Lpl Networking Agreement

Limited Partnership Agreement Vs Private Placement Memorandum
April 10, 2021
Maximum Tax Free Compromise Agreement
April 10, 2021

LPL says it extends credit to consultants in the form of “loan recruitment, commission advances and other credits,” with conditions based in part on the consultant`s “ability to generate future commissions.” According to the 2018 Management Report, LPL lent $233 million to consultants compared to $160 million at the end of 2017. LPL reveals conflicts related to its lending practices to customers. If a client needs cash to, for example, rebuild a house or pay for university, they may have to sell some assets. But LPL is encouraged to recommend that the client lend money and mortgage his financial assets against the loan. According to him, LPL benefits from a 0.75% discount for secured loans. And LPL has deals with Bancorp Bank, Goldman Sachs (GS) and TriState Capital Bank to make the loans. Because of its relationship with these banks, the company says, customers may not be able to “negotiate the most favourable credit terms.” Every day of the week, we highlight market news and explain what will probably be important tomorrow. Another practice that can create conflict is the granting of credits to consultants. Broker dealers often lend forgivable loans to consulting firms to develop their practice. According to a recent SEC investigation, these loans are not always disclosed. According to the SEC, credit conditions had “perhaps an undue influence on the investment decision-making process” for clients. “We have an aggressive due diligence process for alternative investments, and it`s much more aggressive than what would be found in investment funds,” says Rob Pettman, executive vice president of product and platform management at LPL. The information provided by LPL documents a large number of sales practices that constitute conflicts of interest.

For example, for alternative investments such as REITs, Hedge funds and Private Equity, LPL receives a “marketing grant” from the investment sponsor of up to 1.5% on the sale of invested assets and 0.35% on the trailing basis (as long as the client owns the fund). These are conflicts of interest, as shown by the information provided by LPL, as they encourage the company and its consultants to sell these products through other products with lower costs. LPL also points out that cash sweep accounts (which use investors for liquidity) and money funds on their platform are more of a profit center for the company than its customers. LPL`s communications indicate that it receives a fee of up to 0.35% from sponsors of investment funds (for example. B the withdrawal of trades). It is a cash compensation that LPL does not share with consultants and ends up coming out of the pockets of clients. For non-sweeping money markets (which customers can always buy), LPL says it chooses “in many cases” stock classes with higher commissions than identical funds outside its platform. According to the company, investors could see negative “negative total investment returns” on cash reserves. These practices are not uncommon. Most brokers no longer offer cash funds for cash-sweeping accounts.

LPL eliminated money funds for sweeps last spring and put its clients` money into more profitable bank deposits (for which it receives bank commissions). This is not unique: E-Trade Financial (Ticker: ETFC), Charles Schwab (SCHW), TD Ameritrade Holding (AMTD) and Merrill Edge (Bank of America`s discount brokerage arm) have eliminated the sweep markets and left Vanguard and Fidelity as the two largest holdouts. LPL is by far the largest independent broker, and as such, its practices offer a window on the business. The company does a lot of things right: it has been a success with clients and consultants, and its stock has been a winner that has gained an average of 20% over the past five years and has surpassed the S-P 500 index by 9.5 percentage points. Its advisory and brokerage assets reached $719 billion in the third quarter of 2019, up from $509 billion at the end of 2016.