Can LPL hit its recruitment target - and at what cost?

Mark Casady, chief executive of LPL Investment Holdings Inc., has reiterated aggressive growth targets for the country's largest independent broker-dealer
FEB 06, 2011
Mark Casady, chief executive of LPL Investment Holdings Inc., has reiterated aggressive growth targets for the country's largest independent broker-dealer. Speaking at the Morgan Stanley financial services conference last week in New York, he told investors that he plans to recruit 400 advisers per year and increase earnings-per-share growth by 20%, according to Reuters. LPL went public in November and will release its first quarterly earnings report as a public company today. Mindy Diamond, president of recruiting firm Diamond Consultants, thinks Mr. Casady and LPL can reach their recruiting targets. “We expect robust growth at LPL and in the independent-broker-dealer space generally,” she said. “Bringing in 400 advisers per year is not an outrageous goal.” Still, it will be a formidable challenge for LPL, which has been one of the most aggressive recruiters in the industry during the last several years, as rivals are also starting to ramp up recruitment. “Now that the wirehouses and many of the other indie broker-dealers are healthier, they're getting more aggressive in their recruiting,” said Mark Lane, an analyst for William Blair & Co. LLC. Ms. Diamond expects that LPL will have to shell out more money upfront and spend on its technology and trading platforms to lure producers. The company's favorite poaching ground, Wall Street wirehouses, may not be as easy a source of new recruits this year. Morgan Stanley, for one, indicated that its adviser turnover is nearing historical lows. With the pickings getting slimmer, the costs of signing up new representatives will rise for LPL. William Katz, an analyst with Citigroup Global Markets Inc., cited low turnover at the wirehouses as a major reason for his “sell” rating on LPL. Mr. Lane, on the other hand, said that increased broker productivity, positive net asset flows and, most importantly, a market that continues to improve should outweigh the margin pressures that LPL will experience. “Broker recruiting is just one component of their business,” he said. “This is still a good environment for them.” E-mail Andrew Osterland at [email protected].

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