Valens Equity Weekly Insights - 2024 07 02
LPL Financial (LPLA) has created a powerful platform to empower independent and smaller scale wealth advisors to compete with the big players like Merrill Lynch and Morgan Stanley. Uniform Accounting highlights the company's operational improvements that the market is missing, indicating equity upside.LPL has reformulated the value proposition of being an independent RIA with its asset-light advisor platform. Uniform ROA has expanded to new peaks above 20%, which is sustainable going forward. As it continues scaling, that growth flows directly to margin expansion,
meaning Uniform ROA can continue expanding.
LPL's management is aligned to focus on EBITDA growth and customer retention, which will lead management to grow the top-line and improve margins. Given the firm's already asset-light model, these are the right metrics to drive ROA expansion.
Management confidence in the Q1 earnings call about its Pru platform and its stable cash
balances further ROA expansion and continued growth.
LPL Financial Holdings is a holding company. Through its subsidiaries, the company is engaged in the retail financial advice market and independent broker-dealer. The company's product and solution access includes: Commission-Based Products, which include variable and fixed annuities, mutual funds, equities, and insurance, among others; Fee-Based Advisory Platforms and Support, which include wrap-fee programs, mutual fund asset allocation programs, financial planning services, and retirement plan consulting services; and Cash Sweep Programs, which manage their clients' cash balances through a money market sweep vehicle involving money market fund providers and insured sweep vehicles involving banks.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.