LPL Financial executives laid out their tech-focused growth strategies after releasing strong earnings Thursday and also said the firm has “reduced pricing” in the context of the overall industry movement to zero fees.
The independent broker-dealer’s net income jumped 23% and earnings per share 32% year over year to $132 million, or $1.57 per share, in the third quarter of 2019, beating estimates; revenue grew 6% from last year to $1.42 billion.
LPL also says recruited advisors brought in $8.7 billion in Q3’19 and $32.9 billion over the past 12 months. Its indie advisor headcount was 16,349 as of Sept. 30, up 188 sequentially and 175 from a year ago; its year-to-date retention of fees and commissions is 96.3%.
When asked about the “race to zero” on fees and commissions, President and CEO Dan Arnold told equity analysts that the trend “has a really small impact on our business … because we don’t operate in the self-directed [investor] market.”
That said, to “best position its advisors,” the firm has taken steps to adjust pricing in order to boost growth for its advisory platforms and reduce transaction costs, Arnold says.
These steps have involved an average investment of $15 million annually over the past three years, he adds, and will likely remain in place for 2020.
The CEO also stressed that lower industry pricing being rolled out by online brokerages most affects the firm’s RIA clients, who custody assets with LPL.
“It’s a smaller level of impact [than for the e-brokerages], and we absolutely have taken those data points and put them into our overall strategic considerations around how we reduce pricing to best support our advisors, and [it’s] a part of that prioritization stack,” he explained on the call.
Earlier in the discussion, Arnold highlighted three strategic priorities for the firm going forward. He and CFO Matt Audette emphasized that the firm intends to keep its yearly technology budget at about $150 million.
As investor expectations “evolve to include omnichannel, customized and personalized interactions, we aim to deliver an enhanced digital investor experience that will help our advisors win in the marketplace,” Arnold said.
This quarter, the firm is rolling out a mobile app so investors can “customize and personalize the display of their account information,” he adds. The app also lets them “measure progress relative to their goals in real time.”