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After hitting a slump in the first half of this year, LPL Financial reported a strong third quarter in terms of bringing on new advisors; the firm netted 154 new advisors during the quarter, bringing headcount to 13,563, up 3 percent from a year ago and 1.1 percent sequentially.
Advisor productivity also improved during the quarter, increasing to $156,000. That compares to $152,000 in the second quarter and $134,000 in the year-ago quarter.
The increase in advisor productivity led to record revenues for the quarter of $1.1 billion, up 16.1 percent from a year ago. Adjusted earnings were $59.6 million; adjusted earnings per share of $0.56, up 19 percent from a year ago, beat analysts’ expectations by $0.03.
Typically, there is a summer slowdown in commissions per advisor, but that was offset this time around by alternative investment commissions, which grew 75 percent sequentially, said LPL chief financial officer Dan Arnold. During the quarter, several large non-traded REITs became publicly traded equities. Investors who held these as income-producing investments opted to rebalance their portfolio and purchase new income-producing non-traded REITs, he added.
Total assets rose 12 percent to a record $415 billion, or $31 million per advisor, driven by the rise in productivity, improving equity markets and accelerating production of new advisors, Arnold said.
Net new advisory assets, which exclude market movement, grew to a record $4 billion for the third quarter, or 11 percent year over year. Over 50 percent of gross sales now flows to advisory accounts, Arnold said.
The independent broker/dealer’s goal has been to add 400 to 500 net new advisors this year, but it doesn’t look like will happen, with only 25 and 32 net new advisors added in the first quarter and second quarter, respectively. In the last 12 months, the firm has recruited 393 new advisors.
“We do think the momentum will continue into Q4, and though we won’t get back to the 400 to 500 range necessarily, we think at the end of the year, it will be a good year in recruiting on a relative basis to all the other firms,” said Arnold.
In January, investor engagement re-emerged after we got clarity around the tax policy, and investors came back into the markets after sitting on the sidelines for much of 2012, Arnold said.
“When that occurs, typically the advisor is very busy and very focused on serving and supporting that pent-up demand,” said Arnold, and not so much on how to position themselves. But the further away you get from inflection point, advisors begin to explore re-affiliation of their practice or going independent, he added.
Chairman and CEO Mark Casady said the firm is recruiting from banks, credit unions, other independent b/ds, insurance b/ds, wirehouses, the hybrid RIA space and more traditional commission-based brokerages. Third quarter recruiting included one large bank team of 35 to 40 advisors, which has not been publicly disclosed.
“It was a good, solid quarter in terms of the source of advisors and a solid quarter in terms of a return to normal,” Casady said on a conference call this morning.