In a clear indication of a tough start in the recruiting year for independent broker-dealers, LPL Financial Holdings LLC reported a net gain of only 25 reps and advisers in the first quarter.
Those new advisers — reported in the firm's earnings release issued last Thursday — represent a far cry from what has become expected of LPL Financial, the largest independent broker-dealer and a recruiting juggernaut. In the first quarter of 2012, for example, a net 115 new financial advisers joined the company.
Regarded as a bellwether for the independent-broker-dealer industry, the firm has stated an annual target of adding 400 net new advisers per year.
Overall, LPL Financial's rep and adviser head count is 13,377, an increase of 3.2% from a year earlier.
Most independent broker-dealers have struggled so far this year with bringing in new reps, one industry recruiter said. “It's a representation of what's going on,” said Jodie Papike, executive vice president of Cross-Search, an executive and adviser search firm. “It is a tough time.”
“Most of the recruiters I talk to are really struggling,” she said. Recruiting an adviser right now is a “longer process and requires more money. It just takes a lot more to get an adviser to move.”
MARKET'S DOUBLE EDGE
Dan Arnold, LPL's chief financial officer, said in an interview that the recent strong run in the broad equity market is having an adverse effect on recruiting. The S&P 500 is up close to 11% so far this year, and that has kept advisers busy in conversation with their clients.
“When investors re-engage, there are opportunities for advisers to work with clients,” he said. “We have an active and deep [recruiting] pipeline, but we were trending down because of timing of the good market and investors' returning to the market,” he said.
LPL Financial wasn't the only large independent broker-dealer this week to report tepid growth of new advisers.
Raymond James Financial Inc., which has channels for both independent and employee reps and advisers, yesterday said it added four advisers in its U.S. brokerage operation during the first three months of the year. It now has 5,431 reps and advisers in the United States, and 6,297 globally.
Raymond James chief executive Paul Reilly last Wednesday said that the acquisition and integration last year of regional brokerage Morgan Keegan “far exceeded” the company's expectations. The firm continues to look for additional growth of 5% a year in its net adviser head count, and a 15% growth in assets.
Speaking at the Raymond James annual conference in Dallas, Mr. Reilly also said there are about four or five private firms that are smaller than Morgan Keegan that Raymond James would consider acquiring. He added that the firm also hopes to develop new advisers through its revamped training program.
Although reporting weakness in recruiting and new-adviser growth, both LPL and Raymond James posted strong revenue and earnings growth for the first quarter.
LPL said net revenue for the quarter was $974.8 million, an 8.1% increase from the comparable quarter a year earlier. Net income increased 32.9% to $54.7 million.
Raymond James, meanwhile, said net revenue for its second fiscal quarter was $1.14 billion, up 31% from the year-earlier quarter. Net income for the firm during the first three months of this year was $80 million, up 8%.
(Reporter Liz Skinner contributed to this report)