LPLA - Embedded Expectations Analysis - 2020 09 01
LPL Financial Holdings Inc. (LPLA:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 17.0x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about client services, adviser retention, and growth suggest the potential for near-term headwinds, market expectations remain far too bearish, suggesting outperformance is likelySpecifically, management may lack confidence in their ability to sustain advisory assets growth and transaction volumes, as well as prioritize organic growth. They may also have concerns about the sustainability of IRA fees, and continued declines in commission and advisory fees. Moreover, they may lack confidence in their ability to improve service experiences for their clients, secure new business opportunities, and improve their value proposition. Furthermore, they may also have concerns about the efficacy of their business development teams and their position in this environment. In addition, they may lack confidence in their ability to quickly turnover clients to new advisers, continue executing the Assurance Plan, and provide capabilities that will guide advisers in the marketplace. Finally, they may lack confidence in their ability to continue searching for fair-priced investments
Although management's concerns about client services, adviser retention, and growth suggest the potential for near-term headwinds, given the firm's ability to capitalize on a still significantly fragmented market, market expectations are overly bearish, suggesting outperformance is likely for LPLA
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.
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