LPL Financial closed on its acquisition of Commonwealth Financial Network, the Waltham, Mass.-based independent broker/dealer with 3,000 advisors and $305 billion in assets, in August. Since then, many Commonwealth advisors have decamped for other broker/dealers, including $1 billion in assets that left this week.
However, on a third-quarter earnings call on Thursday, CEO Rich Steinmeier stated that Commonwealth advisors representing nearly 80% of assets have signed to date. That represents $275 billion in assets onboarded in the third quarter from Commonwealth advisors, and the firm is still on track to retain 90% of its advisors, its target retention rate.
“Cultural alignment and complementary capabilities are creating a combined firm that is far stronger than the sum of the parts. We feel great about the value this will deliver to Commonwealth advisors, existing LPL advisors, and shareholders,” Steinmeier said on the earnings call.
“The Commonwealth advisors are really thoughtful and they’re a very diligent community, which really doesn’t surprise us given that they include many of the best advisors in the industry,” he added. “We’ve been dedicated to making sure that we can give them all the information they need to make their very best decision. That includes thousands of interactions since the announcement to ensure the advisors understand the benefits of the combination.”
The firm had projected a run-rate EBITDA of $415 million once Commonwealth was fully integrated, and that has increased $425 million, the executives said.
LPL also announced plans to reduce fees and simplify the pricing structure across its advisory platforms. Specifically, for advisors affiliated with the corporate RIA, the firm reduced administrative fees in its Rep-as-Portfolio Manager advisory platform. Advisors managing at least $75 million in advisory assets will see a fee reduction, while those managing $250 million or more will have their administrative fees waived. That’s down from the previous $500 million threshold.
Within its managed account solution, Model Wealth Portfolios, the firm reduced advisor-paid pricing by up to 40% for accounts with balances of $100,000 to $500,000.
LPL has also decreased platform fees paid by end clients in Guided Wealth Portfolios, its digital advice platform, from 35 to 25 basis points.
“As advisory services become increasingly central to both advisors’ businesses and their clients’ portfolios, we’re harnessing our scale and capabilities to deliver platforms that set the industry standard,” said Aneri Jambursaria, Chief Wealth Officer, LPL, in a statement. “This latest enhancement makes our platforms among the most competitive in the industry and underscores our unwavering commitment to equipping advisors with high-impact tools that elevate their practice, deepen client relationships, and expand access to quality advice for those who need it most.”
The firm will also make some pricing adjustments in areas where it was priced below the market, Steinmeier said.
Overall, LPL reported a net loss of $30 million, or $0.37 earnings per share. That included $419 million, or $5.21 per share, of costs associated with the acquisition of Commonwealth.
The firm ended the quarter with a record $2.3 trillion in total assets, up 45% year-over-year and 21% sequentially, due to increased organic growth, higher markets and the Commonwealth acquisition, CFO Matt Audette said.
Recruited assets during the quarter totaled $33 billion, up 27% from a year ago, bringing its trailing 12-month recruited assets to $168 billion. That includes $12 billion of recruited assets into the firm’s traditional independent channel, $18 billion into the bank and credit union channel, and $3 billion into its newer affiliation models, including LPL’s Strategic Wealth Services, employee and RIA offerings. During the quarter, LPL onboarded $17 billion in assets from First Horizon Bank’s wealth division.
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