LPL Financial's parent company, LPL Financial Holdings Inc., reported record revenue in 2012 of $3.66 billion, an increase of 5.2% compared with a year earlier. That did not translate, however, into an increase in profit for the year. The company reported a year-over-year decrease in net income, to $151.9 million, a drop of 10.8%.LPL is the largest independent broker / dealer, has its own clearing firm, and presumably gets the best arrangements from product sponsors, but only managed a profit margin of 4%. The implication for smaller firms and the entire independent broker / dealer business model is scary. Financial advisors that think they are such good deal makers negotiating payouts more than 90% are putting the independent broker / dealers in financial jeopardy. Broker / dealers that agree to high payouts hoping to make up the lost revenue from other sources are enabling their own destruction.
Friday, February 15, 2013
I have had this InvestmentNews article opened in my browser for over a week. The article is about LPL being ordered to pay restitution to Massachusetts' investors who bought non-traded REITs. That story is not why I kept the article open. Here is the part of the story that shocked me: