This week, Charles Schwab Corp. CEO Walt Bettinger called the process of moving registered investment advisors working with TD Ameritrade onto Schwab's custody platform "imperfect." A day later, Dan Arnold, CEO of LPL Financial Holdings Inc., a broker-dealer that is increasingly focused on RIA custody, said "opportunity" often results from such combinations.
Asked by analysts Thursday about the Schwab and TD Ameritrade Holding Corp. integration, which occurred over Labor Day weekend, Arnold did not specifically say that LPL was focused on recruiting those RIAs to LPL's custody business. Instead, he spoke in generalities about the integration, which involved 3.6 million accounts held across 7,000 registered investment advisors moving from TD to Schwab Advisor Services.
"When there's transitions that occur in the marketplace, there's generally opportunity that may occur around the transition of assets from one custodian to another or one broker-dealer from another," Arnold said in a conference call discussing the firm's third-quarter financial results, which saw LPL report organic, or in-house, net new advisory assets of $23 billion for the third quarter, representing 14% annualized growth.
"And depending on the complexity that may occur, then there's some opportunity that may arise post that, whether that be because of new environment, service challenges, new technology, whatever the case may be," Arnold said. "That may create some unrest. And that may create some opportunity."
Charles Schwab announced in November 2019 that it was buying TD Ameritrade for $26 billion.
It wasn't clear how many of the RIA assets, if any, that LPL reported as organic net new assets or recruited assets came from financial advisors formerly using TD Ameritrade for their clients. The firm also reported organic net new brokerage assets during the quarter of $10 billion, representing 7% annualized growth.
Meanwhile, LPL also recorded a $40 million regulatory charge during the quarter in anticipation of a settlement with the Securities and Exchange Commission "related to the industry-wide civil investigation into compliance with records preservation requirements for business-related electronic communications stored on personal devices applicable to broker-dealer firms and investment advisors," according to the company. Earlier this year, LPL had reported that the SEC had made inquiries into such a matter.
LPL also recruited $31 billion in assets during the quarter, and its financial advisor head count at the end of September was 22,404, up 6% compared to the same time in 2022. Net income for the third quarter was $224 million, a decrease of 3.6% compared to a year earlier.
"We try to be well positioned and well prepared to capitalize pre-conversions, post-conversions, when those may occur," Arnold added.
LPL Financial bills itself as the "#3 RIA custodian," citing research from the consultant Cerulli Associates. According to the company, in 2021 LPL rolled out its "enhanced RIA" platform, to enable RIA firms to leverage integrated capabilities, technology, service and clearing functions.
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