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LPL Sees Recruiting Boost, New Assets Top $4B in Q3

LPL Financial broke out of its recruiting slump in the third quarter, adding 154 net new advisors -- nearly five times as many as the previous quarter.

In addition, net new advisory assets for the country’s largest independent broker-dealer rose to a record $4 billion, sparked by increased advisor productivity. Annualized commissions per advisor improved to $156,000 from $134,000 in the year-ago quarter, and advisory and brokerage assets exceeded $400 billion as of the end of the quarter, helping the firm record net revenue of $1.1 billion.

The net increase in advisors -- 393 over the past 12 months -- demonstrated “the quality of our offering,” LPL chairman and CEO Mark Casady said in a statement, as well as "advisors’ strong and sustained desire to migrate to an independent business model."

LPL’s “ability to support and retain existing advisors remains in line with our expectations,” Casady said. “Our year-to-date production retention was 97%, which we believe continues to lead the industry ... These metrics reinforce our belief that our business remains on the right trajectory.”


Indeed, the drivers of the firm’s third-quarter revenue growth -- recruiting, advisor productivity and retention of existing advisors -- “are all pointing in a positive direction,” LPL CFO Dan Arnold said in an interview after the earnings announcement.

The surge of new advisors in the third quarter is at least partially attributable to the end of uncertainty in the beginning of the year around tax policy, Arnold said.

At the beginning of the year, advisors were busy helping clients, which “tends to delay” any decisions about moving, according to Arnold. “The further away we got from that inflection point, the more things normalized for advisors, who then were able to explore their options, and we saw demand pick up,” he says.

Nonetheless, LPL’s total number of net new advisors for 2013 is still only 213, far short of the firm’s stated goal of adding 400 to 500 new advisors annually. While Arnold admitted “it would be a stretch” for LPL to get to 400 new advisors by the end of the year, he also points to the third quarter's “industry-leading” increase and claims that the firm “outperformed relative to the opportunity ... and sees a good pipeline [of new advisors] for the fourth quarter.”

Advisor productivity received a boost from a 16% increase in annualized commissions per advisor from the same period last year. That number usually slumps in the summer, Arnold said, but grew this year because of increased sales in alternative investments.


Arnold also confirmed that LPL plans to considerably expand its presence in Charlotte, N.C., where the company has approximately 900 employees working for its institutional service business, East Coast operations and technology support.

LPL currently has about 238,000 square feet of office space in Charlotte, which it plans to double, Arnold said.

Arnold also confirmed that LPL will begin charging advisors a fee next year for its third-party model wealth portfolios, a money management platform.

LPL has been “subsidizing” the cost of the platform, he said, but will now charge an “industry standard” price for internal research to create model portfolios. The price will most likely be 15 or 20 basis points, according to published reports; Arnold declined to specify what the cost would be.

Arnold also declined to discuss the recent defection of LPL practice management chief Mike Watson back to TD Ameritrade, where he will now be charged with recruiting major RIAs to work with the custodian.

LPL’s net income for the third quarter increased nearly 10% to $37,631,000; earnings per share (diluted) jumped 16% to 36 cents, and the company’s board of directors declared a cash dividend of 19 cents per share.

Looking ahead, Casady said “We believe we will achieve greater efficiency and scale in 2014,” citing LPL’s investments to deliver new technologies and a better service offering to advisors.

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