LPL Lures a Top Northwestern Mutual Advisor in Missouri
While much of the U.S. labor force spent the three work days before Thanksgiving last week cleaning up their desks, John Gatewood said he and 12 teammates secured commitments from clients to move more than $370 million to their new LPL Financial-affiliated business in Clayton, Mo.
“Our needs just outgrew the franchise model of Northwestern Mutual,” he said, pointing to technology that made it difficult to integrate activities such as investment analysis (Morningstar Direct), trading and client reporting, and a reluctance to let him structure an ownership and revenue-sharing plan for junior partners.
Gatewood said that he has gifted one-third of the equity in his newly created Gatewood Wealth Solutions, LLC, to four partners, the oldest of whom is 40. The plan ensures continuity for clients who had entrusted about $550 million of advisory assets to him, he said. He declined to comment on the number of clients, but in a recent Barron’s Top 1200 ranking said his team serviced about 320 accounts at Northwestern Mutual.
Gatewood Wealth is initially custodying clients’ advisory assets with LPL’s registered investment advisor and using LPL as broker-dealer, but will consider multiple-custody relations down the road, Gatewood said.
He accelerated his search for a change about four years ago, he said, and chose LPL after discussions with the RIA custody units of Charles Schwab Corp, Fidelity Investments, TD Ameritrade and Raymond James—as well as with LPL rival Ameriprise Financial and transition facilitators such as Dynasty Financial. He rejected Schwab and Fidelity because of their competitive direct-to-consumer channels, he said, and shied from other contenders who compete for the stock management business of executives that he prospects at national companies such as Monsanto and Express Scripts.
Gatewood, 62, declined to discuss specifics of his deal with LPL, other than to say it includes transition assistance to offset some of the revenue loss and client advance-fee refunds the change entails. (Only about 5% of his team’s revenue involves life insurance products, he said, noting that he expects annuities and other Northwestern proprietary products to remain with his former firm.)
Gatewood began considering changing his business model and improving customer service and trading technology as long as eight years ago, but agreed with a top Northwestern executive to give the firm several years to accommodate his needs, he said.
His primary consultant in the process was ClientWise, an executive coaching and consulting firm founded by Ray Sclafani. Northwestern Mutual last year bought a majority interest in ClientWise.
In the past four years, Gatewood Financial has acquired the wealth practices of eight Northwestern Mutual advisors and expects to do more external acquisitions in high-growth areas such as Florida, Texas and Arizona, with some financial support from LPL, according to its founder. Northwestern was reluctant to let him expand into cities where it already had advisors, he said.
The four younger advisors who have ownership stakes in Gatewood Financial Solutions are Daniel Goeddel, Brian McGeehon, Christina Shockley and Aaron Tuttle, according to LPL. They and Gatewood lead four-person teams providing financial plans and investment management to each client family.
With the more open platform they and their eight colleagues plan to leverage at LPL—they plan to integrate Black Diamond portfolio management software with eMoney [performance reporting, for example—each team will be able to work with up to 175 families, Gatewood said.
Spokespeople at Northwestern Mutual did not respond to a request for comment on Gatewood’s departures and remarks.