UPDATE 1-Independent broker LPL posts profit, but falls short

* LPL swings to a profit after a year-earlier loss

* Adjusted earnings short of expectations

* Volatility, uncertainty weigh on investors

By Joseph A. Giannone

Feb 7 (Reuters) - LPL Investment Holdings Inc , the top U.S. independent brokerage, on Tuesday reported a fourth-quarter profit after a year-earlier loss, but the results fell short of expectations as volatility and economic worries slowed trading activity.

Boston-based LPL, which sells technology, clearing and other services to an army of self-employed brokers, reported fourth-quarter profit of $39.4 million, or 35 cents a share, compared with a loss of $116 million, or $1.20 a share, in the year-earlier period.

Excluding charges and other items, adjusted earnings rose 9.3 percent to $48.8 million, or 44 cents a share, shy of the 46 cent average estimate compiled by Thomson Reuters I/B/E/S.

Net revenue rose 1.1 percent to $828.7 million, which also fell short of the consensus forecast of $876 million. Among experienced advisers, "same-store-sales" growth slowed to less than 1 percent for the fourth quarter.

"Despite a very strong year, we experienced softness in the fourth quarter driven by ongoing market volatility and uncertainty in the global economy," LPL Chief Executive Mark Casady said on a conference call after the closing bell Tuesday.

LPL said its clientele of individual of investors took a more cautious view of the markets, as reflected by increased cash holdings and fewer trades. Fourth-quarter commission revenue fell 5.2 percent compared to the prior year period.

And though 2012 is only a few weeks old, LPL said individual investor sentiment has showed some signs of improving.

"We feel very positive about the beginning of this year as a result of markets improving, and consumers feeling more comfortable going back to their investment programs," Casady said.

At the same time, LPL said its expenses, which typically fall when trading volumes fall, rose faster than expected because of higher deferred compensation and stock-based pay. The firm, known as Linsco/Private Ledger until its 2005 leveraged buyout, also continued investing in technology upgrades and providing loans to brokers launching their own firms.

Looking ahead, Chief Financial Officer Robert Moore told Reuters expenses would likely stay close to fourth-quarter levels for the rest of this year, though LPL expects revenue growth to pick up, fueled by recent takeovers and recruits, improvements to its technology and more robust markets.

Total advisory and brokerage assets increased 4.4 percent to $330 billion during the quarter, b ut its growth in advisers - an important barometer for LPL - was muted by its integration of a previous broker acquisition, UVEST.

LPL said it added 172 new advisers during the fourth quarter, offset by the loss of 124 advisers due to the UVEST conversion. The firm ended 2011 with 12,857 advisers , up 3.2 percent over 12 months, fueled by 549 net new adviser recruits .

The pipeline of new broker recruits has expanded so far this year, Moore said, though he characterized the increase as a return to more normalized levels. Broker movement surged in 2008 and 2009, when the world's biggest banks nearly collapsed, and then slowed to below-normal levels for the past two years.

The company also disclosed Tuesday that it recently renewed a brokerage, clearing and custody services relationship with AXA Advisors, a unit of French insurance giant AXA SA with 4,000 advisers.

Independent brokers, unlike those employed by firms like Merrill Lynch, own their practices and pay their own expenses. However, these brokers often keep 90 percent of the commissions and fees they generate, compared with 40 to 50 percent at a traditional firm.