LPL Financial reported earnings for the third quarter that surpassed analysts’ expectations, as revenue rose on a year-over-year basis.
LPL reported earnings per share of $1.31 on $1.46bn of revenue, slightly beating consensus expectations compiled by Zacks Investment Research.
LPL reported that it at the end of the third quarter of 2020, advisory assets now comprise a majority (50.1%) of its total assets for the first time in the company’s history. The firm reported $406bn in total advisory assets as of the end of the third quarter of 2020.
LPL’s revenue is slightly higher than the $1.42bn reported in the third quarter of last year, yet the company’s net income slid by 21%, as expenses such as commissions and compensation rose.Dan Arnold, LPL’s chief executive, said the company planned to invest more in its RIA custody offering.
‘We are an RIA custodian. We support some RIAs. We’re going in and investing in that model and evolving it such that we think it’s going to create a really interesting, appealing solution that’s differentiated in the marketplace at a time when we expect to see some churn pick up in that part of the marketplace,’ Arnold said.
Arnold is likely referring to Charles Schwab’s purchase of TD Ameritrade, which closed earlier in October. The $22bn all-stock deal gives Schwab custody of a slight majority of all RIA assets, according to Cerulli Associates, and has led some companies to position themselves as alternatives to RIAs dissatisfied by potential service or technology cuts as a result of the merger.
If LPL intends to make a bigger push into the custody space, it will likely run into other institutional competition. Both Fidelity and BNY Mellon’s Pershing have established market segments, while Goldman Sachs indicated it plans to become an RIA custodian through its purchase of Folio Financial earlier in 2020.
