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LPL and Fortigent may be cooking up a merger, sources say

A strategic alliance could give LPL access to VIP RIAs and make Fortigent's highly customized offerings more profitable

Author Brooke Southall December 6, 2011 at 8:01 AM
no description available
Is LPL chairman and CEO Mark Casady looking to add a jewel to the the mammoth B-D's crown?

NDA Ignored

NDA Ignored

December 6, 2011 — 6:49 AM

Interesting that Dynasty feature article ran on front page day before this ran….they were in running for Fortigent…coincidence I’m sure. Or not….

Jeff Spears

Jeff Spears

December 6, 2011 — 1:23 PM

The service needs of the high end RIA are much different than the needs of the mass affluent broker.

Never say never, but this deal doesn’t make sense to me.

Stephen Winks

Stephen Winks

December 8, 2011 — 5:26 PM

The challenge the entire industry faces, whether LPL, Merrill , Fortigent or Dynasty, is not adding complexity in advisory services by integrating desparate technologies but simplifying advisory services around expert utilities for each of the ten major market segments advisors serve so advice and fiduciary standing is safe to acknowledge, scalable and easy to execute and manage.

This requires an expert understanding of advisory services which is both beyond the technical competency of technologist as technologist will readily agree and beyond the cultural liscense of the brokerage industry to execute. Thus, contrary to views expressed here, Dynasty and Fortigent are far more likely to work together to create expert utilities to support world class advisory services than any brokerage firm—even if LPL is likely to dominate the custody business with deeper advisory services support than that of passive custodians—Schwab, Fidelity, TD Ameritrade, etc. can execute.

Eventually, the RIA will weigh the effectiveness, cost and benefit of advisory services support. Providing an expert advisory services utility that maximizes the advisors value proposition and practice margins is highly desirable relative to a brokerage firm or custodian being agnostic about advice to the point that advice is not being acknowledged or supported.

A brokerage and custody alternative that is not accountable for broker recommendations and is not held to a high professional advisory services standard of care, could not possibly compete with a less expensive expert advisory services model that is accountable and responsible.

This is why Dynasty and Fortigent are focusing where the money is at the top of the advisor food chain. Once the resources are in place and scale is achieved, they both will either go down stream or provide institutional services to the brokerage industry as the Intel Inside advisory services.

Capital should not be directed to more of the same— an outdated brokerage business model—but to the creation of expert advisory services ultilities for each of the ten major market segments advisors serve (Mass, Retail, HNW, Ultra HNW, DC, DB, Foundations and Endoements, Public Funds, Profit Sharing and Taft Hartley) that embrace modernity and make advice safe, scalable, easy to execute and manage. This is what LPL sees in Fortigent, but Fortigent still has to build out the expert utilities that make advice/fiduciary standing safe, scalable, easy to execute and manage.

Dynasty has that vision and does not need outside capital—thus in principle, the Dynasty is the defacto market leader.

I see it more likely that Dynasty acquires Fortigent than LPL buying fortigent, because Dynasty and Fortigent have complimentary interests and vision with little conflict in creating a very formidable advisor value proposition geared to optimizing advisor margins and achieving extraordinary client satisfaction, outdating the brokerage approach to advice. A brokerage firm may not feel good about being outdated. The Dynasty/Fortigent combination is the most likely and profitable outcome for all. Trying to change the deeply embeded culture of brokerage industry that is fighting broker accountability and professional responsibility is terribly complex—more so than creating expert advisory services utilities in support of a preemptive advisor value proposition.

It is much easier to create expert advisory services support than to change a culture that doesn’t want to change.

Dynasty and Fortigent combined are the external market forces that will force the industry at large to play by new rules of its making all in the best interet of the consumer and the advisor.


Jeff Spears

Jeff Spears

December 8, 2011 — 5:45 PM

Dynasty is olaying a great game of poker if they are planning to acquire Fortigent.
They have cast their lot with Callan and Envestnet.
I agree with you that a firm who provides advisory business support, like Dynasty (there are others) can benefit from working with Fortigent.
Fortigent is the only game in town and Callan and Evestnet don’t live there!

Stephen Winks

Stephen Winks

December 9, 2011 — 12:08 AM


Neither Fortigent nor Dynasty offer a prudent process that makes advice safe scalable and easy to execute and manage. The important point is neither do major brokerage firms.

Thus, by Dynasty having (a) the vision of a less expensive, preemptive, expert advisory services support (relative to the conventional brokerage approach to advice which affords no accountaility or ongoing fiduciary duty to the consumer), and having (b) the financial ability to develope expert advisory services utilities for each of the ten major market segments advisors serve, (c) which provide an unprecedented level of investment and administrative counsel at lower cost than convential brokerage, (d) Dynasty edges out Fortigent because a comprehensive solution (utility) that (i) simplifies the business, (ii) drives down cost,(iii) increases advisor productivity, (iv) provides a preemptive advisor value proposition while (v) maximizing advisor margins. With the right strategic partner, like LPL,—Fortigent could indeed be formidable, but LPL would create channel conflict in working against itself in making commission sales obsolete. Dynasty would buils a massive advisory services firm attracting the best and brightest and does not have to explain why some clients are not well served.

Fortigent has elements of a solution but not an authenticated expert utility for each market segment that makes advice safe, scalable, easy to execute and manage that inherently incorporates a complete expert practice management solution. A simplifying comprehensive solution incorporates (a) authenticated expert prudent process (asset/liability study, investment policy, portfolio construction and management—authenticated by statute) which makes expert advice safe to acknowledge and execute, (b) advanced technology in support of continuous comprehensive counsel (entailing real time data access and a modern approach to asset management) required for fiduciary standing—which literally makes it possible for advisors to add value and in which Fortigent has distinguished itself but without authentication required for safety, (c) functional division of labor (Advisor, CIO, CAO) which makes advice scalable and easy to execute and manage—maximizing advisor margins, (d) expert advisory services support that facilitates market segment marketing that brokerage firms can nor replicate as it requires acknowledgement that advice is rendered and triggers fiduciary duty/liability which to date has been avoided.

None of the above has been advanced in a easy to use expert utility for each of the ten major market segments advisors serve. This is not a one dimensional technolgy sold by brokers but n expert prudent process managed by the advisor.

It would be wonderful if both Dynasty and Fortigent could introduce simplifying expert utilities that make advice safe, scalable and easy to execute and manage, but Dynasty has less hoops to jump through and a very powerful vision and has the means to execute. This is a process consideration in which technologist are not specifically adept and brokerage firms have resisted for good reason. A new generation of advisory services firm is required to establish large scale institutiionalized support for fiduciary standing which outdates commission brokerage.

Let’s hope they both execute and cut through the cultural resistence to innovation and modernity in the best interest of the investing public.


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