LPL Financial Corp. said Wednesday it will consolidate operations at three of its affiliated broker-dealers on its own platform, a move that ends their prior relationship with Pershing LLC's clearing platform.
LPL's decision will effect roughly 1,700 advisors at Associated Securities Corp. of El Segundo, Calif., Mutual Service Corp. of West Palm Beach, Fla. and Waterstone Financial Group Inc. of Itasca, Ill. All three companies were acquired by LPL from Pacific Life Insurance Co. in 2007.
According to a July 10 regulatory filing with the Securities and Exchange Commission, LPL's move is part of a corporate restructuring plan aimed at enhancing service offerings and creating efficiencies. Affected advisors at the three broker-dealers will transfer their licenses and client accounts to LPL's clearing platform.
The integration process is expected to start immediately, pending final approval from the Financial Industry Regulatory Authority. It's expected to be completed by mid-September.
"To centralize all of our independent advisors under one platform enables us to dramatically improve their offerings," says Bill Dwyer, LPL's president of national sales and marketing.
Dwyer notes it's also a smart business move. "We'll start to see better operating costs over time through reductions in organization complexity and in duplication of activities," he says.
The company expects to take $67 million in pre-tax charges through 2010 for restructuring-related purposes including severance, retention benefits, contract termination fees, and account transfers. It also includes a non-cash impairment charge of $16.6 million.
An estimated 215 positions will be cut. Most of the restructuring is expected to be completed by year-end 2009, and to be wrapped up entirely sometime in first half 2010. LPL anticipates the restructuring to produce about $21 million in annual cost savings, with at least $6.3 million in savings this year.
"But the real driver of this is to help our advisors do more business," Dwyer says. "The way it pays off for us is if advisors grow their business."
LPL made the announcement on Wednesday and advisors at the three firms should receive their welcome kits on Thursday. Dwyer said the initial reaction has been mostly supportive. "Reaction ranges from those who are negative, and frankly, have been since the acquisition, to the lion's share who are saying 'there are many things I'm using at LPL that I like, and I want to see what this means to me and what will happen to my costs in terms of moving, compensation and other things,'" he says.