Mark Casady, chief executive of LPL Investment Holdings Inc., is upbeat about LPL Financial LLC's prospects for recruiting big-time brokers, particularly in the wake of recent and pending acquisitions for wealth management firms that offer specialized services to representatives and financial advisers.
“The work we're doing to enhance our platform and to provide new services is definitely leading to more business coming to us,” he said during an analysts' conference call last Tuesday after the market closed and LPL reported fourth-quarter and year-end earnings.
Indeed, LPL recently expanded its platform of services for advisers.
Last month, LPL said that it would acquire Fortigent LLC, a leading service provider for registered investment advisers, banks and trust companies. In July 2010, LPL bought the assets of NRP Financial Inc., a broker-dealer that focused on retirement accounts.
Mr. Casady underlined the point that the acquisitions are paying off.
He told the analysts that he “really appreciate[s] the question about what new things we've done that help enhance business development, and I think there's absolutely a connection to the things that we're doing.”
NRP A SUCCESS
“National Retirement Partners is really the best example I can give you at the moment, where we now have incorporated that business and its advisers into our system. Also importantly, its management team, led by Bill Chetney, is running a segment within LPL called LPL Retirement Partners,” Mr. Casady said.
LPL Financial, the independent broker-dealer, had a strong recruiting year in 2011, even though that was offset somewhat by losses involving brokers who left a subsidiary broker-dealer.
In total, the company added 549 new affiliated reps and advisers last year. It lost 146 reps and advisers who left LPL Investment Holdings subsidiary Uvest Financial Services Inc. after LPL said that it was consolidating Uvest with its own self-clearing platform.
All told, that is an increase of 403 new advisers.
While LPL missed fourth-quarter earnings estimates by 2 cents a share, the company reported record results for the year.
Net revenue was up 11.8%, reaching $3.48 billion. Net income, meanwhile, was $170 million.
In 2010, LPL recorded a loss of $57 million.
A long-standing knock on LPL has been its inability to recruit top-producing star brokers. Although it is the behemoth of the independent-broker-dealer business, with 12,847 affiliated reps and advisers, the average payout of those advisers lags behind competitors such as Commonwealth Financial Network and Raymond James Financial Services Inc.
According to the most recent InvestmentNews data, the average payout per rep at Commonwealth in 2010 was $377,861, while it was $311,513 at Raymond James Financial Services. The average payout per rep at LPL in 2010 was $186,223.
LPL chief financial officer Robert Moore acknowledged that criticism but said that changes at the company over the past few years have changed the type of adviser that the firm is recruiting.
Historically, LPL has focused on serving reps and advisers with $750,000 or less in production, he said in an interview last Wednesday.
That is changing, Mr. Moore said.
“LPL began quite modestly,” he said, “but LPL has taken a series of steps that has allowed us to move up that chain and to get more complex, larger practices.”
Mr. Moore said that business was stronger during the first half of last year than the second, but noted that net new advisory assets of $10.8 billion in 2011 — a 27.1% increase over 2010 — were a sign of strength.
“Those are larger, more-complex practices,” Mr. Moore said. “That is at the heart of what [Mr. Casady] is alluding to.”
bkelly@investmentnews.com
