LPL Financial Services is Playing Hardball to Prevent Competitor from Raiding Its Newest Brokers.

Linsco Private Ledger (LPL) has apparently warned competitor National Planning Holdings, Inc. (NPH) to stop its aggressive recruiting practices aimed at luring registered representatives away from three broker-dealer firms LPL is in the process of acquiring. Reportedly, LPL has threatened to steer all its representatives away from selling insurance products of the parent firm of NPH if such recruiting tactics do not end.

After months of negotiations, LPL, the largest independent-contractor broker-dealer in the industry, said at the beginning of March that it was acquiring three broker-dealers owned by Pacific Life Insurance Co. of Newport Beach, Calif. Along with Mutual Service Corp., the other broker-dealers were Associated Securities Corp. of El Segundo, Calif., and Waterstone Financial Group of Itasca, Ill.

National Planning is a Santa Monica, Calif.-based network of four broker-dealers owned by Jackson National Life Insurance Co. of Lansing, Mich. Industry observers said that National Planning recruiters were talking to and negotiating with reps and advisers affiliated with the three Pacific broker-dealers LPL is acquiring.

According to sources, officials at LPL of San Diego and Boston recently told executives of NPH’s parent company that they should rein in the recruiters at National Planning Holdings broker-dealers. Failure to comply would result in LPL’s pulling Jackson’s insurance products from its network of 7,900 affiliated reps, observers said.

When asked about the alleged hardball tactics, officials at both LPL and Jackson National said that business remains usual between the two. Spokesmen from each company downplayed any riff. Bill Dwyer, president of LPL’s independent-adviser-services division, declined to comment on recruiting policies in general but added that LPL has long-standing relationships with insurance companies that own broker-dealers. Tim Padot, a spokesman for Jackson National and National Planning Holdings, echoed Mr. Dwyer’s statement stating in an e-mail message. “We have a lot of respect for the LPL organization, and we look forward to a mutually productive relationship for years to come.”

Reaction from advisers to LPL’s alleged tough mandate ranged from severe disappointment to outrage. “It certainly flies in the face of what our industry is all about: independence for the client and the rep,” said one adviser affiliated with Mutual Service Corp. of West Palm Beach, Fla., who asked not to be identified. LPL is “acting awfully big right now.”

“Essentially, LPL played its cards, and NPC folded,” said an adviser affiliated with Mutual Service Corp. He was referring to National Planning Corp., the largest independent-contractor broker-dealer owned by Jackson National. “Personally, I think it’s atrocious.”

In 2006, LPL generated $1.7 billion in gross revenue. When the combination is complete, LPL could add as many as than 2,200 registered representatives. National Planning Holdings network generated $492.7 million in 2006.

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