LPL Soars on First Earnings Beat After Commonwealth Deal

A little stock market uncertainty isn’t going to rattle LPL. 

The country’s largest independent broker-dealer saw its stock price soar 13% over the past week, driven by a better-than-expected earnings report and optimistic remarks from the company’s CEO about the purchase of Commonwealth Financial Network. In fact, shares have climbed some 23% over the past month after the deal was announced at the end of March. But maintaining the San Diego-based brokerage’s recent success will hinge on a successful campaign to bring on the almost 3,000 Commonwealth advisors in what will become the largest acquisition by assets in LPL’s history.

“Let’s kind of hit this thing head-on,” CEO Richard Steinmeier said on an earnings call with analysts last week. “There’s been ample chatter in the marketplace around the deal, but that really speaks to the importance of the Commonwealth franchise, and quite honestly, the quality of their advisors. It’s exactly what we expected to see with a franchise of this quality.”

Which One’s the Pinot?

Some Commonwealth advisors are wary about joining LPL, and rivals — like Raymond James, Cetera, Wells Fargo, Morgan Stanley and Ameriprise — have all reportedly floated lucrative compensation packages to lure those advisors onto competing platforms. Steinmeier reassured investors that LPL is on track to meet its retention target, which would transition 90% of Commonwealth advisors.

“Commonwealth is a very tight-knit community that oftentimes feels far more like a family,” Steinmeier said. He told analysts he has talked with dozens of Commonwealth advisors, some on a “rain-soaked” bike ride in Scottsdale, Arizona, others at a Sunday lunch in Sacramento, and still more at a blind wine-tasting (location undisclosed). “We are deeply committed to keeping that community intact, safeguarding their experience, their cultures, their capabilities,” he said.

Put That in Your Pipe. LPL increased its advisory and brokerage assets by 25% year over year, thanks to higher revenue on commission-based products. Advisor headcount also ticked up 2% to 29,493 over the same period. But it’s not just a stellar earning report and the monumental Commonwealth deal causing all the commotion:

• LPL partnered with institutional clients in recent months, including WinTrust and Prudential Advisors, adding over $80 billion in client assets.
• The acquisition of New-York based Atria Wealth Solutions will add an additional 2,400 advisors to the platform over the next few months.

“Look at what we have in front of us, specifically right now, on beginning the Atria conversions, and specifically getting ready for Commonwealth,” LPL CFO Matthew Audette said on the call. “The recruiting pipeline continues to be quite large.”