By Andrew Welsch

LPL Financial's March 31 announcement that it will acquire rival Commonwealth Financial Network for approximately $2.7 billion came after intense negotiations that included a Florida beach-side meeting between LPL CEO Rich Steinmeier and Commonwealth founder Joseph Deitch. That phase may have been the easy part.

The success of the acquisition, which is expected to close in the second half of this year, now hinges on LPL's ability to retain Commonwealth's approximately 2,900 independent advisors, who operate their own practices.

"The advisors own their business," says Jodie Papike, CEO of recruiting firm Cross-Search in Encinitas, Calif. "They are independent contractors and if they decide this isn't for me, they'll go in another direction. Any time there is an acquisition, the firm that is acquiring has to convince the advisors to stay there."

San Diego-based LPL is working hard to do just that, offering retention bonuses and assurances that it will preserve Commonwealth's respected workplace culture and services. The company's retention rate may determine how successful the acquisition will be; it is aiming for about 90%. Commonwealth financial advisors oversee $285 billion of brokerage and advisory assets.

LPL is offering Commonwealth advisors customized retention bonuses that go as high as 50 basis points on an advisors' assets under management, though the figure could go higher depending on circumstances, according to people familiar with the matter.

"In addition to our commitment to a seamless conversion, we've added financial incentives, based on several factors including assets under management, revenue, asset mix, growth rate and tenure at Commonwealth," a company spokesperson said, adding that LPL is "deeply committed" to preserving Commonwealth's community, brand, and premium service while also giving advisors access to LPL's capabilities.

"LPL will provide to Commonwealth advisors an advanced experience that starts with a frictionless, paperless conversion," that will help with continuity for clients," the spokesperson said. The retention program is grounded in maintaining their community and industry-leading experience, as well as their all-in ongoing economics.

Competing offers. LPL's competitors aren't sitting idly by. They are offering Commonwealth advisors bonuses to switch firms and pitching their platforms as providing superior service, according to recruiters.

The maneuvering to win over Commonwealth advisors underscores the complicated nature of acquisitions in the wealth management sector where negotiating a deal is only one part of the battle. Without the advisors and the assets they oversee, the acquisition isn't worth much. Some wealth management acquisitions have gone awry, with advisors bolting to competitors because they didn't want to join the acquiring firm or because they received attractive hiring bonuses to move their clients elsewhere.

Rivals are trying to match or exceed LPL's retention bonuses, according to recruiters, who say it's become something of a feeding frenzy. "A lot of these people are valuable," says Bill Willis, a recruiter and CEO of Willis Consulting. "There are a lot of good advisors there and they are going to receive a lot of offers in excess of what LPL is offering."

Papike says monetary concerns are but one factor among many for advisors. Brokerage firms are also attempting to appeal to Commonwealth advisors on other grounds, sometimes in very public ways. Todd Mackay, president of Cetera Wealth Management, posted an open letter saying his firm could offer Commonwealth advisors a "concierge-level onboarding team" to assist with advisor practices moving to its platform and continuing support tailored to advisors' specific growth objectives.

Mackay also wrote that Cetera uses the same clearing provider as Commonwealth: Fidelity's National Financial Services. That can make it easier for Commonwealth advisors to transition to Cetera, if they chose to.

In a statement to Barron's Advisor, Mackay said Cetera has seen a surge of interest in his company's platform from Commonwealth advisors. "We're not retrofitting a model -- we're inviting advisors to a community that's already aligned with their values," he said.

LPL has said it plans to use negative consent for the vast majority of clients, thus avoiding the need for advisors to repaper accounts, a potentially tedious process by which advisors transfer assets and accounts from one firm to another.

Practice makes perfect. LPL has had a lot of practice successfully transitioning advisors to its platform, having acquired ten wealth management companies since 2017. Last year, LPL closed its acquisition of Atria Wealth Solutions, saying it expected to meet or exceed its retention target of 80%. In 2021, LPL bought Waddell & Reed's wealth management business and retained more than 95% of Waddell & Reed's advisors.

"I'm pressed to think of a firm that has done more acquisitions than they have in recent years," Papike says.

The Commonwealth acquisition is LPL's largest by assets under management.

Its promise to keep things the same may be appealing to Commonwealth advisors. "The Commonwealth community has high retention levels," Papike says. "It has been a privately held company for 46 years. They have a lot of advisors who have been there a long time and are happy with things the way they've been."

One Commonwealth advisor, who spoke on condition of anonymity, says he joined Commonwealth from a larger wealth management company because of Commonwealth's tight-knit culture, technology, and service for advisors. The platform helped him and other advisors grow their practices, he says.

"Commonwealth has some of the highest paid advisors in the industry," he says. "Not because they had the highest payout per se. It's because they were the most productive in the industry. They weren't bogged down with other details. If that culture goes away, the advisors will go away too."

LPL plans to operate Commonwealth as a standalone entity. And it has said it not only intends to preserve Commonwealth's culture, but copy it for LPL's existing 30,000 financial advisors.

"The way Commonwealth supports advisors is second to none," Steinmeier told Barron's in an interview earlier this month. Steinmeier added that he had long conversations with Commonwealth's leadership prior to the acquisition announcement about workplace culture and the industry's evolution. "It's not just exchanging vision statements and spreadsheets; you get to the heart of why you go to work every day," he said.

Frank LaRosa, a recruiter and chief executive officer of Elite Consulting Partners in Moorestown, N.J., is taking the long view. Commonwealth advisors may stick around to see how LPL manages the transition, LaRosa says. If things aren't satisfactory, advisors can always move to another firm. The real time to measure the success of the deal is in the future. "I think it'll be about retention two years from now," he says.

Write to Andrew Welsch at andrew.welsch@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 15, 2025 16:05 ET (20:05 GMT)

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