LPL Financial is making significant strides in narrowing the gap with wirehouse competitors by enhancing its alternative investment and banking services.
Chief Executive Officer Rich Steinmeier emphasized these developments during the Bernstein Strategic Decisions Conference, stating that the improvements are designed to better attract and retain financial advisors serving high-net-worth clients.
The expansion into alternative investments and banking represents a crucial growth avenue for wealth management firms aiming to deepen relationships with affluent clients and address a broader spectrum of financial needs. Historically, LPL’s limited capabilities in these areas posed challenges for advisor recruitment. “The primary reason wirehouse advisors might have overlooked us was our restricted banking services,” Steinmeier acknowledged. “We’re addressing that, and by mid-next year, this will no longer be a barrier. Our second focus has been alternative investments.”
Wirehouses, a term referring to major brokerage firms such as Merrill Lynch, Morgan Stanley, UBS, and Wells Fargo, have traditionally offered comprehensive banking and alternative investment services. Steinmeier, who joined LPL in 2018 after a tenure at UBS, highlighted how LPL is evolving to compete effectively in these domains.
A Three-Pronged Approach to Alternative Investments
LPL’s strategy for enhancing its alternative investment offerings involves three key initiatives. The first step was partnering with SS&C, a leading technology provider, to enable the custody of alternative investments. This move allows advisors to consolidate their clients’ alternative assets within LPL’s ecosystem, encompassing hedge funds, private equity, and private credit.
The second component focuses on expanding the inventory of alternative investment options available to advisors. “We’re increasing access to products that advisors can integrate into their clients’ portfolios,” Steinmeier explained.
Finally, the firm has streamlined the investment process through technological advancements like electronic signatures. Earlier this year, LPL launched “LPL Alts Connect,” a platform designed to simplify advisor access to alternative investments. The initiative also strengthens LPL’s partnership with iCapital, a fintech leader specializing in alternative investment solutions.
These improvements aren’t solely aimed at attracting new advisors; they also enhance the capabilities of LPL’s existing network of 29,000 financial professionals. Many of these advisors may not have historically utilized alternative investments to the same extent as their wirehouse counterparts. To bridge this gap, LPL has established a 22-member team dedicated to supporting advisors in incorporating alternatives into client portfolios. “This team works directly with our advisors to optimize portfolio construction using alternative investments,” Steinmeier said.
Strengthening Banking Services
While the company’s banking capabilities still lag behind those of its wirehouse rivals, LPL is taking deliberate steps to close the gap. Unlike wirehouses, LPL is not owned by or affiliated with a bank. Instead, it collaborates with banking partners to offer a range of services, including lending products and cash management solutions tailored to the needs of high-net-worth clients.
Steinmeier provided fewer specifics about LPL’s banking strategy but reaffirmed the company’s commitment to evolving these services. “We understand that robust banking solutions are integral to competing in the wealth management space,” he said.
A Transformative Acquisition
LPL Financial’s efforts to strengthen its offerings are part of a broader growth strategy that includes organic expansion and strategic acquisitions. The firm, headquartered in San Diego, manages approximately $1.8 trillion in brokerage and advisory assets, making it one of the largest wealth managers in the United States.
A recent milestone in LPL’s growth journey is its agreement to acquire Commonwealth Financial Network, an independent broker-dealer with approximately 2,900 advisors and $285 billion in assets under management. Steinmeier described the acquisition as a “watershed deal” for LPL, citing Commonwealth’s strong brand and reputation for delivering high-quality services to advisors. “This acquisition not only bolsters our scale but also enhances our ability to meet the evolving needs of financial advisors,” he added.
Expanding Horizons for Wealth Advisors
The strategic enhancements to alternative investments and banking capabilities reflect LPL’s broader mission to empower financial advisors. By providing access to a wider array of tools and resources, LPL aims to help advisors deliver differentiated value to their clients.
“Our goal is to be the go-to partner for advisors who want to serve affluent and high-net-worth clients,” Steinmeier said. “We’re committed to eliminating barriers and equipping our advisors with the solutions they need to compete and succeed.”
As the wealth management industry evolves, LPL Financial’s efforts to close the gap with wirehouse competitors underscore its dedication to innovation and advisor success. By investing in alternative investments, enhancing banking capabilities, and pursuing strategic growth opportunities, LPL is positioning itself as a formidable player in the competitive landscape of wealth management.
