Brokers and advisers at LPL Financial Holdings Inc. will now be able to offer clients securities-based lending through Goldman Sachs, the investment banking giant that was one of the lead underwriters in
LPL's November 2010 IPO.
Goldman Sachs said Monday that LPL's 15,200 brokers and advisers now have access to its securities lending program, Goldman Sachs Private Bank Select. For certain clients, it will reduce the time it takes to obtain a non-purpose securities-based loan from Goldman Sachs Bank USA to days from several weeks,
according to a press release from Goldman Sachs.
Goldman Sachs Private Bank Select currently works with 40 independent advisory firms and broker-dealers, according to Goldman. LPL advisers' clients can borrow between $75,000 and $25 million against the value of their accounts, according to the release.
"LPL also offers securities-backed loans through other firms," company spokeswoman Lauren Hoyt-Williams said. "Making available a product such as this is a way to provide our advisers with a broader range of options to be able to serve their clients' holistic financial needs."
Unlike margin lending, clients can't use the money from securities-based loans to buy more stock or bonds. Such loans also prevent clients from selling the securities against which they've borrowed.
Last April, Morgan Stanley
agreed to pay $1 million to Massachusetts to settle a case involving a high-pressure sales contest among its financial advisers to encourage clients to borrow money against their brokerage accounts.
Massachusetts Secretary of the Commonwealth William Galvin charged that Morgan Stanley encouraged its advisers to cross-sell and failed to follow its own internal rules against sales contests, which he said violated the firm's fiduciary duty to its clients.
