LPL Financial plans to offer about $100 million in retention incentives to reps affiliated with the broker-dealers owned by National Planning Holdings, which LPL bought earlier this week.
 
“We estimate roughly $100 million” for the retention effort, depending on the level of business brought over to LPL, said Matt Audette, LPL’s chief financial officer, on a call with analysts Wednesday.
 
Most of that amount will be in the form of forgivable loans, probably with three- to five-year terms, he said. Deals will be determined on an individual basis.
 
LPL will also be picking up the cost of account-closure and transfer fees, and moving accounts over automatically unless clients respond to a negative-consent letter. And the firm is promising an automated account repapering process.
 
In addition to the retention deals, the firm anticipates $40 million to $60 million in on-boarding costs.
 
LPL expects the account transfers to be complete by mid-2018.
 
NPH intends to close its four B-Ds, so the assets will need to move, said LPL spokesman Jeffrey Mochal in an email. “We’ve made it easy for those assets to move to LPL,” he said.
 
The NPH network, which has 3,500 representatives and $120 billion in assets, includes INVEST, Investment Centers of America, National Planning Corp. and SII. 
 
Down the line, LPL is hoping to see its acquired brokers shift into a higher mix of advisory assets.
 
The NPH B-Ds have about three-quarters of their assets in brokerage accounts, compared to 55 percent at LPL.
 
NPH “advisors can use our capabilities to increase the share of client assets in advisory accounts, where appropriate,” Audette told analysts. NPH reps also have a higher percentage of their advisory assets with third-party managers.
 
In addition, they also have a higher share of brokerage assets held directly with product sponsors, Audette noted. LPL, which is planning to roll out a no-cost mutual-fund-only account, thinks it can bring more of those assets onto LPL’s own clearing platform.
 
Overall, by bringing packaged product assets inside of LPL, the firm will be able to generate higher revenue-sharing and record-keeping fees than the NPH firms currently get, LPL execs said.
 
Cash balances at NPH should also generate higher returns as those amounts are rolled into LPL’s bank-sweep programs. NPH has about $3 billion of client cash held in third-party money market funds. Cash-sweep programs have better economics for B-Ds, and currently pay higher rates to customers.