LPL Financial is experiencing success in its efforts to expand its affiliation models, specifically targeting wirehouse brokers and registered investment advisors (RIAs). During the third-quarter earnings call, company executives highlighted the positive impact of these initiatives on net new assets and headcount.
While LPL’s traditional independent channel remains a substantial contributor, responsible for recruiting $13 billion in assets during the quarter, the newer Strategic Wealth Services (SWS) unit, the Linsco employee model, and the RIA-only custody business achieved a record quarter by adding $5 billion in recruited assets. In the past year, LPL has brought on board brokers representing a combined $14 billion in assets through these affiliation models, which now account for approximately half of all assets acquired through these channels since their launch.
Dan Arnold, LPL’s Chief Executive, emphasized the strength of their diverse affiliation models in attracting a wide range of advisors, many of whom focus on advisory services. He anticipates that the growing awareness of LPL’s models will lead to a sustained increase in growth within these affiliation models.
In recent examples, LPL’s SWS unit successfully hired a father-son duo from Morgan Stanley overseeing $1.2 billion in client assets in Westlake, California, and a Merrill Lynch team with $325 million in client assets in August. Linsco also attracted a 15-year Merrill Lynch veteran who managed $130 million in assets in August and two former Wells Fargo Advisors brokers with $248 million in assets in Charlottesville, Virginia, in July.
The firm reported a total of $31 billion in recruited assets, more than double the figure from a year ago. LPL’s recruitment efforts were further boosted by the addition of enterprise practices from Bank of the West and Commerce Bank.
LPL is preparing to welcome 2,600 brokers from Prudential Advisors, who will be migrating from Fidelity Investments late next year, as previously announced.
During the quarter, LPL, the largest independent-broker dealer, added a net 462 advisors, bringing its advisor headcount to 22,404 as of September 30. This represents a 2% increase sequentially and a 6% year-over-year growth.
Total revenue for the quarter increased 2% sequentially and 17% year-over-year, reaching $2.5 billion. However, net income declined 21% quarter-over-quarter to $224 million from $286 million due to a 6% increase in total expenses during the same period, totaling $2.2 billion.
LPL’s assets under management at the end of the third quarter totaled $1.24 trillion. This included advisory assets, which grew 22% year-over-year to $663 billion, and brokerage assets, which saw a 16% year-over-year increase to $576 billion.
In terms of organic growth, LPL reported the addition of $33 billion in new assets during the third quarter, representing a robust annualized growth rate of 10.7%, as indicated in the earnings release.