The Players in the M&A Game: A Discussion with LPL’s Jeremy Holly

Buying and selling practices is the talk of the town in the financial industry. As the financial advisor population is aging, the need for financial advice continues to grow, and advisors are looking for solutions for succession. Mergers & acquisitions (M&A) continue to serve as a solid resource for retirement. 

But beyond the need for creating a succession plan, there are several other reasons an advisor might enter the M&A conversation.

In a recent podcast with InvestmentNews, Jeremy Holly, EVP, LPL Capital Partners at LPL Financial, discusses what these advisors need, challenges they face, and how LPL is helping them compete in the M&A game.

Generation 1 (G1): Retiring Advisors

The current principal generation — or G1 as Jeremy calls them — is making their move to retirement. After years of building a practice and creating value, these advisors are hyper-focused on establishing succession plans that prioritize client continuity, next-generation development, and competitive monetization.

But many of them are “unicorns” as Jeremy notes, which poses a challenge for sourcing new talent. “Oftentimes, when they’re looking for successors, they’re looking to clone themselves. The war for talent has already started.”

Within this “war for talent,” LPL Financial emerges as a champion of preparing the next generation and sourcing successors that are a great fit for the retiring advisors. Jeremy emphasizes that most buyers not only want to acquire assets but talent as well, and they’ll pay a premium if the next generation is already established. By proactively working with advisors through succession planning efforts, LPL can help G1 advisors increase the value of their business by creating a clear path for Generation 2.

Generation 2 (G2): Advisor-Buyers 

A recent DeVoe and Company survey states that fewer than 1 in 5 retiring advisors thought the next generation could afford their practice. And with a variety of barriers that advisor-buyers face when they want to buy a book of business, it’s no wonder they’re hitting roadblocks. 

LPL extends critical support to these G2 buyers. Jeremy states, “It’s important for us to create a bridge from one generation to the next and perpetuate this independent business model.” That bridge is created through capital support for advisors who are ready to buy but need the financial backing. 

The demand for advice is still there, and LPL is empowering the accessibility of the M&A environment for G2 advisors so that they have the capital to buy and G1 advisors have the successors to leave their legacy. 

Mid-Career Advisors

Not all advisors want to sell their business for the purpose of retiring. Some are looking to remove the burdens of being a small-business owner after realizing that they’d like to focus on working with clients. 

“You’re wearing 12 hats as a business owner and advisor,” says Jeremy. “A lot of folks are looking to simplify and go back to just working with clients. More and more advisors come to the table looking to monetize who aren’t at the end of their career — they just want to simplify their lives.” 

By selling their business to LPL, the firm takes on those back-office, business-owner duties so that advisors can serve their clients as financial advisor practitioners. This unique opportunity for advisors creates a competitive monetization event while keeping advisors focused on delivering advice to clients. 

Advisors in Need of Growth Capital

Knowing the key drivers that maximize the value of one’s business is essential for advisors who are interested in growth capital. 

Jeremy compares it to creating equity in your home. “Think about a homeowner who wants to access capital from the equity in their home — they can get a HELOC. Advisors have asked us, ‘I’ve got this business with value — Are there ways for me to access capital for that?’” 

Yes, there are. Another important aspect of the M&A offering is infusing capital into advisors’ practices so they can grow how they want to. Like homeowners, they’re creating equity in their practice as it evolves — and LPL provides a variety of ways these advisors can access that capital and use it to their advantage. 

For all these players in the M&A game, it’s important that they have a source of support. Notes Jeremy, “One thing is clear: financial advisors own valuable businesses, and unlocking that value isn’t always easy.” Not always easy, but certainly worth it when working with the right partner.