LPL Financial shared good news and bad with stock analysts after it reported its fourth-quarter and year-end 2016 earnings late Thursday. And that put CEO Dan Arnold — leading his first call after taking the reins from Mark Casady — in the hot seat.
The company’s net income jumped 56% in the fourth quarter to $41.7 million from the year-ago period; it rose 14% in 2016 to nearly $192 million. But revenue dropped 1% in Q4’16 to about $1 billion, and it fell 5% for the full year to $4.05 billion.
These results, along with issues related to the new Department of Labor fiduciary rule, prompted analysts to pepper Arnold with questions about business growth in the face of departing advisor groups — like Ron Carson Wealth Management and Resources Investment Advisors.
When asked about a possible move into the pure RIA custodial business, which LPL executives apparently had discussed in an earlier meeting with equity analysts, Arnold gave a clear answer.
“We’re still focused on our core markets,” he said, pointing to the traditional independent broker-dealer and hybrid-RIA businesses.
While some RIAs using its hybrid platform have decided to go pure RIA “as just a way of evolving their practice,” LPL’s leadership is “not actively or currently positioning ourselves, or investing in differentiating relative to an entry into that market,” Arnold explained.
Assets, Revenue Shifts
While LPL Financial’s total assets grew 7% from a year ago to hit $509 billion in Q4’16, its major sales categories moved in the reverse directions.
Commission revenue for 2016 was down 12% to $1.74 billion. Advisory revenue declined 5% to $1.29 billion. Asset-based revenue, however, ticked up 13% to nearly $557 million.
The fourth quarter brought year-over-year declines in commission on alternative products (-42%), fixed annuities (-22%), variable annuities (-9%), variable annuities (-9%) an mutual funds (-4%).