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LPL Financial

LPL Recruits $13B in Q3 as New Affiliation Models Appeal to Advisors

LPL Financial has been adding advisors via Strategic Wealth Services, its W-2 employee model and its relaunched RIA custody offering.

LPL Financial reported $13 billion in recruited assets during the third quarter, up 24% from a year ago, bringing its trailing-12-month recruited assets to $83 billion, more than double a year ago. Advisor head count reached 19,627, up 513 from the second quarter of 2021 and 2,459 from a year ago. That includes 280 associate advisors with Waddell & Reed who became financial professionals with LPL.

“During the quarter, we continued to drive solid recruiting results across each of our markets, including $10 billion in our traditional independent model and $2.5 billion in our new affiliation models,” CEO Dan Arnold said on an analyst call. “Multiple channels contributing to our growth better positions us to drive higher levels of recruiting over time.”

In addition to its traditional independent broker/dealer model, LPL has been adding advisors via Strategic Wealth Services, its premium affiliation model originally aimed at luring breakaway advisors from the wirehouses and regional brokerage firms; its W-2 employee model; and its relaunched RIA custody offering.

Arnold said the firm added 17 practices via SWS, including eight in the past quarter. Five practices joined LPL’s employee channel, including two over the past three months.

“As we look ahead, we see these new affiliation models continuing to build momentum and becoming a larger contributor to our organic growth,” he said.

LPL also completed the onboarding of advisors from its acquisition of Waddell & Reed’s wealth business, with 99% retention of client assets, up from 98% that the firm estimated last quarter, CFO Matt Audette said. The business’s run rate EBITDA was about $50 million during the third quarter, and the firm expects it to grow to $60 million in the fourth quarter and $85 million by the middle of next year.

The firm continued to see growth in its business solutions, a suite of services that advisors can outsource to LPL experts for a monthly subscription fee, including consulting on business growth and strategy. Subscriptions increased to 2,598, up 513 sequentially and more than double a year ago.

“These offerings now generate roughly $25 million of annual revenue and, more importantly, they contribute to organic growth by helping drive recruiting, same-store sales and retention,” Audette said.

Total assets reached a record $1.13 trillion, up 40% year over year, due primarily to organic growth and equity market appreciation. Net new assets were $27 billion during the third quarter, 10% annualized growth, driven by new store sales, same-store sales and retention, LPL said.

Overall, LPL reported net income of $103 million, or $1.26 per share, in line with analysts’ expectations, on revenue of $2.02 billion, up 38% year over year, which missed expectations by $20 million.

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