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LaSalle St., a midsize independent broker/dealer with two registered investment advisor platforms, launched an equity ownership program for its affiliated advisors. At the end of January, the privately owned company sold a “meaningful amount” of stock in the firm to a number of its advisors, said Mark Contey, LaSalle’s senior vice president and head of business development.
“We think the program drives a tremendous amount of value, not only for the firm but for the advisors,” Contey said. “It reaffirms our commitment to our business, and to the industry that we’re not a firm that’s going to consolidate or sell or bring in private equity. We’re committed to the business, and we think it’ll help greatly with our retention strategy as well as growth from a recruiting perspective.”
Contey declined to say exactly how many advisors participated in the first round, except that it was a “meaningful” number and that there would likely be other rounds. The Chicago-based company has about 300 advisors and $12 billion in total client assets.
LaSalle St. launched the program after advisors asked for it; Contey said the concept of equity ownership in the firm had come up in conversations with existing advisors, as well as potential recruits over the last three to five years.
It’s a true equity program, he said, meaning that advisors made individual investments in the firm in exchange for equity shares. They were not gifted, taken out of monthly fees or commissions, nor part of a deferred compensation program. There will also be a group health plan for the equity owners.
“For every dollar the firm makes in profit, they would receive their percentage of the profits of the firm in the form of distributions, so it’s a true equity program,” he said.
For advisors to be eligible to participate, they must be full-time in their practice, not on a retirement path, and have a certain level of production, which Contey declined to specify. If an advisor leaves the firm, they could either sell their shares back to the firm or to another advisor/shareholder.
Equity owning advisors will have a voice in the strategy and direction of the firm, Contey said. LaSalle will create an advisory board of owner advisors who will meet several times a year to provide input on strategy.
Equity ownership programs are not common in the independent b/d space, but there are a few others. Last March, Private Advisor Group, the Morristown, N.J.–based registered investment advisor and office of supervisory jurisdiction affiliated with LPL Financial, rolled out an Advisor Alignment and Equity Program to provide its 700 advisors with direct economic stake in the RIA. United Planners Financial Services has a profit sharing program, where an advisor can become a limited partner in the firm and share in the profits of the IBD in proportion to his or her productivity. Each year, the firm pays out 55% of its profits to limited partners.
“Equity participation is used as a recruiting tool or carrot on a stick to attract advisors to join,” said Jonathan Henschen, founder of the recruiting firm Henschen & Associates. “My experience has shown little results to come of equity participation but if a broker dealer or producer group can show me to be wrong, I’m all ears. Equity Participation frequently gives false hope for a future payday.”
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