Analyst Note| Michael Wong |
LPL Financial reported fairly good revenue and profit growth, but similar to other wealth-management firms, client cash-related revenue that had been a bright spot the previous several quarters is showing signs of slowing down. The company reported net income to common shareholders of $339 million, or $4.24 per diluted share, on $1.02 billion of gross profit. Gross profit increased 52% from the previous year, mainly from client cash-related revenue increasing to $439 million from $85 million the previous year. However, client cash-related revenue was flat sequentially, as higher revenue yields on client cash was offset by about a $10 billion decline in client cash sweep balances. The decline in cash sweep balances is due to clients sorting their cash into higher interest-yielding products and using their cash to invest and isn’t a sign of clients pulling their assets from the company. In fact, LPL Financial had over $20 billion of net new client assets in the quarter.