The importance of hiring and retaining advisor talent is an issue at the forefront of every financial services firm as teams have seemingly played hopscotch back and forth among Wirehouses, Independents, Hybrids, and RIAs. These advisors are in search of greater freedoms including the freedom to manage client accounts, business strategies, and compliance processes in a way more aligned with a customer-centric and advisor-success focused corporate philosophy. The latest firm to make changes in recognition of this advisor shuffle is LPL Financial. Ranked the number one Independent Broker-Dealer, LPL Financial announced this week that the company’s President of Business Development, Bill Morrissey, will be stepping down in mid-August.
The fact that Morrissey is leaving LPL does not come as a shock to those in the industry. Morrissey was the face, voice, and architect of LPL’s lack-luster retention strategy upon acquiring National Planning Holdings. Additionally, Morrissey’s recent press statements boasting about the financial strength and operational scale of LPL as its prime competitor differentiator, while simultaneously arguing that it was time to shrink the firm to maintain personal client relationships, left many confused. The waters were further muddied when LPL announced a requirement that incoming advisors must place $50 million dollars in business in the company RIA. What followed these back-to-back errors was a prompt ratcheting up of the LPL advisor migration – including the loss of seven financially lucrative Hybrid RIA practices – and what ultimately can be argued as the demise of Morrissey’s LPL career.
Here’s where things get interesting; however. As the replacement for Morrissey, LPL has tapped UBS’ Chief Digital Officer Richard Steinmeier. Prior to UBS, Steinmeier worked at Merrill Lynch in various positions that mainly focused on Advisor Center and Merrill Edge, which is Merrill Lynch’s call center program for the mass affluent. Key to this point, Steinmeier’s roles working in the mass-affluent “small account” world and call-center space display very little actual experience in the true advisor facing aspects of Merrill and UBS. Given that information, it is unusual that LPL’s own press announcement touts Steinmeier’s placement in the role of President of Business Development as a way to optimize how they attract and retain advisors, in addition to achieving new value across the entire firm itself.
Which leads us to one very important question – how on earth does hiring an executive that cut his teeth at large Wirehouses into the key leadership position at the number one Independent Broker-Dealer solve the problem of attracting and retaining advisor talent that craves a corporate culture thriving on more forward-thinking business practices?
The answer is – it doesn’t.
When firms talk about “unlocking new value” and “optimizing advisor retention strategies”, it has been my experience that what they are really talking about in poorly veiled semantics is “how do we make more money off of our advisors and client assets”. That sort of thinking on behalf of firm executives most often leads to reduced advisor compensation, higher client account fees, increased transition fees, and the list goes on. All of this in the name of increasing return on assets under management.
From there it is just a simple, logical deduction – higher fees for customers and reduced advisor compensation will lead to deteriorating advisor-client relationships. What naturally follows is a loss of revenue – not a gain – and subsequently a further loss in personnel as I predict LPL advisors will say enough is enough and decide to move on.
The continued confusion on the part of the executive suite – not just at LPL but at many large firms – just doesn’t make sense. In fact, when it comes to retaining advisor talent and, thereby growing your business revenue it’s an equation as easy as positive corporate culture + fair and dynamic compensation = advisor performance and satisfaction. Magical thinking, double talk, and a ‘let’s see if this idea works’ approach to internal strategic failures will not achieve a positive end result. Until the leadership at LPL and firms like them realize this, expect the child’s play and advisor hopscotch to continue.
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