This news service looks at how LPL Financial's ambition to be a major wealth management force proceeds apace.

LPL CEO Rich Steinmeier wasn’t kidding.  

Speaking at a Goldman Sachs financial services conference in December, Steinmeier predicted that LPL Financial would become “the leading wealth management firm in the marketplace” in the next five years.” Earlier this month on executive recruiter Louis Diamond’s podcast, he said LPL, far from being content as the country’s top independent broker-dealer, “wants to go toe-to-toe with Morgan Stanley.”

By all indications, LPL, already the country’s leading independent broker-dealer with nearly $2 trillion in assets and over 28,000 advisors, is about to move one step closer to both goals with its acquisition of Commonwealth Financial Network, a top-shelf IBD with $344 billion in client assets and over 2,300 advisors.

Today, LPL announced it has entered into a "definitive purchase agreement to acquire Commonwealth Financial Network" in a $2.7 billion cash deal. Commonwealth Chief Executive Officer Wayne Bloom will join LPL’s Management Committee and report to Rich Steinmeier, LPL's chief executive. He will also partner with the LPL leadership team to launch LPL’s Office of Advisor Advocacy, charged with further elevating the service experience for LPL’s growing network of advisors. 

The transaction is expected to close in the second half of 2025, and the conversion to the LPL platform is expected to be completed in mid-2026, subject to the receipt of regulatory approvals and other conditions, LPL said. LPL will acquire all the equity of the holding company of Commonwealth for about $2.7 billion. LPL anticipates financing this transaction through a combination of corporate cash, debt and equity, resulting in credit agreement leverage of roughly 2.25 times following the close of the transaction, with a near-term path to reduce leverage to the midpoint of its stated range of 1.5-2.5x, it said.

“Acquiring Commonwealth is a major coup for Rich Steinmeier,” industry analyst Alois Pirker, said. “It will move LPL to a league on its own.” The deal is a “huge statement for LPL,” according to Diamond. “Commonwealth is the crown jewel in the independent space.”

Targeting the high end
The transaction signifies that LPL is dead serious about competing not only with fast-growing Mega-RIAs such as Creative Planning, Mercer Advisors and Wealth Enhancement Group, but also wirehouses and wealth managers in the high and ultra-high net worth market such as Morgan Stanley, Merrill Lynch, JP Morgan and UBS.

Underscoring its intention to expand at the high end of the market, LPL recently lured a $600 million UBS team in Tennessee to join its ranks. To attract more wealthy clients, LPL is partnering with SS&C and iCapital to beef up its alternatives offerings and, according to Steinmeier, is also building up its banking and lending capabilities. 

And it’s no coincidence that the 50-year-old Steinmeier was a senior executive at UBS and Merrill before joining LPL in 2018.

More acquisitions coming
Putting competitors on notice that more acquisitions are on the way, LPL has filed a shelf registration with the SEC to raise $4 billion to significantly boost its capital firepower.

“LPL is a sleeping giant in the acquisition game,” Allen Darby, CEO of Alaris Acquisitions, said. “They have made the right decision to be in the wealth management businesses rather than just serve advisors as a vendor. LPL can become the largest wealth management firm in the country if they execute, which I expect they will.” 

The Commonwealth move also bolsters LPL’s growing custody business, positioning the firm to compete against Charles Schwab and Fidelity for RIA business.

Headwinds
To be sure, LPL has run into its share of headwinds over the past year. 

Former CEO Dan Arnold was fired last fall for violating the company’s code of conduct and the company is embroiled in a nasty lawsuit with rival Ameriprise Financial over how LPL handles confidential client information when recruiting advisors.

LPL’s aggressive growth strategy also entails more spending, which could prove to be risky as the stock market becomes increasingly volatile, threatening to cut into the company’s profit margins. Wall Street analysts cited the company’s rising costs and fourth quarter expenses, which rose 35 per cent year-over-year, on an earnings' call with management in January.

Nor is the Commonwealth deal a slam dunk.

The two firms have very different cultures. Commonwealth is known for its personalized boutique feel, while LPL has a much more institutional reputation. The blending of the two cultures may prove to be challenging and result in some Commonwealth defections, said Diamond, president of Diamond Consultants, who also discussed the issue on his podcast.

“It will be interesting to see how LPL will integrate Commonwealth,” said Pirker, CEO of Pirker Partners. “Custom-built technology is one of the reasons why Commonwealth is one of the most productive IBDs around. Getting rid of it would diminish the franchise. On the other hand, LPL could choose to make use of it for its broader business, which could prove to be an additional major benefit from this transaction.”

What’s more, Commonwealth is embroiled in a legal battle with the Securities and Exchange Commission over $93 million in penalties that the agency says are related to the firm’s revenue sharing practices.

Elite ambition
But LPL’s grand ambition to be taken seriously as an elite wealth management firm and shed its identity as an IBD is unlikely to be sidetracked.

The firm is about to launch a national campaign to rebrand itself and the days of “narrowly defining” itself as an IBD are over, Steinmeier told Barron’s Advisor. “We are reclassifying this firm and competing against Merrill Lynch, Morgan Stanley and Charles Schwab,” he said. “Those are great firms. We intend to be better.”