Q3 2023 Earnings Summary
Reported on Oct 26, 2023 (After Market Close)
Pre-Earnings Price$221.93Last close (Oct 26, 2023)
Post-Earnings Price$207.45Open (Oct 27, 2023)
Price Change
$-14.48(-6.52%)
- Strong Organic Growth and Recruiting Momentum: LPL Financial reported 11% net new asset growth, at the high end of their 7% to 13% target range, with $31 billion in recruited assets in Q3, including a quarterly high of $19 billion in assets prior to large enterprises, which is more than double a year ago. This demonstrates the effectiveness of their diversified affiliation models and the sustainability of their growth.
- Low Adviser Attrition and Improving Win Rates: LPL continues to see low levels of adviser attrition at 1% to 1.5% and improving win rates, despite industry-wide lower adviser movement. Their flexible affiliation models allow them to compete for all 300,000 advisers that may move, positioning them well for future growth.
- Expanding Services Portfolio Driving Additional Revenue Opportunities: LPL is innovating and expanding their services portfolio, including the rollout of CFO Essentials, making advanced services accessible to a broader set of their over 22,000 advisers. This expansion is expected to drive further utilization and organic growth, enhancing revenue opportunities.
- Increasing expenses due to onboarding large enterprises may impact profitability. LPL Financial is incurring significant costs related to onboarding and integrating Prudential's wealth management business, with total onboarding and integration costs estimated at approximately $125 million, including about $100 million expected in 2024. These expenses add to promotional costs and may affect operating margins. , , , ,
- Declining client cash balances and cash revenue could reduce interest income. Client cash revenue decreased by $18 million from Q2, as cash balances declined $3 billion to $47 billion in Q3. The company expects its ICA yield to decline further due to the mix impact of lower floating rate balances, which may continue to pressure revenues. ,
- Increasing payout rates to advisers may compress margins. The payout rate increased to 87.3% in Q3, up 60 basis points from Q2 due to seasonality and onboarding of new enterprises. LPL Financial expects the payout rate to rise to approximately 88% in Q4, which could compress profitability.
Research analysts covering LPL Financial Holdings.