LPL Shares Q2 Recruiting Update, Sees Less DOL-Related Uncertainty

CEO Dan Arnold discusses why the independent broker-dealer is upbeat on its recruiting pipeline for the rest of the year

LPL Financial's new campus in South Carolina LPL Financial's new campus in South Carolina

In the second quarter, LPL Financial reported that the number of affiliated advisors is 14,256, down nearly 100 from the prior quarter’s 14,354 but up 63 from 14,193 a year ago.

The independent broker-dealer says it lost a large advisory group in the quarter, after having Ron Carson’s wealth team depart in Q1. Still, it recruited 91 new advisors with at least $3.6 billion in the second period — 19 of whom moved to the IBD from Wells Fargo.

CEO and President Dan Arnold said on a conference call with equity analysts last week that that recruiting both Q1’17 and Q4’16 were down slightly due to uncertainty tied to regulatory issues such as the new Department of Labor fiduciary rule.

However, today there is “some reduction in that level of uncertainty, and that is better for the recruiting pipeline. We feel good about growing via recruiting in the long term,” Arnold explained.

In the second quarter, the IBD’s new recruits included 14 teams and advisors with $100 million or more in client assets, 22 groups or individual reps with $50 million to $99 million in assets, and 26 reps or teams with $30 million to $49 million in assets.

Asset Flows

Net new brokerage assets continued to experience outflows, which were $5.5 billion in the quarter, translating to a 7% annualized rate of losses.

Net new advisory assets, though, had inflows of $5.9 billion, representing a 10% annualized growth rate. Overall, total net new assets had inflows in Q2’17 of $0.4 billion, representing a yearly growth rate of 0.3%.

Excluding the impact of the large group that left in Q2, net new asset flows would have been $2.1 billion, its executives explained on a conference call with equity analysts last week.

The firm’s overall production retention rate fell in Q2’17 to 93.4% from 96.8% a year ago and from 95.4% in Q1’17. Its total payout ratio was 86.4% as of June 30, up from 84.7% in Q1’17 but down from 85.6% in Q2’17.

Production-based bonuses have remained constant at 2.7% of trailing production.

LPL’s advisors have average assets of about $38 million. Their average trailing-12-month fees and commissions were $215,000 as of June 30.

--- Check out BDs Address Fiduciary Rule, Growth Challenges on ThinkAdvisor.

 

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