LPL Gets ‘Commitments’ from Waddell Advisors Serving 80% of Assets
Just over two months after announcing its $300 million purchase of Waddell & Reed’s wealth management business, LPL Financial executives said advisors serving about 80% of Waddell’s $70 billion in client assets have “committed” to join LPL upon closing.
That would put LPL ahead of the 70% it had expected to retain in the transaction, which is on schedule to close mid-year, Chief financial officer Matthew Audette said on the firm’s fourth quarter earnings call on Thursday. LPL had announced on Dec. 2 that it was purchasing the wealth business, which includes around 900 advisors, from Macquarie Asset Management.
Discussions were ongoing with Waddell advisors serving the remaining 20%, LPL Chief Executive Dan Arnold said.
“There’s still time left to have that ongoing dialogue and make sure that all advisors can make an informed choice around where that best option is for them,” Arnold said, noting that LPL had been focused on retention efforts for just six weeks.
A spokeswoman at LPL, the largest independent broker dealer by its sales force of more than 17,200, declined to comment on the specific number of advisors who had committed to join from Waddell but said it was “in line” with the 80% of assets. The average Waddell & Reed broker had been managing $70 million in client assets at the end of the third quarter, LPL said.
LPL in December began offering Waddell advisors retention deals ranging between 30% and 50% of their prior year’s fees and commissions, the LPL spokeswoman confirmed.
Acquisition and integration costs tied to Waddell are expected to total about $85 million, and LPL is anticipating about $10 million in related expenses in the first quarter of 2021, Audette noted. He said the firm is still looking at an estimated accretion of about $50 million in run-rate revenue minus expenses one year after closing.
Overall in the fourth quarter, LPL reported net income of $112 million, down 11.8% from $127 million in the fourth quarter of 2019 but up 7.7% from $104 million in the previous quarter as the firm recovers from pandemic-related challenges.
Total net revenues climbed 9% year-over-year to nearly $1.6 billion from $1.4 billion.
LPL reported record customer assets of $903 billion in the fourth quarter, up 18% year-over-year. Fee-based assets increased by 26% year-over-year to $461 billion, representing 51% of the firm’s total assets.
LPL’s recruiting efforts also continued to be a key driver of growth as it hired advisors managing a total of $10.8 billion in client assets in the quarter and $40.9 billion for the full year, up 17% from 2019, the firm said.
LPL “continued to drive solid recruiting results and gain market share” despite a slowdown in movement industry-wide last year in its core independent broker market, Arnold said.
Arnold said he expects growth to accelerate in 2021, in part from LPL’s rollout last year of two new affiliation options, a Strategic Wealth Services independent option that is aimed at wirehouse brokers and added five teams last year and an employee broker-dealer model, as well as its new employee channel.
“We have a solid pipeline with a number of commitments that will join in the first half of this year,” Arnold said of the SWS option.
Arnold noted LPL made its first recruit into the nascent employee channel in January. The company had earlier said it hired Tiger Blackwell, a $100 million-AUM broker from Stifel, Nicolaus & Co. in Baton Rouge into the channel.
LPL will also roll out in this quarter an “M&A Solutions” offering, which will provide advisors with deal sourcing, transaction advice and funding to help the acquire other practices, Arnold said.
LPL ended the year with 17,287 independent brokers, up a net 119 from 17,168 in the third quarter and up 5% year-over-year from 16,464 last year. Executives said on the call that its broker retention rate rose to 97.7% in 2020, up from 96.5% in 2019.