Pru sells US broker/dealer network to LPL Financial

Prudential, the major UK insurance and financial product provider, has sold its US broker-dealer network to Boston-based LPL Financial for what was described as an “initial purchase price” of US$325m.

LPL, which is listed on the NASDAQ exchange, is the US’s largest independent broker-dealer, with an adviser force of around 14,000, ahead of the Prudential deal.

The final price may rise to a maximum of approximately US$448m, subject to certain transition criteria, Prudential said.

In a statement accompanying the announcement of the sale today, chairman and chief executive of the company’s North American operation Barry Stowe said that although Prudential “still very much believe[s] in the independent broker-dealer model, our primary strategy in North America is to focus on being the leading manufacturer of retirement products”.

The deal is described as taking the form of a straightforward asset sale that will include “substantially all the business of the network”, and the transition is expected to be completed by the end of the first quarter of 2018.

Prudential’s US network, known as National Planning Holdings (NPH), consists of INVEST Financial Corp,  Investment Centers of America, National Planning Corporation and SII Investments.

Prudential’s announcement of the sale of the NPH business comes around a week after it  announced it would merge its M&G asset management and UK  and European insurance businesses  in a cost-saving and efficiency-boosting measure.

The acquisition also comes as American advisers are preparing to take on board a package of new regulations known collectively as the Fiduciary Rule, which will affect the way retirement products are to be sold to clients. Many companies have opposed the new regulations, which introduce a new “best interest of the client” feature, arguing that they will add burdensome costs and complexity.

Also last week, Prudential reported its operating profit rose 15% on an actual basis to £2.36bn (US$3bn) in the first half, driven by growth in in its Asian businesses.

LPL CEO: ‘Uberisation’

US media reports last month quoted LPL Financial’s chief executive, Dan Arnold, as saying that he saw a case for taking a page from the way Uber remunerates its taxi drivers, and changing the way LPL Financial’s advisers operate, relative to the parent company. The “shared economy model” used by Uber, Arnold said, could lower advisers’ costs and enable them to be more efficient.

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