Adviser with $2.7B in AUM reverses course, drops plan to start own broker-dealer; says reasons to form B-D 'evaporated'
After reining in spending on technology development for a couple of years, LPL Financial LLC is spiffing up its tech offerings for its 12,799 registered reps and advisers. The improvements, to be rolled out early next year, include better reporting for clients, improved trading capabilities for advisers and a new mobile application for both clients and advisers.
And those sweeteners were enough to change the plans of LPL’s biggest rep, Ron Carson, to divorce himself completely from the firm by the end of 2011. In the spring, Mr. Carson said he wanted to start his own registered investment advisory firm by July and then launch his own broker-dealer by the end of the year.
At the time, he cited shortfalls in LPL’s technology as a reason to leave the firm. Mr. Carson’s practice, Carson Wealth Management, is the largest at LPL, with $2.7 billion in client assets under advisement.
Mr. Carson’s plans, however, changed in the fall, in large part due to LPL’s work toward developing technology for its advisers.
While Mr. Carson’s team at Carson Wealth Management moved clients’ accounts from LPL to the new RIA, CWM LLC, by the summer, his plans to create a new broker-dealer never got off the ground. And LPL’s coming technology offerings helped to change his mind.
“LPL is coming out with very exciting technology in the first quarter to help all of us run more-effective businesses,” Mr. Carson said in an interview this week. The new technology will be “more adviser and consumer friendly,” he said.
He declined to reveal details of the new technology. “I don’t want to steal LPL’s thunder,” he said. “But it’s going to be in a category that’s very important to us — it will be among the best of the best. It’s one of the most exciting technologies I’ve anticipated in a long time, other than my iPad 2.”
Mr. Carson also said that he considered buying a broker-dealer rather than starting one. In the end, he did not pursue that route because he did not “want to inherit someone’s liability.”
Mr. Carson said that less than 10% of the firm’s revenue derived from brokerage business such as securities transactions. “It’s not a significant percentage of the business but a necessary part.” LPL is also a custodian of the firm’s RIA assets.
LPL typically delivers what it promises, noted one LPL adviser, although the fast-growing firm often needs time to absorb its most recent areas of expansion, such as acquiring a broker-dealer, before regaining its focus on other areas.
“The technology was getting a little stale,” said Doug Flynn, co-founder of Flynn Zito Capital Management LLC, which controls $290 million in brokerage and advisory assets. “I like the fact that they are going to freshen it up.”
Indeed, LPL spent about $50 million in technology development this year, an amount near or matching the firm’s all time highs for such spending. That’s up from $12 million in 2009 and $28 million in 2010, said Bill Dwyer, president of national sales with LPL.
Like Mr. Carson, Mr. Dwyer was tight-lipped about the specific changes and enhancements to the technology platform.
The firm, however, intends to roll out the changes during trips in the spring for top-producing brokers, he said. “What Ron is excited about is that we continue to expand out capabilities for advisers,” he said.
And technology wasn’t the only area of change and improvement at LPL that Mr. Carson said changed his mind about starting his own broker-dealer. The nation’s leading independent-contractor broker-dealer worked to streamline its compliance procedures, as well.
For example, Carson Wealth Management wanted to act as a subadviser for its own fund under the Investment Company Act of 1940, which regulates mutual funds.
“We added one compliance person and are working with LPL to streamline that compliance process,” Mr. Carson said, “The reasons we had to form our own broker-dealer evaporated.”
