Intro: Review of LPL Financial Advisors (What You Need to Know about LPL)


What is LPL Financial? As the largest organization comprised of independent financial advisors in the U.S., LPL Financial has a history which includes almost three decades of providing a range of financial services.

Throughout this history, there have been changes in scope and direction, as well as regulatory questions and criticisms. 

In a business world full of acronyms, some may be wondering, “What does LPL stand for in the first place?” The answer to that is relatively easy; it represents the merger of two brokerage firms in 1989: Linsco (est. 1968) and Private Ledger (est. 1973).

Since that time the number of LPL advisors has exploded, reaching more than 14,000 financial advisors. Main offices for LPL exist in the following cities:

  • Boston
  • Charlotte
  • San Diego

These are just the three central hubs for LPL, with satellite offices and LPL advisors existing in other states across the country.

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The financial performance of LPL includes the following, as reported by IBG Financial Advisors:

  • Almost $500 billion in advisory and brokerage assets
  • Almost $2 billion in advisory assets
  • More than $4 million in net revenue
  • Approximately $4.5 million in funded accounts
  • More than 740 industry partners

Numbers like these might make you think that it would be easy to perform a successful LPL advisor search. Individuals can search directly from the LPL website or inquire about an LPL advisor at their banking institution of choice to see if it is affiliated with LPL.

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How Does LPL Financial Work?

The simplified end-game of LPL Financial is to connect clients with opportunities to invest in stocks, bonds, and other options. As a registered investment advisor and broker/dealer, LPL advisors can offer both advice for investments and brokerage services. Brokerage services can include the following:

  • Advisors can take customer orders and complete transactions.
  • Advisors can make recommendations to clients as to when to buy, sell, or wait on securities.
  • Advisors can provide investment custodial services.

When LPL advisors are in the advisory role, this is often done through an asset-based fee. LPL Financial fees are usually obtained via commission on every transaction related to a particular account. The level of commission most often depends upon the specific security or investment product selected by a client.

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Image Source: BigStock



The Services of LPL

Prospective clients might be wondering, “What is LPL Financial?” LPL Financial is registered with the Securities and Exchange Commission (SEC), and the advisors within it serve as fiduciary agents for the clients. Acting as a fiduciary means that LPL Financial advisors or legally obligated to give client-first advice rather than base their advice on whatever serves themselves best (i.e., whatever will bring in the highest commission). The following services are examples of some of the programs available through LPL Financial:

  • Discretionary wrap programs, including Strategic Asset Management (SAM) and Model Wealth Portfolios (MWP)
  • Mutual fund asset-allocation services, including the Optimum Market Portfolios program
  • Financial planning services

Some clients elect to pay for an “all-in” fee for management of their investments, meaning that the LPL advisor rebalances portfolios as needed. The LPL Financial fees for these types of services are usually negotiated between the investor and the advisor.



The LPL Financial Mobile App

The LPL Financial mobile app was introduced in 2013, and LPL has since launched a series of upgrades. These upgrades have been based on feedback from LPL advisors and have allowed some of the following capabilities:

  • Advisors can view their full book of business from their mobile devices.
  • There are increased opportunities for social media interactions.
  • Advisors have the ability to read news in a real-time format from Thomson Reuters.
  • Advisors have access to daily updates and information from the research department of LPL Financial.
  • Advisors can communicate with clients via a secure messaging system.

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Image Source: LPL Financial

Some independent reviews of the LPL Financial Mobile app report that one of the best improvements relates to the user interface. Joel Bruckenstein of Technology Tools for Today said that the simple look and sidebar menu make for an easier time navigating the site, which results both in less training time for companies to spend with their employees and a greater likelihood the app will be used.



LPL Financial Technologies

The technologies associated with LPL Financial span a two-fold approach. The first is the technology utilized to connect advisors with clients, such as with the LPL Financial mobile app. The second is the technology in place to support LPL advisors as they provide financial management to clients. Some of the technological tools provided to these advisors include the following:

  • Secure document storage
  • Management resources
  • Instant access to client account information
  • A range of investment offerings

Tools like these are a major draw to LPL, as advisors receive support of a large corporation while maintaining a certain level of independence.

LPL Financial Reviews

In recent years and months, LPL Financial news has included scrutiny and even legal charges. In May of 2015, the Financial Industry Regulatory Authority, Inc. set against LPL Financial a $10 million fine and ordered $1.7 million to be paid in restitution. These consequences were handed down due to “widespread supervisory failures.” These actions come on the heels of a $7.5 million fine in 2013 and an almost $1 million penalty in 2014.

The products that keep bringing these actions relate mostly to high-commission services that are sold by brokers — and are also not usually recommended. It appears there was consistent failure by LPL to supervise nontraditional ETFs, in turn lowering LPL Financial’s rating among financial organizations.

Toward the end of 2015, Moody’s Investors service downgraded the LPL Financial rating from Ba3 to Ba2 as the result of increased credit risk. This risk comes from the move of LPL to increase the number of existing credit facilities. The outlook at the time of the rating change was, according to Moody’s, “relatively stable” with predictable margins. Those interested in other information and reviews can also access these through the Better Business Bureau (BBB), although LPL Financial is not accredited with the organization.

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Impact of the DOL Fiduciary Ruling

In April of 2016, the Department of Labor ruled on fiduciary matters for investing; the government claims that the millions of dollars investors spend each year are unnecessary and excessive for the services rendered.

LPL advisors will now have to be able to prove that the advice they give for services such as retirement planning is priority over their own personal gains. Advisors will be required to do the following in order to be in compliance with the regulations:

  • Recommend to clients investments in the best interest of each particular client when planning 401(k) management
  • Put the needs of the client first when offering advice on individual retirement accounts
  • Have advisors who accept commissions or revenue sharing to sign best interest contract exemptions (BICE)

LPL Financial fees will likely have to be restructured at some levels to account for these regulations. While these measures might seem like givens, the reality is that the prior guidelines only required advisors to offer suitable advice, not necessarily financial planning advice that was in the best interest of the client.

It will be a matter of restructuring and waiting to see if the new approaches necessary at LPL will still provide LPL advisors with the opportunities they need for business and potential clients with enough trust to put their monies in an LPL-recommended investment strategy.



Future Outlook for LPL Financial

The stock prices for LPL Financial have fluctuated, as stocks tend to do. However, even after a significant stock buyback’s intent to raise share prices, prices continue to fluctuate on a lowering slope.

Since its public offering, the stock prices have continued to close, on average, lower. The LPL Financial news regarding the buyback has had strong repercussions.

The stock buyback program, initiated by activist investor Marcato Capital Management, also unintentionally initiated a class shareholder lawsuit. The complaint claims that LPL failed to raise the price of stock and cost shareholders more than $100 million.

Because of the ongoing legal battle, LPL Financial has not yet commented directly about the allegations. Even without this legal challenge, LPL is facing other challenges as well:

  • Dismal growth reports
  • Stagnant numbers of new advisors joining LPL
  • A new fiduciary ruling from the Department of Labor

LPL Financial fees and practices may have to change as a result of these new challenges and the ruling. Change in the financial world can land anywhere on the spectrum — all the way from horrendous to wonderful. The important thing is to always do your homework before investing your money, and make sure that you trust the company (and people) that will be handling it.

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