In Money talk

Valued at more than $3.5 billion, LPL Financial prides itself on being one of the most important financial companies that most people have never heard of. Even fewer may know the increasingly primary role that the Charlotte region — or, should we say, Fort Mill, S.C. — plays at the company. That’s where LPL built a glittery $150 million office building last year to house about 1,400 people, with hopes of doubling that number over the next few years. But that’s a parochial quibble. While the site is 6 miles south of the state line on oft-congested Interstate 77, LPL has deep roots in the Queen City after its 2007 purchase of a company led by the guy who now runs the entire business.

Dan Arnold was a 30-year-old Georgia Tech electrical engineering grad who had worked at BellSouth and MCI before joining Charlotte-based Uvest. Charlotte banker and headhunter John Robison co-founded Uvest as an investment bank in 1978, later shifting to discount stock trading. When Arnold came aboard in 1994, it was losing money, according to a Business North Carolina story in 1999.

Over the next 13 years, Uvest moved into more lucrative lines, including offering brokerage services at banks. Boston-based LPL bought the business when it had 200 employees, and Arnold moved to the company’s San Diego office to lead strategic planning and, later, the institution-services division. He was named president in 2015 and became CEO in January, succeeding Mark Casady, 55, who had held the job since 2004. Arnold, 51, who declined an interview request, remains in San Diego, the company’s other key hub with more than 1,500 workers.

LPL serves as a back office for financial advisers who prefer their independence to working for big brokerages such as Merrill Lynch or Wells Fargo Advisors. (LPL stands for Linsco and Private Ledger, which merged in 1989.) In some cases, established stockbrokers can make more money aligned with LPL than with better-known peers, a formula that has helped LPL grow rapidly, if not smoothly, over the last decade.

The company went public in 2010 and shares initially sold for about $30. Shares topped $50 in 2014 and traded at about $40 in mid-March. LPL paid $70 million in fines and restitution in 2014 and 2015 related to compliance problems that followed its rapid growth after the IPO. Senior management turned over repeatedly under Casady, according to an Investment News story last April.

Eight hedge funds and private-equity groups, which often push CEOs to sell rather than build companies, held more than 40% of LPL’s shares at the end of last year. In October, Reuters reported LPL had hired Goldman Sachs Group to probe a potential sale. Amid reports that the company didn’t receive sufficient offers, LPL officials in December emphasized their plan to remain independent.

LPL’s challenge is convincing more customers to convert commission-paying accounts — such as those charging a $10 or $20 fee to trade IBM shares — into fee-based relationships, which provide a steadier stream of revenue. Commissions made up more than 40% of revenue last year, much higher than at many big brokerage firms.

But the company has a bright future because of its relationships with 14,000 registered representatives and independent advisers and its focus on helping them succeed, says Andy Kalbaugh, a division president. “The adviser is the key to a customer’s decision-making. They are buying him, while we are the strength behind that engine.”

Keeping the focus on advisers explains LPL’s relatively low profile. “By design, we haven’t spent a lot of money on our brand,” he says. “Some people have questioned our need to get better public awareness, but that’s a tough matter because the advisers typically aren’t using our name. You won’t see big ad campaigns or our name on football stadiums.”

LPL made a statement by investing heavily in its Fort Mill site, which is part of the new Kingsleydevelopment on land held for decades by the Close family, former owners of Springs Industries. LPL had previously operated in four buildings in Charlotte but jumped whenSouth Carolina and York County offered a $60 million incentives package, including state income-tax rebates and a 50% cut in property taxes for 30 years. Operating costs are half the level of those in San Diego, Casady said in December.

Picking Fort Mill was an easy decision, says Kalbaugh, a Maryland native who lives in North Carolina about 10 miles from his office. “This area is where a significant number of people are moving to, and it obviously feels very much a part of the Charlotte metro area.”

LPL’s two new buildings cover 450,000 square feet and include an elaborate cafeteria, coffee bar, fitness center and natural-light-filled office space that enables most employees to look out windows on at least two sides. An attractive office adjacent to restaurants and shops is important to attract software developers, analysts and customer-service representatives, given the competition with other Charlotte financial-services companies such as Bank of America, Vanguard Group or TIAA, company officials say.

“No one wants to drive to the suburbs, park in a big lot, and then walk across that usually windy lot to their office,” says David Brown, the Atlanta-based architect who designed
the building. “LPL is competing with some of the largest financial companies on the planet, and they have to have something special.”

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Mick McMahan