Earnings season for the fourth quarter of 2010 is winding down, but analysts say, many financial-service companies are poised for strong results in 2011, as they put more issues tied to the financial crisis of '08 behind them. This is especially true for a select group of companies in the broker dealer, investment banking and asset management sectors.
"LPL Financial's results are indeed impressive," said Mark Elzweig, a New York-based executive recruiter in an interview Thursday. "Assets, the number of advisors and adjusted net income are all up. Getting into the RIA business was a shrewd move that seems to be paying off."
LPL Financial announced its first results as a public company on Monday. For the final three months of 2010, the largest independent broker-dealer posted a net loss of $116.6 million, or $1.20 per share, on an 11.6% increase in net revenue of $820 million.
Minus a charge of $220 million taken in the fourth quarter, largely related to its IPO, LPL's adjusted net income rose 6.2% in the period to $44.7 million, or $0.42 per share. These adjusted quarterly earnings beat the consensus estimates of equity analysts by $0.02, while revenues came in ahead of estimates by roughly $23 million.
At year-end 2010, LPL had 12,444 registered representatives, or 494 net new advisors. Total advisory and brokerage assets rose 13% in the year to $315.6 billion.
"I think that they'll be able to continue to hit their recruiting goals of 400 new advisors per year. Wirehouse brokers [thinking of going independent] are comfortable with LPL's brand name and broad fee-based offerings," said Elzweig. "The fact that they are a public company makes advisors of all stripes feel that they are financially solid."
More broadly, "It looks like broker dealers are doing well in general and are well positioned to continue on that path this year. Rising markets are coaxing more investors back into the game," Elzweig shared.
Morgan Stanleyreported earnings in late January of $867 million, or $0.43 per share, vs. $460 million, or $0.18 a share for the same year-ago period. Net revenues were $7.8 billion for the quarter compared with $6.8 billion last year.
Analystshad expected earnings of $0.35 a share on sales of $7.35 billion.
Morgan Stanley said its global wealth-management unit had net inflows – or net new client assets – in the fourth quarter of 2010 of $14.1 billion vs. outflows of $6.8 billion in the same year-ago period. Inflows in the third quarter of 2010 were $5 billion.
MSSB now includes 18,043 financial advisors, down 1% from 18, 135 a year ago and off slightly from 18,119 in the third quarter of 2010. Average revenue (or gross production) per advisor now stands at $742,000, an increase of 7% from $692,000 last year and 6% from $686,000 in the third quarter.
Morgan Stanley's revenues per FA do "look great," says Chip Roame of the consultancy Tiburon Strategic Advisors, and this figure is getting closer to that of UBS and Merrill Lynch. "The stock market being up drives AUM revenues higher," he added in an interview.
Total assets for wealth management are $1.67 trillion as of the fourth quarter of 2010, or about $92.5 million per financial advisor, up from about $86 million per advisor a year ago and $88.5 million in the third quarter of 2010.
"Retail firms of all stripes have a renewed sense of optimism and confidence and are scrambling to boost both the numbers and quality of their salesforces," said executive search consultantMark Elzweig (left) in a statement.
Still, "The Morgan Stanley Smith Barney combination has been far from seamless," explained Elzweig. "Morale on the Smith Barney side of the house is still an issue."
