As a private equity firm executive, Eric Becker was always a client of wealth managers, never one himself. Yet here he is, co-founder and head of one of the fastest-growing registered investment advisors in the country, a firm that has attracted more than $3 billion since its founding in June of last year, all organically grown with a focus on guiding high-net-worth individuals and families through the world of private placements.

Private equity funds are growing and scrambling to find new investors, and increasingly retail financial advisors are being asked to vet them for clients. Capital in private equity funds grew 20 percent last year and is expected to grow 58 percent from $3.1 trillion at the end of 2017 to $4.9 trillion in five years, overtaking hedge funds as the largest alternative asset class in the process, according to an analysis by private placement data firm Preqin.

Historically, for those who can afford private placements, they work; JP Morgan Asset Management says that in the 15 years up to end of 2017 private equity returned 14.4 percent annually, versus 8.8 percent of the MSCI World Equity index.

Becker was in on that boom, co-founding Sterling Partners in 1983, shortly after leaving college, and raised $5.7 billion over eight funds. He retired from Sterling Partners in 2014 and founded two new investment firms in 2015: Caretta Group and VennPoint Real Estate.

His initial capital raises for those funds focused on acquaintances and professional connections, but soon other wealthy individuals were looking to put their money with him. The strength of the demand was a revelation. 

With a growing number of options, there is also a growing need for financial advisors to navigate the market, which is where Becker sees an opportunity. He and Avy Stein, another private equity investor, co-founded Cresset Capital Management in July of 2017.

They’ve gone large right out of the gate. They hired more than 60 employees across business segments Cresset Wealth Advisors, Cresset Family Office and Cresset Partners, its private investing arm, and offer clients direct, often exclusive, access to real estate, private equity and secondaries deals.

Becker’s biggest achievement may be pulling together an all-star team of talent with deep experience, the lure being ownership opportunity in the new firm: Michael Cole, who founded U.S. Bank’s ultra-high-net-worth Ascent Private Capital Management, joined to head Cresset’s family office service; he was followed by several Ascent colleagues, along with veterans from Wells Fargo’s Abbot Downing. Douglas Regan, now CEO of Cresset Wealth Advisors, previously was the Midwest region head and managing director of J.P. Morgan’s Private Bank and spent 27 years at Northern Trust. Jack Ablin, for 17 years BMO Harris Bank’s investment chief and a high-profile investment guru featured by several media outlets, has come on board as the new firm’s chief investment officer.

Although it’s growing fast, Becker talks about Cresset with a “100-year” view: a firm establishing a foundation of partners that will carry into the next century without him, serving the next generation of its current clients. Compiling the other firms taking that approach would make for a short list, he said.

“The idea of taking a very long-term view, that clients should be served by advisors who are owners of the firm and that the firm should have a very long-term orientation, that’s what we think clients and families deserve,” Becker said.

—Michael Thrasher

Annuities may offer a solution to longevity risk and the attendant retirement income crisis.

Seth D. Harris’ challenge is to combat the feeling of revulsion you experienced when reading that sentence. The former acting secretary of labor in the Obama administration and labor relations scholar at Cornell is on a mission to re-educate your clients on the benefits of newer and more evolved annuities, or “lifetime income products,” to help solve the growing problem of navigating longevity in retirement.

He is backed by the Alliance for Lifetime Income, a nonprofit partnership with close to two dozen financial services firms, mostly insurance companies. “The core mission for the alliance is to inform and expand the discussion around retirement planning in response to the retirement income crisis,” explains Harris.

It’s important to differentiate between the retirement income crisis, which the Alliance aims to address, and the retirement savings crisis, which is what the financial media means when using the shorthand “the retirement crisis.” The latter revolves around many Americans’ savings shortfall that will prevent them from retiring in the first place. The former focuses on the risk of those even with significant retirement assets to properly allocate them to support the full course of an unknowable, but likely longer than you think, lifespan.

Harris believes that protected lifetime income is the key for many. “It may be something like an annuity or pension where you get regular and reliable retirement checks that will last for the rest of your life,” he notes. With pensions rapidly going the way of the dodo, that leaves annuities to attempt to simulate those plans’ predictability, reliability and visibility.

Unfortunately, annuities have a less than stellar reputation among advisors and clients alike. The idea of a long-term investment product intended for older clients will inevitably raise eyebrows, and plenty of horror stories about bilked oldsters abound.

Harris says that reputation was forged largely under a different set of circumstances and no longer applies. “There’s very little controversy around the concept, just the name.” Harris says.

“The annuity product market has changed dramatically. It’s a very different world than it was when a lot of financial advisors and opinion leaders formed their opinions. The industry, for a host of reasons, has evolved and innovated,” adds Harris.

For one, the notion that buying an annuity always generates a large commission for the advisor is no longer valid, he says. “There are numerous fee-based products out there. Also, in a lot of cases insurance companies will cover the whole commission where it exists, but also there’s just a lot more transparency now in general around fees and commissions than there ever was before.”

Another criticism his group is out to debunk? The idea that annuities lock up a client’s money for a long time thanks to onerous surrender charges. While the very nature of an annuity means it’s not a liquid investment, there are a growing number of products that have fewer or no such surrender charges and shortened lock-up periods. “There is simply more diversity in the pathways to protected lifetime income,” he says.

Harris stresses that Alliance is not advocating every person should buy into these products. But for advisors, talking about protecting lifetime income is essential, and for some, buying it may be in their best interest.

“The task that the Alliance has undertaken is to engage the conversation around outcomes: what do clients want, what do they need. Then that conversation between retiree and advisor can shift to figuring out how to get there.” 

—David Lenok

An underlying theme of the criticism often leveled against the Financial Industry Regulatory Authority is that the self-regulator is something of a blunt instrument—imposing a framework for overseeing member firms that fits into neat categories on a whiteboard at the group’s headquarters but doesn’t necessarily allow for the nuances found in the field. That often creates repetitive tasks and a longer-than-needed examination schedule at the lower levels of the organization.

Bari Havlik, the new executive at FINRA in charge of monitoring and examinations, wants to change that by modernizing the way the group approaches its oversight. Her name may not be one advisors and brokers will notice with regularity in the coming years, but there’s no doubt the changes she is bringing will demand attention. At least that is her intention.

Havlik, who started in April, made an early splash with the announcement earlier this month that the self-regulator would be consolidating its three separate examination programs—around sales practice, trading and financial compliance and risk oversight—into a “single, unified program” to help ensure consistency, eliminate duplication and “create a single point of accountability” for the examination of firms. FINRA oversees over 629,000 registered reps and 3,690 securities firms.

The move is an outcome of FINRA’s year-long FINRA360 efforts, an internal review meant to identify areas of inefficiency and redundancy but will be implemented based on a roadmap created by Havlik and her team.

The effort is a “significant undertaking” that will continue into next year, but member firms will see a difference. “The goal of consolidating these programs is similarly to make them more effective, as well as to make them more agile and risk-based,” she said in a note to WealthManagement.com. “The changes are focused on tailoring our programs to the business model, activities and risks of the firm being examined. Once the changes are implemented, firms should experience more efficient examinations, find duplication to be eliminated, see more of the exam work done off-site and experience more transparency in our communications.”

The intention is to take a more tailored approach to examinations based on the characteristics of the business model under review. Havlik said she was cognizant of the fact that examiners don’t always understand the business models they are being asked to oversee, telling WealthManagement.com she is looking at dedicating teams to specific types of firms and enhancing examiner training, much the same way they have created specialist teams around their anti-money laundering efforts.

Havlik, an outdoor enthusiast who said she likes to “spend as much time as possible” hiking and biking in the mountains, joined FINRA after 35 years in financial services, including stints at both a discount and a full-service brokerage, as well as at a bank-affiliated broker/dealer. She was most recently chief compliance officer at Charles Schwab. 

—David Armstrong

For many advisors, estate planning is a bit of a dirty word. Not that it isn’t necessary, it just isn’t really their responsibility.

Scott Huff, a practicing registered investment advisor since 2001, sees this reticence as a major market inefficiency, which is why he created Yourefolio, a platform that seeks to digitize the nuts and bolts of the estate planning process and connect advisors with estate planning attorneys to carry the plans across the finish line.

“In the course of my business, I noticed a real disconnect for advisors and estate planning itself, and I just had one of those ‘ah ha!’ moments.” There’s just so little software that supports this very large industry. “There’s a lot of DIY stuff, but it just hasn’t really been touched on the professional end of things.” Huff says.

Where many existing technology solutions that touch estate planning fall under the broad category of “digital vaults” to help centralize, collate and secure a client’s estate planning information, Yourefolio has larger aspirations (though, yes, it has a vault as well).

Huff explains that “[b]ecause advisors are my natural fit, I wanted to build software similar to a MoneyGuidePro or eMoney that I could use for estate planning. Yourefolio functions very similarly to those platforms, except at the very end there’s that bridge you have to cross when legal documents
get involved.”

According to Huff, estate planning is one of the rare opportunities that necessarily involves multiple professionals. The majority of clients are already touched by a financial advisor, but that advisor needs help to properly craft and implement an estate plan. This collaboration requires that all involved tread the fine line of, “whose client is this?”

Yourefolio strives to make this often-awkward relationship as seamless as possible. “We partnered with a document drafting solution and a group of attorneys to fulfill that need for advisors, so now they can just click a button and be connected to an attorney,” Huff says. “And it’s a real engagement, it’s not a LegalZoom.com that just spits out a document. A real attorney comes in, and you get a client engagement letter signed, but you work with each other virtually through the software. It streamlines the process for both parties.”

Once an advisor works through the estate planning process to the point that an attorney is required, he can click a button to receive some referrals. “When the advisor hits the button, they’re provided with some basic information about three attorneys that are geographically near them, with some biographic, specialty and pricing info included, from which they select one.”

This list is populated first with attorneys who are Yourefolio subscribers (they pay the normal fee to use the software; the referral service itself is free). If the advisor doesn’t find a suitable match from the subscriber network, Yourefolio has a partnership with Interactive Legal, helmed by noted estate attorney Jonathan Blattmachr, to act as backup; they’ll draft the documents and offer advisors a wider network of attorneys to cover any unmet requests.

The Yourefolio subscriber base currently has over 100 legal firms on board, including some large organizations holding 40 to 50 licenses to the platform.

Huff said there’s been some reticence from old school attorneys to adopt a technological solution, so it’s currently advisors who are driving leads. His goal over the next year is to grow engagement overall, particularly among the attorneys, but as a product initially conceived by an advisor, for advisors, Huff is not concerned about any imbalance between requests and providers.

“It’s an advisor-driven software that gives the advisors the opportunity to stay involved in an estate plan. If you’re able to stay engaged in the process, you’ll be more connected to beneficiaries and the next generation, which will increase an advisor’s chances of retaining that wealth once the primary client passes.”

—David Lenok

After more than 20 years in the asset management business—most recently as CEO of AllianceBernstein—Peter Kraus realized he was in danger of being disrupted. The average active mutual fund manager was underperforming, net of fees. And the proliferation of passive products—low cost and simple—was affecting his business.

“The issue with disruption is, it’s affecting the other person,” Kraus says. “It’s never affecting you. Then, when you realize it is affecting you, that’s actually a very scary moment because you’re usually not at the beginning of the disruption. You’re usually pretty far down the line.”

After pouring over industry research, he came to the simple conclusion that what is wrong with the asset management business is the incentive structure. It is, he says, entirely out of whack.   

“For years I managed managers who would come in my office and say, ‘Well, my capacity to manage my product is $10 billion,’” Kraus says. “They’d get the $10 billion, and they’d say, ‘You know, my capacity grew. It’s now $20 billion.’ I was arguing with them. They light their hair on fire. They run around my office. I’d say, ‘We agreed on 10. Why are you arguing it’s 20?’ Because, they can make more money. That’s what drives them. Ultimately, they want to make more money.”

Asset managers, like anyone else, are motivated by the compensation schemes they operate under. But the incentive structure in the asset management business, being paid a fee on assets, is not built to incentivize performance; it’s built to gather money.

“The only other way to make more money is if you pay them on performance, which we (as an industry) don’t do,” Kraus says.

So, in September, Kraus unveiled Aperture Investors, a new active asset management firm with a performance-linked fee model. Investors will pay an ETF-like fee based on the asset the firm is managing. Then, investors pay 30 percent on returns generated in excess of the fund’s benchmark, up to a cap.

“We know that nobody performs all the time,” he says. “But, the actual manager themselves will be more interested in controlling their capacity and actually performing if they’re paid on performance.”

So far, the firm has filed to launch an emerging markets debt fund and a global fixed income fund.

Kraus partnered with Assicurazioni Generali S.p.A., an Italian insurance company that also provides investment and wealth management services, which provided up to $4 billion in seed capital for managers’ use.

“That’s a huge benefit to a manager because when a manager is launching a new fund, generally they start with a small amount of money,” Kraus says. “They’re extended. They’re anxious about their expenses. They’re generally not paying themselves much. They’re focused on trying to raise assets.”

Aperture’s managers are, instead, focused on producing returns. To be sure, some would argue that performance-based fees incentivize too much risk-taking. “My reaction is, well, you have to understand the structure. If you understood the structure, the ecosystem in which the manager lives, you wouldn’t conclude that.”

Kraus believes financial advisors will naturally be cautious of his new model, but he believes it’s also an opportunity for them.

“Now, they can go to clients and say, ‘Look, I can now find a manager that’s incentivized consistently with you. And, you don’t pay anything other than an ETF-level fee if they don’t perform. That means your fees are lower. If they’re higher, you’re happy.’ If I was a financial advisor, I would bring that value proposition to my client and say, ‘I’m doing something for you.’”

—Diana Britton

At just 39, Sabrina Lowell already has an impressive list of professional accreditations and accomplishments; topping that list: Certification in CFP and earning the CPCC designation; she also won the national Heart of Financial Planning Award in 2015, which is the highest honor that the Financial Planning Association bestows. Not long before that, she became a partner at Mosaic Financial Partners, where she was mentored by founder and RIA pioneer Norm Boone, and appointed chief operating officer of the firm.

Thanks to the recent acquisition of Mosaic by Private Ocean, another San Francisco area firm, she’s now a partner in a $2.2 billion RIA with even more opportunity to become a visible leader in the industry. She’ll be working alongside Private Ocean’s CEO, Greg Friedman, himself a well-known RIA innovator and, most recently, winner of the RIA CEO of the Year award at WealthManagement.com’s Annual Industry Awards.

So what gets a financial advisor working with such well-known and established mentors excited? It’s not copying a blueprint handed down to her. She wants to pave her own trail, and that involves showing how advisors can transition away from numbers-based investment types towards becoming life coaches for their clients.

“In my twenties I felt like my value proposition was my technical knowledge; that can be overwhelming for new advisors and CFPs and that can be challenging for a young advisor,” Lowell said of her first few years in the field.

“In my thirties, I realized (technical knowledge) is table stakes—helping clients realize what they really want and then helping them get there from a behavioral standpoint, that was the ultimate challenge,” she said. So Lowell has sought to develop her skills in what she calls “human capital cultivation.”

“How do you really help move the needle with clients? How do you do that in a repeatable way? I think coaching is going to be required going forward,” she said, adding that this is something she would ultimately like to be known for in the industry. “It is about helping people with the unknown, help with changing the behavior necessary to get them to their goals,” she said.

In addition to becoming an accredited coach with the International Coach Federation, which includes  a minimum of 100 hours of coaching, 75 percent of those hours paid with no fewer than eight clients, plus an exam, she’s active with the Financial Planning Association’s Residency program, which involves spending a week with 35 or so new planners, teaching them client-relation skills; she likens it to the TV show “American Idol” for financial planning. “We basically tear them down and build them back up again,” Lowell said. “It is absolutely amazing the transformation you see in the participants from the beginning of the week to the end.”

Given her age and ambition, the industry will likely see a lot more from Lowell, and the kinds of transformations she is championing, in the years ahead.

—Davis Janowski

Anyone who thinks compliance is boring hasn’t met Hanh Nguyen. The 30-year-old foreign affairs graduate has a contagious passion for a subject often reluctantly, or even fearfully, addressed in wealth management circles. After four years working for consultant ACA Compliance Group, she sensed a need for transparent, project-based compliance help for financial advisors. That led to co-founding the compliance marketplace startup Complect last year.

“Most advisors have limited options when seeking out compliance assistance,” Nguyen explained. “Many are unaware of the thousands of solo practitioners and boutique compliance consulting firms in the market, and they’re relying on the word of a peer or two.” This referral-heavy approach at best limits the options available to advisors—and at worst can lead to bad counsel, she said. It’s a problem she set out to solve by establishing a marketplace where compliance specialists and advisors in need of compliance help can find—and rate—each other. For helping make those connections, Complect charges a percentage of the project’s cost, shared between the compliance specialist and advisory firm.

Complect is well-positioned to take advantage of both regulatory and industry trends, said Nguyen. With breakaways and independent advisors becoming more commonplace, the time is ripe to help advisors seeking project-based help, not long-term consultant relationships. “A lot of advisors, they’re investment folks. They’re front-of-house people. That’s what they love. That’s what they know,” she said. “They are not nerds like me stuck in securities law. That’s not their background. They don’t know what they don’t know.”

With younger advisors joining the ranks of the industry and technology putting pressures on the old ways of doing business, including the word-of-mouth referral system, Nguyen sees Complect as another disruptor. She pointed to XY Planning Network, an organization with a median age of 38, as some of Complect’s “most fervent adopters,” because “they’re much more comfortable with technology.”

If it sounds like a changing of the guard, it just might be. Outside of the compliance behemoths, “your average consulting firm has some rinky-dink website. It’s a cookie-cutter, cut and dry relationship. There’s nothing new and exciting about it and people are slow to adopt new things,” Nguyen said.

The firm is also riding a regulatory tailwind. The Securities and Exchange Commission laid out a 2019 strategic plan that could lead to more audits for retail-focused advisors, said Nguyen. A regulatory emphasis on advisors serving retail customers, coupled with an advisory landscape exploring alternatives to a 1 percent assets under management fee, means the industry is facing new areas of regulatory complexity, she explained.

Advisors will also see better-educated investors when it comes to compliance, said Nguyen. In fact, Complect is working on an educational program for investors and advisors, so that both groups can learn more about the regulations governing their relationship.

“Compliance hasn’t been driven by investors at all,” Nguyen explained. Advisors don’t feel pressure from investors to provide compliance education, and the SEC might visit once a decade. “With an educated retail investor asking about an advisors’ compliance program though, there is suddenly a carrot,” she concluded. “We want to be able to educate [investors] on what they should be asking.” It’s scary for a retail investor to be making a decision that will impact their life savings, she said, without knowing how to ask the right questions and perform the same due diligence as institutional investors.

“They say knowledge is power. I say that knowledge and options are power,” said Nguyen. “I’m giving people options.” Armed with those options, financial advisors have one more tool at their disposal in the mission of serving their clients.

—Samuel Steinberger

On Jan. 1, Penny Pennington will become only the sixth managing partner—and the first woman—to lead Edward Jones.

Those are notable headline-making milestones, but the day-to-day running of the largest brokerage firm in North America (by headcount), with 16,000 advisors, 7 million clients and advising on more than $1 trillion in assets, isn’t done by waving victory flags.

Pennington, who isn’t talking publicly until the leadership transition is complete, is tasked with continuing the transformation of the brokerage that predecessor James Weddle began during his 13 years at the helm, working to shed some old perceptions of the firm as stodgy and out of date, opening new branches in urban centers and focusing on hiring advisors from top competitors as opposed to only grooming new recruits from within.

It’s a strong act to follow: Edward Jones is consistently ranked as one of the best places for brokers to work, and it frequently tops the list for broker satisfaction on WealthManagement.com’s “Broker Report Card.” As other firms talk about increasing diversity and inclusion among advisors, Edward Jones has successfully institutionalized programs on the ground to make that happen, including a coaching and inclusion program for new advisors that was recognized this year at the WealthManagement.com Industry Awards.

Pennington, a native of Nashville, started at Edward Jones in 2000 as an advisor in Michigan. In 2006, she was named a principal at the company and relocated to the St. Louis headquarters. She’s held several other leadership positions in the interim on her way to being named Weddle’s successor.

“Having served as a financial advisor, she has a first-hand understanding of what our clients’ value and our mission to grow and serve more individual investors,” Weddle said in May about Pennington, who was chosen by a succession committee composed of Edward Jones senior leaders and an external advisor. Retired partner and succession committee chair Norm Eaker said it was a unanimous decision.

Historically, Edward Jones has not recruited experienced brokers from other wealth managers, but that is changing. Katherine Mauzy, head of talent acquisition at Edward Jones, told WealthManagement.com in August that the industry had a dated perception of the brokerage; Edward Jones continues a campaign to educate potential recruits about its platform, tools and technology.

The notion that Edward Jones can’t equip top advisors with resources to effectively serve the wealthiest clients with complex needs is false, she said. In terms of assets, the largest business operated by a single advisor at Edward Jones manages more than $1 billion, and the company’s largest single producer brings in revenues of more than $6 million per year.

“No one has the model that we do,” Mauzy said. “[Advisors] have got the autonomy, so you have your own office. But we’re also a Fortune 300 company so you’ve got the resources of a very successful, large organization with a lot of history.”

Edward Jones plans to grow its workforce to 20,000 advisors before 2022 and many of the new hires will be in urban areas. Mauzy said the goal after that will to be to get to 30,000 advisors to serve what Edward Jones identifies as 40 million potential clients it doesn’t already have.

It’s a lofty goal, and if Pennington comes even close to achieving it, her tenure at the helm will be seen not as a gender-parity milestone, but as that of a successful corporate leader on par with any in the industry.

—Michael Thrasher

Tyrone Ross Jr. has emerged as one of the leading crypto evangelists in financial advice, a space very, very few advisors dare enter. Yes, it’s a tech story, but more than that, it’s an example of how advisors with a passion for a topic and an authentic voice will find like-minded clients, which, in turn, leads to broader success for their advisory firms.

Of course, dedication plays a part too, and Ross has no shortage of that. Raised in New Jersey in a family where no one had a high school diploma, 16-year-old Ross watched sprinter Michael Johnson set records at the 1996 Olympic Games and dreamed of winning his own gold medal. Training over the years, he eventually qualified for the 2004 team in the 400-meter dash, only to be left off the roster when coaches decided to trim the athletes competing in Athens, Greece.

As a young college graduate with a degree in communications, Ross found Wall Street. It was a completely new environment. “I don't come from money. I was the first one in my family that finished high school,” he said. “I didn’t know anything about stocks or anything. And so here I am walking into an investor relations firm and talking about buy-side and sell-side.” A mentor suggested Ross explore retail financial services, where he found success harnessing his charisma on cold-calls with prospects. In 2012, he ended up at Merrill Lynch, where he first heard about cryptocurrency.

“I get a call from a friend of mine who is a Ruby [programming language] developer and used to make our fake IDs when we were younger—and he’s like bitcoin, bitcoin, bitcoin,” said Ross of his first brush with cryptos. “I said, this is the biggest scam.” Still, at his friend’s insistence, Ross downloaded a digital wallet and sent and received his first cryptocurrency, and something clicked.

“This is different,” Ross remembered thinking. “One of the pet peeves that we have in the financial services industry is settlement. Money takes forever to settle. Money takes forever to transfer.”

His passion for fintech and cryptocurrencies made him something of an outlier at Merrill, he said. “In the investor meetings I’m talking about blockchain and crypto and Square and PayPal and they’re like, what the hell are you talking about?” he recalled. “My mentor said, ‘You’re going down a path that no financial advisors are willing to go or want to go. There’s no clarity. There are no regulatory updates here. And if you’re going to do that, you can’t do it here.’”

Ross decided to go all in, betting that knowing more about cryptos than any other advisor would set him apart from the pack. He left Merrill to join NobleBridge Wealth in 2017. “If it means I take arrows in the back because people think I’m nuts, or I could possibly lose my job because I’m talking about cryptos, I’m willing to do that, because I’m certain this is the future of financial services,” he said.

Through a passion for the technology, he’s found a client niche enviable to any broker at the traditional wirehouses: a coterie of clients with an average age of 35 in the asset-accumulation phase of their careers, ranging from first-time investors to tech-inspired executives.

While he advises on traditional portfolios, he extends that advice to accommodate clients’ eagerness for crypto. He urges caution, advises clients to keep their exposures to minimal levels relative to their overall portfolio and helps them navigate the dizzying number of offerings, preferring clients go to one or two coins with depth and trading volume versus holding a diversified fund of the coins.

The path Ross says he’s taken is simply that of a responsible fiduciary, and it doesn’t hurt that there’s no competition. “First and foremost, we’re fiduciaries, which means that we have to put the best interest of our clients first,” he said. “If my clients are asking me about something and I don’t have an answer for it or dismiss it, I’m not fulfilling my fiduciary standard.”

—Samuel Steinberger

On a call with home-office leaders in late February, LPL Financial CEO Dan Arnold laid out a plan to overhaul the independent broker/dealer’s approach to working with its more than 16,000 advisors. He cited the firm’s struggle to recruit out of the National Planning Holdings acquisition and a growing dissatisfaction among its own brokers.

The firm’s advisors have complained about declining service levels; some feared it will only get worse with the addition of NPH reps. Arnold has tasked Dimple Shah, his head of corporate strategy, to help put the firm into higher gear. She’ll have a major impact on the direction of LPL, a firm that must move faster, Arnold says.

“Where we’ve historically thought about things in years—and we have multiyear strategies—those are now obsolete,” Arnold said on the call. “We need to start thinking in months.”

While corporate strategy can often mean churning out PowerPoints and attending board meetings, Shah’s team is focused on actionable initiatives. The new Independent Advisor Institute, for example, a training program for new-to-the-industry advisors, was the brainchild of Shah’s team. Last Spring, the firm announced it would launch a no-transaction-fee mutual fund platform and reduce pricing on its Strategy Asset Management advisory platform, changes which also came out of corporate strategy.

That’s what attracted Shah to LPL over four years ago; the company was still nimble and entrepreneurial enough that strategy could shape new services. Prior to coming to LPL, she worked for many years as a consultant at Oliver Wyman, where she developed a general skillset for problem-solving and strategic thinking. She also served as a product manager at PayPal in a more operational role.

Half of Shah’s team are part of the Innovation Lab, developed this past year as an incubator for new ideas. It’s a way for the company to test and experiment with new ideas to see what works and what doesn’t, without the pressure to produce results over a period of time.

“If you launch new ideas out to the business too prematurely, there’s a risk that they get kind of eaten, right? Eaten by the bigger, more mature parts of the business,” Shah says.

And LPL has some hairy problems that resist quick fixes, she admits. The firm’s service experience has become a pain point for advisors. “I would say it’s hands-down the number one priority across the firm.”

But she doesn’t ascribe to the “LPL is too big” argument, a complaint of many advisors. 

“LPL historically was known for having really high-quality service,” she says. “As we’ve grown and grown and grown, we haven’t evolved that service model to scale alongside our advisors.”

Shah takes a four-step approach to help solve some of the firm’s biggest problems: Be clear about what you’re trying to solve; establish guiding principles; develop a fact base to better understand the problem; and develop a hypothesis.

“The four steps are basically breaking down how you get to a hypothesis around solving for a problem in a pretty short period of time,” she says. “So, instead of spending months analyzing a problem, can we spend a week or two doing that?”

The end goal, of course, is clear to Shah. Whatever the solution, “it needs to make it easier for our advisors to do business with LPL.”

—Diana Britton