LPL signs up 80% of Commonwealth Financial's advisors, keeps target at 90%

With its competing wealth management firms doing their best to recruit away Commonwealth Financial Network financial advisors, LPL Financial Holdings Inc. has signed up nearly 80% of the firm’s 3,000 or so advisors and maintain its target at 90%.

That’s according to Rich Steinmeier, LPL’s CEO, who spoke Thursday afternoon to analysts on a call to discuss the company’s third quarter earnings. The wealth management industry for months has doubted whether LPL and Steinmeier could reach its goal of 90%. 

“As we said earlier, we're at that kind of nearly percent -- nearly 80% of assets having signed their agreements to stay with Commonwealth and on track for the 90% and putting all of that retention aside, we feel over the moon with this transaction,” Steinmeier said. “The cultural alignment and complementary capabilities are creating a combined firm that is far stronger than the sum of the parts.”

“Commonwealth is the key driver and has led to increasing momentum across the organization,” William Blair analyst Jeff Schmitt said in a note to investors, “While organic growth has been below normal recently due to lower advisor movements and a reallocation of resources to Commonwealth, this should turn when macro uncertainty improves and Commonwealth is integrated.”  

Since LPL announced at the end of March its $2.7 billion, all-cash purchase of its former rival Commonwealth Financial Network, the company has steadfastly maintained its target of retaining 90% of the firm’s close to $300 billion in assets.

That has not been an easy task.

A handful of senior industry executives over the summer privately told InvestmentNews that Raymond James Financial Inc. was second to LPL Financial in the bidding for Commonwealth.

Losing such a prize may have spurred Raymond  James in the pursuit of Commonwealth advisors.

LPL’s competitors, including Raymond James and Cetera Financial Group, have turned on the charm and recruiting bonus offensive to woo those advisors, who are among the most productive in terms of annual revenue in the independent brokerage and registered investment advisor industry.

Raymond James, for example, from the start of August to the beginning of October, recruited 18 teams of Commonwealth financial advisors with close to 4.5 billion in client assets, according to the company.

Cetera has managed to recruit at least two former Commonwealth groups of advisors with $1.1 billion in assets under administration.

Other firms are pursuing Commonwealth advisors but keeping mum about their progress.

With the broad stock roaring and continuing to hit record highs, LPL, like its competitors reported new highs in assets for the third quarter.

Total assets increased to a record $2.3 trillion, driven by our acquisition of Commonwealth, organic growth and higher equity markets. The firm saw an increase of organic net new assets of $33 billion, representing a 7% annualized growth rate.

The third quarter also saw record adjusted earnings per share of $5.20, an increase of 25% from a year ago.

And Schmitt expects earnings per share – EPS – growth to continue.

“The company is on pace for 22% EPS growth this year, and we believe it can maintain EPS growth around the 20% level through 2027,” he wrote. “Key drivers include rising spread income despite interest rate headwinds, improving expense discipline, and synergy realization for the Commonwealth deal, which should result in an acceleration in EPS in 2027.”