LPL dumping two branch offices with $20 billion in assets
LPL Financial Holdings on Thursday in its statement of second quarter earnings said it was cutting two branch offices – known as OSJs or offices of supervisory jurisdiction in the parlance of independent broker-dealers – with $20 billion in assets from its platform.
The company announced “a planned separation from two misaligned large OSJs on our platform that collectively have $20 billion of client assets, which began to off-board in July,” according to LPL’s earning release for the three months ending in June.
As of Friday afternoon, it was not clear who the “misaligned” branch offices were or how many financial advisors would be moving to another broker-dealer. An LPL spokesperson declined to comment when asked about the matter.
In response to LPL’s decision to cut the two branch offices, market sources said they were waiting for the giant firm to make such a move. For years, LPL has been trying to figure out for years how to make a better return on its large OSJs, which use other custodians like Schwab and Pershing, along with LPL, to custody registered investment advisor assets.
Large branch offices, or OSJs, at many independent broker-dealers typically have their own separate registered investment advisors that custody assets at multiple firms.
All IBDs, not just LPL, have a love/hate relationship with OSJs, industry sources said. IBDs love the number of financial advisors an OSJ can bring into the firm at one time, but they hate the power OSJs have to negotiate fees to their advantage.
It’s more profitable for an independent broker-dealer to work with smaller teams of financial advisors.
The $20 billion in assets represents 1.3% of LPL’s total assets, which were $1.5 trillion at the end of June.
Dan
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