LPL Financial has closed its first deal to acquire an outside counsel practice under its liquidity and continuity program, executives announced during the first quarter of 2024. Independent broker/dealer opened the purchase model for outside counsel last fall.
An LPL spokeswoman declined to name the outside counsel.
below SOFTWAREintroduced to LPL advisors about two years ago, IBD acquire practices with approaching principals—but not yet in—retirement and commits to spending 10 to 13 years supporting a future generation that will eventually have the opportunity to take control without the high price—or any cost.
In an earnings call Tuesday, CFO Matt Audette said the firm was bullish on the model and has deployed about $400 million in capital across 27 deals so far. In the first quarter, the firm deployed $10 million in capital across two deals.
He said the average deal size has been between $10 million and $20 million, with acquisition multiples around 6 to 8 times EBITDA. The firm expects to close six more deals later this year, and when the program reaches full capacity, it expects to do 30 to 40 deals a year.
Audette said the economics of these deals are quite attractive, given that the return on assets doubles when LPL buys them.
Generally, this is because the advisor becomes an employee advisor and receives a reduced payment once LPL has acquired a firm.
CEO Dan Arnold said the program hopes to address the fact that one-third of advisors are expected to retire over the next decade.
“While there are a variety of options available in the market, we think ours is truly differentiated and a compelling and very elegant way to help these advisors transition their practices to look after them , to take care of their teams, take care of their customers, and ultimately create a bridge to the next entrepreneurial leader or owner,” Arnold said.
Overall, LPL reported first-quarter net income of $289 million, or $3.83 per share, down 10% from a year earlier. Adjusted earnings per share were $4.21, down 6% year over year, beating analysts' expectations by 39 cents, according to SeekingAlpha.com. Revenue was $2.83 billion, up nearly 17% year over year, beating expectations by $110 million.
Total assets rose to $1.4 trillion during the quarter. Organic net new assets were $17 billion during the period, up 5% on a year-over-year basis.
The firm raised $20 billion in assets during the first quarter, bringing assets raised over the past 12 months to $87 billion. LPL added approximately $2 billion to its newer affiliate models, including Strategic Wealth Services, its RIA offering and its W-2 employee model. It had about $3 billion in assets raised in the traditional bank and credit union space. The firm continues to include Prudential's wealth management business and two of Wintrust Financial's wealth businesses, which will collectively add $66 billion in assets by early 2025.
The number of adviser employees reached 22,884, up 224 consecutively and 1,363 year-on-year.
LPL also announced plans in February for it buy Atria Wealth Solutions, which manages approximately $100 billion and works with approximately 2,400 advisors and 150 banks and credit unions. The firm is on track to close that deal in the second half of this year, and it expects to complete the adviser transition in mid-2025.