Easing market conditions helped LPL Financial realize a surge in net new advisers in the fourth quarter, and the company is confident it can continue.
LPL, of San Diego, added 427 advisers in the quarter, to give it a total of 12,444. Robert Moore, its chief financial officer, said that 200 of those advisers were hired as a result of LPL's acquisition of National Retirement Partners, but the 227 net new advisers brought on organically represented a "very, very, very, good" boost on a quarterly basis.
"We have indicated over time that adding 400 net new advisers annually is a good operating assumption," Moore said in an interview Tuesday. "That translates into 100 per quarter. So, on a quarterly basis we more than doubled that in the fourth quarter."
Moore said the surge in advisers was caused by "thawing" economic and market conditions.
"Through the first three quarters of last year, the entire industry saw a subdued level of advisers in motion relative to our expectations and previous historic conditions," he said. "But the fourth quarter saw a lot of people coming out of that. Between that, and improvements in our service offering, things came together quite nicely for us in the quarter in terms of attracting advisers."
LPL expects to gain 100 to 150 net new advisers in the first quarter, Moore said.
"Based on our pipeline and expectations going forward, we suggest more normalizing conditions going forward," he said.
In its first results since going public last year, LPL said Monday that fourth-quarter net income increased 6.2% from a year earlier, to $44.7 million. Net revenue rose 11.6%, to $820 million. Without charges related to its initial public offering and other adjustments, LPL had a net loss of $116.6 million, or $1.20 a diluted share.
LPL's net new advisory assets increased 21.4%, to $8.5 billion from a year earlier. At Dec. 31, the nation's largest independent broker-dealer had $315.6 billion of total assets under management, up 13% year over year.
Moore said the growth was driven by market conditions and a surge in assets from advisers LPL added in 2008 and 2009. "They have ramped up their businesses and brought in additional advisory assets to our platform."
Last month, LPL's top executive said in an interview that it plans to hire at least 400 advisers this year and increase technology spending 50% as part of a strategy to attract and retain advisers.
"Historically we have added new 500 advisers per year, and we plan to add net new advisers of 400 on a going-forward basis," Mark Casady, LPL's chairman and chief executive, said during the January interview. "That is part of the mixture of how we will create growth for the company."
LPL, which is the third-largest broker-dealer by head count and the fifth largest by revenue, has grown into a financial services powerhouse over the past decade. Its adviser base has increased from 3,596 advisers in 2000 to 12,017 at Sept. 30, representing an annual growth rate of 13.2%.
Casady said 2010 was "a little bit slower" as 128 net new advisers joined LPL through the first three quarters of the year.
The majority of advisers who enlisted with LPL in 2009 came from wire houses, according to Casady, but 70% of the advisers that joined last year came from other independent firms. On average, advisers coming to LPL had at least seven years experience.
LPL also plans to continue to look for ways to expand through acquisitions, Casady said. Over the past decade, 80% of LPL's growth has come organically and 20% from acquisitions. He said LPL continues to look for acquisitions that "make sense," but most future purchases will be "add-on" deals.
"Most of our acquisitions in the past have been to add scale, but we are really through that phase," Casady said. "Going forward we'll look for add-on services. … We want to find services that we can bring to our advisers."
Casady said LPL has the excess capital to make acquisitions without using any stock.
