As financial institutions become inundated with new tools designed to take on developing regulations and compliance orders, lagging adviser forces are creating a distribution bottleneck.

Arthur Osman, executive vice president and institution service business consultant at LPL Financial, says while business development opportunities have flourished, helping these firms structure their investment programs "to meet their full potential" has become the Boston-based firm's toughest test.

"We've always been challenged with getting financial institutions to recognize growth opportunities and to more adequately invest in the wealth business and the retail investment business, specifically, to reach that full potential," Osman said in an interview with Bank Investment Consultant. "That's been a longstanding challenge for the entire industry and it remains a big one."

As the industry continues to embrace new regulations, Osman says new digital offerings will ultimately push advisers to learn and evolve in order to meet the developing needs of their clients.

"Client needs haven’t changed," he says. "People still need to retire, people still need to plan for education and address all the other needs that they have. Last I checked nothing has changed in our ability to do that."

What are the biggest opportunities right now for LPL’s bank business?
I would say the opportunities span three specific areas. One is what I would just call the traditional retail investment program and driving same-store sales growth within our existing financial institution relationships.

Our new business development — meaning new financial institution pipeline — has never been better. We are excited about the ability to add new financial institution relationships to the firm.
Then the third would be expanding beyond the retail investment program and using LPL's execution, custody and capability set to support more broadly the affluent and high-net-worth client segments by supporting the broader wealth division within the financial institution.

What are the biggest challenges in the way of those opportunities?
Our view as a firm is that our financial institutions, and most within the industry, are very much under-advisered. Institutions have not reached the right distribution channel size to effectively capture the opportunity that they have to provide investment services to their clientele and their membership.

We're focused on trying to really help organizations adequately invest and appropriately structure their investment programs to meet their full potential. So, that's really going to help them drive penetration of more households. Equally as important is to make sure that their existing advisers are capturing a greater share of wallet from the existing financial institution investment program clientele.

Is there a feasible opportunity for growth, or has LPL taken an approach of strengthening its current partnerships?
I think there is tremendous growth in all areas. It's certainly strengthening and growing the business with our existing clients. That has always been a focus that will continue as such, especially for a firm like ours with the scale that we have and the number of financial institutional relationships that we have in place today.

Our pipeline of new financial institution recruiting has really never been stronger. We're seeing larger and larger banks really explore a third party outsourcing solution.

Not only is our pipeline looking quite good from a traditional bank side that would use a third party, we're seeing bank-owned broker-dealers really question whether or not they can maintain that competitive offering, and want to still operate a regulated broker-dealer. So, we're excited about the trend that we see happening there.

What's the biggest concern right now of your bank advisers?
Probably the velocity of change. Specifically the DoL rule, I think, is creating a bit of inertia for advisers. The thing that we're doing at LPL is certainly making sure that as a firm we're prepared to support them in the post-DoL compliance arena, and we're doing that with tools and roadmaps and dashboards to really help them focus on continuing to serve their clients, and focusing on continuing to grow their business in the way they always have. The message is: Focus on what you can control, keep moving your business forward, and we're here to help you with our toolkits.

Where do you see robo technology evolving and how much do you see that as a piece of LPL's business?
We believe that it is an important capability to best serve a certain client segment, and also allow advisers to more efficiently service the right segment of their existing clientele. I have to refrain from making a prediction in terms of how big of a component that will be, but I think efficiency is important, automation is important, and we're excited about what our solution will do to allow our financial advisers to best serve the younger generation and also more efficiently serve the right client segment that they support today.

What do you think the bank advisory space will look in the next 10 years?
We have already seen material growth in the advisory business across our 750 financial intuition relationships and that significantly outpaces the broader financial institution industry. We think that's a function of our robust platform and our vast resources to help advisers transition their business in that regard.

Our view is that the regulatory changes will undoubtedly serve as a catalyst to accelerate the use of advisory solutions…. We see that trend continuing and occurring at a much faster pace.

Andrew Shilling

Andrew Shilling

Andrew Shilling is a reporter for Financial Planning, Bank Investment Consultant, On Wall Street and Money Management Executive.