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How LPL's biggest branch office added $3.5 billion this year by beating LPL itself with a key service

Private Advisor Group brought 22 compliance-minded advisors onboard this month alone to its RIA -- all with the blessing and help of its big IBD partner

Author Lisa Shidler December 20, 2011 at 4:33 AM
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John Hyland: If you compare that to LPL itself, that's a more competitive comprehensive structure.

Stephen Winks

Stephen Winks

December 20, 2011 — 6:08 PM

The transition of Morristown to Private Advisor Group with a net increase of $3.5 billion in assets in one year clearily illustrates the demand for expert advisory services support in a marketplace where no broker/dealers acknowledge or support the fiduciary standing of the broker.

Just think what would happen if the Private Advisor Group, or LPL or an affiliate were to make expert advice (fiduciary standing) safe, scalable, easy to manage and execute. If that level of personalized advice were further achieved at a lower cost than expensive packaged product sales, there would be no compelling counter arguement for brokers to remain at their present firm.

The result is expert advice at a lower cost than transactions (for which brokers are neither accountable or responsible) with an increase in advisor compensation relative to brokerage and higher practice margins. Who could then defend brokers acting counter to the best interest of their client’s ?

LPL or the Private Advisor Group, or Foritgent, or Dynasty could be the first to offer large scale institutionalized support for fiduciary standing which makes advice safe, scalable, easy to execute and manage—which would fundamentally change the financial services industry in the best interest of the consumer, minimizing compliance, because compliance is inherent in the execution of an authenticated prudent process.

Brokerage compliance prohibits brokers from achieving fiduciary standing which triggers fiduciary liability. The exact opposite is required of expert authenticated advisory services support which makes advice safe, scalable, easy to execute and manage. Brokerage compliance materially constrains the role of the advisor while advisory services support optimizes the role and value of the advisor.

Compliance for a product sales/brokerage enterprise has historically been very expensive (15% of gross revenues) and assures that brokers do not render advice, have no ongoing fiduciary duties and are not held to the fiduciary standard of care.

The missing links are (a) an expert auithenticated prudent process which makes advice safe, (b) technology which makes transparency in cost and compensation and continuous comprehensive counsel required for fiduciary counsel possible, (c) work flow management tied to a functional division (advisor, CAO, CIO) of labor which makes expert advice scalable and easy to execute and manage as a business, (d) conflict of interest management which literally makes fiduciary counsel possible, (e) expert advisory services support for each of the ten major market segments advisors serve.

Maybe the Private Advisor Group can be the first to establish large scale, institutionalized support for fiduciary standing which would make advice safe, scalable, easy to execute and manage. But my bet would be an LPL affiliate would have a hand in creating the necessary supporting infrastructure cited above, presently not available in the brokerage industry.


John Hyland

John Hyland

December 21, 2011 — 9:54 PM

I thought I’d add some further comments to this story…..

Our success at Private Advisor Group is in part a testimony to the strength of the LPL Financial’s business model for advisors. As LPL affiliated advisors for over 14 years, we have never viewed LPL as a competitor – but as a valued business partner. Their management speaks at our conferences, we leverage their research, tools, etc. We benefit from LPL’s continued forward momentum in the IBD and Hybrid RIA space and feel that they (LPL) offer advisors the best Hybrid RIA platform in the industry.

I also wanted to thank everyone for their support of the Leukemia & Lymphoma Society’s IronTeam and the support of our recent media event in NYC. To follow our progress over the next 8 months, check out our website at www.iron-team.com

Maria Marsala

Maria Marsala

January 1, 2012 — 2:47 AM

Intriguing article. Most independent FA’s I’ve meet have gone to a b-d based on price, and boy do they complain about them! That in turn sets up a negative attitude in other areas of their buisness. They would have been better off at a firm such as this with the infrastructure and desire to support them the right way, but allowing for an independence not found in their former firms.

Stephen Winks

Stephen Winks

January 1, 2012 — 9:22 PM


Unfortunately the brokerage industry does not acknowledge or support the fiduciary standing of its brokers whether they are independent contractors or employees. Under Dodd-Frank the broker is required to act in the consumer’s best interest and the broker’s supporting broker/dealer is required to provide the necessary resources to act in the best interset of the consumer. Not one broker/dealer is providing the necessary enabling resources so it is safe for the broker to act in the client’s best interest and acknowledge fiduciary status. In order to make advice safe, scalable, easy to execute and manage—the ball is in the broker/dealer’s court—not each individual advisor.

The brokerage industry says it wants to support the best interest of the consumer, as long as it doesn’t have to do anything different—which is a complete abdictation of its responsibility to make brokers accountable and responsible for their recommendations. Unfortunately for the brokerage industry, there are statutes, case law and regulatory opinion letters which establish what is required for a fiduciary to act in the consumer’s best interest. There are no excuses. Rather than the brokerage industry getting to work in properly supporting advisory services, it prefers to advance specious arguements which are easily countered in the best interest of the consumer. The hope of the Brokerage industry is the best interest of the industry will prevail over the best interest of the consumer, which has been the case with FINRA over the past 70 years.

The consumer naturally presumes that their broker/advisor acts in the consumer’s best interest because of the regularory imperative under Dodd-Frank that brokers should be held to a fiduciary standard of care. Thus, in the brokerage industry’s efforts to have its interests prevail over that of the consumer, the uninformed consumer would expect the industry to comply with Dodd-Frank. So, wouldn’t it be resonable from the consumer’s perspective for the brokerage industry to (a) actually support fiduciary standing so (b) brokers would be accountable for their investment recommendations, (c) be responsible to an expert fiduciary standard of of care based on objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters, where© pre-arranged industry arbitration proceedings denying accountability and responsibility for broker recommendations would be eliminated; thus requiring brokers to act in the best interest of the consumer? The brokerage industry doesn’t think so and is not accordingly taking the necessary steps to support the fiduciary standing of itsbrokers.

Thus, brokers looking for market leadership in support of expert advisory services which requires fiduciary standing are presently looking at the wrong places by seeking a fiduciary solution from the brokerage industry. Culturally, structurally and technologically—the industry is not interested or willing to distinguish themselves on the basis of the cepth and breadth of fiduciary counsel they support.

Thus, Dynasty, Fortigent, and others are where we will see the necessary innovation to support fiduciary standing—not broker/dealers or custodians directly themselves.

The demand for support for fiduciary standing is massive, just ask the consumer.

It is time for brokerage and custody firms to step up. Just ask the industry’s top brokers who seek the same entrapreneurial effort of their broker/dealer in providing the necessary enabling resources in support of fiduciary standing as their broker/dealer requires of them in winning clients..


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LPL Financial
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