Valens Equity Weekly Insights and Inflections for April 12, 2022

April 12, 2022

  • 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 Q4 earnings call about their advisor capabilities and secular growth trends support further ROA expansion and continued growth.

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