What is the story with Derek Bruton's sudden LPL departure?

Brooke’s Note: LPL is a great company that tends to keep its executive around a long time. Derek Bruton has had a 23-year career of long stretches at successful companies. When a great company and great executive part ways, you are, as the one with a good relationship to both, left feeling like the child of freshly divorced parents, bewildered and not knowing how to feel or act. I have known Derek quite well at Merrill Lynch, TD Ameritrade and LPL and I have covered LPL since 2000 but the two conflated in my mind over the past seven years. Understanding what happened is an attempt at closure in processing the divorce. This article doesn’t have all the answers but hopefully advances insight.

When LPL Financial 's Bill Dwyer left the company about a year ago, LPL did not seem to break stride. See: LPL’s Bill Dwyer decides to call it quits and Robert Moore is taking over his duties.

Not only did the Boston- and San Diego-based firm have, in Derek Bruton, another executive of Dwyer’s professional stature to step in and handle many of his duties, they also had, in Bruton, a man of Dwyer’s personal stature both physically (tall and imposing) and in the abstract sense of presence. Not to mention one in his seven figure salary class.

Mid e-mail

But now Bruton himself has stepped aside, as first reported by Bruce Kelly at InvestmentNews, under unclear but clearly sudden circumstances that seem to leave a void that will be harder to fill. Dwyer’s position was never replaced per se — mostly just absorbed. LPL says that next week it will announce who will take over from Bruton. The company emphasizes that the duties will be filled from within. See: At the $50 billion mark, Derek Bruton discusses how LPL’s hybrid unit became 'wildly successful’ and why Fortigent helps put the $100-billion target closer still.

Bruton was the top executive responsible for the oversight of the relationship managers who keep the bulk of 14,000 LPL-affiliated financial advisors happy (He did not oversee the institutional advisors.) It’s a job he was known to fill artfully in commanding respect yet in looking after the interests and dignity of underlings.

That his time at LPL — with no warning signs and a cryptic explanation — is over made literally everyone consulted on the matter for this article express a degree of surprise or shock. People describe being in mid e-mail chains with him. See: LPL brings aboard a godfather of clearing business.

Shock and mystery

Ryan Shanks: I’m blown away. Actually
sent him a message to see
if I could help in any
way.

Ryan Shanks, chief executive of Finetooth Consulting echoed all the sources I contacted.

“I’m blown away. Actually sent him a message to see if I could help in any way.”

A human resources expert who asked not to be named says that the sense of shock and mystery surrounding Bruton’s departure was only stoked by the unusual language used in the written by LPL in a Form 8-K, a document filed with the SEC reporting events of importance to shareholders. This is one of the most common types of forms filed with the SEC, used for bankruptcies and personnel changes in top ranks.

Here are those 8-K lines:

“On April 4, 2014, LPL Financial LLC (“LPL Financial”), a wholly owned subsidiary of LPL Financial Holdings Inc. (together with its subsidiaries, the “Company”), permitted Derek Bruton to resign, effective immediately, in light of the Company’s concerns about Mr. Bruton’s interactions with other employees. Mr. Bruton served as Managing Director, Independent Advisor Services, of LPL Financial. The separation was not related to the Company’s performance.”

No meeting of minds

In most cases, the HR expert says, a company merely says that an executive resigned rather than including the extra information that the were “permitted” to resign. Nor are communications typically so explicit about what triggered the resignation, in this instance “interactions”, and what did not trigger it, in this case “performance.”

When I asked Betsy Weinberger, spokeswoman for the firm, about the matter, she referred to the 8-K statement and added: “The company intends to fill the position of Managing Director, Independent Advisor Services, from a slate of internal leaders, capitalizing on the strong talent we have developed at LPL. We anticipate announcing this new leader by the end of next week.”

Bruton responded by e-mail to a request for comment and characterized the events leading to his departure as revolving around a “disagreement.”

“Recently senior management and I had a disagreement over some internal matters,” he writes.

Positive energy

That non-meeting of the minds put Bruton in a reflective mood.

“It allowed me to step back and look at all I had accomplished to date and where I wanted to go from here. In the short term, I will be taking some time to prioritize and recharge, then I will look for the next exciting opportunity.”

In response to a question about the whiplash and career setback he may have suffered, he responds:

“I am doing just fine. It’s funny, when these moves come up how you hear from so many people. I have had an outpouring of support from so many of those I have worked closely with over my 23 years in this business. It’s been amazing to have so much positive energy supporting me in this process.”

Bruton adds: “I had a great run at LPL over the last seven years and truly enjoyed the advisors and home office people with whom I worked. It was both challenging and rewarding leading the firm through an integration of three broker dealers and driving significant growth and profitability in the independent advisor channel, approximately doubling the number of advisors at LPL over that period of time.

I had tremendous support from an amazing staff and management team. It was personally and professionally exciting bringing my RIA experience to LPL and leading the incredible growth of the RIA Platform to over $60 billion in assets in just 5 years. All this helping the firm get public.” See: At the $50 billion mark, Derek Bruton discusses how LPL’s hybrid unit became 'wildly successful’ and why Fortigent helps put the $100-billion target closer still.

Fast-moving firm

Shares of LPL Holdings now trade in the $50 range, up from the mid $30s at the time of the IPO in January of 2011 giving the company a market cap of about $5 billion. See: 10 reasons why LPL Financial could pull off a hot IPO in a cold market.

Still, close observers say that the company’s fast growth, complex business plan, FINRA issues and adjustment to life as a public corporation has created a charged atmosphere at the company that can, directly or indirectly, make changes in the corporate executive ranks in a sense unsurprising.