October 31, 2012

LPL Tops Estimates, Boosts Assets

The number of advisors drops from the second quarter, but is up for the year at 13,140

LPL Financial’s parent company (LPLA) said the independent broker-dealer had third-quarter net income of $34.3 million, or $0.31 per share, down $2.1 million versus $36.4 million, or $0.32 per share a year ago. Adjusted earnings were $53.0 million, or $0.47 per share, up $1.4 million or 2.8% compared with $51.6 million, or $0.46 per share, last year.

Net revenues for the third quarter grew 2.8% to $907.2 million from $882.9 million in the prior-year period. Analysts had expected adjusted earnings of $0.44 a share on sales of $899.60 million.

“With the backdrop of an uncertain economic environment, individual investors continued to take a cautious approach to engaging with the markets, which led to the subdued levels of advisor productivity we experienced this quarter,” said Mark Casady (left), LPL Financial chairman and CEO, in a press release.

Advisor Results

The number of independent financial advisors affiliated with LPL Financial stands at 13,170, down 15 reps from 13,185 as of June 30, but up 371 from 12,799 a year ago.

Total advisory and brokerage assets were $371.4 billion as of Sept. 30, a jump of 17.4% from $316.4 billion a year ago and an increase of 5.2% from $353.0 billion in the second quarter. Advisory assets under custody were $118.6 billion at quarter-end, up from roughly $111 billion in the second quarter and $96 million in the second quarter of 2011.

Net new advisory assets were $2.9 billion during the third quarter versus $2.8 billion in the second quarter and $3.0 billion last year. For the past nine months, net new assets were $8.2 billion, down 16.3% from the year-ago period.

“Our platform continues to attract a diverse set of advisors, including larger practices, RIAs and retirement producers, in addition to core and financial institution-based advisors,” Casady said. “For the first nine months of 2012, we added 323 net new advisors. In addition, we continued to see strong asset flows, as reflected by the $2.9 billion in net new advisory assets for the quarter, representing 10% annualized growth. The performance of these fundamentals contributed to recurring revenues growing to 67% of net revenues this quarter.”

Total advisory and brokerage assets were $371.4 billion at the end of the quarter, which increased 17.4% from $316.4 billion as of Sept. 30, 2011, and increased 5.2% from $353.0 billion as of June 30, 2012. Supported by net new advisory assets of $2.9 billion during the third quarter, advisory assets under custody were $118.6 billion at quarter-end.

In its earnings release, the company notes that it added 495 net new advisors during the 12 months ended Sept. 30, excluding the attrition of 124 advisors from the UVEST platform conversion. It attributed the loss of 15 advisors in Q3 to the loss of a bank program with 181 advisors. “The bank's parent company consolidated the bank's external operations onto the broker-dealer platform of an affiliate within its organization,” LPL said in its earnings release.

Assets under custody on LPL Financial’s RIA platform grew 75.2% year over year to $35.4 billion, encompassing 180 RIA firms. About $18.6 billion were in advisory fee accounts custodied by LPL, and $16.8 billion were in LPL brokerage accounts.

RIA Push

Noting that LPL's advisor growth has included a "good healthy balance across business models," CFO Dan Arnold (right) sad that the growth rate of hybrid advisors (those using LPL's broker-dealer platform and operating as their own RIA, rather than using the corporate RIA) and hybrid assets is impressive. "We've had a 75% growth rate in hybrid RIA assets in the past 12 months, and 180 new RIA platforms join us in that period," he said in an interview with AdvisorOne. In contrast, corporate-level assets grew about 8%.

In addition, LPL Financial says it hosted more than 2,500 financial advisors in San Diego for its annual conference.

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For more Q3 2012 earnings news, see AdvisorOne’s 2012 Q3 Earnings Calendar for the Finance Sector.

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