LPL Financial's Mark Casady will step down as CEO on Jan. 3,2017, the firm said Monday.

Casady, 56, who has run the Boston-based independentbroker-dealer for 10 years, will stay on as non-executive chairmanthrough March 3.

President Dan Arnold will take over as CEO. Arnold has served asLPL's president since March 2015, having joined the firm in2007.

“The board extends its deep appreciation to Mark for hisoutstanding leadership and careful stewardship of the LPL missionover the past 14 years, and we wish him the very best in hisretirement,” said Jim Putnam, the board's lead director, in astatement. “In selecting Dan Arnold, the board has demonstrated itsconfidence in a proven senior leader who has played an integralrole in creating a talent-rich organization that is gainingmomentum within a promising business environment.”

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

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

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

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

As for the Department of Labor's new fiduciary rule, itcould “particularly whack the bottom lines of independentbroker-dealers,” Elzweig explains, though President-elect DonaldTrump and others are looking to “mitigate some of the damage tobrokerage firms” from such rules.

Compliance Costs

On Friday, a regulator in Massachusetts charged LPLFinancial-affiliated advisor Roger Zullo with fraud due to hissales of “unsuitable variable annuities to retirees and olderclients” and the IBD with supervisory failure.

The regulator's office says that Zullo and LPL received morethan $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 werebehind them at their [September 2016 national advisor] conferenceand that other broker dealers were going to experience what they'vebeen through in FINRA scrutiny,” said Jon Henschen of Henschen& Associates, an independent-advisor recruiter. “Since theconference the compliance issues have continued with the mostrecent VA-fraud advisor news piece being an especially dammingincident, that I think was the tipping point for newleadership.”

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

In 2015, for example, the Financial Industry RegulatoryAuthority levied a $11.7 million charge against LPL for supervisoryfailures in the sale of complex products and ordered that $6.3million be paid in restitution for failing to waive mutual fundupfront charges on certain retirement and charitable organizationaccounts.

Turnaround Times?

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

“Additionally, LPL's scale and financial performance haveequipped the firm to continue investing in the business and torespond decisively to opportunities as they arise. Against thisbackdrop, we have great confidence in our ability to thrive as anindependent public company,” he explained, in a statement.

On Monday, LPL's shares traded down 4% at around $39.25. Year todate, its shares are down about 8% vs. a jump of 73% for rivalRaymond 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, beatinganalysts' estimates. Sales, though, dipped 4% to about $1.02billion, which were generally in line with what analystsexpected.

The independent broker-dealer also said total brokerage andadvisory assets grew 9% year over year and 3% sequentially to $502billion. Net new advisory assets increased at an annualized rate of8%, or $4.1 billion.

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

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

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

One industry consultant sees the move as somewhat expected.

“Dan Arnold has been the on obvious pick for a while,” said ChipRoame, head of Tiburon Strategic Advisors. “Dan built UVest, whichLPL acquired. He served as head of strategy and then CFO. He seemsto have been in line since [former-President] Robert Mooredeparted” in March 2015.

As for Casady's legacy, Roame says he “transitioned LPL from amodest 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 suchas RPR, Fortigent and UVest.”

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