LPL’s Stock Price Sinks as Commonwealth Deal Closes

If transitioning advisors were graded, LPL Financial would get an A-minus. 

Company CEO Rich Steinmeier told journalists late last week that the firm is still on track to retain 90% of Commonwealth’s nearly 3,000 independent advisors in this year’s blockbuster acquisition that closed Friday. But since 90% was LPL’s stated goal, it could be considered as meeting 100% of what it intended: a solid A-plus, if indeed the numbers pan out. Since the time the acquisition was announced in March, however, there have been reports of advisors leaving — in some cases to start their own RIAs — as well as a race among competitors for the industry talent that went up for grabs.

Additionally, LPL reported earnings on Thursday that didn’t quite meet Wall Street’s estimates. As a result, its stock took a dive on Friday, going from a high of nearly $400 a share to $361, which is still up from the low point this year of $283. We’re not high school educators, but we’d call that a borderline C-plus.

Nothing to Worry About

There have also been plenty of industry reports of Commonwealth advisors who aren’t taking the LPL deal, and instead starting their own RIAs. Steinmeier seemed unfazed by the media coverage and potential loss of advisors during LPL’s earnings call Thursday. “Again, I would tell you even at 90% [retention], what you are going to see is announcements of folks that are going to leave,” he said. “But on balance, we think that center of gravity sits around 10% in spite of the fact that really it seems like each and every one of those stories is being amplified by the trades.”

While Steinmeier agreed Commonwealth advisors starting their own practices would be very much in their culture, he argued it would also create a lot of inefficiencies and extra work. “As an RIA, they’re responsible for their own regulatory compliance and risk management, in addition to running the responsibilities of the small business like tech and HR,” he said.

Steinmeier added that LPL sent a group of employees to Commonwealth’s annual wing eating contest and cornhole tournament. And if that’s not enough to show the new crowd that you’re cool, then what is?