What: Shares of LPL Financial Holdings Inc. (LPLA 0.09%) are down more than 35% at 11:20 a.m. ET as the market digests the company's fourth-quarter earnings.

So what: Harmed by a slump in the financial markets, LPL Financial's fourth-quarter results failed to live up to expectations. It reported adjusted earnings of $36 million, or $0.37 per share, well below the analyst consensus estimate of $0.51 per share.

On its conference call, the company's chairman and CEO, Mark Casaday, noted that "brokerage sales were the slowest for the year and advisory fees were down due to the equity market decline at the end of the third quarter. Alternative investments were a large factor, as commissions were down by about 75% from a year ago."

LPL Financial expects declining markets to further weigh on its results in the future. "Like many of our peers, we saw a drop in brokerage sales activity across products throughout the year as volatile markets led to uncertainty. We would expect to see cash from retail investors build up, and we did. We believe this lower level of brokerage sales is likely to continue," Casady said.

Notably, its two largest revenue line items, commissions and advisory revenue, fell by 12% and 5%, respectively, from the year-ago period.

A Credit Suisse analyst lowered his price target on the stock from $44 to $28 per share, while giving a "neutral" rating. Wells Fargo reduced its rating from "outperform" to "market perform" following its fourth-quarter earnings. 

Now what: A recent ruling from the Department of Labor has made the industry less profitable, even if it may create better outcomes for financial advisory clients. The ruling will expand the fiduciary responsibilities of advisors such that more investing advice falls under a fiduciary standard, which requires that the interests of the investor are put first.

Currently, many financial products fall under a "suitability standard," which gives financial advisors the flexibility to make recommendations that are merely "suitable" for their clients' needs, while considering the interests of the advisor and the firm. The transition is quite a hurdle for LPL Financial, which generates more of its revenue from brokerage services than advisory.