LPL Financial's revenues and net income declined in the second quarter, but the country's largest independent broker-dealer recorded its largest gain in net new adviser headcount since 2014.
Total net revenues for the three months ended June 30 slid 7% to $1.01 billion, from $1.09 billion for the second quarter in 2015. Net income fell 5% to $47.8 million from $50.2 million for the year-earlier period.
But the giant IBD did improve a key metric in an area where it had been languishing for about two years— it added 100 advisers from the prior quarter, for a total of 14,193 advisers.
LPL Chairman and CEO Mark Casady expects the headcount surge to continue.
The firm is having discussions with advisers from firms who were "not helping them" sufficiently prepare for next year's fiduciary rule, Casady said in a conference call with analysts. Some banks may give up their broker-dealer units in the wake of the Department of Labor's fiduciary ruling, which would be a "positive" development for LPL Casady said.
FIDUCIARY RULE 'MANAGEABLE'
The IBD will be offering "fewer products" in a post DoL fiduciary rule world, Casady said. But the financial impact of the fiduciary rule "will be manageable" for LPL, he told analysts.
"Improving business fundamentals and disciplined expense management" resulted in what Casady called a "strong" quarter for LPL, despite a volatile market.
"Our business model is generating strong earnings and cash flow," Matt Audette, LPL's chief financial officer said in a statement. "Commissions and advisory fees, as well as sponsor revenues, were up sequentially, and we are staying disciplined on expenses."
Total commission revenue for the firm continued to slide as LPL's business model becomes increasingly fee-based, falling 13% to $446 million, down from $510 million in the second quarter last year.
Net new advisory assets for the second quarter were $2.8 billion. The operating metric is "the driver of our financial results" Audette said in the analysts call. Net new advisory assets for the year-earlier period were $4.3 billion, a 35% drop, although the firm in its earnings results described the percentage change as "not meaningful."