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LPL Profit Dives 45 Percent on Poor Brokerage Sales

LPL Financial’s fourth quarter net income was $27 million, or 28 cents a share, down 45 percent from $49 million, or 49 cents a share, a year ago, the firm announced Thursday after the market close. The firm’s adjusted earnings of 37 cents a share missed analysts’ estimates by 14 cents, according to Seeking Alpha.

The stock price fell Thursday 5.2 percent from its previous close, but remained flat in after hours trading. 

“The market environment was volatile and challenging in 2015, particularly for brokerage sales,” LPL Chairman and CEO Mark Casady said in a statement. “As we move into 2016, market volatility has only increased, and we expect continued pressure on brokerage sales. That being said, we believe our scale and stability give us an advantage in markets like this.”

Sales commissions declined 4 percent sequentially and 12 percent from the year-ago period to $464 million, which the firm attributed to an industry-wide slowdown in sales of alternative investments and trailing commissions remained flat.

Advisory fees were down 5 percent sequentially and year-over-year to $324 million. These fees are billed on a prior quarterly basis, so assets fell in tandem with the S&P 500, which declined in the third quarter 2015, the firm said.

Asset-based fees stayed flat over the prior quarter and gained 2 percent over last year at $124 million.

Here are some of the other highlights:

  • Headcount for the quarter declined by 19 advisors compared to the previous quarter to a total of 14,054.
  • Net revenues were $1.02 billion during the quarter, down 8 percent year-over-year and missing analysts’ estimates by $30 million.
  • The firm gathered $3.1 billion in net new advisory assets, a 7 percent annualized growth rate.
  • Total brokerage and advisory assets were $476 billion, up 3 percent from the third quarter and about flat over the prior year quarter.
  • The firm reported a core G&A expense of $179 million during the quarter, up $8 million from the previous quarter, $4 million of which was mostly non-recurring severance payments.
  • Regulatory-related expenses were flat sequentially at $8 million, with 2015 regulatory charges totaling $34 million, down $2 million from 2014. 
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