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Industry Spotlight > Broker Dealers

LPL Earnings Decline but Revenues, Assets Rise

By Bernice Napach

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LPL Financial (LPLA), the largest independent U.S. broker-dealer, reported a 4.6% drop in net income for the first quarter to $50.7 million from $53.1 million a year ago, but revenues and assets rose.

Net revenues rose 2% to $1.1 billion and assets increased 9% to $485 billion.

On an adjusted basis, net income fell 11.1% to $63.2 million from $71.0 million a year ago and earnings per share fell to $0.64 from $0.69.

In a statement following the earnings release, LPL Financial President Dan Arnold said regulatory-related costs plus costs for two advisor conferences and a decrease in cash sweep revenues more than offset benefits from business growth and reduction in the number of outstanding shares. 

LPL Financial paid $11 million in regulatory charges for the quarter, including fines and legal and regulatory consulting fees, and, according to its earnings statement, expects such costs will remain elevated for the rest of the year but not as high in subsequent quarters.

The IBD continued to add advisors during the first quarter, ending with 14,098, or 62 more than the previous quarter and 372 more than year ago. Advisory assets grew 16.3% to $183.7 billion and accounted for almost 38% of the firm’s assets under custody.

Assets under custody on LPL’s Hybrid RIA platform – for RIAs who may also be registered as broker-dealers– grew 51% to $104.8 billion and net new advisory assets, which exclude the impact of changes in the market, grew $5.2 billion. Total payouts for advisors, however, declined 75 basis points to 85.64%.

In a statement following the earnings release, LPL Chairman and CEO Mark Casady said he supports “the intention” of the Dept. of Labor’s proposed fiduciary rule requiring financial advisors to serve the best interests of their clients and does not believe it will not have a “material adverse long-term impact” on the financial performance of the advisory business. In the earnings call, however, Casady added that he preferred a single regulator to oversee the rule rather than the three agencies — the DOL, SEC and FINRA — that are now involved.

– Related on ThinkAdvisor: 12 Best & Worst Broker-Dealers: Q4 Earnings, 2014

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