LPL Profits Drop in Q2; Stock Weakens

LPL Financial reported a 5% year-over-year drop in its second-quarter adjusted earnings to $293.5 million, while its adjusted earnings per share fell 2% to $3.88 per share.

Although the results, which were released late Thursday, beat analysts' estimates, the stock was down 6% in afternoon trading Friday.

As of June 30, the independent broker-dealer's advisor headcount was 23,462 — up 1,520 from a year ago and 578 from the first quarter of 2024.

Advisory and brokerage assets rose 21% from a year ago and 4% from the prior quarter to $1.5 trillion; organic net new assets jumped 8% from a year ago to $29 billion.

"Our Q2 recruited assets were $24 billion, which prior to [the addition of] large institutions was the highest quarter on record," Matthew Audette, LPL's chief financial officer, said during a call with analysts Thursday transcribed by Insider Monkey. "Looking ahead to Q3, our momentum continues, and we are on pace to deliver another strong quarter of recruiting."

Recruited assets for the quarter ended June 30 were estimated at $24 billion. The firm noted that recruited assets over the past 12 months totaled about $93 billion, up roughly 55% from a year ago.

According to Dan Arnold, the firm's president and CEO, about $19 billion of recruited assets were tied to advisors joining the firm as traditional independent advisors, while $4 billion came from its newer affiliation models, such as strategic wealth and its enhanced RIA offering.

The firm also added about $1 billion of recruited assets via its bank and credit union affiliation model.

Total client cash balances, though, fell $6 billion to $44 billion from $50 billion in the second quarter of 2023. Cash balances as a percentage of total assets were 2.9%, down from 4.0% a year ago.

Update on Acquisitions, OSJs

As for the firm's deal with Prudential, announced in August, an anticipated 2,600 advisors should be onboarded by year-end. The firm is also working to digest its purchase in February of Wintrust Financial, which includes roughly 85 advisors.

"Collectively, these two deals will add approximately $66 billion of brokerage and advisory assets by early 2025," Audette said on the earnings call.

Turning to the acquisition of Atria Wealth Solutions — which works with 2,400 advisors, 150 banks and credit unions, and $100 billion of assets — Audette said that LPL was "on track to close on the Atria transaction in the second half of the year and plan[s] to onboard their business in mid-2025."

As for the recent review of LPL's work with offices of supervisory jurisdiction, Arnold explained that the firm found there were "a couple of isolated firms that surfaced as strategically misaligned with our mission and model because they were limiting advisors' ability to choose how and where they do business."

LPL is ending these two OSJ relationships, he said, which entail a combined $20 billion in assets and "began to off-board from our platform in July."

The firm also has been working on a suite of trading capabilities and is "rolling out a new trading system, ClientWorks Rebalancer, which enables advisors to rebalance models across multiple client accounts at one time and deliver a more personalized client experience across the book of business," Arnold said.

The firm aims to "help more advisors run models-based practices and ultimately turn trading from the administrative function into a strategic asset," the CEO stated, adding that "initial feedback on ClientWorks Rebalancer has been positive."