LPL on a recruiting roll - but the price is rising

LPL Financial LLC continues to be the behemoth of recruiting in the independent broker-dealer industry. But expenses involved in bringing in new brokers have increased. In the first quarter, a net number of 115 new financial advisers joined LPL Financial, the chief subsidiary of LPL Investment Holdings Inc. During the past 12 months, LPL Financial added 408 advisers. That net figure takes into account the departure of 146 former Uvest Financial Services Inc. advisers who left last year when those brokers were moved to LPL's platform. LPL has said in the past that it targets about 400 recruits each year. “With strong volume of new advisers and inclusion of larger producing practices, the cost to attract new business has risen, in absolute terms, as a percentage of adviser production,” Mark Casady, LPL Financial's chairman and chief executive, said during a conference call with analysts last Monday. He didn't provide specific figures about potential recruiting or costs in the coming months. But Mr. Casady said that LPL sees interest from wirehouse brokers whose three-year “stay bonuses” — given during the financial crisis — are coming to an end, along with large practices from independent broker-dealers. LPL also sees interest from larger offices affiliated with independent broker-dealers with 20 to 75 representatives and advisers, Mr. Casady said. At LPL, those large branches are seeing a faster growth rate right now than smaller offices, he said, adding that he isn't sure how the phenomenon will play out and how sustainable it will be over the next several quarters. For the quarter, LPL Investment Holdings reported net income of $41.2 million, or 37 cents a diluted share, down from net income of $49 million a year earlier. The company's adjusted earnings were $63.2 million, or 56 cents a diluted share. Net revenue for the first quarter was $901.8 million, an increase of 6.4% from a year earlier. Meanwhile, LPL Investment Holdings said that its private-equity owners, Hellman & Friedman LLC and TPG Capital LP, are selling $510 million in company stock in a secondary offering. Most of the shares sold in LPL's November 2010 initial public offering were controlled by longtime employees and brokers with the firm. [email protected]