LPL Says Retention of NPH Reps at 70%

If it hits 72% of fees and commissions, the IBD will need to pay up to $123 million more for its acquisition

LPL President & CEO Dan Arnold LPL President & CEO Dan Arnold

LPL Financial hosted its 2017 Investor Day on Wednesday, which included comments on its ability to retain advisors acquired via its purchase of the National Planning Holdings broker-dealers in August.

According to Instinet equity analyst Steven Chubak, LPL executives said during the event that they expect 70% advisor retention from the first onboarding of reps.

That news came as Securities America said two super offices of supervisory jurisdiction with a total of over $2.4 billion in assets and 105 advisors are joining its platform from NPH.

In August, LPL said the initial purchase price for the NPH reps was $325 million. The IBD said, though, that it could pay up to $123 million more based on how much of the NPH advisors’ revenue moves onto LPL's platform.

No contingent payment will be made if less than 72% of the advisors’ production (fee and commission revenue) is retained, “and the amount of the contingent payment increases on an interpolated basis for onboarded production in the range of 72% to 93.5%,” LPL explained at the time.

The four NPH broker-dealers — National Planning Corp., Invest Financial, Investment Centers of America and SII Investments — had a total of about 3,200 advisors with $120 billion of assets at the time the deal was made.

The first group of reps, from NPC and ICA, will be moved in early December, while the Invest Financial and SII advisors will be transferred in mid-February.

According to Chubak, the second wave contains “a higher mix of financial institutions (which generally carry a higher retention rate).”

In August, LPL President and CEO Dan Arnold said: “Historically, we see 70% … as a solid number for transitions. We have spectrum from past deals … and 70% is a good average retention level.”

As for Arnold’s comments this week, Chubak said he is upbeat: “We left Investor Day more confident on the bull case as updated guidance on NPH, expenses and capital management support earnings potential for 2019 at roughly $4.70 per share,” according to a research note.

“In addition, [the] continued mix shift toward advisory [business] and increased usage of centrally managed platforms … support long-term optimized EPS potential of more than $5.70,” the analyst explained.

--- Check out Under Pressure, LPL Cuts Fees on Corporate RIA Platform on ThinkAdvisor.

 

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