For LPL, recruiting numbers add up

Firm nets 154 new reps and advisers in third quarter, reversing trend over the first half of the year

Oct 30, 2013 @ 1:28 pm

By Bruce Kelly

Recruiting came roaring back in the third quarter for LPL Financial, which added 154 net new registered representatives and advisers for the three-month period ended Sept. 30.

The firm added 40 registered reps from a bank, which LPL declined to identify. The recruiting figures were made public as part of the firm's third-quarter earnings report Wednesday.

The robust quarter brings LPL's 12-month recruiting tally to 393 net new reps and advisers, putting the industry's largest independent broker-dealer in line with its long-stated objective of adding at least 400 net new reps and advisers per year.

Like many of its competitors, LPL's recruiting was in the doldrums over the first half of the year, a period in which it added just 56 net new advisers.

LPL's recruiting efforts have long led the industry and are widely regarded as a bellwether among its competitors, which likewise saw a slowdown in recruiting in the first half.

(See also: LPL puts layoff, outsourcing plan into action)

Overall, LPL reported a solid quarter: Net revenue increased 16.1% compared with the same period a year earlier, reaching $1.05 billion. Net income was $37.6 million, an increase of 9.7% versus the same quarter in 2012. Total assets were $414.7 billion as of Sept. 30, up 11.7% from a year ago. The firm now has 13,563 registered reps and advisers.

With the strong performance of the stock market in the first half, reps and advisers were reluctant to move, chief executive Mark Casady said Wednesday in a conference call with analysts. During that time, advisory firms either were focused on existing clients or getting used to the increased volume and adding staff members to deal with their practices' higher revenue, he said. That slowed down recruiting.

Recruiting got back to normal over the summer, Mr. Casady said.

“In the third quarter, recruiting was from all over,” he said, with reps and advisers leaving banks, credit unions, insurance company-owned broker-dealers, independent broker-dealers and wirehouses to join LPL.

Leading independent firms such as LPL, Raymond James Financial Services Inc., the independent broker-dealer arm of Raymond James Financial Inc., and others are enticing brokers for a variety of reasons, said Jodie Papike, executive vice president of Cross-Search, a third party recruiting firm for advisers and independent broker-dealer employees.

“There’s no real one trend to explain the improvement in recruiting, but LPL is always a good indicator because it’s so large and has the largest number of recruiters,” she said. “Other big broker-dealers are busy, too, and they are all offering a lot to recruits, including (money for) transition support, practice management tools and marketing ideas for advisers to take their businesses to the next level.”

Like at LPL, recruitment has improved at RJFS.

After a slow start to the recruiting year, RJFS posted better net new adviser numbers in the second half of its fiscal year, finishing with 3,275 reps and advisers at the end of September. That's a net gain of 55 reps and advisers in the course of the year, an increase of almost 2%.

At LPL, Mr. Casady said the firm continues to study the idea of starting a bank and will have more information regarding that potential line of business in a few months.

Commission revenue jumped 19.3% in the third quarter compared with the 2012 period; that reflected an increase in sales of alternative investments, including nontraded real estate investment trusts, the company said.

Along with several other independent broker-dealers, LPL has drawn scrutiny over the past year for sales of nontraded REITs. In total, six IBDs, including LPL and Securities America Inc., have agreed to offer $21.6 million in restitution to clients with regard to violations involving sales of nontraded REITs, and they have paid fines of close to $1.5 million.

(Don't miss: Massachusetts hits five IBDs with $10.75M charge on nontraded REIT sales)

LPL's chief financial officer, Dan Arnold, said in an interview that commissions from nontraded REITs increased as trusts such as Cole Credit Property Trust III became listed companies. As a result, some clients selling those holdings and allocating the money into other nontraded REITs that promise yields of 6% to 7%.

Mr. Arnold added that LPL was seeing potential to add advisers from banks with $30 billion to $60 billion in assets that are looking to outsource broker-dealers business to a third party such as LPL.

“There is a trend towards larger banks exploring outsourcing for economic reasons, and one bank [this past quarter] did deliver 35 to 40 reps,” he said.


What do you think?

View comments

Recommended for you

Advisers on the Move

Does your pay stack up?

The Adviser Research Dashboard

Based on data collected through InvestmentNews' annual adviser research studies, this interactive, customizable tool allows you to view detailed data on compensation, staffing and financial performance practices from across the industry.

Learn more »

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

Gadget Girl

How Tamarac’s new platform will help advisers better engage with clients

Tamarac recently announced the launch of the Tamarac platform for Registered Investment Advisors. What can advisers expect from the completely redesigned platform?

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print