LPL Returns to Recruiting Growth, Recruited Assets Jump

LPL Financial added a net 331 advisors through recruiting in the second quarter and saw recruited assets rise 35% year over year to $25 billion, recovering from a first-quarter net advisor loss.

The gains raised LPL’s total advisor headcount to 32,475. Recruiters had spent recent months focused on retaining teams at Commonwealth Financial Network, which LPL acquired last August for $2.2 billion. During April through June, recruiting efforts shifted back toward attracting advisors from rival firms.

Chief Executive Rich Steinmeier told analysts the firm is benefiting from a broader acceleration in advisors changing firms and is capturing a “disproportionate share of the advisors in motion.” He identified opportunities to recruit from large wirehouses, regional brokerages and other independent broker-dealers, and said retention work at Commonwealth is easing.

Commonwealth has lost several hundred advisors since the acquisition was announced. LPL has set a target of retaining at least 90% of the roughly $305 billion in client assets Commonwealth held at the time of purchase. Steinmeier said integration is progressing, onboarding of Commonwealth advisors remains on track for the fourth quarter, and asset retention is currently in the mid-80s percentage range.

Net asset inflows together with market gains pushed LPL’s total client assets to $2.6 trillion, a 34% increase year over year. Of that total, $1.5 trillion was in advisor-managed accounts, up 46% year over year; advisory assets now make up just over 60% of client assets.

The company reported revenue of nearly $5.2 billion, up 35% year over year, and net income of $379 million, a 39% increase.

LPL said it will change pricing for its insured cash account sweep program in the third quarter, shifting payouts from a basis tied to household total assets to payments based on cash balances only. Chief Financial Officer Matthew Audette explained the firm previously based payouts on client household totals and will align with practices used by Commonwealth and other firms.

Audette noted price tiering that pays less on smaller cash balances and more on larger ones. He added the average amount held in insured cash accounts at LPL is about $5,000 and that average cash per account has been around that level for roughly two years.