LPL said it would work to “unify these groups into one common entity that will provide sales and support to all our advisers and institutional clients.”
How is the effort going one year in? According to a new interview with Bill Beardsley, current head of Retirement Partners, a lot of progress has been made, but there is also a lot left to do.
As Beardsley explained, currently the effort is underway to close the LPL Worksite Financial Solutions platform, which had been designed in part to help advisers generate new business from 401(k) rollovers under the now-defunct Department of Labor (DOL) fiduciary rule. While the move by LPL has been interpreted by some analysts (and competitors) as a pullback from the retirement market, Beardsley says this is a totally incorrect assertion. Rather, the plan at LPL is actually to leverage savings from the winding down of the Worksite program and “reallocate it to enhance components of retirement plan support, including financial wellness, marketing resources and advice programs that enable advisers to serve in a fiduciary capacity.”
According to Beardsley, LPL is actively increasing capabilities within its Retirement Partner Consulting Program. Retirement advisers at LPL still have access to an expanding suite of marketing materials for insurance, high-net-worth and retirement trust clients to help capture ancillary business related to the employer-sponsored plan space. He said the underlying philosophy to LPL’s move is that unifying these business units will help its advisers deliver a fuller suite of specialized services and resources, while also helping to grow and differentiate their businesses.
“The integrated approach enables us to move our business forward in a way that aligns with the direction of the industry, and provides us the opportunity to deepen the value we deliver to our advisers,” Beardsley suggested.
Opportunities and challenges
While Beardsley voiced optimism about the road ahead, there are also some basic new realities in the marketplace that LPL and its competition are still coming to grips with. Notably, as more retirement plan sponsors are looking to get away from commissioned business in favor of working with fee-based independent registered investment advisers (RIAs), this naturally puts some amount of pressure on the entities that support advisers who still want to work on a brokerage-commission basis.
Simply put, brokerage platform providers like LPL spend a lot of time and money on things like compliance assurance, investment modeling, technology development, etc. As advisers move more of their business away from brokerage commissions, this raises the general question of how the evolution in client expectations and compensation practices will impact advisers’ collaborative relationships with broker/dealers. With these questions hanging in the air, it’s only natural that some industry stakeholders would question whether the LPLs of the world will continue to focus on the defined contribution (DC) retirement planning market. After all, a consulting fee-based adviser can have billions in DC plan assets under advisement, but that’s likely going to result in less compensation for the broker/dealer than could be delivered by a retail brokerage-based adviser serving even a small handful of high-net worth clients.
But for his part, Beardsley pretty strongly pushed back against this storyline, and his proof is the following numbers. In the last year alone the LPL Retirement Partners program has attracted some 200 new advisers, with 1,600 members now working on LPL’s “hybrid platform.” Nearly 1,000 other advisers support retirement plans on LPL’s corporate platform, and overall, more than 6,000 in LPL’s total adviser pool touch at least one retirement plan, many of them non-specialists using LPL’s Small Market Solution.
“It’s a very exciting time to be doing retirement planning work in all of these capacities; DC retirement is a significant line of business for us today and it will remain so,” Beardsley confirmed. “For some context, when I came here five years ago we had 300 retirement-focused advisers.”
Another important part of this history is the fact that a significant portion of LPL Financial’s retirement business was only somewhat recently acquired, in 2010, when it purchased NRP. The historical exercise of tracing NRP’s own development in the last decade is not exactly an easy one, but it reveals the complicated way large retirement planning entities come to be—and how their big organizational challenges arise.
As laid out in previous PLANADVISER reporting, the advisory brand and its executives started their run in 2003 as 401k Advisors USA, changing to the NRP brand in 2005. By 2008, NRP was approaching and quickly surpassing 100 affiliated firms, and the following year the advisory group brought on dozens more acquisitions. Then-CEO Bill Chetney made frequent pledges to race past 200 or even 300 affiliations. At the time he told PLANADVISER that NRP was seeing such strong growth in its advisory footprint because of its “relentlessly retirement-focused adviser model.”
It was Chetney’s influence on the industry which led LPL Financial to take notice, given its own aspirations for growth in the retirement adviser market, and in 2010 LPL announced that its parent company, LPL Holdings Inc., would acquire major retirement assets from NRP and that NRP’s advisers would have the opportunity to join LPL Financial, under the new LPL Retirement Partners entity.
Thinking about the future, Beardsley had another important point to make about ongoing changes within LPL and its competitors.
“If you think about how an adviser sets up their business today from a wealth management perspective, they either can build out that business in a rep-driven portfolio model, where the adviser is also the portfolio manager and can make investment decisions directly. Or they are outsourcing this work to a centrally managed platform,” he explained. “If you look at the work we have been engaged in within our Retirement Partners Program, this is now very similar to the rep-driven model, where that adviser is acting as a fiduciary to the retirement plan clients.”
So, Beardsley feels the firm is setting up advisers to act as a skilled fiduciary to 401(k) plans for the long term.
“That’s our conviction for the long-term future. The fiduciary relationship might not be important for every client or adviser, but overall it is becoming more important,” he said. “There is, of course, still a need to offer choice and other approaches that allow clients and their trusted advisers to make the best decisions about the structure of the relationships. With our Small Market Solution in particular, we can ask our advisers, do you want a rep-driven model where you are the fiduciary? Or do you want an outsourced model where you are going to serve more in the relationship management role and then leverage the strength and scale of LPL to serve the client?”
Reflecting on the epic regulatory saga surrounding the DOL fiduciary rule, Beardsley echoed commentary from other industry executives to the effect that the rulemaking, though short-lived, has already had a big and ongoing impact. He also said he expects the Securities and Exchange Commission (SEC) to evolve its own best-interest regulations.
“One of the things I’m proud of as part of LPL is that our products and platform group has really proven itself in this whole back-and-forth story,” Beardsley said. “We have always embraced the reality that there is a broad need for independent advice in the retirement space, and thus our identity as a registered investment adviser remains very important. But we also know there are other needs that exist in the marketplace, and we have remained true to our identity as a broker/dealer, as well. We have evolved our compensation structures and we have created platforms and products that allow our advisers to serve their clients’ best interest both through an advisory capacity and a brokerage capacity. The flexibility of what we have created is crucial for the future, we believe.”