LPL Financial is seeking to renegotiate the terms of its agreements with numerous Office of Supervisory Jurisdictions (OSJs) within its sprawling network of independent brokers. Over the last few weeks, the firm has met with its OSJs, which it refers to as large enterprises, and asked them to sign non-disclosure agreements (NDAs) while outlining some of the details of the new arrangement, which could be unveiled as early as next Monday.

An LPL official confirmed that an announcement was likely this week. He did not provide any details but said some of the reports being circulated among third-party headhunters were inaccurate.

According to third-party recruiting sources who have talked with several OSJs in the LPL network, the new terms would alter agreements with new recruits dramatically to LPL's advantage. Some OSJ executives are concluding the move will force them to reinvent their business models.

The move comes at a time when many broker-dealers have tried to cut payouts to reps in the wake of margin pressures resulting from the DOL's pending fiduciary rule. Last month, Raymond James reduced payouts for many reps and other B-Ds reportedly are exploring similar moves.

It was unclear whether LPL would seek to renegotiate payout arrangements with existing reps within its OSJ network or elsewhere, though recruiters said they had not heard of any imminent plans on this front. But the firm was expected to continue to look for ways to increase profitability.

Complete details of the new agreements reportedly are still being finalized. However, the terms could make it more difficult for OSJs in the LPL network to compete against OSJs at other firms and against LPL itself.

Sources said that new recruits with less than $50 million to $60 million in assets joining an LPL-affiliated OSJ probably would be required to park those assets at LPL's corporate RIA, not the OSJ's hybrid RIA. In recent years, LPL's growth engine has been fueled by attracting brokers from firms like Merrill Lynch, typically with about $50 million in assets.

One source estimated that future OSJ recruits fitting this profile could see their payouts slashed from as high as 92 percent currently to as low as 72 percent. It isn't clear if some of the largest super-OSJs affiliated with LPL would be able to negotiate their own side deals.

An official at LPL acknowledged there would be changes to the payouts next week but said the figures being discussed among these recruiters were inaccurate. The payout ratio "we talk about," according to this official, is "90 percent for brokerage and advisory accounts and 100 percent for hybrid advisory accounts." However, OSJs typically take a portion of those reps' payouts in return for various services they provide.

A driving force behind the payout repricing plan is pressure from Wall Street on LPL's new CEO, Dan Arnold, to boost profitability. When LPL rolled out its hybrid platform in 2009, then-CEO Mark Casady was running a private company that was seeking to ramp up top-line growth in anticipation of the firm's initial public offering.

Consequently, Casady created very attractive terms for OSJs to engage in aggressive recruiting activities. Super-OSJs were incentivized to earn as much as 12 percent on new recruits' revenues. Some received stock options in the pre-IPO period. It's a very different world today as Arnold is forced to answer to restless and sometimes disgruntled public investors seeking a higher return on their investment.

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