March 1, 2010

LPL Financial: Nears 12,000 Indie Advisors

As it nears 12,000 advisors, LPL Financial stands just below Morgan Stanley Smith Barney, Bank of America-Merrill Lynch and Wells Fargo Advisors in terms of its Series 7 representatives. And it is clearly well ahead of UBS.

In its latest 8-K, LPL reported that its rep force was essentially unchanged for the year -- it started with 11,920 as of year-end 2008 and finished 2009 with 11,950.

But CFO Robert Moore said in an interview with Investment Advisor magazine that LPL added 750 new representatives during the year.

While there was some attrition among reps, as it expected would be the case with moving the Pac Life B/Ds onto its clearing platform, Moore pointed out that "looking at the total business," LPL had retained 92% of total production during the year.

As it nears 12,000 advisors, LPL Financial stands just below Morgan Stanley Smith Barney (18,135 FAs), Bank of America-Merrill Lynch (15,006) and Wells Fargo Advisors (14,961) in terms of its Series 7 representatives. And it is clearly ahead of UBS, which has 7,084 reps.

Moore said that recurring revenue accounts for 55% to 60% of LPL Financial's annual revenue, as shown by 29.6% growth in advisory AUM to $77.2 billion for the year.In a challenging year that began with the company announcing layoffs, LPL Financial rebounded to end 2009 with a 4.4% increase in net income despite an 11.8% decline in net revenue.

For the full year ended December 31, LPL reported in an 8-K filing with the SEC that it had net income of $47.5 million on revenue of $2.7 billion, compared to net income of $45.5 million on net revenue of $3.1 billion in 2008.

Moore also said in an interview that the profit increase was made possible by the company's ongoing strategic business review which rather than "cutting costs across the board" takes a more systematic approach to viewing and trimming a company's expense structure, finding efficiencies in areas that were not core to its compliance, legal, or client-facing operations, for example. He did say that the company ended the year with a lower employee headcount than it began the year.

LPL's financial picture was strengthened by the consolidation of its three affiliated broker/dealers (the former Pacific Life B/Ds) onto LPL's own clearing platform, a move that while only consummated in the fall nevertheless saved LPL $6 million in 2009, Moore reported. Moreover, LPL expects to realize annual savings of $21 million from the move, he said.

Moore also said that while still a small part of the firm's overall revenue mix, LPL's Hybrid RIA platform headed now by Derek Bruton was "an important growth lever for us." The platform grew from custodying $1.3 billion in AUM at year-end 2008 to $7.33 billion at the end of 2009, with 92 firms on the platform.

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The original version of this story appeared on the website of Investment Advisor magazine and was reported by Jamie Green, group editor-in-chief, Advisor Media Group, Summit Business Media.

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