LPL Might Not Retain 90% of Commonwealth Advisors. Why That’s Not Necessarily a Problem

Eh, close enough, right?

LPL Financial purchased Commonwealth Financial Network last year, with a retention rate goal of 90%, a target that has been expressed both in terms of headcount and assets during earnings calls. As far as sheer advisor numbers go, roughly a quarter of the Commonwealth advisors have chosen to go in a different direction, with retention currently standing at 78%, according to a report from AdvizorPro and Muriel Consulting. The number could be even lower when all is said and done, as some of those advisors currently in the LPL system don’t actually plan on sticking around.

“You’re still going to see a large number of moves from now until Q3,” said Frank LaRosa, Elite Consulting Partners CEO.

Should I Stay or Should I Go?

LPL is the largest independent broker-dealer, supporting a network of over 32,000 advisors with more than $2 trillion in assets. They’ve even got Anna Kendrick doing more ads for them. But even for a firm with as much pull as LPL, retaining 90% of advisors from its $2.7 billion, all-cash purchase of Commonwealth seemed like a lofty goal. “[Commonwealth advisors] signed the deal, took the money, but nothing has been done yet,” LaRosa told Advisor Upside. “They haven’t transferred client assets from Fidelity to LPL.” He said any who leave the firm will likely have to return any retention bonuses they’ve received plus interest, but that, “most advisors don’t care, though, because it’s minimal compared to being at the right or wrong firm.”

Onboarding of the Commonwealth advisors is expected to be completed by the fourth quarter, so there’s still time for advisors to go elsewhere. “It’s become pretty clear by now that the 90% was pretty aggressive,” said Jason Diamond, president of Diamond Consultants. However, he added that 78% sounds low, and he believes that the percentage will increase this year. LPL declined to comment.

The AdvizorPro-Muriel report tracked departures between April 1 and Dec. 31 of last year. Out of 2,900 Commonwealth advisors, about 650 left: 

• Roughly two-thirds of those joined other broker-dealers, with Raymond James emerging as a standout destination. One out of every three advisors who changed firms chose Raymond James, attracted by early engagement, competitive transition packages and a familiar culture.
• The rest, roughly one third, took a different path, moving into the independent RIA space. 

“Those are people who have outgrown the model,” Diamond said. “They’re thinking, ‘My broker-dealer was just bought. Do I really want to hop in bed with another?’ The RIA space is the natural evolution. It’s more freedom, more control, more autonomy.” 

Where’d You Go? I Miss You So. Ultimately, it might not even matter if LPL’s retention rate falls below its initial goal. “It’s still going to be a very successful transaction,” LaRosa said. “Even if it falls another 10%, that’s still 2,000 stellar financial advisors. What’s wrong with that? Congratulations.”