LPL Financial’s Post

Transcript

Hello, and welcome to Institutional Insights. Joining us now is Chris Cassidy at Senior Vice President and Head of Institutional Business Development at LPL Financial. Well, Chris, it's great to have you with us. For starters, what does the institutional landscape look like in 2024 and beyond? Yeah, it's a pleasure to be here. Thank you for investing the time with us today. That's pretty broad question, right. So the institutional landscape is an ever evolving kind of changing environment. At LPL we sort of think of institutions as organizations that operate wealth, a wealth business that is complementary to their core. So think about organizations that are you know, banks, credit unions, asset managers, insurance companies and the like. Really as we think about sort of the landscape over the next handful of years and maybe on into the future, it's it's an evolving environment. Those types of organizations have classically operated wealth businesses that are predicated on really their strong brand and the products that they generate, oftentimes in more of a transactional nature rather than sort of a relational nature. And so we sort of see the evolving landscape looking like a few really a focus on advice, so starting to kind of evolve the the ecosystem around how they deliver, what they deliver and kind of the goals of the clients that they serve. And the 2nd is really this, this. Concept of leaning into kind of their core business, so taking advantage of the other solutions that they bring along. And then kind of the final element, which is just an Evergreen type of concept and something that's certainly advancing as the power of the advisor. So we've consistently seen that digital experiences enhance the experience of a client, but are not necessarily on a standalone basis the way they prefer to engage. And Chris, you mentioned an insurance providers and asset managers are playing a larger role in the wealth management space. What's driving this change and what are the benefits to these institutions and entering the market? Yeah, it's an exciting space. And I, I will say each one of those organizations has some nuance or kind of specific element to them, but there's a kind of a broad construct that exists. So if you think about an environment in the US wealth landscape today that is served by about 300,000 advisors, about 70,000 of them sit inside of insurance companies. So actually the largest pool of advisors and there's about another 10 or 15,000 that sit inside of asset manager. So it's a very large population of advisor sets and classically. As I kind of started off with the those pools have been very focused on the distribution of the solutions that the parent company generates. And there's value in that, right. There's some very strong and kind of thought leadership type of of solutions. But what is happening is these organizations are seeing the value of bringing advice to bear, helping clients sort of meet their goals around what they're trying to achieve from a life perspective. So it's absolutely adjacent to what has historically been done inside of these institutions. And banks and credit unions seem to have a a captive audience. What might be stopping them from offering wealth management services? Yeah, banks and credit unions near dear to my heart. I, I grew up in kind of the banking environment and it's a pretty large player in sort of the wealth space today. So 15% of the advised assets inside of the United States are all served by advisors inside of banks and credit unions. That said, there's an opportunity to do more. So if you look out into the landscape about 5000 credit unions, 4500 banks today, about 25% of those are in the wealth business. So there are more organizations that are not. In the wealth business than those that are. And really what we hear from organizations that are not in the wealth business or even sort of those that are is a handful of challenges. One is the ability to compete with very large scaled providers in terms of delivering an exceptional advisor and client experience. The two is sort of this increasing and. Increasingly complex environment as it relates to regulatory infrastructure and then the ever Evergreen concept of cost pressures. And so we're sort of seeing them look to what is the right operating model in this business. And then the final element in banks and credit unions is their core business tends to be deposits and loans. And viewed through sort of an inappropriate lens at times, wealth can be viewed competitively. What we're finding is that more and more organizations view it as a complementary offering. Finally, Chris, what do institutions need to know about due diligence, culture fit, and finding the right partner? Yeah, that's a great question. It starts with defining why are you in the business, so why wealth, sort of the target operating model, what's the strategy that you want to achieve? And then I think only then can you figure out what's the right partner and what are the right set of platforms. We really kind of see three constructs in the environment today. The 1st is very large organizations, generally those with more than a trillion dollars in assets under management are billed organizations. So they'll build their own capabilities. Historically, what we've seen everyone else do is sort of this. Best in breed approach, So pulling together a collection of vendors to to execute on their strategy and where they're emerging strategy is, is really this singular vertically integrated partner that encapsulates a broad array of sort of the the elements that are required to deliver. Think about a clearing function and advisory function and maybe even a client or advisor experience. And so specifically to the question around what are the appropriate measures I cultures the right one you start off with is the partner. Aligned with where you want to go from a strategic perspective, do they have history and do they have experience in the business? Well, Chris, thank you very much for being with us today. Yeah, you bet. Thanks again for the investment of time, Jenna. Absolutely. And thank you to everyone out there watching. Once again, I was joined by Chris Cassidy, SVP and Head of Institutional Business Development and LPL Financial. And I'm Jenna Dagenhart with Asset TV.