Financial basis

LPL Financial shares peak after drama-free CEO Dan Arnold provides (nearly) 20,000 advisors, over $1 trillion in AUAs and a surprising wrinkle from Waddell & Reed

Shares of the San Diego company rose nearly 5% after the leader reported a $300 billion jump in assets, high M&A retention and multi-channel gains.

LPL Financial’s assets jumped to $1.2 trillion, up nearly $300 billion or 34% from last year, thanks to a booming market, better recruitment and better-than-ever results. expected from the acquisition of Waddell & Reed Wealth Management.

The San Diego broker’s organic net new assets totaled $119 billion, representing organic growth of 13%, compared to 7% a year ago. Assets recruited were $89 billion, double the take in 2020.

Dan Arnold: Sees LPL well positioned for long-term growth.

LPL added an impressive 2,589 advisors, including 900 from its acquisition of Waddell & Reed. See: LPL Financial enters full-service brokerage via acquisition – with help from Raymond James’ Silver Lane advisors

After such a record year, CEO Dan Arnold was mostly asked to explain exactly what went well – and better than expected. He repeatedly made efforts to contain the excitement.

“I think if you think about our growth going forward, maybe if you look at the last two years as a framework for that, you have 7% growth in 2020 and 13% growth in 2021, and that are probably pretty good bookends as a way to think about a potential growth range over the long term, or as we move forward,” he told Wall Street analysts on the quarterly and year-end conference call. ‘year.

Rich Steinmeier, LPL’s chief executive and divisional president of business development and strategy, was ready to stoke a little more optimism in an interview with Barron’s when asked how many advisors LPL could adequately service.

“I don’t know if there is a ceiling. I do not. It’s not 20,000. It won’t be 30,000. There’s no cap. »

LPL (LPLA) shares rose $8.29 or 4.79% in today’s trading to close at $181.24, beating NASDAQ’s overall gain of 1.58%, on which it reported. negotiate.

The stock price is about $3 below its all-time high and a big jump from its $152.73 close on Jan. 24. The market capitalization is now $14.5 billion – a fraction of Charles Schwab Corp.’s $174 billion, but nearly $2 billion more than Robinhood’s $12.6 billion.

Mergers and acquisitions transactions often underperform in the brokerage world as representatives can be poached and IT systems and cultures clash. But LPL’s high-profile purchase of Waddell & Reed largely outperformed, according to LPL chief financial officer Matt Audette.

“Waddell’s [cash flow] was around $70 million in the fourth quarter,” he said on the call.

“Based on current asset levels and our continued integration progress, we now expect the EBITDA run rate benefit to be at least $90 million by the midpoint. of 2022, up from our previous estimate of $85 million,” he added.

Mind-boggling gains

LPL gained assets by successfully casting a wider network, including in the banking channel where it picked up billions in assets from BMO Harris and M&T.

One advisory channel that was mentioned briefly on the call was the RIA channel, which was largely overshadowed by more dramatic increases in LPL’s more historic brokerage markets. See: Dan Arnold finally plays LPL’s RIA guard card by hiring five senior RIA scouts caught up in Schwab-TD Ameritrade post-merger ‘churn’, signaling possible direct challenge to industry leader

“In terms of our new affiliate models, strategic wealth, people, and enhanced RIA custody offering, we recruited approximately $2 billion in assets in the fourth quarter,” Arnold said.

LPL retained 98% of the assets during the year.