When the COVID-19 pandemic hit in early 2020, many banks and credit unions had to close branch offices. And in an environment heavily dependent on lobby-traffic, which negatively affected the advisors and money management programs that sit inside those branches. As they lost that foot traffic, many institutions had to figure out ways to reinvent themselves, relying more on digital tools and virtual meetings to acquire new customers.
LPL Financial seeks to partner with institutions to help them recover from the pandemic and get through those changes. While the firm has served banks and credit unions for many years, it has only recently made a more concerted effort to support these institutions, as it sees growth in this channel.
In June, the firm acquired Waddell & Reed, Inc. Shaun Mihall, the former chairman of Waddell & Reed Financial, brought in the broker/dealer subsidiary of Waddell & Reed Financial to lead the institution’s services. And in early 2021, the firm launched the Institutions Business Strategy Department, led by Executive Vice President Kirby Horan-Adams.
Mihal says the institutions are doing fine; From February 1, 2020, through January. As on October 31, 2022, firms backed by LPL increased their assets under management by about 48% and revenue by 42%.
LPL currently serves about 800 institutions out of 3,000 advisors, but if the firm adds institutions from the pending CUNA deal, it could grow to 1,150 institutions and 3,500 advisors by the end of this year. Mihal also says that the pipeline is strong, and the firm expects significant growth in this area.
“We are dedicated to the institution space, but as we look to the future and how businesses will continue to change, the needs of those businesses will continue to change and change over time,” Mihal said. “My role was to come in and really help those businesses understand as they change and add all of the support and services that we have internally and make sure that we deliver the best of our institutions. Keep evolving to meet the needs and how they are going to get more complex here in the future.”
In his first media interview since joining LPL, Mihal recently talked about WealthManagement.com About the development of B/D in the field of institutions, the steps his team is taking to better serve that channel and the opportunities in larger institutions.
The following has been edited for length and clarity.
WealthManagement.com: LPL has been in the field of institutions for a long time, but has recently made a more concerted effort to serve this channel. What does that look like?
Shawn Mihal: We are focused on pulling in more of our internal partners to take a deliberate view of how we engage with institutions. In early 2021, we organized an Institutional Business Strategy Department, which focuses on how we think about the growth of the institutional space and the needs of our institutions. So we’re aligning with those institutions to understand where they’re looking for the next three to five years and what are the tools and technology, digital experiences, what they need to do with those experiences for their customers and the journey of their customers. There is a need to develop those experiences.
We are also pulling in our business development people into the institutional sector. There is a significant amount of consolidation and growth accelerating through M&A; We are looking at how we can partner with other institutions to help them in their M&A efforts and ensure that when they do those transactions they have the opportunity to transition into business like no other. Not getting experience.
We are also focusing on how we support institutions with wealth solutions, and the industry has transitioned towards more holistic financial planning. So in an industry where things are a little more transaction-focused, we spent a lot of time building our resources and our wealth solutions teams to help our institutions as they transition through a more holistic financial plan.
WM: Why did LPL launch the Institutional Business Strategy Division and what is its role?
SM: LPL is the largest independent broker/dealer asset management firm; As we thought about the types of digital support tools, technology, and strategy, we recognized that the specific requirements for our institutions may be slightly different than those of our independent consultants. The department was created in order to facilitate innovation and strategy for our institutions.
WM: How is LPL helping institutions with M&A?
SM: Our business development folks actually work with institutions to determine what the transition to those funding programs looks like, to make sure we’re well aligned and make the transition as smooth as possible. Make it as easy as you can. This is new business that is going to come into the organization, so if we think of any of our financial institutions that are with LPL and they are acquiring a bank or credit union that has a funding program that is not with LPL So, these are the new properties that are trending and that we work very diligently to compete for. So we see that as a new business opportunity to help the bank win that business.
WM: How does LPL attempt to serve institutions differently than independent consultants?
SM: When we think about institutional experiences, those are probably the areas where we try to make a little difference. We are spending a great deal of time on the relationship side to understand the differences between the institutions we support and work with them to build their growth and strategy plans for the future . And then when we build those plans, we’re helping them connect with those internal resources.
We’re investing in those resources and equipment. We are making significant investments in technology within our ClientWorks platform with platform enhancements that make doing business easier as it relates to more seamless transactional experiences for end clients. We are focusing on our account visualization platform as well as the ultimate customer experience.
When we think about the tools that our institutions use, we’re expanding our annuity order entry tool and creating more tools and easier capabilities for institutions to add their technology to our account visualization tools .
WM: What does the Wealth Solutions team do?
SM: That team focuses on helping those institutions grow what we call “same store sales.” Helping those institutions understand what they have historically had in product portfolios, but also future opportunities. So, is he doing more in the way of bringing in the securities business, the insurance business, the advisory, its financial planning components. They are focused on deepening client relationships through financial advice and creating those opportunities for advisor-based experiences.
WM: How have institutions been affected by the pandemic?
SM: When the pandemic hit, we looked at how business was being done and the challenges associated with it, and then the resilience of institutions as they had to think about their business models and pivot to meet customers where they needed to be. . In 2020, many institutions had to temporarily close branch offices due to COVID. And when you have institutional experiences that take away from lobby-type traffic, it does have an impact. That’s why we were working with our institutions to move towards more digital experiences, and as we approach 2020, we have seen significant improvement in the organization’s business.
As we’re looking at things today, it’s getting back to the balance of in-person and virtual interactions with customers. As that pivot has taken place, it has provided more opportunities for institutions to broaden their vision of how they engage with customers. Over the past two years, we have seen incredible growth in net new assets, assets under management and overall revenue.
WM: On a recent earnings call, LPL CEO Dan Arnold said that large financial institutions, along with BMO Harris and M&T in 2021, have become a new source of growth for the firm. CUNA Mutual Group will transition its wealth management business this year. What is the opportunity in this space from where you sit?
SM: We think there is a tremendous opportunity there as these financial institutions look at the cost and competitiveness of the wealth management space and retain their own broker/dealers and investment advisors for their retail business. I think they see this as a great opportunity to outsource this to a larger scale player.
Hence LPL has created a scale business, which is able to be deployed in institutions like BMO and M&T. We believe we are well positioned to support those institutions and ultimately reduce their cost of transacting this business. So we see this as the potential for the LPL to play extensively in institutions that are looking for opportunities that reduce some of the cost and compete in this space.
We can bring to market the investments we are making in our wealth management platforms, and they can take advantage of all the tools as well as all the other resources that we bring to our institutions. So I think about relationships, business development, growth solutions, business solutions and innovation — those are all things that we’ll focus on in that institutional space that will help continue the experience of those institutions, but the experience for us. Will drive it too. Other existing clients in the institutional sector.