LPL Financial (LPLA) continues to decline comment on “rumors and speculation” regarding a sale of the firm, CFO Matt Audette said during a call with equity analysts earlier this week.
A possible suitor who stepped forward in mid-October – former registered rep Joseph Nodarse, head of Hudson, Riley Asset Counsel – told ThinkAdvisor that he and some of his business contacts have decided against a deal with the independent broker-dealer, citing regulatory and other issues.
However, the IBD may be in talks with potential private-equity buyers, according to a story posted Thursday by Dealreporter. (LPL became a publicly traded firm in 2010, five years after it sold a 60% stake to Hellman & Friedman of San Francisco and Texas Pacific Group of Fort Worth.)
Rather than looking for buyers, Audette says the IBD is focused on “creating long-term value for our shareholders and … won’t comment beyond that.”
LPL reported that its third-quarter net income rose 27% from last year to $52 million, or $0.58 per share, beating analysts’ estimates, late Wednesday. Sales, though, dipped 4% to about $1.02 billion, which were generally in line with what analysts expected.
The independent broker-dealer also said total brokerage and advisory assets grew 9% year over year and 3% sequentially to $502 billion. Net new advisory assets increased at an annualized rate of 8%, or $4.1 billion.
The independent broker-dealer remains upbeat about its strategy to keep commissions in retirement accounts and other moves it is making in response to the new DOL fiduciary rule. It has some $502 billion of client assets, $261 billion of which are retirement assets affected by the coming regulations.
“We believe we are leading the industry in innovating and adapting to the changing regulatory environment,” said Chairman and CEO Mark Casady in a statement. “Our efforts to be early in the market with solutions designed to help advisors meet a range of investor needs in the midst of regulatory changes are helping to create more opportunities for LPL and our advisors to grow.”
When asked directly on an earnings conference call on Thursday if higher-than-expected DOL expenses could result in changes to the advisor payout grid or shifts in charges for services, Casady replied: “While there is always that flexibility … we don’t really see the need to do that. And, in fact, what we’ve been trying to do is grow volume growth and asset gathering and also to change these policies related to things like [the] direct business that will be helpful … We think that’s the right strategy and feel very comfortable that that’s going to give us some lift that we are not experiencing today.”
(Earlier this year, the firm said it planned to end its mutual-fund direct business, which let LPL advisors hold brokerage mutual fund investments directly with sponsors, April 10, 2017; it also explained that its new fund-only accounts will not entail IRA custodial fees, trading (or ticket) charges, inactive account or confirm fees, and fees for “systematics.”)
(Related: LPL Details New Mutual Fund Only Accounts)
In the third quarter, commission revenues for the IBD were $432 million, down 10% from last year and 3% from the prior quarter. Advisory fees of $322 million fell 6% from a year ago and less than 1% from Q2’16.
Asset-based revenues, though, grew 12% from the prior year to $138 million; this includes sponsor and cash-sweep revenues. Transaction and fee revenues were $108 million, up 3% year over year and 6% sequentially.
More DOL Details