In the Q2 earnings calls, four of the top wealth advisory firms communicated strong earnings and optimism about the outlook for the rest of 2023. In light of improved market conditions, firms remain committed to investments in innovation and mergers and acquisitions (M&A).
LPL Financial (NASDAQ: LPLA)
Leadership exuded confidence in Q2 earnings, stating ongoing M&A activity and strong organic growth. In July, LPLA signed an agreement to acquire wealth management business Crown Capital, onboarded Bank of the West, and began preparations for onboarding Commerce Bank. This brings their total recruited assets to $19 billion, up 4% from a year ago, prior to large enterprises. Also prior to large enterprises, organic net new assets saw 4.1% annualized growth.
In total, advisory and brokerage assets increased 16% year- over- year to $1.24 trillion, with advisory assets increasing slightly more at 18% year-over-year.
Dan Arnold, President and CEO stated, “Over the past quarter, we remained focused on our mission of taking care of our advisors, so they can take care of their clients. This focus led to another quarter of solid recruiting, retention, and business growth. As we look ahead, we will continue to invest in order to enhance the appeal of our model, as we strive to increase our market share within the advisor-centered marketplace.”
For the second half of the year LPLA plans to continue their horizontal expansion strategy to achieve the goal of meeting their advisors where they are. They plan to do this while also investing in vertical integration capabilities that enhance the advisor value proposition and drive growth.
Read more about second quarter earnings for LPLA.
Ameriprise Financial (NYSE: AMP)
Through environmental uncertainties, AMP leadership delivered confident earnings. Strong financial results benefited from business momentum and higher interest rates. Representing 68% of AMP earnings, the Wealth Management sector delivered strong organic growth, while benefiting from higher spread revenue.
According to Chairman and CEO, Jim Cracchiolo, AMP is “benefiting from our broad investment capabilities, extensive technology and high-quality service that are core to the Ameriprise client experience and represent strategic advantages. We’re serving more affluent clients and had another strong quarter of experienced advisor recruiting. And with the growth of Ameriprise Bank, we’re driving excellent results across Wealth Management with revenue and profitability at record levels.”
Wealth Management delivered a record high pretax adjusted operating margin of 31 percent from strong business growth. This was elevated from increased total client flows of 10%. Second quarter adjusted operating earnings per diluted share was $7.44, up 30 percent from the prior year, driven by strong business performance in Wealth Management. A 30% increase in EPS (earnings per share) demonstrated the strength of their diversified business model.
Read more about second quarter earnings for AMP.
CI Financial (TSX: CIX)
As stated by CEO, Kurt MacAlpine, CI’s second quarter was “marked by several significant accomplishments across our business lines.” In the first half of the year, CI’s Wealth Management segment reported year-over-year adjusted EBITDA growth of 42%. This was elevated from robust net inflows, reflective of the successful integration of acquired firms.
CI announced two acquisitions to conclude the first half of the year. Coriel, a female-owned, ultra-high-net-worth wealth manager based in Montreal, and Intercontinental Wealth Advisors, a Texas-based RIA serving high-net-worth and ultra-high-net-worth clients. These announcements come in addition to the completed acquisition of Avalon Advisors and La Ferla Group over the quarter, which together add approximately $11.9 billion in combined assets.
Over the quarter, CI rebranded their U.S. based Private Wealth business as Corient, to present a unified brand that better reflects their integrated, national platform and unique vision for growth. Ahead of an anticipated IPO, Corient completed the sale of 20% interest in the firm to Abu Dhabi Investment Authority, Bain Capital, Flexpoint Ford, Ares Management Funds, the State of Wisconsin, and others. The approximate $1 billion investment was made at an enterprise value of $7.1 billion, representing 25.6x Q1’23 annualized adjusted EBITDA. The funds will be used to deleverage the firm, reducing CI’s net leverage ratio from 4.0x to 2.7x when accounting for the earnings reduction associated with the minority investment.
Read more about second quarter earnings for CI.
Avantax Financial (previously BluCora, NASDAQ: AVTA)
AVTA hit new records in Q2. Total revenue increased 15% year-over-year to $186.9 million. Advisory assets ended Q2 at $42.6 billion, 50.9% of total client assets. These two records came after six straight quarters of net positive asset flows, totally $390 million in Q2.
Total client assets marked an improvement of ~4% from Q1 2023 due to improving market conditions and net new asset inflows.
AVTA implemented a cash sweep hedging program and transacted on multiple derivative instruments which allowed the company to benefit from interest rates, while also protecting against future rate reductions below 2.5%, impacting a substantial portion of client assets held in the cash sweep program.
CEO Chris Walters praised the ongoing success of AVTA stating, “With two quarters behind us as a pure-play wealth management business, we have maintained strong operational performance across several key metrics. We continue to break records in revenue and advisory assets as a percentage of client assets.”
Read more about second quarter earnings for AVTA.
Wealth leaders remain cautiously optimistic about the prospects for their businesses in the face of continued economic headwinds, challenges coming from inflation, elevated interest rates and labor shortages. Conditions can change with little notice, and firms that are able to remain agile and adapt quickly, will likely win the day.
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