The Pain Points of Wirehouse Advisors | Payouts & Support

Independence is becoming a bigger buzz-word than ever as financial professionals look to break away from wirehouses. Recently, an article from Financial Planning Magazine shared data from a Cerulli study that supports this wave toward independence.

The two main pain points that advisors often face within the wirehouse framework include: lack of flexibility in compensation and lack of support in business operations. These pain points may be beginning to overshadow “brand recognition” which has traditionally been the main benefit of wirehouses.

As advisors opt for more independence, they may also be looking to create their own niche and align their unique brand with their values and goals.

Advisors find wirehouse compensation complicated

Wirehouse advisors are paid based on the assets they generate for the firm. However, the way these assets are valued can be complicated and may not always be transparent. For example, some wirehouses may value certain assets more highly than others, or may not credit advisors for the full value of the assets they generate. This scenario can make it difficult for advisors to understand how their compensation is calculated and can lead to frustration and dissatisfaction.

Additionally, wirehouse advisors typically receive a lower percentage of the assets they generate than independent advisors. This is because the wirehouse takes a portion of the assets as a fee for providing services and support. The amount that the wirehouse charges can vary, but it is typically around 1-2%. This can eat into an advisor's earnings and make it more difficult to generate income.

Wirehouse advisors also have to contend with the fact that they may not always have access to the best products and services. This is due to the fact that wirehouse firms typically have preferred relationships with certain vendors, and may not offer the same level of choice and flexibility that independent advisors can access. This can limit an advisor's ability to meet the needs of their clients and may lead to lost business.

Advisors can’t find adequate support from wirehouses

Apart from compensation complications, advisors may feel unsupported and restricted in pursuing what’s best for themselves and their clients. Wirehouses may require the advisor to maintain a certain level of assets under management (AUM) and may charge the advisor for not meeting this requirement.

The wirehouse’s overriding goals are to make money and to grow larger. To achieve these goals, wirehouses tend to focus on recruiting new advisors and clients, rather than on providing support to existing advisors. Advisors with these types of firms often feel they are not supplied enough leads, or given the adequate resources to maintain and pursue progress amid ever-changing regulations, legal notifications, and more. Resources may be limited where they’re needed most, such as administrative support, operational support, and technology support for remote offices and client communication.

This lack of support can lead to advisor burnout as advisors start feeling perpetually overwhelmed. It may also lead to a lack of growth and personal development, which is essential for an advisor’s continued success. Eventually, this pain point may lead advisors to explore opportunities to breakaway from the wirehouse, or in more serious circumstances, leave the industry entirely.

How LPL helps wirehouse advisors breakaway to independence

Advisors who want to break away from the wirehouse firms and pursue their own path face additional challenges. These challenges often prevent advisors from being able to leave, and cause them to feel stuck. Alternatively, advisors who start a journey of independence are susceptible to common mistakes when going independent, and may realize too late that they weren’t adequately prepared.

Fortunately, at LPL Financial, we offer several resources, business models, and opportunities for advisors to find the support they need and the financial flexibility they want when building their business their way. When it comes to compensation, LPL offers:

• Providing highly competitive payouts. As a broker-dealer, custodian, and clearing firm all in one, LPL is able to provide highly competitive payouts at every service level. And, LPL’s scale often results in lower pricing and fees.
• No production quotas or compensation grids. Most of LPL’s affiliation models offer payouts between 90% and 100%.

Advisors find support through LPL’s business models 

When it comes to breaking away from the wirehouse and pursuing independence, LPL offers a wide-range of services and business model options advisors can choose from, as they define the level of support they want. Two LPL business models that help eliminate typical pain points for advisors include: 

• LPL Financial Strategic Wealth Services
  This hybrid model combines the best features of the traditional brokerage model with the fee-based model. Advisors can choose to receive a fixed annual fee for certain services or they can receive a variable fee based on a percentage of AUM. And, they’ll have a comprehensive wealth management platform that provides turnkey solutions and remote support from a team of specialists, allowing them to outsource key functions and free up their time to focus on client relationships.
• Linsco by LPL Financial
  Through this model, advisors experience a simple and straightforward way to do business, with one primary point of contact and no franchise fees. Advisors join LPL as an employee advisor while controlling their book of business and their brand. They also receive a competitive payout, with the ability to transition seamlessly should they decide to leave LPL. 

Additionally, all of LPL-affiliated advisors have access to a wide array of resources, including our investment research, and our award-winning technology and platforms.

Disclosures

The views and opinions expressed by LPL Financial Advisor(s) may not be representative of the views of other Financial Advisors and are not indicative of future performance or success. Neither LPL Financial nor the LPL Financial Advisor can be held responsible for any direct or incidental loss incurred by applying any of the information offered.