LPL OSJ Gateway Financial Partners Introduces Equity Participation Program

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Gateway Financial Partners, a Glastonbury, Conn.–based large office of supervisory jurisdiction of LPL Financial, has launched an equity ownership program for its financial advisors and employees. Under the Gateway Growth Partnership, the OSJ will take a 15%-20% revenue stake in the advisor’s practice, in exchange for a combination of cash and equity in Gateway’s holding company.

Participating advisors still own 100% of their businesses. So far, 50 advisors and employees have participated. The firm has 170 advisors overseeing about $7 billion in client assets.

David Wood, founder and chief visionary officer of Gateway, said they’ve already had a number of advisors use the capital to acquire other practices.

“If you’re a smaller advisor looking to buy a bigger practice, you’re going to have a hard time getting financing on that,” Wood said. “Now the advisor has substantial capital to be able to make those acquisitions. We view that capital as a way that’s going to further fuel the growth of those advisors.”

The program also allows advisors to participate in the profits of a larger enterprise.

“There’s a big difference between what an enterprise is worth and what an individual advisor’s practice is worth,” Wood said. “The enterprise earnings are worth a lot more. We’re basically arbitraging the valuation between an advisor’s practice and our enterprise, and we’re giving them equity to be able to participate in the upside of that.”

Gateway has been working on the new program for the last seven to eight months, and hired Paul Lally, a principal at Wipfli, to help with the initiative. Wood said the OSJ wanted to create more alignment between the firm and the advisors it serves.

“In a typical firm structure like this, an advisor really doesn’t care if the firm grows; they really care about themselves. I think this alignment completely changes that,” Wood said. “We’ve already seen the difference in our advisors and the way they view us now as a partner, and they care a lot more about not only the firm’s success, but they also care about each other’s success.”

One advisor has used the program to position himself more positively to clients, Wood said.


“That’s feedback directly from an advisor who’s participating, saying ‘Boy, now I can really make this place a home long-term, and tell that to my clients and make the clients feel good about the fact that I’m involved in a bigger organization.’”

Last year, Gateway announced its first major OSJ acquisition with its purchase of Advisors’ Pride, another LPL OSJ, in Appleton, Wis. The deal more than doubled its number of advisors. 

Other OSJs have introduced equity participation programs to their reps. Last year, for instance, Private Advisor Group, the Morristown, N.J.–based OSJ of LPL, rolled out an Advisor Alignment and Equity Program, with backing from Merchant Investment Management, its first outside investor. Under the opt-in program, an advisor agrees to contribute a portion of their revenue, typically between 10% and 20%, in exchange for upfront cash and equity in Private Advisor Group.

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