LPL Advisor Headcount Hits New High

LPL Financial saw strong advisor recruitment results in the second quarter ended June 30 that Dan Arnold, its CEO and president, said he expects will continue into the third quarter.

The firm ended Q2 with 21,942 advisors, an increase of 421 from the end of Q1 and up 1,071 from the end of Q2 last year, it said.

“We expect to carry this recruiting momentum into Q3 for both our traditional independent market and our new affiliation” model, Arnold told analysts Thursday on an earnings call.

Regarding LPL’s overall Q2 performance, he said: “We delivered another quarter of solid results while also continuing to make progress on the execution of our strategic plan.”

During Q2, LPL net income grew to $286 million, or $3.65 per share, up from $161 million, or $1.97 per share, in Q2 last year, the firm said.

Total LPL assets increased to $1.2 trillion in Q2, while organic net new assets were $22 billion, representing 7.4% annualized growth, or about 8% when adjusted for seasonal tax payment, he said. That “contributed to organic net new assets over the past 12 months of $84 billion, representing approximately an 8% organic growth rate.”

Recruited Assets

In Q2, recruited assets were $19 billion, a quarterly record for the firm, excluding periods when on-boarding large enterprises, Arnold said about LPL, which is a 2023 ThinkAdvisor LUMINARIES award finalist.

That outcome was “driven by the ongoing enhancements to our model as well as our expanded addressable market,” he said.

“Our advisors remain focused on serving the clients and delivering a differentiated experience,” Arnold explained. “As a result, our advisors are both winning new clients and expanding wallet share.

When it comes to retention, he said, “we continue to enhance the advisor experience through the delivery of new capabilities and technology, as well as the evolution of our service and operations functions.”

As a result, asset retention for Q2 and over the last 12 months was about 99%, Arnold noted.

Business Models and Services

Turning to the progress LPL made on its strategic plan, he said: “Our long-term vision is to become a leader across the advisor center market, which for us means being the best at empowering advisors and enterprises to deliver great advice to their clients and to be great operators of the business.”

The CEO added: “To bring this vision to life, we are providing the capabilities and solutions that help advisors deliver personalized advice and planning experiences to their clients. And, at the same time, through human-driven technology-enabled solutions and expertise, we’re supporting advisors in their efforts to be extraordinary.”

To “execute on our strategy,” he said LPL “organized our work around two primary categories: horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate such that we can compete for all 300,000 advisors in the advisor-mediated market, and vertical integration, where we focus on providing capabilities that solve for a broader spectrum of advisor needs.”

In doing so, Arnold explained, “durable, differentiated value” is being created.

The firm’s horizontal expansion work “involves meeting advisors and enterprises where they are in the evolution of the business by creating flexibility in our affiliation model, so they can design the perfect practice for themselves and for the client,” he said.

During Q2, LPL “saw strong recruiting in our traditional independent market, reaching a new quarterly high of approximately $14 billion in assets,” the executive pointed out. “At the same time, due to the appeal of our model and the efficacy of our business development team, we maintained our industry-leading win rates while also expanding the breadth and depth of our pipeline.”

When it comes to LPL’s new affiliation models and its enhanced RIA offering, the company “delivered our strongest quarter to date, recruiting roughly $4 billion in assets in Q2,” Arnold noted. “In each of these models, we continue to experience growing demand and expanding pipeline which position them for increased contribution for our organic growth.”

Shifting to LPL’s vertical integration efforts, he explained: “We are focused on delivering value-added capabilities, services and technology that extend across an advisor’s end-to-end business, all for the purpose of helping them differentiate and win in the marketplace and run thriving business.

“In that spirit, this quarter, we launched a new performance optimization solution called Practice Hub. This capability delivers comprehensive data in a structured format, so advisors can better understand their performance on an absolute and relative basis,” according to Arnold.

He added: “Over the coming months, we will further expand the functionality by enabling it to generate personalized insights around additional services, technology and solutions we offer in order to help advisors enhance the overall performance of the practice.”

Additionally, he said: “Over time, we see Practice Hub becoming a key tenet of our advisor experience, leveraging the power of artificial intelligence to operate as a co-pilot for our advisors. And while we’re still in early innings, we’re excited about the growth opportunities that this innovation unlocks and how it will serve as an additional leverage point to help advisors run thriving business.”

Also, Arnold explained, “As a result of demand in Q2, the number of advisors utilizing our services group continued to increase. We ended the quarter with approximately 3,500 active users, up roughly 30% year-over-year.”

New Services

As LPL works with advisors to “increase the utilization of existing services, we’re also continuing to create new services, such as our tax planning solution, which is part of our broader suite of comprehensive advice and planning services,” he said. “This new solution helps enable tax intelligent advice that can deliver material savings to clients and help further differentiate the advisor’s value proposition.”

That service is “receiving positive early feedback in demand in the market while also unlocking interesting synergies with our existing services portfolio,” he said.

“Now as we continue to evolve our services portfolio, we are leveraging our structured approach to innovation in order to address the needs of our broader advisor base,” Arnold said.

“In that spirit,” he explained, “we are creating streamlined versions of existing solutions to help advisors who may have less complex products.”

Examples of those solutions include CFO Essentials, digital marketing and payroll.

“As we move forward, we remain focused on enhancing and expanding our services portfolio to better support our advisors and enterprises and to drive growth,” he added.

LPL CEO Dan Arnold. Photo: LPL Financial