* LPL affiliate profits by selling compliance services
* Morristown Financial added 80 clients in past 14 months
* Sells through LPL Financial to independent advisers
(In last paragraph, changes assets figure to billions)
By Joseph A. Giannone
NEW YORK, March 7 Navigating securities
regulations is expensive and time-consuming for financial
advisers, but one independent New Jersey firm has made managing
compliance and paperwork the cornerstone of its growth.
Morristown Financial Group more than doubled its gross
revenue in 2010 to $25.1 million by performing record-keeping,
reporting and other tasks for independent wealth managers who
affiliate with LPL Investment Holdings (LPLA.O), the biggest
U.S. independent broker-dealer.
Morristown, which also manages about $750 million of assets
for its own clients through 27 advisers, is nominally LPL's
largest branch since it holds the compliance reins of 170
advisers who manage about $3.8 billon of client assets. It
added 70 new compliance clients last year and another 10 in the
past two months.
"They leave their compliance and supervision concerns to
us, so they can concentrate on their practice," Morristown
partner and co-founder Patrick Sullivan said. "We found most
advisers spent 25 percent of their time on office-management
duties. It's a big cost."
PITCHING TO BREAKAWAY BROKERS
The 14-year-old firm focuses much of its regulatory
marketing on so-called breakaway brokers who are new to running
their own businesses. It starts early in the process, pitching
its efficiency in helping them transfer their securities
licenses to a new firm and in expediting the transfer of client
Morristown can accelerate a normally three- to five-month
transfer ordeal into as little as three weeks, Sullivan said.
In return for its services, the firm collects a percentage
of advisers' annual revenue that in most cases totals less than
Morristown, an affiliate of LPL since 1997, got into the
regulatory business to defray its burgeoning compliance and
support expenses, Sullivan said.
FORMING AN RIA
The firm in January filed with the Securities and Exchange
Commission to launch its own registered investment
adviser(RIA), whose assets will be kept in custody with LPL
Financial. It's part of the firm's push to attract "hybrid"
advisers, a growing category of wealth managers who offer
fee-based planning and investment services but seek an
affiliation with a broker-dealer so they can continue to
collect some commissions and sales fees.
Boston-based LPL, which has a network of 12,000 brokers and
went public in November, has itself embraced the hybrid advisor
marketplace. It has established its own RIA to custody the
fee-based accounts of Morristown and other affiliates, putting
it in competition with firms such as Charles Schwab Corp
(SCHW.N) and Fidelity Investments, the leading custody
providers for small investment advisers.
LPL added 22 RIAs with $6.2 billion of assets to its hybrid
platform last year, giving it a total of 114 firms with $13.5
billion on its custody platform.
Schwab, by comparison, provides trading, technology and
other support services to about 6,000 RIAs who managed $655
billion of client assets at the end of last year.
(Reporting by Joseph A. Giannone, editing by Jed Horowitz)