Casady said in an interview with The Wall Street Journal on Monday that he felt it was the right time for a transition with big industry changes ahead, adding, “I had two choices: Retire now knowing you got a great leader in Dan in place or stay and see it through that phase.”

Industry watchers and recruiters gave differing views on the significance of the move and its impact on LPL's 14,000-plus affiliated financial advisors.

“Dan Arnold takes the reigns from Mark Casady at a challenging time for both the industry and for LPL. There have been rumors that the firm is for sale, and they have lost some big teams while they have hired others,” said executive-search consultant Mark Elzweig.

Recently, Ron Carson said Carson Wealth Management will be moving from LPL, where it had about $2.6 billion of assets, to Cetera Financial Group. Meanwhile, LPL said it recruited a group with about $4 billion of assets and 135 advisors from Lincoln Financial Advisors.

As for the Department of Labor's new fiduciary rule, it could “particularly whack the bottom lines of independent broker-dealers,” Elzweig explains, though President-elect Donald Trump and others are looking to “mitigate some of the damage to brokerage firms” from such rules.

Compliance Costs

On Friday, a regulator in Massachusetts charged LPL Financial-affiliated advisor Roger Zullo with fraud due to his sales of “unsuitable variable annuities to retirees and older clients” and the IBD with supervisory failure.

The regulator's office says that Zullo and LPL received more than $1,825,000 in variable annuity commissions over three years. About $1,791,000 of that came from commissions on the same product, the Polaris Platinum III (B Shares) variable annuity.

“Mark Casady was quite clear that the compliance issues were behind them at their [September 2016 national advisor] conference and that other broker dealers were going to experience what they've been through in FINRA scrutiny,” said Jon Henschen of Henschen & Associates, an independent-advisor recruiter. “Since the conference the compliance issues have continued with the most recent VA-fraud advisor news piece being an especially damming incident, that I think was the tipping point for new leadership.”

LPL spent a total of $36 million in regulatory charges for 2014 — four times what it incurred in the previous two years for risk management and compliance issues, according to Casady's 2014 Letter from the Chairman.

In 2015, for example, the Financial Industry Regulatory Authority levied a $11.7 million charge against LPL for supervisory failures in the sale of complex products and ordered that $6.3 million be paid in restitution for failing to waive mutual fund upfront charges on certain retirement and charitable organization accounts.

Turnaround Times?

For its part, LPL says it is “in the midst of one of our most successful recruiting years,” according to Putnam.

“Additionally, LPL's scale and financial performance have equipped the firm to continue investing in the business and to respond decisively to opportunities as they arise. Against this backdrop, we have great confidence in our ability to thrive as an independent public company,” he explained, in a statement.

On Monday, LPL's shares traded down 4% at around $39.25. Year to date, its shares are down about 8% vs. a jump of 73% for rival Raymond James Financial, for instance, which trades above $73.

LPL reported that its third-quarter net income rose 27% from last year to $52 million, or $0.58 per share, beating analysts' estimates. Sales, though, dipped 4% to about $1.02 billion, which were generally in line with what analysts expected.

The independent broker-dealer also said total brokerage and advisory assets grew 9% year over year and 3% sequentially to $502 billion. Net new advisory assets increased at an annualized rate of 8%, or $4.1 billion.

LPL remains upbeat about its strategy to keep commissions in retirement accounts and other moves it is making in response to the new DOL fiduciary rule. It has some $502 billion of client assets, $261 billion of which are retirement assets affected by the coming regulations.

Earlier this year, the firm said it planned to end its mutual-fund direct business, which let LPL advisors hold brokerage mutual fund investments directly with sponsors, on April 10, 2017; it also explained that its new fund-only accounts will not entail IRA custodial fees, trading (or ticket) charges, inactive account or confirm fees, and fees for “systematics.”

“I am thrilled that Dan will take up the mantle of LPL's profound mission,” said Casady. “I will be able to retire knowing the company is in good hands and with bright prospects for the future. Dan and I have worked together for 10 years, and I know he is a passionate advocate for our employees, advisors, and shareholders.”

One industry consultant sees the move as somewhat expected.

“Dan Arnold has been the on obvious pick for a while,” said Chip Roame, head of Tiburon Strategic Advisors. “Dan built UVest, which LPL acquired. He served as head of strategy and then CFO. He seems to have been in line since [former-President] Robert Moore departed” in March 2015.

As for Casady's legacy, Roame says he “transitioned LPL from a modest size (2,000-3,000 FAs) to be the dominant (14,000 FAs) IBD. He expanded LPL's value proposition for retirement advisors, fee-based advisors, bank advisors and others with acquisitions such as RPR, Fortigent and UVest.”

But as Roame admits, along the way Casady has “dealt with a lot of noise as a result,” since having six times as many advisors entails more compliance work “and everything else.”