LPL shares jump on strong earnings; assets exceed $1.2 billion

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Shares of LPL Financial soared more than 4% on Friday morning after the independent brokerage reported revenue and earnings that beat analysts’ expectations, along with robust growth numbers.

The company reported $1.2 billion in total advisory and brokerage assets at the end of the fourth quarter of 2021, a 34% year-over-year jump that chief executive Dan Arnold attributed largely part in recruiting, in addition to the company’s acquisition of Waddell & Reed’s $63 billion wealth management business.

Of LPL’s $26 billion in net new assets for the fourth quarter, $17 billion was raised through recruiting. Over the year, recruited assets totaled $89 billion, more than double the 2020 total.

“Our continued growth in recruited assets reflects our continued progress in improving the appeal of our model and expanding our addressable market,” Arnold said during an earnings call Thursday night.

But where exactly do these assets come from? A few large institutional clients helped bolster the numbers. LPL struck deals last year to service retail brokerage and advisory businesses for BMO Harris Bank, which added some $14 billion in client assets to LPL’s platform, and M&T Bank, which brought approximately $20 billion in client assets. The company is preparing to add another $36 billion of CUNA Brokerage Services later this year.

“We view large financial institutions as a more accessible market opportunity for us and another new and distinct affiliate model that can drive sustainable organic growth over time,” Arnold said.

Arnold added that LPL’s new affiliate models — the separatist Strategic Wealth Services platform, a W-2 employee model for advisers and an “enhanced RIA custodial offering” — are also starting to attract assets.

“As for our new affiliate models…we recruited approximately $2 billion in assets in the fourth quarter. In each of these three models, we continue to see growing demand and expanding pipelines, which positions them for increased contributions to organic growth going forward,” he said.

The company’s advisory channel reported total assets of $643 million at the end of Q4 2021, up 8% year-over-year and now representing 53% of LPL’s total assets .

For the fourth quarter, LPL reported earnings per share before amortization of intangibles and acquisition costs of $1.63, representing a 7% year-over-year gain and beating estimate the Zacks consensus of $1.54 per share. Revenue rose 4% year-over-year to $2.09 billion, beating Zacks’ consensus estimate by just over 2%.

LPL’s share price has felt the effects of recent market volatility, but shares are now up 11% year-to-date and more than doubling in the past 18 months.

In response to a question from Goldman Sachs analyst Alex Blostein, Arnold said he didn’t expect market volatility to slow adviser moves or have a significant impact on recruiting.

“There are instances where you might have a large market move that could temporarily disrupt the general pattern of opportunities in the market, i.e. advisors don’t move as much because they’re focusing on those market conditions to serve and support their customers, and we’ve certainly seen that historically in the past,” Arnold said. However, he argued that “the volatility we see early in the year is more consistent with what we’ve been playing for the last two years.”

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