LPL Financial mum on potential sale talks

During its third quarter earnings call, LPL Financial Holdings Inc. executives said they would not comment about any speculation in the market that the firm was on the block. “There have been speculative stories in the news about us,” said chief financial officer Matt Audette on a conference call with investors. “Let me reiterate that we don't comment on rumors and speculation.” “Second, we are focused on creating long-term value for our shareholders. That is what we do each and every day,” Mr. Audette said. “We won't comment beyond that.” Reuters last month reported that LPL, the largest independent broker-dealer with more than 14,000 reps and advisers, was exploring a sale. Citing two anonymous sources, InvestmentNews then reported that after it received an unsolicited offer from a potential buyer that it considered low, LPL Financial hired Goldman Sachs Group Inc. to evaluate the bid. [More: LPL Financial’s problems keep piling up] In an environment where securities firms like LPL are seeing sharp declines in commission revenues from a slowdown in sales in products like nontraded real estate investment trusts and variable annuities, LPL has been in a rough patch. For example, LPL in August told its employees they were not getting raises. LPL, like its competitors, has also been dealing with increasing compliance expenses and the move to shift away from high commission products to prepare for the coming Department of Labor fiduciary rule, which takes effect in April and impacts how advisers work with clients' retirement accounts. During the conference call, CEO Mark Casady said he was optimistic about the firm's recruiting pipeline in the future, pointing to the uncertainty that the DOL rule is creating for many smaller firms and institutions as a potential catalyst. Mr. Casady said the company was seeing a significant volume of inquiries from potential recruits, and such inquiries can lead to better recruiting results. Banking institutions are asking themselves the question, "Should we own our own broker-dealer?" he said. Such institutions want to stay in wealth management business but want to outsource the brokerage operations to LPL, he said. He added that he was comfortable with an annual recruiting goal of 400 net new advisers at the firm, a long-term benchmark for LPL. LPL Financial reported for the quarter ending in September net income of $52 million, or $0.58 per share. That was an increase of 27% when compared to the same quarter last year, when the company reported $41 million of net income, or $0.43 cents per share. (More: LPL Financial's problems keep piling up)