Commonwealth loses a few advisors ahead of LPL deal

As LPL Financial’s purchase of Commonwealth Financial Network nears, a steady trickle of advisors are leaving to set up shop elsewhere.

The moves so far — including an advisor joined LPL’s independent broker-dealer rival Osaic and several who are founding registered investment advisories — are largely in line with expectations. Recruiters and other industry experts had predicted that some Commonwealth advisors would choose to leave the smaller firm, with its headcount of nearly 2,900, rather than join the much larger LPL, whose advisor tally is pushing 30,000.

In one of recent departure, Brent Bridenback, an advisor with 21 years of experience, left Commonwealth for an affiliation with its rival Osaic. Bridenback is the founder of Bridenback Wealth Management in Cle Elum, Washington, and manages roughly $90 million for 26 high net worth families, according to a statement on his move.

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Kristen Kimmell, the executive vice president of business development at Osaic, said in an interview Tuesday that she can’t say for certain that LPL’s coming purchase of Commonwealth was what drove Bridenback and his team into Osaic’s arms. But the announcement of those acquisition plans, at the end of March, certainly “accelerated, expedited” the move, she said.

“So if change is taking place, it was just a little bit of their mindset to have a voice in that change, or at least make sure they’ve explored the options to have some choice in what that change would be,” Kimmell said.

In its press release, Osaic said Bridenback chose it because he wanted a “more independent, advisor-centric environment.”

“Their commitment to supporting independent advisors with industry-leading technology and comprehensive planning resources has been a key differentiator for me,” Bridenback said in the statement. “Most importantly, Osaic gives me the ability to maintain the high level of service my clients have come to expect — without disruption.”

Advisors also leave to start RIAs

At least three Commonwealth teams have filed paperwork to set up their own RIAs rather than stick with the firm through its acquisition by LPL. 

David Coult and Justin Miller, who have been with Commonwealth for 13 years, are leaving to start Milestone Financial Associates in Macungie, Pennsylvania. Separately, Adam Spiegelman, who has been at Commonwealth for seven years, is starting Spiegelman Wealth Management in Walnut Creek, California. And the founders of Odyssey Group Wealth Advisors, who came together in 2018 at Commonwealth, have registered their practice as an RIA operating out of Lancaster, Pennsylvania. All three departures were first reported by the industry publication AdvisorHub.

When announced in March, LPL’s plans to buy Commonwealth in the second half of the year prompted much speculation on how many advisors such a larger acquirer would be able to retain from a firm known for its cozy, small-firm feel. LPL executives have set the ambitious goal of moving over at least 90% of Commonwealth’s 2,900 advisors and $285 billion in client assets.

Various industry recruiters have predicted that most Commonwealth advisors would remain in place through the acquisition to see if LPL keeps its promises to maintain most of their firm’s distinguishing features. Among the attributes LPL executives have pledged to retain are Commonwealth’s brand, technology and general way of doing business.

If any advisors were going to depart, several recruiters have said, they likely had already been considering leaving to form an RIA. The recent round of departures conforms with that prediction, said Rick Rummage, the CEO of the recruiting firm The Rummage Group.

Commonwealth advisors likely to know if they like LPL within 6 months

Rummage said the number of Commonwealth advisors who have long been thinking of leaving to start an RIA and were given an extra push by LPL’s purchase plans is probably small. Like other industry recruiters, he thinks most Commonwealth wealth managers will stay with the firm through the acquisition to see whether they like being at LPL.

Those who won’t be happy will probably know it within half a year.

“Typically, from my experience, it’s within six months of the total integration that the bleeding will stop, and firms will go back to normal attrition rates,” Rummage said. “Then you are talking less than 1% of attrition a year. But it takes most advisors up to six months to figure out it’s not that bad.”

LPL’s rivals have meanwhile not been shy about making direct appeals to Commonwealth advisors. Cetera Investment Services President Todd Mackay has published online two “open letters” questioning LPL’s ability to live up to its promises and asking Commonwealth advisors to consider his firm as an alternative.

Osaic CEO Jamie Price has also confirmed he has been talking to many at Commonwealth about coming over, while casting doubt on whether a small firm can keep its distinguishing features after being absorbed into a concern as large as LPL. 

On Tuesday, Kimmell said that LPL’s acquisition plans have at least given many Commonwealth advisors reason to step back and consider their options.

“And it has been a great opportunity to really tell the story of Osaic,” Kimmell said. “In talking with Commonwealth advisors, I think there are a number of things where there’s a definite match and that work really well for them.”

Avoiding the dreaded need to repaper

Top of that list, she said, is Osaic’s custody relationship with Fidelity Investments’ National Financial Services unit. Commonwealth advisors already custody their clients’ assets — or hold them for safekeeping — with NFS. So moving them over to Osaic would not entail the laborious process of repapering that so many advisors dread when changing firms.

LPL, for its part, has said it will be able to avoid repapering with a majority of Commonwealth advisors using what’s known as negative consent. That system allows wealth managers to move assets from one custodian to another without clients having to give their approval, just so long as they don’t object.

Kimmell said Osaic’s other points of appeal include its technology and the various ways wealth managers can join it — as independent contractors, RIAs or direct employees. Banks and credit unions can also receive brokerage support for their advisors through Osaic’s institutional division.

Many independent broker-dealers, including LPL, have similar affiliation options. Their goal is often not only to give outside advisors reason to come to them from rivals but also to prevent their own advisors from leaving by allowing them to change how their practice operates without changing firms.

“How will it look as their business continues to grow and evolve?” Kimmell said. “Are they looking to make a change? Maybe not today, but maybe a few years down the road in their business model, type, and did they have the support, the flexibility to be able to do it.”

FINRA numbers on brokers going RIA

The option of dropping a brokerage affiliation and starting an RIA remains popular. 

The Financial Industry Regulator Authority, the broker-dealer industry’s self-regulator, reported in the latest edition of an annual snapshot on Wednesday that just over 4,000 registered representatives either dropped their broker licenses or abandoned their dual status as both brokers and advisors. 

Those wealth managers are now registered solely as investment advisors with the Securities and Exchange Commission or state regulators. But the brokerage industry also saw gains. 

FINRA reported that the number of representatives affiliated with broker-dealers hit 634,508 last year, showing its third year of growth after several years of losses. Slightly more than half of them, 323,039, were dually registered as brokers and advisors, according to FINRA.

In seeking to distinguish itself from LPL, Osaic can in no way claim to be a small firm itself. It has affiliations with more than 11,000 financial professionals and $700 billion in assets under administration. 

Its $4.43 billion in annual revenue in 2023 placed it third in Financial Planning’s annual IBD Elite ranking of the largest independent broker-dealers. The firm came in behind only Ameriprise, with $6.45 billion in annual revenue, and LPL, with $10.05 billion. 

Osaic has had its share of departures

Osaic itself has contended with notable departures in recent months, including large teams that decamped to Commonwealth, despite its looming acquisition by LPL. Last month, Patrick Funke & Associates, a firm in Phoenix, Arizona, with $430 million under management, announced it was joining Commonwealth Financial Network from Osaic. About a week after that, Angelo Planning Group, a 30-member practice managing $1.5 billion in Rochester, New York, said it left Osaic for Commonwealth.

Osaic has said many of the departures have fallen in line with its own expectations following its consolidation of nine broker-dealers that had formerly operated separately under its brand. That “Journey to One,” as Osaic has deemed the process, was completed early this year.

Kimmell said Tuesday that Osaic has gone through its transition period and can now present itself to advisors as an island of stability within an industry in which acquisitions remain frequent.

“As the industry consolidates, I think that’s something that matters to them, to ensure that if they make a change, that’s different than going to the acquiring firm: Is it another firm that could be acquired in a short period of time?” Kimmell said. “Or is it with that partner that they can find that has that scale to be able to grow with them into the future?”