LPL Financial is on a buying spree, scooping up firms like Commonwealth Financial Network. The stated goal? Long-term earnings and margin improvement driven by advisor and asset growth. But let's dive into the numbers and see if this narrative holds water.
The headline numbers look good. Third quarter 2025 revenue hit US$4.55 billion. Adjusted earnings exceeded analyst estimates. And the onboarding of Edge Wealth Advisory Group suggests continued interest from independent teams. The projection? $23 billion in revenue and $1.9 billion in earnings by 2028. That requires, they say, 18.7% yearly revenue growth and an increase in earnings of $0.8 billion from $1.1 billion. Ambitious.
Here's where things get interesting. The report mentions a "net loss due to acquisition-related accounting costs." This isn't just a footnote; it's a flashing red light. Acquisitions always come with costs – integration expenses, potential write-downs, and the risk of cultural clashes that can send advisors fleeing.
LPL's narrative hinges on "successful integration and asset retention." That's corporate speak for "we hope we don't screw this up." The Simply Wall St community estimates fair value anywhere from US$326 to US$484 per share, a massive range reflecting the uncertainty around LPL's path forward. Those varied outlooks reflect how varied assumptions can influence your view on LPL’s path forward.
Now, I've looked at hundreds of these filings, and the reliance on adjusted earnings always makes me raise an eyebrow. What exactly are they adjusting out? And are those adjustments truly one-time events, or are they recurring costs conveniently swept under the rug to paint a rosier picture?
The article also mentions Simply Wall St's "Snowflake," a visual tool for evaluating financial health. While I haven't seen the Snowflake, it sounds like a decent attempt to summarize a complex situation – but it’s still just a summary. Investors need to dig deeper than a single visual, no matter how pretty.
LPL's success depends on two things: keeping the advisors they acquire happy and retaining the assets those advisors manage. Both are easier said than done. Independent advisors are, well, independent. They value their autonomy. Force them into a rigid corporate structure, and they'll walk. And when advisors walk, assets follow.
The article mentions the completed onboarding of Edge Wealth Advisory Group. That's positive, but it's just one data point. What's the attrition rate across all acquired firms? What's the average asset retention rate? These are the numbers that will tell the real story, and they're conspicuously absent from the report.
And this is the part of the report that I find genuinely puzzling...why don't they include these crucial data points? Is it because they don't want to highlight potential problems? Or are they simply not tracking these metrics effectively? Either way, it's a cause for concern.
LPL’s advisor recruitment momentum is good, but it needs to be seen in context. Are they attracting top-tier advisors, or are they simply hoovering up anyone with a book of business? The quality of advisors matters just as much as the quantity.
LPL Financial is betting big on growth through acquisition. It's a high-risk, high-reward strategy. If they can successfully integrate acquired firms, retain advisors and assets, and manage costs, they could create a financial powerhouse. But if they stumble, they could end up with a bloated, inefficient organization weighed down by debt and integration nightmares. The 18.7% yearly revenue growth they project is aggressive, to say the least.
Frankly, I think that LPL Financial’s acquisition of Commonwealth Financial Network enhances LPL’s competitive positioning, but the most immediate catalyst, successful integration and asset retention, remains critical, while execution risk from ongoing M&A continues to be the biggest watchpoint.
