LPL Financial executives last week touted investments in portfolio management tools and the introduction of newer and cheaper products as the broker-dealer’s path to continued growth.
“We are really in a phase of innovation and iteration,” president and CEO Dan Arnold told analysts during a quarterly earnings call last Thursday.
LPL’s purchase of Blaze Portfolio, announced last Tuesday, is a step in that direction, he said. The Chicago-based company provides trading and portfolio management technology, which Arnold described as “foundational” as more advisors rely on models to address client investment needs while also growing their practices.
In fact, LPL reported that for the first time, more than half of its total $810.4 billion in client assets sat in fee-based programs. Overall, assets were up by 6% from the previous quarter and 13% from a year prior. Advisory account assets ended the quarter at $405.9 billion.
In addition to bolstering the advisors’ capabilities to build their own models, the firm is focused on expanding the centralized models its research team builds. Such assets swelled by 14% year-over-year to represent $1.9 billion, LPL chief financial officer Matt Audette said.
“We’re thinking about how do we continue to lower the cost, lower the price point and again extend the appeal to more advisors,” said Arnold, who called advisor use of models a “significant and sustainable trend.”
The firm is also investing in a unified platform that allows advisors to combine different types of products and client account types more easily and is focused on simplified pricing, he said.
The focus on how to make investments more efficient for advisors follows work the firm has done to help support advisors to be more efficient in other areas of their practices. LPL offers outsourced administrative, marketing, technology and CFO support through a subscription model. Subscriptions to such services doubled to 1200 in the third quarter, Arnold said, crediting the pandemic as a major cause.
“[T]his year has been a great learning opportunity for us to take the traditional admin, CFO and marketing solutions and evolve their utility or listen to what our clients need through a different environment, in a tough environment,” and broaden the firm’s appeal.
Initiatives focused on service and advisor experience helped LPL achieve production retention rates of more than 98% in each of the three quarters this year, Arnold noted. The retention rate was 98.1% for the third quarter, slightly lower than 98.6% in the prior quarter but up from 96.3% compared to the same quarter last year.
The firm reported $10.7 billion in recruited assets in the quarter — assets expected to transition to LPL — from recruited FAs, contributing to a trailing twelve-month total of $40.8 billion in recruited assets.
Total advisor count grew by 195 over the quarter to reach 17,168 FAs. That marks a 1% gain for the quarter and 5% year-over-year, last week’s earnings show.
While LPL has had success in attracting larger practices to its traditional independent broker-dealer market, Arnold said the firm is leveraging new affiliation models to “expand our addressable market from $4 trillion to $13 trillion."
The broker-dealer is also working to broaden its range across channels.
In the past year, LPL has launched a number of new affiliation models including an employee RIA model and the Strategic Wealth Services model for wirehouse breakaways. Its recent push is coming in the third party bank channel, according to Arnold, in the aftermath of its August deal with M&T Bank.
Arnold also projected more mergers and acquisitions both among practices and advisory firms. LPL will look at opportunities if they “make sense from a strategic standpoint, a financial one and operationally.”
“[W]ith a new offering called growth solutions that is in the experimental phase right now, we’re being more explicit and coming up with new ways in which to help advisors grow their existing businesses,” Arnold said during the call.
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