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LPL's Assets, Advisor Headcount Suffer on High-Profile Departures

The brokerage lost $3.9 billion in assets and 118 advisors due to departures by some large advisors.

LPL Financial said it expects to lose about $6 billion in mostly brokerage assets and 210 advisors over the first half of 2017, due to separations from some large advisory firms. In the first quarter, the Boston-based brokerage had 118 advisors leave the firm, resulting in outflows of $3.9 billion in assets. But the firm recruited 95 new advisors during the quarter, bringing total headcount down by just 23. 

In the first quarter, top LPL advisor Ron Carson moved his firm, Carson Wealth Management, to Cetera Financial. Carson had $2.6 billion in assets with LPL, according to published reports. The brokerage also lost a hybrid RIA firm, Resource Investment Advisors, with about $4 billion in assets which moved to Triad Advisors.  

Overall, LPL’s profit fell four percent year-over-year to $48 million, compared to $50.4 million in the first quarter 2016, which the firm attributed to a $2.2 billion debt refinancing program — changing business models to comply with the Department of Labor’s fiduciary rule and spending $22 million on repurchasing stock.

Revenue was up three percent year-over-year to $1.04 billion beating analysts' expectations by $30 million, according to LPL ended the quarter with a total of $530 billion of assets under management. Advisory assets accounted for 42.6 percent, or $225.7 billion, of that. Despite the drop in profit, the firm's earnings beat analysts' expectations by 29 cents a share.

“These organic inflows help demonstrate that our advisors are successfully growing their practices and that LPL is winning in the marketplace for new advisors,” said Matt Audette, LPL’s CFO, on a conference call last week. “Excluding those departures, net new assets were $6.5 billion with advisory a net inflow of $7.1 billion and brokerage in that outflow of $0.6 billion.”

LPL president and CEO Dan Arnold attributed some of the inflows to price reductions and improved functionality of its centrally managed platforms helping advisors improve scale. He plans to continue investing in these platforms in 2017, as well as introduce new functionality into Model Wealth Portfolios.

“We're also lowering third-party manager cost and continuing to add functionality such as model management and our separately managed account solutions,” Arnold said. “These efforts are intended to add functionality and lower cost for retail investors, while giving our advisors more capacity and differentiated solutions with which to grow their practices.”

Despite calls to abandon the fiduciary rule by the Trump administration, Arnold said LPL is on-track for the June 9 requirements and is preparing for a Jan. 1 implementation date for full compliance. He believes that the rule would help LPL attract more advisors and institutional partners.

Arnold also said the fiduciary rule could make the M&A environment more attractive by pushing for consolidation in the broker/dealer space.

“We believe we’re well positioned to capitalize on opportunities as the industry evolves," he said. 

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