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LPL Financial

LPL Signs First Succession Deal With External Practice

The IBD has deployed about $400 million in capital across 27 deals since launching the liquidity and succession program.  

LPL Financial has closed on its first deal to acquire an external advisor practice under its liquidity and succession program, executives announced during its first quarter 2024 earnings. The independent broker/dealer opened the acquisition model to external advisors last fall.

An LPL spokeswoman declined to name the external advisor.

Under the program, introduced to LPL advisors about two years ago, the IBD acquires practices with principals nearing—but not yet at—retirement and commits to spending 10 to 13 years supporting a next generation that will eventually have the option to take control without the steep price tag—or any cost.

On an earnings call Tuesday, CFO Matt Audette said the firm was bullish on the model and deployed about $400 million in capital across 27 deals so far. In the first quarter, the firm deployed $10 million of capital across two deals.

He said the average deal size has been between $10 million and $20 million, with purchase multiples around 6 to 8 times EBITDA. The firm expects to close another six deals later this year, and when the program reaches full capacity, he expects to do 30 to 40 deals per year.

Audette said the economics of these deals are pretty attractive, given that the return on assets doubles when LPL purchases them.

 In general, this is because the advisor becomes an employee advisor and receives a reduced payout once LPL has acquired a firm.

CEO Dan Arnold said the program hopes to solve for the fact that as many as one-third of advisors are expected to retire over the next decade.

“While there are a variety of options that are available in the marketplace, we think ours is really differentiated and a compelling one and a very elegant way to help these advisors transition their practices to take care of them, take care of their teams, take care of their clients and ultimately create a bridge to the next entrepreneurial leader or owner,” Arnold said.

Overall, LPL announced first quarter net income of $289 million, or $3.83 per share, down 10% from a year ago. Adjusted earnings per share was $4.21, down 6% year-over-year, beating analysts’ expectations by 39 cents, according to Revenue was $2.83 billion, up nearly 17% year-over-year, beating expectations by $110 million.

Total assets increased to $1.4 trillion during the quarter. Organic net new assets were $17 billion during the period, up 5% on an annualized growth basis.  

The firm recruited $20 billion in assets during the first quarter, bringing recruited assets over the trailing 12 months to $87 billion. LPL added roughly $2 billion to its newer affiliation models, including Strategic Wealth Services, its RIA offering and its W-2 employee model. It had about $3 billion of recruited assets into the traditional bank and credit union space. The firm continues to onboard the wealth management business of Prudential and two of Wintrust Financial’s wealth businesses, which will collectively add $66 billion in assets by early 2025.

Advisor headcount totaled 22,884, up 224 sequentially and 1,363 year-over-year.

LPL also announced plans in February to acquire Atria Wealth Solutions, which manages about $100 billion and works with roughly 2,400 advisors and 150 banks and credit unions. The firm is on track to close that deal in the second half of this year, and it expects to complete the transition of advisors in mid-2025.

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