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Ease of shift from Pershing platform surprises reps who stayed with LPL

Ease of shift from Pershing platform surprises reps who stayed with LPL

00:00 01 October in In the News

by Darla Mercado and featured in Investment News
October, 2009:

Advisers once annoyed by LPL Financial’s decision to move brokers from three acquired firms off Pershing LLC’s clearing platform say they’re pleasantly surprised by how the independent broker-dealer has eased their transition.

Close to a month after LPL shifted some 1,700 advisers affiliated with Mutual Service Corp., Associated Securities Corp. and Waterstone Financial Group over to LPL’s own clearing platform, advisers who remained through the transition are saying the change really hasn’t been all that bad.

“The technology is faster and more efficient, and now I can contact people directly at LPL, whereas before, I had to go through Mutual Service Corp. and then to Pershing,” said William Hamm, president of Independent Financial Partners. “You never talked to the horse’s mouth.”

However, the platform change was indicative of a shift in broker-dealer culture for some reps who left before the transition took place.

“They didn’t tell us the truth as reps when they first took over, and that continued to the point when they decided to get rid of Waterstone and move everyone to LPL,” said ex-Waterstone registered representative Kevin Newman. He left in June to join Ausdal Financial Partners.

“I wanted a personal relationship with a broker-dealer,” he said.

An About-Face

The positive attitude among the producers who stayed represents an about-face from where a number of them stood as recently as July when LPL officially announced that it would move the advisers from those three affiliated broker-dealers to LPL’s clearing platform.

Back then, there was speculation among recruiters, executives at competing firms and brokers that the platform switch would spur 10% to 33% of the advisers at the three firms to walk away from LPL.

But three months later, recruiters are saying that their phones haven’t been ringing since the platform conversion took place.

“When LPL acquired the broker-dealers, they said they’d have an ongoing relationship [with Pershing], and when they changed, an awful lot of people were upset,” said Larry Papike, president and owner of broker placement firm Cross-Search.

“But I have to say that the way LPL did this, they managed to keep a lot of people, and I haven’t heard any rumblings.”

The controversy around the platform switch goes back to 2007, when LPL bought the three firms from Pacific Life Insurance Co. Back then, LPL indicated that it was committed to keeping those advisers on the Pershing platform.

The change stirred up anger among advisers, who felt that the platform change also signaled a shift in broker-dealer culture, leaving some reps feeling that the firm had lost sight of what mattered to the sales forces.

“With Mutual Service, it felt as if decisions were being made with some regard to how that would be received by the field force,” said Paul Hoffman, who left this July, prior to the Sept. 9 platform conversion. “The attitude I felt with LPL is that “it’s our way or the highway; we’re the biggest and the best.’”

To aid with the transition, LPL helped defray the cost of moving firms from the Pershing platform, but William Dwyer, president of national sales and marketing at LPL, noted that larger organizations cost more money to move. Some called this a “retention bonus” for larger offices, but Mr. Dwyer said the firm directly handled the costs.

Since he parted ways with MSC, Mr. Hoffman has been creating his own broker-dealer.

“The premise is to bring the service level back to what reps expect,” he said. “I mean that we have open and free communications, and that we’re not always making decisions based on what’s going to make the for the highest [initial public offering], and building out a more relationship-driven broker-dealer.”

Jon Henschen, a recruiter at Henschen & Associates LLC, noted that some of the LPL reps he has spoken with told him that “the large producers get lots of attention, but the bar keeps going up” and that anything below $500,000 in production leaves those producers off the firm’s radar.

“At Waterstone, there’s a lower average production per rep,” he said. “They’re not going to feel significant when they’re in the production range of $100,000 to $200,000.”

Waterstone defectors have fled to Ausdal, FSC Securities Corp. and other firms, he said.

Although advisers and recruiters say that most broker-dealers give special attention to large producers, Mr. Dwyer disagrees with the assertion that smaller producers get the brush-off at LPL.

“The reality is that there are Americans who live in small towns where advisers won’t do $1 million per year in production,” he said.

“We have more advisers over $1 million and more under $200,000 than any other firm. We want to support people in downtown Chicago as well as in Locust Point, Ind.,” Mr. Dwyer said.

He also noted that the firm has a business-consulting group — which has been expanded for 2010 — that gives advisers the feel of being at a small firm.

That service provides practices with relationship managers for direct communication and a place for advisers to call in with questions.

Some large producers also said that if they are unhappy, the relationship managers will go to bat for their practices.

Although advisers at large offices say they’re pleased, it isn’t as if they didn’t approach the change with some initial skepticism.

“I’ve Done A 180”

“I was unhappy, but I’ve done a 180 because LPL has done a 180,” said Frank Congemi, an adviser who was affiliated with MSC. “A lot of people realized that every company has its problems, but I’d rather go to a company that has the technology and the deep pockets to deal with those problems.”

Mr. Hamm said that other broker-dealers don’t offer the same capabilities.

“The broker-dealers that reached out to us could not provide the resources or payout we get at LPL,” he said.

Although LPL declined to provide information about how many advisers left between the July announcement of the platform change and the September rollout, Mr. Dwyer said that those who stuck around did so because of what the firm can do for them.

“Advisers who chose to stay did so because of the opportunity to get the access to more-robust services, not just to grow their businesses but to operate more profitably,” he said. “We create a value proposition that’s second to none, and that’s how we keep them.”

E-mail Darla Mercado at