LPL’s Stunning Revenue Surge X Morgan Stanley’s Balanced Q3 Showdown

In Q3 2025, investment banking and brokerage firms delivered strong top-line performance, exceeding revenue projections across the sector. LPL Financial led the pack in revenue growth, with a dramatic ~46% YoY increase driven by both organic asset gathering and material acquisitions; however, its bottom-line was negatively impacted by acquisition costs and elevated operating expenses [2][3][4]. Morgan Stanley also posted a robust quarter across its segments, with significant contributions from equity and fixed-income trading, investment banking, wealth and asset management, which underpinned ~18% revenue growth and ~47% growth in EPS year-over-year [5][6].

From a competitive standpoint, LPL’s acquisition strategy (Commonwealth Financial Network, Atria, First Horizon onboarding) bolstered its asset base – advisory & brokerage assets grew to ~$2.3T (+45%) [2][4]. Its adjusted earnings power (25% EPS growth) suggests strong underlying performance once acquisition expenses are factored out. For Morgan Stanley, strength in institutional securities (including trading and investment banking fees up ~44%), coupled with rising wealth management revenues and improved net interest income, led to record revenues [5][6].

Strategic implications:

• Firms with a hybrid model spanning advisory, securities trading, and investment banking appear best positioned in this cycle—diversification is helping mitigate cyclical deal flow volatility.
• M&A remains a force-multiplier: scale through acquisition is delivering both assets and near-term revenue uplift (e.g. LPL), though acquisition costs and integrations impact short-term margins.
• Expense control and efficiency metrics are critical: while revenue growth is strong, expense growth at LPL (+66%) is outpacing revenue growth; for Morgan Stanley, improved expense efficiency (expense ratio improved) is enhancing profitability. [5][2]

Open questions and risks:

• Will deal flow and advisory mandates sustain growth as economic uncertainty persists, particularly into 2026?
• How will rising regulatory capital, leverage constraints, and interest rate volatility impact profitability and willingness to expand in riskier product lines?
• Can firms maintain organic asset growth amid intensifying competition and pressure on advisor retention and acquisition costs?
• How will valuations adjust in light of elevated expenses and the mix shift toward advisory and fee-based income?