LPL Financial said it has recruited $31 billion in total assets during the third quarter, up from $18.6 billion in the second quarter and $12.8 billion in a year ago. That includes $12.3 billion from large enterprises that the firm brought on during the quarter, and brings LPL’s trailing 12-month recruited assets to $78 billion.
During the third quarter, the firm onboarded the retail brokerage and advisory businesses of Commerce Bank and BancWest Investment Services, representing that $12 billion that transitioned.
“Those wins reinforce that value proposition, our continued investment and our experience in managing and working with these large enterprises,” said CEO Dan Arnold on an earnings call with analysts. “We continue to see an opportunity set in that large enterprise space of those that continue to act as their own broker/dealers and RIAs and do the business in-house.”
In August, LPL announced an agreement with Prudential to move its retail brokerage and investment advisory assets from current third-party custodian Fidelity to LPL Financial. That business, which supports 2,600 advisors with about $50 billion in assets, is expected to transition later this year. CFO Matt Audette said the firm estimates onboarding and integration costs of $125 million, including $20 million in the fourth quarter.
Arnold said he sees the Prudential deal as a catalyst to having more discussions with insurance-owned firms with similar needs.
“The announcement of the Pru win opens up a different part of large enterprises—in this case perhaps insurance-owned solution sets and/or part of the marketplace,” Arnold said. “From there, we take that similar chassis. We’re building some personalized and interesting customized solutions for Prudential that we think will resonate with other solutions in that part of the space.”
The firm’s traditional independent advisor model accounted for $13 billion of recruited assets, while its newer affiliation models, including LPL’s Strategic Wealth Services for larger advisor teams, its employee advisor model and its RIA support business, all had their strongest quarter yet, with $5 billion in recruited assets. Its bank and credit union channel recruited $1 billion.
Advisor headcount was 22,404 at the end of the third quarter, up 462 sequentially and 1,360 year-over-year.
Meanwhile, total organic net new assets were $33 billion for the quarter, a 10.7% annualized growth rate. That’s up 11% sequentially and 9% from the year-ago period.
LPL’s Services Group, which provides advisors with marketing support and business consulting, among other services, reported subscriptions of 5,574, up 1,341 from a year ago. That group generated annualized revenue of $40 million, up 19% year-over-year.
Executives said the firm is seeing a lot of traction in its liquidity and succession offering, introduced at the beginning of 2021. The firm recently expanded that offering to unaffiliated advisors, and the firm has deployed $275 million of capital across 20 deals.
The firm recently launched Tax Planning Services, its newest offering, which pairs tax professionals with advisors to consult and create tax proposals for clients, and allows advisors to offer tax planning without having to hire their own tax professionals.
It also recently enhanced its CFO Solutions, which was initially launched for larger and more complex practices. The firm has now introduced CFO Essentials, which provides advisors access to a suite of outsourced services, strategic partners and resources to run a successful business, at a lower price point. Executives said they expect to do something similar with its marketing solutions, to bring those services to smaller advisors at a lower price.
LPL’s Services Group now encompasses 13 solutions, and there are three more that will be rolled out shortly and a handful of others in incubation, Arnold said.
Overall, LPL reported net income of $224 million, or $2.91 diluted earnings per share, during the quarter, up 2% from a year ago. Non-GAAP earnings per share was $3.74, beating analysts’ expectations by 17 cents, according to SeekingAlpha.com. Revenue was $2.52 billion for the quarter, up 16.7% year-over-year and beating expectations by $10 million.
The firm also recorded a $40 million regulatory charge in anticipation of a settlement with the Securities and Exchange Commission related to record-keeping requirements for business-related electronic communications stored on personal devices.
In its earnings report, Raymond James announced an incremental $55 million legal and regulatory provision related to the SEC’s sweep on off-platform communications.