LPL Financial said it admitted $17 billion in assets during the fourth quarter 2021, up from about $13 billion in the third quarter and $89 billion for the year, more than double the 2020 numbers. The total number of advisory staff reached 19,876, up 249 sequentially and 2,589 year-on-year. This includes 1,209 advisors that came about through LPL’s acquisition of Waddell and Reed.
On Thursday’s earnings call, LPL CEO Dan Arnold said the results speak to the appeal of its multiple affiliation models and the firm’s efforts to expand the addressable market. Over the past three years, the firm has introduced new channels for advisors to work with the financial services firm, including Strategic Wealth Services, its premium model targeting wirehouse and regional advisors, Linsco by LPL, its W-2 Includes Employee Channel and its RIA. Offer of custody SWS recently added its 20th team, while the firm now has 50 consultants in its employee model across 12 offices. Arnold said $2 billion of recruited assets in the fourth quarter were brought in through these new affiliations.
“You are beginning to see the payoff of the investments you’ve made to expand your addressable market over the past several years,” said Rich Steinmeier, LPL Financial’s managing director and divisional president of business development.
Steinmeier said it is highly likely that advisory headcount will reach more than 20,000 by the end of the first quarter.
Arnold said the large financial institutions became a new source of growth for the firm in 2021, along with BMO Harris and M&T. And in June 2021, mutual insurance company CUNA Mutual Group announced it would transition its retail wealth management business, consisting of 550 advisors across approximately 300 credit unions, to LPL’s brokerage and advisory platform. CUNA Mutual’s advisors were previously supported by CUNA Brokerage Services, the firm’s in-house broker/dealer, and the RIA.
Steinmeier said the firm currently has a 50% market share of banks or credit unions that have outsourced their funding programs, but these are largely programs with less than $10 billion in AUM. But now, large institutions with over $10 billion are realizing that a funding program and the investments required to operate a broker/dealer are important.
“The general consensus was that if you’ve historically been above $10 billion, you’re massive; you should run your own broker/dealer; you build your own technology; you work with a mentor. The challenge that has been made in this is that the pace of investment required to maintain the modern platform has accelerated, not decreased,” Steinmeier said.
“What we have found is, broadly speaking, most of the firms we are talking to have world-class experience in retail banking, they have world-class experiences with their clients. But when it comes to their money business , so many times there has been relatively little investment. To modernize it to such an extent that it equals the balance of the experiences they have for their customers, it will be an investment of millions of dollars.
Steinmeier said the partnership with LPL is a fast way to modernize their capabilities. In addition, the LPL becomes the broker/dealer for those advisors to outsource that compliance risk.
“You modernize your offering, you strengthen your end-investor capabilities, you dramatically strengthen your advisory capabilities, you de-risk it,” he said.
The firm is also working on adding new capabilities to attract and support more consultants serving high-net-worth clients. The firm recently introduced a new set of business programs to assist consultants on the planning side, including paraplanning services. They are also covering tax planning and other services that will support HNW advisors.
Membership for its business solutions, consultants and services group of the firm grew to 3,022, up from 424 sequentially and more than double a year earlier. Launched two years ago, the platform connects LPL experts’ consultants to outsource a range of business activities for a monthly subscription fee.
Fourth-quarter assets stood at $1.2 trillion, up about 34% from a year ago, the firm reported. Net new assets during the fourth quarter were $26 billion, representing a 9% annual increase, which Arnold attributed to new store sales, same-store sales and retention. The advisory retention of the firm remains at 98%.
Overall, LPL reported fourth-quarter net income of $108 million, or $1.32, according to SeekingAlpha.com, which beat analysts’ expectations by 11 cents. Fourth-quarter revenue was $2.09 billion, up 32% year-over-year, beating analysts’ expectations by $10 million.