Mark Casady, chief executive of LPL Investment Holdings Inc., is feeling upbeat about the independent broker-dealer's prospects for recruiting big-time brokers — particularly in the wake of recent and pending acquisitions for wealth management firms that offer specialized services to reps and advisers.
In a conference call with analysts Tuesday, Mr. Casady said: “The work we're doing to enhance our platform and to provide new services is definitely leading to a larger business coming to us.”
Indeed, LPL recently expanded its platform of services for advisers. In January, LPL said it would acquire Fortigent LLC, a leading service provider for registered investment advisers, banks and trust companies. In July 2010, LPL said it was buying the assets of NRP Financial Inc., a broker-dealer that focused on retirement accounts.
Mr. Casady underlined the point that the acquisitions are paying off. He told the analysts that he “really appreciate[s] the question about what new things we've done that help enhance business development, and I think there's absolutely a connection to the things that we're doing.”
“National Retirement Partners is really the best example I can give you at the moment, where we now have incorporated that business and their advisers into our system. Also importantly, their management team, which is led by Bill Chetney, is running a segment within LPL called LPL Retirement Partners.”
LPL Financial LLC, the broker-dealer, had a strong recruiting year in 2011, even though that was offset somewhat by losses involving brokers who left a subsidiary broker-dealer. In total, the company added 549 net new affiliated reps and advisers in 2011. It lost 146 reps and advisers who left LPL Investment Holdings' subsidiary Uvest Financial Services Inc. after LPL announced that it was consolidating Uvest onto its own self-clearing platform.
All told, that's an increase of 403 new advisers.
The company also posted all-time-high financial results for the year. Net revenue was up 11.8% in 2011, reaching $3.48 billion. Net income, meanwhile, was $170 million. In 2010, LPL recorded a loss of $57 million.
A long-standing knock on LPL has been its inability to recruit top-producing star brokers. While it is the behemoth of the indie-B-D business with 12,847 affiliated reps and advisers, the average payout of those advisers lags behind competitors such as Commonwealth Financial Network and Raymond James Financial Services Inc.
According to the most recent
InvestmentNews data, the average payout per rep at Commonwealth in 2010 was $377,861, while it was $311,513 at Raymond James Financial Services. The average payout per rep at LPL in 2010 was $186,223.
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LPL chief financial officer Robert Moore acknowledged that criticism, but noted that changes at the company over the past few years had changed the type of adviser LPL is now recruiting.
In an interview Wednesday morning, Mr. Moore said that historically, LPL had focused on serving reps and advisers with $750,000 or less in production. That is changing, he said.
“An important underlying theme is that LPL began quite modestly,” Mr. Moore said. “The core advisers produced $750,000 or less [in fees and commissions]. The goal was to serve them profitably, but LPL has taken a series of steps that has allowed us to move up that chain and to get more complex, larger practices.”
Mr. Moore said that business was stronger during the first half of the year than the second, but noted that net new advisory assets of $10.8 billion in 2011 as a sign of strength. That's an increase of 27.1% over 2010.
“Those are larger, more-complex practices,” Mr. Moore said. “That is at the heart of what [Mr. Casady] is alluding to.”
