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LPL Financial shares spike after no-drama CEO Dan Arnold delivers (near) 20,000 advisors, $1 trillion-plus in AUA and surprising Waddell & Reed wrinkle

Shares of the San Diego company rose almost 5% after leader reported $300 billion asset leap, high M&A retention and multi-channel wins.

Saturday, February 5, 2022 – 2:03 AM by Brooke Southall
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Rich Steinmeier (to Barron's): I don’t know that there’s a cap. I don’t. It’s not 20,000. It’s not going to be 30,000.

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

The San Diego broker-dealer's organic net new assets totaled $119 billion, or 13% organic growth, up from 7% a year ago. Recruited assets were $89 billion, double the take in 2020.

Dan Arnold LPL Financial
Dan Arnold: Sees LPL well positioned for growth over the long run. 

LPL added a staggering 2,589 advisors, including 900 from its Waddell & Reed acquisition. See: LPL Financial jumps into the full-service brokerage business via acquisition -- with help from Raymond James' Silver Lane Advisors

After such a record year, CEO Dan Arnold was mostly asked to explain what exactly went right -- and better than expected. He repeatedly made efforts to rein in ebullience.

"I think if you think about our growth going forward, perhaps if you look at the last couple of years as a framework for that, you've got 7% growth in 2020 and 13% growth in 2021, and those are probably pretty nice bookends as a way to think about a range of potential growth over the long run, or as we go forward," he said to Wall Street analysts on the quarterly and year-end call.

Rich Steinmeier, LPL’s managing director and divisional president of business development and strategy, was willing to stoke a little extra optimism in an interview with Barron’s when asked just how many advisors LPL can adequately service.

“I don’t know that there’s a cap. I don’t. It’s not 20,000. It’s not going to be 30,000. There’s not a cap.”

Out-sized performance

LPL shares (LPLA) were up $8.29 or 4.79% in today's trading to close at $181.24, outpacing the overall 1.58% gain of the NASDAQ, on which it trades. 

The share price is about $3 off its record high and a big leap from its $152.73 closed on Jan. 24. The market capitalization is now $14.5 billion -- a fraction off Charles Schwab Corp.'s $174 billion, but nearly $2 billion higher than Robinhood's $12.6 billion.

M&A deals often under-perform in the broker-dealer world because reps can get poached, and IT systems and cultures clash.  But LPL's high-profile Waddell & Reed purchase outperformed big-time, according to LPL chief financial officer, Matt Audette.  

"Waddell's [cash flow] was roughly $70 million in Q4," he said on the call.

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

Eye-popping gains

LPL won assets by successfully casting a wider net, including to the bank channel where it nabbed multi-billions in assets from BMO Harris and M&T.

One advisor channel that gained brief mention on the call was the RIA channel, which was roundly upstaged by more eye-popping increases across LPL's more historic brokerage markets. See: Dan Arnold finally plays LPL's RIA custody card hiring five senior RIA recruiters caught in Schwab-TD Ameritrade post-merger 'churn,' signaling possible direct challenge to the industry leader

"With respect to our new affiliation models, strategic wealth, employee and our enhanced RIA custody offering, we recruited approximately $2 billion in assets in fourth quarter," Arnold said.

LPL retained 98% of assets during the year.

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Mentioned in this article:

LPL Financial
Asset Custodian
Top Executive: Dan Arnold

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