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LPL Profits Soar on Strong Recruiting: Q1 Earnings

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LPL Financial improved profits 66% from last year in the first quarter; the independent broker-dealer reported net income of $155 million, or $1.79 per share, vs. $94 million, or $1.01 per share, a year ago.

Net new advisory asset inflows were $4.6 billion, while net new brokerage assets outflows were $0.7 billion — translating into an overall 2.5% annualized inflow rate. Recruited assets were $7.1 billion.

On a call Thursday with equity analysts, President & CEO Dan Arnold said that over the past 12 months, the IBD has had “a little over $30 billion in recruited AUM. It’s the first time we’ve ever had that.”

Arnold attributed the recruiting momentum to a number of factors, with the IBD doing a “better job of pulling through those prospects once they’re in the pipeline” and aligning transition assistance with financial returns.

As a result, “things bode well for our continued ability to recruit going forward, but also [are] more reflective of the success that we’ve had in the past other than any sort of circumstance out in the marketplace, ” he explained.

The IBD ended the first quarter with 16,187 advisors vs. 16,109 in the prior quarter.

Other Results

LPL advisors have average yearly fees and commissions of $227,000 and average assets of $42 million.

Firmwide, there are $684 billion of assets, up 9% from a year ago and 6% from the previous quarter.

The IBD’s total revenue grew 10% from last year to $1.37 billion. Commission revenue was $461 million as of March 31, down 2% from a year ago.

Sales commissions on variable annuities and mutual funds dropped, while they rose on alternatives, fixed annuities, fixed income and group annuities.

IFP Update

LPL expected to maintain $8 billion of assets as Independent Financial Partners, a group of advisors, moves off the LPL platform to form its own broker-dealer, Arnold said during the call.

Of the $4 billion transitioning off the platform, about $0.5 million left in the first quarter.

The rest — $3.5 billion — will come out in Q2, the CEO said, “probably more specifically in the May and June periods of time, associated with their transition date.”

Arnold said the IBD retained slightly more than half of IFP’s advisors, “which would suggest we retained on balance the more productive advisors.” (IFP had about 500 advisors as of a year ago.)