LPL Financial said it recruited $17 billion in assets during the fourth quarter 2021, up from about $13 billion in the third quarter, and $89 billion for the year, more than double its 2020 number. Total advisor headcount reached 19,876, up 249 sequentially and 2,589 year-over-year. That includes 1,209 advisors who came over through LPL’s acquisition of Waddell & Reed.
On an earnings call Thursday, LPL CEO Dan Arnold said the results speak to the appeal of its multiple affiliation models and efforts to expand the firm’s addressable market. Over the last three years, the firm has introduced new channels for advisors to work with the financial services firm, including Strategic Wealth Services, its premium model targeting wirehouse and regional advisors, Linsco by LPL, its W-2 employee channel, and its RIA custody offering. SWS recently added its 20th team, while the firm now has 50 advisors in its employee model across 12 offices. Arnold said $2 billion of the fourth quarter recruited assets were brought in through these new affiliations.
“You’re starting to see the beginning of the payoff of the investments we’ve made over the last several years to expand our addressable market,” said Rich Steinmeier, managing director and divisional president, business development of LPL Financial.
Steinmeier said it’s highly likely advisor headcount reaches over 20,000 by the end of the first quarter.
Large financial institutions became a new source of growth for the firm in 2021, with the addition of BMO Harris and M&T, Arnold said. And in June 2021, mutual insurance company CUNA Mutual Group announced it would transition its retail wealth management business, which includes 550 advisors across nearly 300 credit unions, to LPL’s brokerage and advisory platform. CUNA Mutual’s advisors were previously supported by CUNA Brokerage Services, the firm’s in-house broker/dealer and RIA.
Steinmeier said the firm currently has 50% market share of banks or credit unions that have outsourced their wealth programs, but that’s largely programs with under $10 billion in AUM. But now, larger institutions, with over $10 billion, are realizing that the investment required to operate a wealth program and broker/dealer are significant.
“The general consensus was that if you’re above $10 billion, historically, you’re at scale; you should run your own broker/dealer; you build your own technology; you work with a custodian. What’s been challenged in that is, the pace of investment required to keep a modern platform has accelerated, not decelerated,” Steinmeier said.
“What we’ve found, largely, is that the firms that we’re talking to have world-class experiences in retail banking, have world-class experiences with their clients. But when it comes to their wealth business, a lot of times that has been relatively under-invested in. To modernize it to the point where it would in parity with the balance of their experiences for their clients, would be tens of millions of dollars of investments.”
Partnering with LPL is a faster approach to modernizing their capabilities, Steinmeier said. Further, LPL becomes the broker/dealer for those advisors, so they can outsource that compliance risk.
“You modernize your offering, you strengthen your end-investor capabilities, you dramatically strengthen your advisor capabilities, you de-risk it,” he added.
The firm is also working on attracting more advisors serving high-net-worth clients, and adding new capabilities to support them. The firm recently introduced a new set of business programs to help advisors on the planning side, including paraplanning services. They’re also incubating tax planning and other services that would support HNW advisors.
Subscriptions for its business solutions, the firm’s suite of services for advisors, increased to 3,022, up 424 sequentially and more than double a year ago. Launched over two years ago, the platform connects advisors to LPL experts to outsource a range of business activity for a monthly subscription fee.
Fourth quarter assets were $1.2 trillion, up about 34% from a year ago, the firm reported. Net new assets were $26 billion during the fourth quarter, representing 9% annualized growth, which Arnold attributed to new store sales, same-store sales and retention. The firm’s advisor retention remains at 98%.
Overall, LPL reported fourth quarter net income of $108 million, or $1.32, beating analysts’ expectations by 11 cents, according to SeekingAlpha.com. Fourth quarter revenues were $2.09 billion, up 32% year-over-year, beating analysts’ expectations by $10 million.