LPL Financial, the nation’s largest independent broker-dealer, has experienced a significant increase in net income during the second quarter. The company reported adjusted earnings per share of $3.94, surpassing analysts’ expectations by six cents.
Impressive Growth and Expansion
The flourishing financial firm recently announced its latest acquisition, further bolstering its already sizable roster of advisors. With the broker-dealer sector undergoing consolidation, LPL appears poised for even more deals in the future.
During the second quarter, LPL’s net income skyrocketed by 78% to reach $286 million, compared to the previous year. This notable growth is a testament to the company’s successful strategies and resources.
Record Advisor Head Count and Asset Growth
LPL’s focus on expanding its advisor base has yielded impressive results. The company now boasts a record-breaking head count of 21,942 advisors at the end of the second quarter. This figure represents an increase of 421 advisors from the previous quarter and 1,071 advisors compared to the same period last year.
The company attributes its continuous success in attracting new advisors and wealth management firms to its capabilities and extensive resources.
Future Outlook
During the recent earnings call, LPL’s CFO, Matt Audette, affirmed that the company’s momentum will carry into the third quarter. They are poised to deliver another robust quarter of recruitment efforts.
LPL reported that recruited assets for the quarter amounted to $19 billion, while organic net new assets reached an impressive $22 billion. Overall, total advisory and brokerage assets saw a 16% year-over-year increase, surpassing $1.24 trillion.
CEO Dan Arnold expressed confidence in the company’s ability to not only expand wallet share with existing clients but also attract new clients.
Positive Ratings from Analysts
Jeff Schmitt, an analyst at William Blair, noted in a research note that LPL shares continue to be rated as outperform. He highlighted the company’s improved organic growth profile, rising spread income, and high capital return, which are anticipated to generate strong earnings per share over the next few years. Additionally, Schmitt considers LPL’s valuation to be attractive in comparison to historical levels.
LPL Financial’s remarkable second-quarter performance positions the company for continued success and growth in the wealth management industry.
Industry Consolidation
In recent years, broker-dealers have been actively pursuing opportunities to achieve greater scale in the face of increasing regulatory, compliance, and technology costs. As a result, we have witnessed a surge in acquisitions and mergers within the industry.
For instance, in 2021, LPL made headlines by acquiring Waddell & Reed’s wealth management business, which boasted a strong network of 900 advisors. Similarly, rival firm Cetera announced its plans to purchase insurer Securian’s wealth management business earlier this year, a move that could potentially add 1,000 advisors to their team.
Continuing this trend of consolidation, LPL announced on Tuesday its acquisition of Crown Capital Securities, a well-established broker-dealer with 260 advisors and an impressive $6.5 billion worth of advisory and brokerage assets. Anticipated to join in early 2022, these new advisors will undoubtedly strengthen LPL’s position in the market.
Dan Arnold, who has been serving as LPL’s Chief Executive Officer since 2017 and President since 2015, emphasized that their company’s scale and investments in capabilities make it an attractive partner for smaller wealth management firms. With a clear focus on future growth, Arnold confidently stated, “We firmly believe that ongoing consolidation is imminent, and we are strategically positioned to seize those opportunities.”
Furthermore, LPL has been actively venturing into the RIA (Registered Investment Advisor) custody market, traditionally dominated by industry giants Charles Schwab and Fidelity. Arnold expressed the company’s determination to establish itself as a credible alternative to the existing players in this space, stating, “We are committed to building awareness around the fact that we provide a viable alternative for advisors in the marketplace.”
LPL’s services group has also been making significant headway. By offering advisors tailored service packages through a subscription model, this division reported a remarkable annualized revenue of $39 million, an impressive 22% increase compared to the previous year. Furthermore, the number of subscriptions witnessed substantial growth, rising by 34% year over year to reach an impressive count of 5,238.
Overall, LPL’s strategic acquisitions, focused growth initiatives, and commitment to offering unparalleled services to advisors have undoubtedly positioned them as a key player within the industry. As they continue to embrace industry consolidation, the company is poised to drive further innovation and expansion in the wealth management landscape.
