LPL Financial executives said they expect to close the deal Friday morning to acquire Commonwealth Financial Network, the Waltham, Mass.-based independent broker/dealer.
LPL first announced its intention to acquire privately-held Commonwealth, which has 3,000 advisors and $305 billion in assets, in March, for a purchase price of about $2.7 billion in cash. On its second quarter earnings call Thursday evening, LPL executives said they had completed all the pre-close work on the deal, and that they expected to meet their retention target of 90% of Commonwealth advisors.
President and CFO Matt Audette said his firm expects to move Commonwealth assets onto the LPL platform in the fourth quarter 2026, a little later than its original timeframe.
“We’ve had four months of fever-pitched engagement with them, where we have gotten to know the advisors, the leadership team, and more broadly the employees better and better,” CEO Rich Steinmeier said. “And as we’ve stated continually, we are committed to preserving that unique culture, the advisor experience the brand, and in fact, we’ll only enhance what they already receive with the combination of the LPL capabilities with that Commonwealth experience.”
Steinmeier said that despite noise in many of the trade publications about Commonwealth departures, he felt good about advisor retention.
“We’ve engaged with so many advisors, and for those Commonwealth advisors who are prioritizing the Commonwealth experience, their community, the technology service ongoing and really staying at their forever home for their business and their clients, staying with Commonwealth is their only option. But as with any transaction or competitive recruiting event, some advisors will prioritize differently. That exact dynamic is contemplated in our retention target.”
Several high-profile advisor teams have jumped ship for rival broker/dealers.
One analyst asked him to comment on Commonwealth advisors who are opting to start their own RIAs as opposed to joining LPL. Take Adam Spiegelman, for example.
Steinmeier said that wasn’t surprising, given that Commonwealth advisors tend to skew towards advisory business. But LPL does support RIAs, whether it’s those who start their own firm or come under the firm’s corporate RIA. And after speaking with some of those advisors, he said many of them underestimate the operational lift and regulatory complexity that comes from running an RIA.
“One of the things I think they also haven’t considered is, if they choose to set up their own RIA with another custodian, they’re going to have to go through a repaper event,” Steinmeier said. “It means they’re going to have to engage their clients; they’re going to have to repaper all of their accounts; and they’re going to find some lost efficiency and spending some time actually working through that transition.”
“Advisors are seeing that we can support them. They keep their community, they keep their support model, they keep that leadership team that they love. They can do that inside of an RIA or on our shared ADV at LPL.”
The firm’s run rate EBITDA is projected to be roughly $120 million at closing and $415 million once fully integrated. They anticipate onboarding and integration costs of $485 million. LPL expects to spend $155 million on technology related to the acquisition, which will be capitalized and amortized over time.
An investor presentation said roughly 75% of Commonwealth’s business was advisory and 25% brokerage. The broker/dealer has client cash balances of about $4 billion. It has retained roughly 98% of its advisor headcount on average over the last five years.
Upon the close, Commonwealth’s CEO Wayne Bloom will join the LPL management committee as a managing director. Commonwealth Founder Joe Deitch will take on an advisory role to LPL’s Board of Directors.
Post-close, LPL’s pro-forma leverage ratio will be 2.25x, Audette said. But they expect to deleverage to 2x by the end of 2026.
Overall, LPL reported net income of $273 million, or $3.40 earnings per share, for the second quarter, up 5% from a year ago. Total revenues were $3.84 billion, up about 31% from a year ago, beating analyst expectations by $60 million, according to SeekingAlpha.com.
The firm added $18 billion in recruited assets during the quarter, down 24% from a year ago, bringing recruited assets to $161 billion for the trailing 12 months. Steinmeier attributed the decline in recruiting to truncated advisor movement given the market volatility. Also, the firm had a subset of its recruiters working on retaining Commonwealth advisors during the quarter.
#LPL #Close #Commonwealth #Deal #Friday