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LPL Buys National Planning Holdings

The nation’s largest independent broker-dealer just got a whole lot bigger.

LPL Financial LLC, a wholly owned subsidiary of LPL Financial Holdings Inc. has acquired the independent broker-dealer network of National Planning Holdings, Inc. As of June 30, 2017, the member firms of the NPH network supported approximately 3,200 advisors across the country with over 1.5 million customer accounts and approximately $120 billion in assets under management.

According to a press release, the transaction is structured as an asset purchase with an initial purchase price of $325 million, though LPL stands ready to make a contingent payment between $0 and $123 million in the first half of 2018, based on the level of NPH’s business that onboards onto LPL’s platform. No contingent payment would be due if less than 72% of NPH production is onboarded, and the amount of the contingent payment increases on an interpolated basis for onboarded production in the range of 72% to 93.5%.

“The demand for financial advice continues to grow, and the independent model is the fastest growing part of the industry,” said Dan Arnold, LPL Financial president and CEO, in a press release. “This transaction adds to our scale, which we can leverage to provide LPL and NPH advisors with the capabilities they need, and the service they expect, at a compelling price.”

Under the transaction structure, LPL says it will onboard NPH advisors and client assets onto its platform rather than integrating NPH’s operations, although NPH will maintain its operations during the onboarding period. LPL says it plans to onboard NPH advisors in two waves that it anticipates completing by the end of the first quarter of 2018.

LPL expects onboarding costs of $40-60 million, including staffing to onboard NPH advisors and clients, account closure and transfer fees, and technology capacity investments that it says will be mostly complete by mid-2018.

LPL estimates the transaction can generate $75-100M of run-rate EBITDA accretion by the end of 2018, estimates it says are primarily dependent on the level of onboarding of NPH client assets, and they also include amortization expense from onboarding assistance loans to NPH advisors.

LPL funded the initial purchase price with cash available for corporate use from its balance sheet, though it says it may raise additional debt and/or refinance its existing debt in conjunction with funding other transaction-related costs.

As of June 30, 2017, financial advisors associated with LPL served more than 4 million client accounts across the U.S., as well as an estimated 46,000 retirement plans with an estimated $138 billion in retirement plan assets. Additionally, LPL supports approximately 3,700 financial advisors licensed and affiliated with insurance companies with customized clearing, advisory platforms and technology solutions. LPL Financial and its affiliates have more than 3,400 employees with primary offices in Boston, Charlotte, and San Diego.

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