The hunt is on.

LPL Financial may have struck a monumental deal to acquire Commonwealth Financial Network last month, but competitors are swooping in on Commonwealth’s roughly 2,900 independent advisors. Recruiters from the likes of Raymond James, Wells Fargo, Morgan Stanley, and more, are reportedly looking to poach those advisors away from the largest independent broker-dealer in the nation. That has made Commonwealth advisors hot ticket hires, with some being offered lucrative deals to leave LPL.

“Anytime there’s a major broker-dealer acquisition like this, the competitors smell blood in the water,” said Jason Diamond, executive vice president of recruitment firm Diamond Consultants.

Call Me, Maybe

The all-cash, $2.7 billion dollar deal is expected to close later this year, with the goal of LPL retaining about 90% of Commonwealth’s advisors. Even with competitors actively trying to recruit those advisors, Diamond said LPL is likely to hit its retention goal — at least in the short term. “It’s an easy-button option for most of these advisors” he told Advisor Upside, adding that LPL is offering meaningful money in retention deals. Advisors also won’t have to repaper accounts if they go straight to LPL. However, many advisors may be looking for the exit after just a few years, he said.

“There is a cultural mismatch between LPL, which is as big as it gets, versus Commonwealth, which is all about culture and being boutique,” Diamond said. Already, industry efforts to court as many Commonwealth advisors as possible include:

• Cetera President Todd Mackay recently published an open letter, urging Commonwealth advisors to consider Cetera as their new home.
• “We’re having conversations with advisors from across the industry, including those from Commonwealth, who are looking to grow and affiliate with a leading brand and firm,” an Ameriprise spokesperson said in a statement to Advisor Upside.

One anonymous Commonwealth advisor told InvestmentNews that Raymond James is offering “over 100 of your trailing 12 months of compensation.” Another industry source told the outlet LPL is offering Commonwealth retention bonuses that are between 10 to 50 basis points on an advisors’ assets under management.

Please, Don’t Go. While some Commonwealth advisors might not end up at LPL, expect attrition levels to be low, said Samantha Sferas, COO of recruitment firm Terrana Group. “Acquisitions like this are usually in the works for two years before they’re ever announced,” she told Advisor Upside. “LPL is putting down billions in cash — that’s confidence and that confidence doesn’t just come from nowhere.”

Social Security’s insolvency is like a deer in the headlights. We’re driving the car — and while it is moving extremely slowly, we’re not braking or steering away.

The system’s Old-Age and Survivors Insurance trust is projected to dry up by 2033, amid longevity increases, lower birth rates, and FICA tax limits that haven’t kept up with a growing wealth gap. There could be at least a 20% reduction in benefits. Addressing the problem is a political third rail, since solutions include widely unpopular options such as reducing benefits, raising taxes, or a combination. As a result, no Congress or president in recent history has addressed the system’s basic problem of paying out more than it takes in.

That leaves financial advisors and their younger clients with some murkiness in planning assumptions — should, for example, a drop in Social Security benefits be factored in?

“My fear is, because people are now worried, you’re going to have more people claiming permanently reduced benefits at 62, just to get their hands on the money,” said Mary Beth Franklin, a Social Security specialist.

Aging Out

Eventually, politicians must do something. One step might be increasing Social Security’s full retirement age, which is currently 67 for people born in 1960 and later. But that would be a mistake, according to a former pension actuary who in a paper published this month said that “the unfair and unnecessary threat” of that would affect 80% of future retirees, “most of whom can ill-afford the reduction.”

Instead, author Edward Lane suggests merging the system’s two trusts and allowing them to receive money from the Treasury General Fund. He also proposes scrapping Social Security payroll taxes for employees and replacing those with across-the-board hikes in personal income tax. Lastly, boosting immigration into the US would bolster the system, since new arrivals would pay into the system and help compensate for an aging workforce and a declining birth rate. Even then, however, increasing taxes would be necessary, he noted.

Changes to the system could disproportionately affect lower-income workers. Figures last week from the Employee Benefit Research Institute show:

• Middle-income households have 35% to 45% of their preretirement income replaced by defined-contribution plans, such as 401(k)s, or IRAs.
• Lower-income retirees are more dependent on Social Security, and a 25% cut in benefits across the board would have a disproportionate effect on them.

Changes Needed. Andrew Biggs, a senior fellow at American Enterprise Institute who has proposed Social Security reforms, took issue with numerous findings in the paper. For example, increasing the full retirement age by two years would reduce the system’s long-term funding gap by 18%, but that doesn’t mean it couldn’t be part of a package of changes that keep the progressive nature of the system, meaning that it has a greater financial impact on lower-income workers.

“The fact that increasing the retirement age would be only a partial fix weakens the argument regarding progressivity, since other steps (that almost certainly would hit high earners more) also would be taken,” Biggs said.

Estate planning is never static.

In fact, it is often shaped by evolving legislation, shifting political climates and the unique needs of each client, and with President Trump now in his second term, estate tax policy has once again taken center stage. Potential reforms, ranging from a complete repeal of the estate tax to an extension of the Tax Cuts and Jobs Act (TCJA) provisions, could significantly impact estate planning strategies. With that in mind, advisors need to ensure that clients are well positioned regardless of what changes come to pass.

Open lines of communication, multi-generational education and strategic use of current tax advantages can serve as critical tools for advisors. By projecting alternate scenarios and staying ahead of any potential reforms, they can proactively help clients safeguard their wealth and legacies in what is shaping up to be an unpredictable economy and geopolitical situation.

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