LPL is said to play hardball

NEW YORK — LPL Financial Services is playing hardball.
Officials at the firm reportedly made it clear to competitor National Planning Holdings Inc. that it needs to step away from recruiting registered representatives from Pacific Life Insurance Co. or it will face consequences.
Industry observers said that many of those recruiters were talking to and negotiating with reps and advisers affiliated with the three Pacific broker-dealers LPL is acquiring.
According to advisers, executives at rival broker-dealers and recruiters, officials at LPL of San Diego and Boston this month told executives of NPH’s parent company that they had to rein in the recruiters at National Planning Holdings broker-dealers.
National Planning is a Santa Monica, Calif.-based network of four broker-dealers owned by Jackson National Life Insurance Co. of Lansing, Mich.
Failure to comply would result in LPL’s pulling Jackson’s insurance products from its network of 7,900 affiliated reps, observers said.
When asked about the alleged hardball tactics, officials at both LPL and Jackson National said that business remains usual between the two.

“I’ve got 165 vendors in the system,” said Bill Dwyer, president of LPL’s independent-adviser-services division. “We’re an open-architecture shop.”
Mr. Dwyer declined to comment on recruiting policies in general but added that LPL has long-standing relationships with insurance companies that own broker-dealers.
Tim Padot, a spokesman for Jackson National and National Planning Holdings, echoed Mr. Dwyer’s statement.
“Jackson has a long-standing and excellent relationship with LPL, and today, the partnership is stronger than ever,” Mr. Padot wrote in an e-mail message. “We have a lot of respect for the LPL organization, and we look forward to a mutually productive relationship for years to come.”
Meanwhile, reaction from advisers to LPL’s tough mandate ranged from severe disappointment to outrage.
‘Independence’ undermined
“It certainly flies in the face of what our industry is all about: independence for the client and the rep,” said one adviser affiliated with Mutual Service Corp. of West Palm Beach, Fla., who asked not to be identified. LPL is “acting awfully big right now.”
After months of negotiations, LPL, the largest independent-
contractor broker-dealer in the industry, said at the beginning of March that it was acquiring three broker-dealers owned by Pacific Life Insurance Co. of Newport Beach, Calif. Along with Mutual Service Corp., the other broker-dealers were Associated Securities Corp. of El Segundo, Calif., and Waterstone Financial Group of Itasca, Ill.
“Essentially, LPL played its cards, and NPC folded,” said another adviser affiliated with Mutual Service Corp.
He was referring to National Planning Corp., the largest independent-contractor broker-dealer owned by Jackson National. “Personally, I think it’s atrocious.”
In 2006, LPL generated $1.7 billion in gross revenue, while the broker-dealers of the National Planning Holdings network generated $492.7 million.
To the dismay of many industry executives, National Planning Holdings currently is offering top advisers an astounding 42.5% upfront bonus as part of a recruiting package. That deal far exceeds the industry norm, executives and recruiters said, and is forcing some broker-dealers that never before made offers to pony up for recruits. Although some firms offer no upfront bonuses, others may offer up to 10%, industry observers noted.
In its first significant step to becoming a public company, a majority of LPL was acquired by two private-equity firms in October 2005.
Based on recent meetings, Mr. Dwyer was optimistic that the overwhelming majority of registered representatives and advisers affiliated with the three Pacific Life broker-dealers would join LPL.
LPL is self-clearing, and the deal, which is scheduled to close in June, is structured so those reps remain on the platform of Pershing LLC of Jersey City, N.J.
Out of 2,200 advisers currently affiliated at those three broker-dealers, Mr. Dwyer estimated that only 20 were certain about disliking LPL and wanting to leave.
He recently attended a conference of advisers affiliated with Associated Securities. Those advisers are “so sick of talking to recruiters at other firms, it’s unbelievable,” Mr. Dwyer said.
Some advisers affiliated with those broker-dealers disagree wholeheartedly with Mr. Dyer’s assessment.
“There’s an awful lot of guys at [Mutual Service Corp.] who are looking to leave,” said the second adviser affiliated with Mutual Service Corp.
This week, Mutual Service Corp. reps will have their annual meeting in Orlando, and advisers said they look forward to speaking to LPL officials.