Amping up recruiting efforts, giant LPL firm grew its revenue by 300% in 2011

Following the lead of Private Advisor Group LLC, Tampa-based Independent Financial Partners experienced dramatic growth in recent months, signing on 140 new advisors and increasing its revenue by 300% — becoming so powerful that it competes with its owner broker-dealer. See How LPL’s biggest branch office added $3.5 billion this year by beating LPL itself with a key service.

The Tampa, Fla.-based firm started building a head of steam in 2010 when LPL bought National Retirement Partners Corp. At that time, IFP bolstered its retirement services and stepped up its recruiting efforts, signing on 100 advisors from NRP. Last year IFP brought on 140 new advisors thanks to LPL’s own recruiting efforts and LPL advisors themselves brought on other advisors. See: First Allied, LPL aim to sell customized 401(k) plans for the small business market. Independent Financial Partners is among the top 5% of LPL offices.

IFP now has more than 400 advisors in its network and snared record revenues of $56.5 million in 2011, up from $15.6 million in revenue for 2010. The company’s assets on its most recent ADV stood about $5 billion and are expected to be more than $10 billion when it files its ADV form this spring, according to chief executive William Hamm Jr.

IFP has its own RIA and, like Private Advisor Group, is considered to be a giant office of supervisory jurisdiction firm that supervises and provides consulting and business services to other independent advisors for a fee. Both firms have reaped the windfall of advisors who are fleeing from wirehouses and may want to hang on to commission-based business without the hassle of running their own offices. See: Big advisors drive solid year for breakaway wins at Schwab, Fidelity, Pershing and TD.

A hand in both pots

In a unique move as part of IFP, advisors also can keep assets under custody assets with Schwab, Fidelity and TD Ameritrade, which is something LPL advisors can’t do through LPL’s corporate RIA.

Jim O’Shaughnessy: Groups like IFP
have been able to attract new
people [in part because of] the
partnering between LPL and IFP.

In addition, IFP provides compliance assistance, business coaching and turnkey transition assistance for advisors. Advisors using IFP typically use their own brand name to market their firm.

IFP has nearly 200 offices and is located in more than two dozen states. Most of its advisors are dually registered with IFP as their RIA and LPL as their broker-dealer.

“We are growing because we have an enticing story. Our advisors want to grow and many of them are bringing on their own new advisors,” Hamm says. “We have one of the best deals out there, and if there’s a better platform, I’d like to know about it.”

'Interesting resources’

When National Retirement Partners announced it was being acquired by LPL two years ago, NRP advisor Jim O’Shaughnessy had just six weeks to decide how to handle his complex practice, which had a combination of fee-based and commission retirement assets and a wide range of wealth management assets.

Rather than going straight to LPL, O’Shaughnessy went looking for a firm that would offer him some back-office assistance, and IFP was quick on its feet showing how it could provide the services he wanted. In an illustration of the symbiotic relationship between IFP and the huge Boston- and San Diego-based independent broker-dealer, LPL executives even steered him in the direction of IFP, according to Hamm.

O’Shaughnessy’s practice, Sheridan Road Financial in Northbrook Ill., manages about $2 billion in assets and is rapidly expanding its retirement business.

He acknowledges his firm did lose a few advisors in the rapid transition in the fall of 2010, but since that time, LPL and IFP have assisted him in recruiting and growing his business. O’Shaughnessy opened a new office in Milwaukee last year and just opened one in Minneapolis this year.

“Groups like IFP have been able to attract new people and part of that is the partnering between LPL and IFP to help grow strategically,” he says. “They’ve really helped us grow and we feel we have a huge opportunity in the next two-, three- or four-year period to grow geographically with acquisitions and they’re providing some interesting resources to do that.”

Friendly competitors

Even though IFP competes with LPL, the nation’s largest IBD gives its blessing to this giant firm’s aggressive recruiting efforts — in fact, LPL recruiters often work with IFP. See: What LPL’s Bill Dwyer had to say about recruitment, and pressure from custodians.

“Independent Financial Partners’ robust growth is a testament to its strong leadership and the tremendous service they provide to advisors and their clients,” Bill Dwyer, president of LPL Financial, said in a statement. “We’re very proud to support one of the top branches in our network.”

Hamm says that in addition to lending a recruiting hand, LPL gives IFP concrete ideas for growth strategies.

Back-office plus

Jennifer Tanck: We’ll do a lot
of work.

“Advisors are able to tap into the scale of Bill Hamm’s office and their services and platforms, which are some of the things that LPL doesn’t provide,” says Scott Collins a former executive at LPL who is a partner along with Scott Miller of their own recruiting firm, FirstPoint Partners, LLC. “He’s a smart businessman and he’s found a way to maximize the business.”

Miller, also a former LPL executive, points out that IFP also creates some ease for LPL. “Instead of sending out a compliance analyst to 10 or 20 offices, they can send it out to one and save money.”

In fact, the growth among these large LPL-based firms seems to indicate that advisors sorely need these services, agrees PAG partner John Hyland.

While PAG and IFP clearly have similar sets of services for advisors, Hyland points out that the two firms have different cultures. His Morristown, N.J.-based firm often attracts a large chunk of East Coast advisors and IFP often snags advisors in the South. IFP also tends to bring aboard more retirement-based advisors, having developed a niche in that area, Hyland acknowledges.

Private Advisor Group’s assets are about $7.5 billion and about $2.5 billion of those assets are in either the firm’s RIA or LPL’s corporate RIA. Hyland says he expects by the end of the first quarter that the firm’s RIA will have about $1 billion in assets.

“We’re serving a population that has this great need,” he says. “The demand for what we do is so great that we don’t even bump into each other that much.”

Payouts

In many cases, advisors with IFP are able to get a higher payout than they might receive if they had simply become an LPL advisor, That’s because due to IFP’s size and pricing leverage it can offer competitive payouts to advisors in some instances. Also, when advisors use IFP’s RIA, the payout on fee-based business is typically higher than what is typically available under LPL’s corporate RIA. See: What’s behind LPL’s decision to slash its ticket charges for advisors.

However, payouts that advisors receive on assets held at Fidelity, Schwab and TD Ameritrade are slightly lower due to the increased compliance costs for assets held away.

IFP’s average payout ranges from 93% to 97%.

Jeremy Gottlieb: There’s not a day
that goes by that I’m not
hearing from them.

While a potentially higher payout is a bonus, IFP leaders think that the firm’s added services are also a reason why advisors join them.

“The payout is nice but a lot of people come to us because we’ll help them with the transition and we’ll do a lot of work and we have due diligence that we’ll perform. There’s a number of other tangible benefits of being part of us,” says Jennifer Tanck, president of IFP.

New to the team

Jeremy Gottlieb, an advisor for 25 years, recently left First Allied Securities following a management buyout and joined IFP with about $130 million in assets. Gottlieb specializes in retirement income options for clients. He is based in Carlsbad, Calif., and IFP anticipates his revenues will be about $900,000 to $1 million annually.

Gottlieb looked at a number of firms but says he liked the way IFP was structured, particularly the technology and services end.

He says he was attracted to the hybrid element because he has a number of clients who have assets at Fidelity and he felt that working with IFP would make it easier to handle those assets. The bulk of his assets will be at LPL, but about a quarter of his total assets will be at custodians, including Schwab, Fidelity and TD.

“The people there are phenomenal,” Gottlieb says. “IFP does fantastic support. There’s not a day that goes by that I’m not hearing from them asking me if I need any help.”