Derek Bruton
Registered Rep.: LPL Financial bought three firms from Pac Life in the spring: Mutual Service Corp., Waterstone Financial Group and Associated Securities. How many of the approximate 2,200 reps from those firms have been retained? And what's the growth strategy from here?
Derek Bruton: We've retained nearly all of the advisors and production involved in the Pacific Select Group acquisition. As a whole, LPL Financial had a 98-percent retention rate in 2007. The affiliated broker/dealers will increasingly benefit from the scale that LPL Financial affords them, particularly in the areas of compliance, technology, client service and research. Furthermore, each broker/dealer will benefit from the purchasing power LPL has with different vendors and third parties.
RR: These firms are operating independently of LPL and keeping their own CEOs. They are even keeping their clearing relationship with Pershing instead of clearing through LPL's platform. Why not fold them completely into LPL Financial?
DB: These are three strong, independent firms that will continue to operate on their own. These firms will continue to retain their culture, strong geographical presence and brand identity, while gaining access to the benefits of the largest independent broker/dealer in the industry. For example, advisors at the affiliates now have access to LPL's new Group Health Coverage Plan through Healthcare Solutions Advisors (HSA), which provides lower health care costs to advisors, employees and their families.
Furthermore, we have solid leadership in place at these organizations. Steve Anderson has over 30 years of experience as the president and CEO of Waterstone. Andy Kalbaugh is the CEO of MSC, the former head of AIG's American General Securities, and has over 20 years experience in the business. We've also moved John Dixon from the CEO of MSC to head Associated. John has been in the business over 40 years, and is well-respected in the industry.
RR: Profit margins at insurance-owned b/ds like these are notoriously thin, what are the margins of these firms? What do independent firms in general need to do to increase margins?
DB: While I cannot comment on the specific profit margins at these firms, I will point out that LPL has, and will continue to, improve the bottom lines of each of these firms by using our scale and our leverage with partners in the industry.
