July 27, 2011 / 8:09 PM / 6 years ago

UPDATE 4-LPL second-quarter profit rises, tops Street view

* Q2 adj EPS 52 cents vs Street view 50 cents

* Revenue up 13.1 pct to $894 million (Updates share price to close)

By John McCrank

TORONTO, July 27 (Reuters) - LPL Investment Holding Inc LPLA.O, parent of independent broker-dealer LPL Financial, reported higher a quarterly profit on Wednesday as its clients committed to more long-term investments, boosting fee and commission revenues.

LPL caters to middle-income Americans, whose investment choices shifted more toward long-term products like variable annuities and alternative investments, as well as increased use of LPL’s centrally managed advisory platforms, which are twice as profitable as its brokerage platforms, LPL Financial Chief Executive Mark Casady said on a call with analysts.

“A sustained market downturn, or significant economic disruption, such as the failure to increase the (U.S.) debt ceiling, would likely negatively impact investor behavior,” he added.

The largest U.S. independent broker-dealer said that net new advisory assets were $3.1 billion during the quarter, compared with $2.4 billion a year earlier.

Total advisory and brokerage assets rose 23.1 percent from a year earlier to $340.8 billion, while assets under custody in LPL’s fee-based platforms rose 30.8 percent to $103.2 billion.

LPL’s second-quarter net income rose to $45.5 million, or 40 cents a share, from $8 million, or 8 cents a share, a year earlier.

Adjusted for noncash charges, it earned 52 cents a share, 2 cents above the average forecast of analysts polled by Thomson Reuters I/B/E/S.

Revenue was up 13.1 percent at $894 million, versus average expectations of $894.9 million.

“We are coming out of this with an incrementally positive view,” said Ed Ditmire, an analyst at Macquarie Capital.

“Revenue was higher than we expected, the ending client assets were higher, they added more advisers than we thought they would have, and they had better net new assets than we expected, so all of the metrics were extremely encouraging,” he said, adding that a lower tax rate helped LPL beat market expectations.

Over the past five years LPL has amassed one of the largest brokerage forces, fueled by the waves of advisers leaving banks, insurers and big Wall Street firms. It also recruits from other independent firms.

“That mix has smoothed across those channels relative to some of the more elevated levels that we saw particularly during 2009,” Robert Moore, LPL Financial’s chief financial officer, said in an interview.

The company said it has added 594 net new advisers in the past year.

Ditmire said that most of LPL’s growth comes from existing advisers building their assets, with about 3 percent of the growth coming from new advisers.

Commission revenue was up 9.5 percent to $459.9 million in the second quarter. Advisory fees revenue rose 22.8 percent to $264.3 million, while asset-based fees revenue gained 16.9 percent to $90.5 million.

Shares of LPL ended down 1.64 percent at $33.49 on Wednesday in New York amid a broad-based market decline. The company went public in November with an initial price of $30. (Editing by Lisa Von Ahn and Gerald E. McCormick)

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