LPL shares hit fresh high after strong earnings

LPL Financial Holdings Inc. continued its hot streak in recruiting at the start of the year, recruiting financial advisors who work with $20 billion in client assets, a new, three-month high for the largest independent broker-dealer in the wealth management industry.

That figure, released Tuesday after the close of trading, represents the estimated total advisory and brokerage assets expected to transition to the company’s primary broker-dealer subsidiary, according to LPL.

“We had a really nice quarter, $20 billion in recruited assets,” CEO Dan Arnold said Tuesday afternoon in a conference call with analysts. “You see significant growth year-on-year across all affiliation models.”

The market responded on Wednesday morning, sending LPL shares, with the ticker LPLA, to a new 52-week high of $276.12 before they fell back to $264.74 after 1:00.

Total organic net new assets were $17 billion, representing 5% annualized growth, according to the company.

And one analyst expects LPL to continue to add assets.

“The company’s unique aggregation model is set to drive high levels of growth in 2024,” wrote Jeff Schmitt, research analyst at William Blair & Co., in a research note Wednesday morning. “While organic growth faced seasonal headwinds in the quarter, recruiting is as strong as ever and several large outsourcing partnerships and deals should further augment growth through 2025. The company is on pace for client asset growth of 25% to 30% in 2024 and 15% in 2025.”

The firm’s revenue for the quarter of $2.83 billion, an increase of almost 17% compared to the same quarter last year, beat analysts’ estimates by $110 million.

“After the earnings beat, we raise our target price per share by $26 to $310,” wrote Michael Elliott, senior equity research analyst with CFRA Research, in a note Wednesday morning.

He cited a forward price to earnings multiple for LPLA shares of 19 times his earnings per share estimate for this year, a premium to LPL’s 10-year average price to earnings multiple of 17.2 times, due to strong advisor recruitment and benefits to asset-based revenues from elevated interest rates.

LPL Financial has been on a roll in recruiting financial advisors, as well as in mergers and acquisitions, in the aftermath of the Covid 19 pandemic.

According to InvestmentNews data, in 2021 and 2022, respectively, the firm added 1,024 and 708 net new financial advisors. Last year, LPL added 1,237 net new financial advisors.

In contrast, each of the four wirehouses, Merrill Lynch, Morgan Stanley, UBS and Wells Fargo Advisors, all saw net decreases of financial advisors in 2023, according to InvestmentNews data.

Meanwhile, LPL Financial is not only recruiting financial advisors, it is acquiring them.

In February, LPL Financial Holdings said it was acquiring Atria Wealth Solutions Inc., which launched as a broker-dealer aggregator in 2017 and has 2,400 financial advisors and registered reps across seven broker-dealers who work with $100 billion in client assets. Moving those advisors to LPL’s platform will likely take until 2025.