LPL Policy Change

LPL Policy Change
LPL adjustments that affect outside RIA’s

For years there have been inconsistencies in the independent broker dealer space when it comes to outside RIA’s. Broker dealers differ vastly on whether they permit outside RIA’s, what outside custodians they allow and how much they charge on this business. LPL has been one of the more open architecture firms up until now. In a recent Investment News story, titled “Dan Arnold’s big gamble at LPL Financial” this LPL policy change is explained.

In the past, LPL allowed outside RIA’s to have full open architecture, meaning they could hold their assets off platform and would not be charged an administrative fee for that business. The LPL policy change that was announced to advisors recently, outlines a new structure where they will still allow outside RIA’s, but that at lease $50 million of assets have to be on the LPL platform. “LPL said that in the future it would require advisers who want to have an RIA outside of LPL to put at least $50 million of advisory assets under custody with LPL first”.

There is little doubt the LPL policy change is happening out of the necessity to become more profitable, but what isn’t known is how this will affect ongoing recruiting as their flexibility has been a draw for years.

Jodie Papike was quoted in the story discussing these changes and how LPL is more than likely taking a calculated risk.

“The change in policy doesn’t surprise me,” said Jodie Papike, executive vice president of Cross-Search, a third-party recruiting firm. “What will be interesting to see is if this change affects their recruiting. I’m sure LPL has evaluated this and is betting that any missed recruiting opportunities will be made up with higher profitability per adviser and continued opportunities with acquisitions.”

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