XP's Advisory Shift Aligns with Strategy Amid Persistent Risks

What happened

XP Inc. reported 4Q25 results showing steady client asset growth driven by high-interest rates, despite slow new client acquisition, continuing trends from earlier quarters. The company is strengthening its advisory model governance, shifting towards fee-based options to better align advisor-client interests and protect its brand, a move consistent with its long-term pivot. However, this transition comes as the DeepValue report highlights ongoing retail take-rate compression, regulatory pressures from Brazil's CVM, and increased balance-sheet usage that could erode profitability. XP trades at an attractive 10.5x TTM P/E with 10% YoY earnings growth, reflecting market skepticism about its ability to sustain high returns amidst competitive and macro headwinds. Overall, while the strategic adjustment supports the investment thesis of a scaled wealth platform, execution risks and external pressures remain significant near-term challenges.

Implication

The shift towards fee-based advisory could enhance client trust and stabilize revenues, but it may accelerate retail take-rate compression, a key risk that could pressure margins if not offset by volume growth or cross-sell. XP's valuation at 10.5x P/E suggests the market is pricing in headwinds, providing a margin of safety if the company maintains high ROE and executes aggressive buybacks as outlined in the DeepValue report. However, the DeepValue bear scenario of $15 implied value looms if take-rate compression exceeds 10bps YoY or net inflows weaken further, emphasizing the need for vigilance. Near-term catalysts, such as regulatory adjustments to CVM rules and 1H26 flow data, will test management's ability to balance growth with profitability. Consequently, investors should maintain a cautious stance, aligning with the report's 'Potential Buy' rating but prioritizing monitoring of early warning indicators like advisor numbers and BIS ratios.

Thesis delta

The news reinforces XP's strategic focus on fee-based advisory, aligning with the DeepValue thesis that emphasizes managing take-rate compression through business model evolution. However, it doesn't shift the core investment premise; instead, it underscores the urgency of execution in a tightening regulatory environment. The thesis remains a 'Potential Buy' with moderate-high conviction, but success hinges on near-term flow recovery and capital discipline.