October 30, 2013

LPL Beats Q3 Estimates on Strong RIA, Advisor Growth

The independent broker-dealer says advisors had average commissions of $156,000 in the third quarter

LPL celebrating its 2010 IPO. LPL celebrating its 2010 IPO.

LPL Financial (LPLA) beat analysts’ estimates with net revenue of $1.053 billion for the third quarter of 2013, up 16% from a year ago.

This included a 19% jump in commission revenue and a nearly 12% improvement in advisory revenue. Recurring revenue represented 64% of total sales in the period, LPL says.

Net income rose about 10% year over year to $37.6 million, or $0.36 a share, from $34.3 million, or $0.31 a share, last year.

“Advisor productivity continues to be strong and points in a positive direction moving into the fourth quarter across our advisory and brokerage businesses,” said CFO Dan Arnold, in an interview with ThinkAdvisor.

On the advisory side, net new assets were up 11% or $4 billion in the third quarter. “This shows our great strength in attracting assets across both our hybrid RIA and corporate RIA programs,” Arnold said.

On the brokerage side, average advisor commisions improved to $156,000 in the third quarter from $152,000 in the second quarter, “which bucked the trend of a summer slowdown mainly due to third-quarter sales of alternative products,” the CFO said.

“Our unique offering around the hybrid RIA option continues to be attractive as we recruit new advisors and are seeing good, consistent asset growth,” Arnold explained. “Also, [advisors across the board] are using more of our advisory solutions,” such as the Model Wealth Portfolios and Strategic Asset Management platform.

LPL had 13,563 affiliated advisors as of Sept. 30, up from 13,409 on June 30 and from 13,170 a year ago.

Advisory and brokerage assets grew 12% year over year to $415 billion, while advisory assets under custody jumped 19% to $141 billion.

Assets under custody on the independent RIA platform grew 55% year over year to almost $55 billion. This platform is used by 228 independent RIA firms vs. 180 firms with about $35 billion in assets a year ago.

Furthermore, Arnold is upbeat on how LPL clients are investing this quarter. The markets “are performing in a way that is not overly volatile and more predictable," he said, "which is a positive for investors.”

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Check out ThinkAdvisor’s 2013 Q3 Earnings Calendar for the Finance Sector.

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