LPL: $20B in Organic Growth Over Quarter, Despite Market Drops

LPL Financial reported net new assets of $20 billion during the third quarter, down from about $37 billion in the second quarter, but representing a 7.5% annualized growth rate. Total assets were $1.1 trillion, down 2% sequentially and 8% year-over-year, as organic growth was offset by lower equity markets, the firm said.

“Over the past quarter, amid persistent market volatility, our advisors continued to be a source of support and guidance for their clients by helping them navigate uncertainty,” said CEO Dan Arnold, on an earnings call Thursday. “This commitment to their clients underscores the importance of our work on our mission, taking care of our advisors so they can take care of their clients.”

Of course, the volatility is causing clients to put more money on the sidelines; client cash balances were $67 billion, up $16 billion from a year ago.

The firm reported third quarter recruited assets of $13 billion, bringing its total recruited assets over the past 12 months to $84 billion. In the second quarter, the firm reported record recruited assets of $44 billion, $32 billion of which came from CUNA Mutual Group, which it onboarded in May 2022.

Its third quarter recruited assets included $3 billion (of $4.4 billion) from the retail brokerage and advisory business People’s United Bank, which it started to onboard during the quarter.

While LPL Financial has served banks and credit unions for years, it’s recently made a more concerted effort to support these firms, and is optimistic about growth in the channel. During the third quarter, LPL announced it had hired Pete Dorsey, who spent the last two years at the RIA-focused custodial and technology platform Altruist, as executive vice president of institution services, the team responsible for LPL’s bank, credit union and enterprise clients.

Total advisor headcount ended the third quarter at 21,044, up 173 sequentially and 1,417 year-over-year. Arnold said the firm is still having success recruiting into its traditional markets, which accounted for $6 billion in recruited assets during the quarter.  

“We continue to increase our win rates and expand the depth and breadth of our pipeline, despite advisor movement in the industry remaining at lower levels,” Arnold said.

But the firm is also seeing traction in its newer affiliation models, including Strategic Wealth Services, its employee channel, and its RIA custody offering. Those channels accounted for $2 billion in recruited assets during the quarter.

“Following several quarters of elevated market volatility, advisors are acclimating to the conditions and increasingly exploring new strategic alternatives for their practice,” Arnold said. “This creates a more favorable scenario for us as market driven headwinds give way to the structural strength per model. This should result in a solid finish to the year from a recruiting team.”

Overall, net income was $232 million during the quarter, or $2.86 in diluted earnings per share, up 127% from a year ago and beating analyst expectations by 18 cents. Revenue of $2.16 billion, up 6.9% year-over-year, was in line with expectations, according to SeekingAlpha.com.

The firm also reported record subscriptions within its business services group of 4,233, up 1,635 year-over-year. The annualized revenue from these services increased to $34 million, up about 51% from a year ago.