LPL Adds 1,000 Advisors and Sees Recruited Assets Spike
LPL Financial ended 2018 with 16,109 advisors – a headcount figure up 6% from the 15,210 advisors in December 2017. Yet numbers were down by 65 for Q4 compared to Q3 2018. LPL president and CEO Dan Arnold explained on an earnings call that advisor numbers were lower in Q4 on account of 50 IFP advisors who left, 30 advisors belonging to a small group of hybrids who left because they weren’t strategically aligned and about 30 low-producing advisors who just decided to leave the business.
IFP parted ways with LPL Financial last year with plans to launch its own broker-dealer this year, but both sides have disagreed in public about the advisors moving to the new entity. Arnold said approximately 75% of IFP’s $12 billion assets will stay with LPL.
And Arnold is confident of a “solid” recruiting pipeline for the year ahead.
“The primary drivers of our improved outcomes were enhancing the performance of our business development team, as well as aligning our transition assistance with financial returns. We believe these types of structural changes will drive more sustainable and repeatable results going forward,” Arnold said.
The company is also looking to invest in capabilities to help its advisors differentiate themselves. Arnold says the company is focusing on three key areas – digitizing advisor practices to lower costs and increase their scalability, enriching the quality of advice, and modernizing practice management.
A $28 million acquisition of AdvisoryWorld in December was apparently a step in that direction, especially to help advisors convert prospects into clients.
“We are working to integrate this multi-step process into a single digital workflow with several components, including CRM, goals based planning, portfolio analytics, proposal generation and client on-boarding,” Arnold said.
The company will not change its philosophy on mergers and acquisitions. Arnold said M&A is an area to add growth and LPL will evaluate opportunities from a financial, strategic and operations lens.
When questioned whether LPL had considered a fee-only RIA platform, like recent moves by certain wirehouses and broker-dealers, Arnold said LPL currently has a model where an advisor can drop their brokerage license but continue to operate on the LPL platform. But the firm is considering how to reposition this model.
“Can we transform it? Can we materially rethink it such that we reposition it into a more compelling and competitive offering out in the marketplace? So, we’re in the process of doing just that,” he said. “It’s an interesting possibility that we should be considering relevant to improving and enhancing our offering today.”
The company also saw its net revenue grow by 21% to $5.18 billion for the full year 2018 over the previous year. Net income for Q4 2018 increased 88% to $120 million as compared to the previous quarter, while it grew 84% for the same quarter in 2017.
“In 2018 we grew assets and gross profit, remained disciplined on expenses while increasing our investments in organic growth, and returned capital to shareholders,” said CFO Matt Audette in a press release. “As a result, we grew earnings per share over 80% for the year.”
In the last quarter of 2018, LPL saw its total brokerage and advisory assets increase 2% to $628 billion despite market volatility. The firm recorded positive net new assets of $5.9 billion. In fact, for the fourth quarter of 2018, recruited assets stood at $8.6 billion while that number was $27.3 billion for the whole year, an increase of 9% over the previous year.