Despite missing asset goal, LPL points to silver linings in Commonwealth deal

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• Key insight: LPL Financial fell short of its goal of retaining 90% of the assets Commonwealth Financial Network had at the time of its acquisition. Executives are still finding much to love about the deal.
• Expert quote: “This works out to a purchase price multiple of roughly 8x EBITDA, which remains a compelling use of capital.” — LPL Chief Financial Officer Matthew Audette

LPL Financial acknowledged for the first time on Tuesday that it has fallen substantially short of its goal of retaining 90% of the assets from its purchase last year of its former rival Commonwealth Financial Network.

With roughly two weeks until Commonwealth advisors and accounts are formally moved over to LPL, CEO Rich Steinmeier told analysts in a call that he and his colleagues “have increased clarity on final asset retention, which we now expect to be approximately 83%.” That is far short of LPL’s previously announced goal of retaining 90% of the roughly $305 billion in assets Commonwealth had when LPL completed the acquisition in August 2025.

Despite the shortfall, Chief Financial Officer Matthew Audette said he still expects the Commonwealth purchase to achieve an EBITDA “run rate” of $415 million annually by the fourth quarter of 2027. An EBITDA run rate is earnings before interest, taxes, depreciation and amortization over a year-long period.

“This works out to a purchase price multiple of roughly 8x EBITDA, which remains a compelling use of capital,” Audette said.

How asset appreciation, ‘synergies’ sweeten the Commonwealth deal

Devin Ryan of the investment bank Citizens JMP wrote in an analyst note about LPL’s earnings that Commonwealth’s asset total has climbed to about $340 billion since its acquisition was announced, “implying roughly $282B of retained assets at the 83% rate.”

“That is only around [$3 billion], or 1% below the [roughly $285 billion] contemplated when the transaction was announced,” Ryan wrote. “The retention percentage has declined, but market appreciation and growth in the acquired asset base have offset nearly all of the difference in dollars.”

The economics of the roughly $2.7 billion LPL paid for Commonwealth were in part built on predictions that the deal would eventually result in an EBITDA run rate of at least $415 million. Audette acknowledged Tuesday that asset retention had come “in below that 90%” but said “synergies” had been better than expected.

“So all in all, not that you usually nail it, I think we’re right on top of where we would expect it,” Audette said.

In many industries, the word “synergies” is often a euphemism used for acquisition-related staff cuts to eliminate redundant positions and lower costs. With the Commonwealth purchase, though, workforce reductions are less of an option than in most cases.

Steinmeier and other LPL executives have repeatedly pledged to make sure Commonwealth retains features that made it distinct in the wealth management industry, including service staff. As a result, Audette suggested Tuesday, efforts to reduce costs at Commonwealth will move more slowly than with most acquisitions.

“We are intentionally retaining the entirety of their service organization that is a big part of their value proposition in their model,” Audette said. 

Meanwhile, LPL will prop up its EBITDA run rate with revenue generators like cash sweeps — moving Commonwealth clients’ uninvested cash over to banks to be lent out and generate interest income.

Commonwealth is still holding national conferences

Steinmeier noted that Commonwealth CEO Wayne Bloom and other executives appeared at the Commonwealth National Conference last week. Bloom has retained his executive title following the acquisition while also becoming a managing director on LPL’s management committee.

Steinmeier said roughly 1,000 advisors, staff workers and others attended Commonwealth’s conference at a resort in Aurora, Colorado.

“I would say that the overwhelming sentiment … across the entire resort was eager anticipation, an acknowledgment that we are keeping what has made Commonwealth, Commonwealth: the service, the supervision, the support, etc., the community, especially,” Steinmeier said, “and augmenting that with what makes LPL, LPL, which is exceptional technology, the ability to continue to invest at scale, quickly delivering incremental capabilities.”

LPL’s recruiting is slow to resume

With the incorporation of Commonwealth nearly complete, LPL has been trying to rededicate its energies to advisor recruiting. Earlier this month, LPL announced it named its former head of institutional client success, Kenneth Hullings, as its new head of recruiting after Scott Posner left earlier this year.

Despite those efforts, LPL reported its recruited assets were down by 26% in the third quarter to $24 billion. The firm added 122 new advisors net, and its total headcount was up 1% year over year to 32,597.

Steinmeier said in the call Tuesday that the recruiting process can take a while to restart and can take many months to show results.

“What we saw six months ago was what you might say is the python swallowing the pig in the first couple stages of our recruiting pipeline being outsized relative to the later stages, as you might expect,” he said. “What we’ve seen over the course of this year is a normalizing of a movement through the pipeline.

Steinmeier, meanwhile, said the firm’s organic growth rate — which measures net new assets brought in from recruiting, as well as new and existing clients — was about 5% in the third quarter and that his goal is to move it into the “mid- to high single-digit range.” Getting there will most likely require recruiting into the firm’s institutional division, which provides support services to advisors at banks, credit unions and similar firms.

“Specific to the institutional recruiting, we continue to feel great about the opportunity,” Steinmeier said. “We have more active dialogues than we’ve had in the past. Those dialogues are increasing, and we have a growing pipeline of diverse potential partners.”

Revenue, income and recruiting deals

Despite the decline in recruited assets, LPL reported it brought in $29 billion in net new assets. That helped push its total for client assets up by 11% to $2.6 trillion, $1.6 trillion of which is in accounts managed by advisors.

LPL’s revenue was up 17% year over year to $5.34 billion in the third quarter and its expenses by 6% to nearly $4.86 billion. Its net income was virtually unchanged year over year at $357 million.

Steinmeier suggested in Tuesday’s call that LPL’s purchase of Commonwealth has helped contribute to a rise in the money offered to advisors in recruiting deals. The announcement of the Commonwealth acquisition last year sent many of LPL’s rivals scurrying to attract Commonwealth advisors who perhaps were dismayed at the prospect of joining a much larger firm. Some of the deals on offer specifically to Commonwealth advisors offered particularly generous payout terms.

Steinmeier acknowledged Tuesday that recruiting deals (sometimes called transition assistance, (or TA) obviously matter a great deal to advisors seeking to change firms.

Yet, he said, “while TA grabs attention and it is a headline rate that you see in the marketplace, and you’ve got to be within the area code of the TA rate to make sure you get into those initial conversations, more often than not … when advisors make a decision, they’re making a decision about the capabilities, technology and support and service environment.”

“That’s usually their No. 1 decision-making criteria,” he added. “The second is the ongoing economics. And then third is TA.”