As LPL Financial sees it, there’s a vast pool of potential clients just waiting for the right professional to step up and offer them solid, comprehensive financial advice: the millions of Americans who keep their money in community banks and credit unions. And as the nation’s largest independent broker-dealer, the firm wants to see more of its advisors step into the role.
At a conference in Orlando, Fla., in late February, LPL executives talked to managers of community lenders about expanding advisory services to their banking customers, dwelling on the benefits — to client, bank and advisor — of cross-selling. “These institutions have never really promoted these services to clients in a disciplined, dynamic way, but that’s changing,” says Rob Comfort, an EVP at the broker-dealer.
Savers at small banks and credit unions may not be multimillionaires, but there are a lot of them, and they are unlikely to get financial advice anywhere else. Industrywide, community lenders employ a third as many advisors as they need to meet client demand, Comfort says, citing research from consulting firm Kehrer Saltzman & Associates, and only 5% to 8% of lending clients receive advisory services. So LPL has been actively cultivating the channel since 2006. Currently, 2,268 of its 13,600 financial advisors work at 724 community lenders. The firm has more FAs at credit unions and small banks than Raymond James, Cetera or Securities America, says Comfort.
The channel appeals to advisors who like the idea of being a salaried, in-house expert working with other financial professionals, leveraging resources from both their broker-dealer and the lender to guide unsophisticated investors of moderate incomes, experts say. Community banks and credit unions can be attractive environments for young advisors tired of the blood-from-stone atmosphere at wirehouses or for independents disenchanted with the day-to-day chores of running their own shop. They can also be a good choice for insurance agents who want to transition into advising and who might face higher hurdles in other channels.
Working in-house has been rewarding for Ray Beloin, a CFP at Connecticut-based Webster Bank who is registered with LPL. The bank has over 100 branches from Rhode Island to New York, with about 90 advisors who collectively manage more than $3 billion in assets. Based in West Hartford, Beloin and two assistants manage $170 million — the highest AUM of any Webster advisory team. His average client has between $500,000 and $1 million in investable assets, although some have over $2 million.
LPL isn’t the only advisory firm looking to beef up its presence in the community lending channel. “You can build a footprint much faster than banging on doors,” says Mike Anderson, first vice president of financial institutions and business growth at Securities America. Loan officers and even tellers can help spot customers in need of a financial advisor’s services, he adds. “There’s an opportunity for an immediate referral. The lender gives the advisor more credibility.”
About 150 of Securities America’s 1,750 advisors work at 100 lenders. When such setups prosper, advisors can grow their practice rapidly while filling gaps in the community lender’s services, according to Anderson. And an in-house advisor who’s willing to sit down frequently with colleagues on the lending side to talk about asset allocation or preparing for retirement equips those colleagues to refer clients more often.
For LPL’s Beloin, the arrangement works well. He has been with Webster Bank for 18 years, having formerly worked in mortgages, insurance and as a sole proprietor before Webster recruited him. “They made me an offer that was better than I was experiencing at the time,” he says.
Nowadays, much of Beloin’s new business comes from client referrals and existing customers bringing him more assets. “If you do the right thing for the client, and do it well, you can achieve your goals and the bank’s goals,” he says.