LPL regains recruiting lead as recruited assets surge

LPL Financial added a net 331 advisors in the second quarter, bringing its total headcount to 32,475, and reported recruited assets of $25 billion, up 35% from the year-ago quarter. The results, covering April through June, reversed an unusual net advisor loss in the first quarter.

Executives said recruiting momentum returned after internal teams shifted much of last year to integrating Commonwealth Financial Network, which LPL acquired for $2.2 billion in August. With integration work moderating, recruiting resources were redeployed toward attracting advisors from large wirehouses, regional firms and other independent broker-dealers.

CEO Rich Steinmeier told analysts the firm is benefiting from a wider increase in advisors changing firms and is capturing a disproportionate share of that movement. “That’s important for us,” he said, noting LPL’s focus on advisors who are already in motion.

LPL confirmed retention work for Commonwealth advisors remains under way but is tapering. The firm estimated retention of Commonwealth client assets is in the mid-80s percentage today and is aiming to retain at least 90% of the roughly $305 billion in assets Commonwealth held at the time of the acquisition. LPL plans to complete onboarding of Commonwealth advisors in the fourth quarter.

Net inflows from recruiting, together with market appreciation, pushed LPL’s total client assets to $2.6 trillion, a 34% increase year over year. Of that total, $1.5 trillion was in accounts managed by advisors, up 46% from a year earlier. Advisory assets now represent just over 60% of LPL’s client assets.

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

LPL also announced a change to how it pays interest on its insured cash account sweep product. Chief Financial Officer Matthew Audette said the firm will start in the third quarter to pay interest based only on cash balances held in the sweep rather than on a household’s total assets. Audette noted the average insured cash account balance is about $5,000 and that LPL uses tiered pricing that pays lower rates on smaller balances and higher rates on larger ones. “When you look at the price tiering … you pay less on smaller balances and more on the larger balances,” he said.

Company executives described the quarter’s recruiting gains as a resumption of external recruiting after a period focused on integration work. They said the firm continues to emphasize advisory assets because of their recurring fee income.