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UBS and LPL’s Earnings Show Washington's Influence

April 28, 2017

LPL Financial Holdings posted a 4% drop in profits in the first quarter, but rising revenue from fee-based accounts has offset some of the losses in commission revenue, the Wall Street Journal writes. Meantime, UBS saw a fee income boost in Q1.

The independent broker-dealer had a net profit of $48 million in the first three months of 2017, compared to $50.4 million in the quarter the year prior, according to the publication. Revenue, however, was $1.04 billion, up 3% from the year before, the Journal writes. Rising revenue from advisory fees helped balance out lower revenue from commission-based accounts, according to the paper.

Assets in fee-based accounts made up 42.6% of the $530.3 billion in total assets as of the end of March, the Journal writes. At the end of last year, they made up 41.5% of total assets, according to the earnings report.

LPL added $2.6 billion in net new assets in the first quarter, according to the paper.

LPL has been steering assets away from commission-based accounts to fee-based ones in order to comply with the Department of Labor’s fiduciary rule, which was postponed from its April implementation date to at least June, the Journal writes.

The firm, unlike Merrill Lynch and JPMorgan, has opted to continue offering both types of accounts, with some changes to help its brokers comply with the rule, which purports to force retirement brokers to put clients’ interests first, according to the paper. And while president Donald Trump’s administration is intent on changing or killing rule, LPL is betting it will eventually get implemented and benefit the firm, the Journal writes. Chief executive Dan Arnold said in a call with analysts that the rule will “create disruption that will lead to movement of both advisers and assets in the coming months and years,” according to the paper.

LPL’s broker count, meanwhile, grew 2% from the year prior, to 14,354, but is relatively unchanged from the last quarter of 2016, the Journal writes.

Meanwhile at UBS better investor sentiment boosted profits but its future remains uncertain, Reuters reports. UBS Wealth Management Americas saw net new money in Q1 2017 drop to $1.9 billion from $13.6 billion a year earlier, Bloomberg reports. The hiring of more FAs was one reason cited by the bank for its stall collecting net new money. Yet fee income was nonetheless up, with pretax profits at the brokerage hitting $302 million on the back of rising U.S. interest rates, according to the company.

By Alex Padalka
  • To read the Reuters article cited in this story, click here.
  • To read the Bloomberg article cited in this story, click here.
  • To read the Wall Street Journal article cited in this story, click here.