LPL Financial at Bernstein Conference: Strategic Growth and Resilience

On Wednesday, 28 May 2025, LPL Financial (NASDAQ:LPLA) presented at the Bernstein 41st Annual Strategic Decisions Conference. CEO Rich Steinmeyer highlighted the company’s strategic growth, focusing on M&A activity and technological investments. While acknowledging market volatility challenges, Steinmeyer expressed confidence in LPL’s resilient business model and future prospects.

Key Takeaways

• LPL Financial’s growth strategy is heavily focused on mergers and acquisitions, notably the acquisition of Commonwealth Financial Network.
• The company is investing in technology, including AI, to enhance operational efficiency and service capabilities.
• LPL aims to sustain high single-digit to low double-digit growth, despite market volatility.
• The business model includes natural hedges against market cycles, emphasizing flexibility and scale.
• CEO Rich Steinmeyer remains optimistic about LPL’s competitive position and future industry leadership.

Financial Results

• EPS has compounded at 20% since 2018 under Steinmeyer’s leadership.
• Organic growth has increased from 4% to 8%.
• LPL is focused on enhancing its operating margin and expects the Commonwealth acquisition to significantly boost EBITDA.
• The company is actively working to reduce advisor attrition rates.

Operational Updates

• LPL’s acquisition of Commonwealth is aimed at enhancing service experience and attracting top talent.
• The integration of Atria and other institutional clients is underway.
• Technology investments focus on AI and automation to improve efficiency.
• LPL has expanded its alternatives platform for broader access and custody options.
• A new brand launch aims to increase market awareness and consideration.

Future Outlook

• LPL targets sustained growth and improved market share in the advisor movement market.
• Continued investment in technology is planned to close capability gaps.
• The company aspires to lead and shape the wealth management industry.

Q&A Highlights

• Despite increased competition, LPL is confident in its advantages, including flexibility and scale.
• Advisor movement has slowed due to market conditions but is expected to recover.
• M&A remains a strategic focus with disciplined acquisitions to enhance synergies and margins.
• The business model’s natural hedges help mitigate market cycle impacts.

For a detailed exploration of LPL Financial’s strategic insights, refer to the full transcript below.

Full transcript - Bernstein 41st Annual Strategic Decisions Conference:

Christian, SEC: Alright. I think we can get started here. So good morning, everyone, and thanks for joining this early session with LPL Financial. I’m delighted to have, Rich Steinmeyer, CEO at LPL, for the first time at the SEC conference. As many of you know, LPL is one of the fastest growing players in The US wealth management space with almost 2,000,000,000,000 in, in client assets driven by a long track record of strong organic growth and strategic acquisitions.

Rich took over as CEO, late last year. Prior to that, he served as a chief growth officer. And before that, rich had senior leadership roles at UBS, Merrill Lynch, as well as working for McKinsey. So, Rich, thank you very much for joining the SEC.

Rich Steinmeyer, CEO, LPL Financial: Thanks, Christian. It’s great to be here.

Christian, SEC: Good. So just quick housekeeping. You can send questions to Pigeonhole via some QR code somewhere, so you can, find that and, I guess, send the questions, and I’ll try and try and get them to Rich. So let’s just start, Rich. It’s been a very busy start to your time as CEO, doing the largest deal in LPL’s history and dealing with significant policy and macro uncertainty.

So just reflect on your time as CEO so far. How have your views in the company evolved? Kinda what changes are you making relative to maybe the prior management team?

Rich Steinmeyer, CEO, LPL Financial: Yeah. So I was part of the prior management team, so I’ll say we haven’t made tremendous changes. Look. I I think it’s been, a busy seven months. I’m really proud about the progress that we’ve made.

So much of this is a continuation of the strategy of the firm. I think we are, very solidly participating in two market trends that are macro trends that continue to move. The first is the movement to independence. We hold ourselves out certainly as the strongest player in the independent channel. And in addition to that, you know, participating in this movement in the institutional market of outsourcing slash partnerships, banks, credit unions, now increasingly insurance firms as well.

A couple of things we’ve done over the last maybe seven months that are pivots, we have heightened our focus on operating margin. That’s one thing that is starting to pull through. Maybe some of you saw that in our q one earnings, but that is a culmination and of investments we’ve made over the last several years to drive greater efficiency in the operating experience. I think as we think about it, as you think about calls even into a call center, we view those as a flawed experience inside of the operating environment. And so taking a really keen eye into all of the things that drive, I wouldn’t even say dissatisfi I was gonna say dissatisfaction, but drive inefficiency in the operation of an adviser’s business, getting to the root cause of those, you know, leaning those out, applying lean principles, and then designing them out into the experience is beginning to take shape in how we think about the cost curve for servicing advisers, not just in service, but in operations.

So, you know, elevation of the operating, margin. I think one other thing which you’d see culminate a little bit in in the Commonwealth acquisition is this heightened orientation to driving an exceptional service experience. That’s not just getting the right answers to questions that come in. That is actually an orientation towards really being responsive to advisers, creating many more ways to ingest their feedback, to to disposition that feedback, to act on it, and to close the loop back with advisers. And so those are two areas that I would say, you know, we’ve changed.

We’ve elevated that import, that will continue to drive, I think, improvements not only into the client experience, but the overall operating performance of the firm.

Christian, SEC: Great. And I’d love to dig into the margin the margin debate at some point, but let’s stick to growth for now. You joined in 2018, and, maybe I’ll give you credit for this. But since then, EPS has compounded 20%. Organic growth has doubled from four to eight, which is best in class in industry.

Maybe just help us contextualize what’s driving the outsized growth, and how you think about maybe that sustainability of that growth going forward.

Rich Steinmeyer, CEO, LPL Financial: Yeah. When I joined the firm in 2018, I’d come from the wires, and I think there was this perception even inside the firm that, there was a less than element of how the independent broker dealers operated. And and I was struck by the capability set that we had at LPL that I thought was really competed with the wires in a very, very toe to toe fashion, but I don’t think that a lot of folks in the marketplace really experienced us that way or believe that to be the case. And so one of the first things that we pursued was expanding our affiliation models. And the reason we did that was we needed greater access points into independence because independence is not a is not a model.

It’s actually a belief that the adviser owns their own business. And so there’s a continuum of how you deliver an experience there. And so we introduced an independent employee channel, a supported independent channel. We enhanced our capabilities as as a custodian to be a counterparty to RIAs. And so the first step was really expanding the access point, and it didn’t just mean that new advisers went into those channels.

It meant that we were relevant, and so much of that strategy was around enhancing consideration. That was around having more advisers actually actively engage us. Because when they actively engage us, we found that disproportionately, we would actually win relative to competitive set. So step one, I think investors would have viewed that as a TAM strategy. I would’ve I I would view that more as a consideration strategy to be a relevant counterparty to as many advisers in the marketplace who are moving as possible.

And that doesn’t mean they move into those models. It just means that they consider us, and then they ultimately work through what is the appropriate model. And I I think that was step one. I think the second step was as we accelerated growth, and that was the beginning of the acceleration of growth, I think was more confidence in ourselves, knowledge about where we were competitively, and then expanding our addressable market. As we began to accelerate growth, we reinvested, and you see that over that course of those kind of four years where we built out capabilities where there were gaps.

We identified that there were material gaps, and and and that’s where we thought about how relevant are we, not just a TAM strategy, but how relevant are we to those advisers that are moving and what are the key inhibitors from where we get disqualified in the sales process. And we have a pretty rich and robust feedback loop inside of our sales process. So the identification and building out of new capabilities to make ourselves more relevant, and then you pair that with, I would say, a second to none value exchange in the marketplace, and all of a sudden, our win rates began to increase. And what you see that manifest in was our market share of advisers changing firms dramatically increased over that kind of five year arc, which culminates in, you know, us having industry leading growth. And and I don’t think we’re giving that up anytime soon because we continue to pursue that strategy, But now we’ve moved out of so many of those gaps have been closed.

You get into what I would say again is a second to none value exchange with capabilities that are no longer compromised. And in fact, we’re on the cusp of those capabilities being stronger than the players that I used to work at. And so you marry that with an unbelievable value proposition, and you get you know, you don’t have to have independence or capabilities. You kinda get the best value proposition and the best capabilities, and I think it’s really hard to stop. So that’s we’re on the cusp of that, and so I’m excited about that being the next leg in our journey.

Christian, SEC: Right. M and a has also been, just a key part of your growth strategy. I count close to six deals in the last couple of years, almost half a trillion of AUM. But it does feel like the Commonwealth deal that you recently announced, was a step function change in your ability to attract the best, talent, your ability to serve advisers. Maybe talk through what makes Commonwealth special, what exactly you want to preserve in the Commonwealth model, and transfer to LPL.

Rich Steinmeyer, CEO, LPL Financial: I would agree with you. I think that the Commonwealth transaction is a bit of a watershed deal for us. And and what I mean by that is that was a firm that could’ve could’ve ultimately paired with anybody in the marketplace. I think it was a very robust process that they went through. And I think the decision process that ultimately culminated in us winning that transaction was the the founder of the firm asking the leadership of the firm, and they’re in a partnership model, what firm do you think if we partnered with will be the most successful for our advisers over a five year arc?

That is a huge validation to LPL. They they had any other firm they could have chosen to go with, and they chose not based on a monetary consideration. Obviously, there are monetary considerations, and so you gotta be in the ballpark. But they chose it based on where they thought the advisers would have the best opportunities to succeed. And and and I think if you think about that, that is not where a lot of folks would have positioned this firm five years ago.

And and it goes into and I know you’d asked about the the, you know, growth. Maybe one of the things that I didn’t hit, not only do we take more advisers in the marketplace, but we have one of the lowest, if not the lowest attrition rate of our existing advisers. And so there’s a commonly held narrative in in the space that, you know, we’re too big, etcetera. And and I would tell you that the data doesn’t support that. And and so driving growth is not only satisfaction with advisers, but low attrition rates and then helping advisers be successful, which is I think ultimately how that decision got made.

But if you take that, Christian, and and put that together, Commonwealth has an exceptional service experience. As I mentioned a little bit earlier, the way that they receive feedback, the way they ask for feedback, the way it’s dispositioned, which means it’s distributed across the firm, the way that they then close the loop, they actually build towards the capability gaps that are identified by their existing clients or the flaws in their system. So they have a really rich and robust feedback system. In addition to that, they empower the servicing associates not just to get answers to the questions that advisers are asking when they call in, but to actually solve their problems. And I think that empowerment is one other thing that we wanna really emulate.

In addition to that, they have a fully aligned incentive system across their associates for the client satisfaction. And so there’s so much of this in their responsiveness. They are really an ultra responsive firm to advisers’ needs. We wanna ingest that in. We wanna make sure we’re taking that on and and then serving that up to the broader population.

And so you asked, what do we want to keep in place for Commonwealth? Well, number one is the brand. The brand is fantastic. Advisors are really proud of being affiliated with Commonwealth. The second is they have a common set of experiences.

It starts with you know, you could think of things as, you know, easy and tangible as conferences, but they have a they have an adviser development program called power and practice, and that is fantastic as well. The IP in that, program is really well regarded. And so this this consistency and commonality of experiences that they live inside of this community plus the service experience and then us emulating that feedback system. I think that that is the body of those things that we wanna keep common. And then so much of that we wanna bring over into our broader experience.

And and as you then evaluate, maybe as we get out of looking at this transaction, on the backside of this, you will see that we will have elevated our service experience. We will have elevated our ability to ingest and disposition and act on feedback. We will also open up our conversations with more wirehouse advisers Because I think that is where, as wirehouse advisers look to independents, there are two names that they look to. It’s LPL and Commonwealth. And I think Commonwealth had a higher tier experience, and and so I think that is a pretty validating event for us to have the firm that is the premium 10 90 nine model have chosen to partner with us go forward.

Christian, SEC: Awesome. So so, Richard, we’re sitting here in two years’ time. How do we judge the success of the deal Commonwealth deal? I know you have a couple of targets around, growing EBITDA by company from $1.01 20 to not the 400,000,000. You have some retention targets.

Yeah. But but talk about financially and strategically or service wise, how will we judge the deal success in a couple years?

Rich Steinmeyer, CEO, LPL Financial: Yeah. Given that we’re at the SDC Right. Well, I’ll start with strategy. I also have an affinity for strategy. I think I do think that, you know, there’s there’s so many questions in the marketplace about are we going to, you know, sustain what makes Commonwealth great?

And the answer is we’re going to. This is a strategic deal as much as it is a transaction about coming together of two different firms. This is actually about taking what is best with each of the firms individually, and and elevating them. Because I didn’t mention, while there are things we’re keeping common, or keeping consistent at Commonwealth, they are going to gain access to our capability set, our robust, rich business solution support, etcetera. And so I think what how would you measure the success of this transaction?

I think, one, obviously, the short term evaluation will be the retention of the advisers. We continue to track and feel good about our engagement, and we’re pretty robust in the way that we model these and the way that we track the duration of how those, recruiting re recruiting conversations go, and we feel pretty comfortable about where we stand relative to targets there. But I think the judgment will not just be on EBITDA because that’s relatively straightforward. We retain the advisers. We move to self clearing.

We actually put them onto our ClientWorks platform, and I think you’re gonna see that pull through. It’s not that complex to figure out. There’s a lot to to make it happen, but it’s not that complex to figure out that we would actually hit those, financial targets. I think I think the success of this will be, are we able to attract more advisers in the marketplace to this premium offering that is Commonwealth, which we will sustain? Are we ingesting those capabilities into our service experience?

Do they have a 92? They have consistently sit around 92 in their J. D. Power NPS score. Are we able to lift the overall NPS score at LPL?

Because I we think that we can drive attrition even lower than it is today, and I think that would be principle for us driving attrition in that, you know I gotta be careful not to create guidance. These guys will these guys will wreck me. But something lower than we’re at today. I think we feel confident that as we build our capabilities, get this service model, get this responsive culture, there’s a chance for us to suppress attrition even further while we elevate, adviser satisfaction. And I think if you do that, that’ll that’ll really solidify us and continue to excel our ability to maybe even move growth, certainly to sustain it in that high single digits, low double digits, but maybe even, you know, begin to move up a little bit.

Christian, SEC: Okay. You you alluded to this, the competitive landscape and, folks targeting the Commonwealth advisers. But, generally, I think you’ve noted, there’s been enhanced competition, but you’re very confident in LPL’s competitive advantage. Just elaborate on that. What what exactly, from an economic perspective Yeah.

Is more attractive at LPL versus peers? Yeah. Yeah.

Rich Steinmeyer, CEO, LPL Financial: Yeah. So I think, you know, this is, I think, something I noted in q one earnings. And we saw we’ve heard it from other firms in the marketplace saying they they view it as a more competitive, movement environment. And so I think they they said they’re gonna reflect properly into TA to be more competitive. I think it’s quite late in the cycle to be making that call, but, okay, that have the privilege of being in a firm that doesn’t have to make that call.

I think what what you would see is advisers don’t choose to join firms exclusively because of TA. In fact, I don’t think it’s the number one choice. Ultimately, advisers will choose the firm that they think they can be successful at, and most advisers, not all, but 90 probably five to 98% of advisers are looking for the last firm they can work at. Nobody really wants to go through transition. There are flippers who will go every seven years and change firms, and that’s that other, you know, set of advisers, but they’re looking for a firm that can grow with them and evolve with them.

So if you think about all of the affiliation models that we’ve put in place, that allows an adviser. It allows her to start in a ten ninety nine model, move to a w two model if it makes sense, in time if it means set up your own RIA. They can do all of that without having to change firms. So many firms, as you change and evolve your business, you actually have to change firms, which is disruptive. And so I think they look for a firm that has incredible flexibility.

I think they look for a firm that is an at scale firm that has the capabilities to serve them and drive their growth. I think they look for a firm that is efficient in the way that you do business. Our NIGAR rates are about 2% pushing underneath that. Some other firms’ NIGAR rates that’s not in good order. Sorry.

Sit in the mid teens, you know, fifteen, sixteen, 17. I’ve heard of firms up to 50% NIGAR rates, which means you it’s really hard to do business. So an efficient operating environment, a firm that has permanent capital so you don’t have to think about, oh my goodness. I’m gonna go through a trade here. I didn’t want to, but I’m going to because of my partner has traded away.

And then, ultimately, you know, I think that you take that together, and then we obviously have economics that are really rich and robust. We acknowledge that advisers generate the lion’s share of of the value that is created between them and a client. And so reflecting that back in a differentiated fashion, that’s actually the attraction to the October model. So the at scale player in the October space who believes in independence and has flexibility with the ability to be a sustaining partner over a long arc, it is like, put those and stack those together. There are not any there really isn’t another firm that can say what I just said.

And I think that’s what drives so much of the movement to our firm and the attractiveness of this firm.

Christian, SEC: Okay. But are you seeing in real time incremental competition on the TA side as you go out and recruit advisers?

Rich Steinmeyer, CEO, LPL Financial: I we haven’t seen more competitive a more competitive environment. What we have seen is, the last several months, you’ve seen a further dampening of adviser movement overall. And so I would tell you that we are feeling that more acutely over the last three months. We see you know, in the last couple of years, we’ve sat around a five to five and a half percent movement. I think if you just take the beginning of this year, I think you’re seeing that move into the fours.

And so you see a truncation of movement, which I think is a deferral of movement. But I don’t see and and by the way, again, for us, even as you’ve seen that come down from six and a half to five and a half to five, we’ve grown share capture of movement in the marketplace. And so I would expect us to continue to drive share capture improvement so that we will be somewhat insulated from the macro. Not not entirely insulated because you’d much prefer the macro to be better. But in terms of direct competition, listen.

It’s acutely there at Commonwealth. Right? I mean, there’s every single firm in the marketplace is coming out with their best offer and, reflecting themselves as positively as they can. I would tell you, Christian, the thing that’s surprising to me in that is that I think so many firms in the marketplace don’t know who they are. They’re defining themselves by being the opposite of LPL, which is like, you know, darkness is the opposite of light, but it doesn’t really explain what it is.

And so I think it’s quite odd to see the firms show up defining themselves through a counter to our firm versus actually articulating to advisers why they’re the right firm to position with and to partner with. And so, yes, I’ve seen intense competition at Commonwealth more broadly. I haven’t seen the TA effect more broadly in the marketplace, though I have seen it. You see the the offers out there in the marketplace for the Commonwealth advisers.

Christian, SEC: Okay. So, are we going on Commonwealth but you also have Atria, a bunch of large institutional

Rich Steinmeyer, CEO, LPL Financial: Yeah.

Christian, SEC: Clients you’re integrating. I mean, how’s the management team holding up here, in terms of just the ability to prioritize and, allocate resources to different initiatives? I mean, is there any sort of worry here that, just management capacity could be stretched given just the amount of stuff going on?

Rich Steinmeyer, CEO, LPL Financial: I think if you’d asked me that question in 2021, I would have said yes. So in 2021, we actually onboarded what Ellen Reed, BMO, and M and T Bank. And that for us was a watershed year because that was three major onboardings that occurred over the course of a six month period, and we weren’t ready to I don’t think we’re we’re not anywhere near as ready as we are now today to understand the organizational impact of having to hire up service associates at that clip, having to make sure we have all of these transitions occur. And so we began building the discipline to onboard large transitions And and onboard them, you know, with regularity. We used to think about one a quarter, then we thought about one a month.

Now we think about multiples that we can do over the course of a month. Think couple of weeks ago, we did an Atria. We we converted over two different broker dealers over the same weekend from two different custodians. Like, four years ago, that was unheard of for us. That would have been ridiculous.

And so I think as you look at our institutional capability to actually onboard material large events in short periods of time and do them really well. That’s one of the other things. We’ve invested significant resources in automating so much of that. We have a discipline in place now, and it feels like more like regular course of business than an anomalous event. Yeah.

I’m really look. I don’t wanna minimize bringing on, you know, $400,000,000,000 in assets over the course of this year will be momentous, maybe the course of this year plus next year. It’s it’s a significant event. We’re taking it very seriously, but we’re not intimidated by it nor is it really that far off the path that we’ve been on. We’ve this drumbeat of large deals has really I would I would mark that 2021 as a year where we probably got in the deep end of the pool needed to do some work.

And I would tell you that BMO and M and T would have said, man, these weren’t the best transitions we’ve ever had. By the way, subsequent to that, we transitioned Bank of the West and People’s United Bank for each of them individual deals they’ve done. Those were exceptional transactions. And and I think transitions, I should say. And I think that is where we realized we need to make sure we are very serious and very good at transitions because this can augment how we drive growth.

And I think we feel good about our institution capabilities. Management team may be tired, but that’s kind of what you’re in the game for.

Christian, SEC: Alright. So, I mean, clearly, the top line growth for you guys is pretty, pretty, pretty robust here. I think what’s particularly exciting is adding that to operating leverage or productivity efficiency as you mentioned earlier on. And it feels like, to your point, we’re beginning to see it already. Maybe just talk to some specifics as to what you’re seeing, and then what’s the potential over the next couple years in terms of driving incremental efficiency?

Rich Steinmeyer, CEO, LPL Financial: Yeah. So maybe I’ll start with organizational design, which is not where you would necessarily think you’d start with an operating margin question. But I think if you look at one of the bigger decisions that I made in conjunction with the board, when I was named into the CEO role, I actually named our CFO, Matt Audette, who you know very well. And I think everybody in this room probably knows him better than you know me. Named him the president as well.

And we actually consolidated, service, operations, supervision, risk, and compliance in with him. And so you actually and and and I know a lot of folks know Matt as a really disciplined CFO, but he also shows up as a very disciplined operator as well. And and putting those organizations together with financial targets, but also in an uncompromising you can no longer well, you know, you can’t set targets and just say, come hell or high water. We’re gonna sit the hit hit these targets. We’re going to create an operating environment that does not, does not deteriorate the client experience, in fact, enhances the client experience because it’s more efficient.

And so Matt had had some of those functions. He didn’t have all of those functions. And I can tell you, it’s one of those things where when you get an exceptional talent and create the right conditions for their success. And I would say that is the story here. There is a story of a leader who is a fantastic leader who had been inside of one definition and a broadened expansive, you know, mandate.

He’s really shown up in a way that is transformational to the firm, demonstrating leadership. And so what you see for us is a beginning of understanding how we can bend the cost curve in that variable cost to serve per adviser. You see emerging technologies. So there’s a partnership between not just those organizations that Matt owns, but our technology organization for the application of AI and the drive to more efficient operating environment as well, as we ingest more of those, you know, emerging technologies. And, again, I would go back, Christian, you have to have the capacity to invest to be able to actually so the investments that went in in advance and the continued capacity to invest that allows us to ingest AI, to drive operating efficiency, I think these things come together, and they are they will culminate us in a continued march, not just as you mentioned around growth and sustaining growth, but sustaining growth at a higher margin.

And we’re very convicted. We’re very convicted in that journey, and we can see a pathway for that journey’s continued success. And this isn’t kind of a hope and a prayer. This is in the same way you organize, you you build a plan, and we have a multiyear plan for the continuous improvement of operating margin.

Christian, SEC: That’s a good segue to maybe talk about your investment and technology priorities going going forward. How do you think about what you need to be invested in from a tech perspective? I think you mentioned AI automation, but we’ll have a broader conversation on that.

Rich Steinmeyer, CEO, LPL Financial: Yeah. I I mean, so much of our investment over the last couple of years has been in building capabilities to close gaps relative to wirehouses, and that’s where I’m feeling a lot better about those no longer being gapped and and more about us actually beginning to demonstrate some gapping of ourselves relative to even what I used to call aspirational competitors. I don’t anymore. They’re just competitors. So so there’s an orientation toward continued capability investment.

I think you see performance reporting, CRM enhancement. With Commonwealth, we’re gonna drive towards a single account construct, which doesn’t mean a lot to folks in this room, but it means a lot to advisers. So keeping your finger on the pulse of what the needs are of advisers to make sure that they’re getting every bit of capability they would get at the best firm in wealth management, which is what our aspiration is to become. Second is obviously that orientation we were just discussing towards investments in building a more efficient operating environment. And and so much of that actually pays off with advisers in having a frictionless ecosystem that they operate in.

It it it it wins on both sides. It is less interactions on our side because there’s a more logical and fluid workflow environment and and a lower cost to serve because you’re measuring straight through processing as a percentage of total transactions. And that’s a measure we look at, which is what where are we at on percentage of interactions that are straight through process versus having to have a human on them and designing out those that have to have human touch. So, one would be capability enhancements. Two would be operational efficiency enhancements.

And then three is making sure that we have a modern architecture. That is there are increasing cyber threats. As we get larger, we are more subject to those increasing cyber threats. And so making sure we have an incredibly robust operating environment with, you know, redundancy, load balance systems as well, that’s those are probably the three areas I would think about that that are principle for investing.

Christian, SEC: Another place you’ve been investing is is is in the alternatives, platform, done some work around enhance enhancing the access. Maybe talk through, what you’ve done so far, but more importantly, adviser take up Yeah. When you think you’ll be a meaningful contributor to the business.

Rich Steinmeyer, CEO, LPL Financial: Yeah. Yeah.

Christian, SEC: So so for us,

Rich Steinmeyer, CEO, LPL Financial: alts is an area where I would tell you, as we look at where will we get disqualified from more complex advisers from choosing to join this firm, banking and alts would have been the two big areas that you would look at, and I think we’ve put a pretty sizable check mark into that alts business. So what we’ve done is there’s kind of three legs on the stool of what we had to build. The first is we actually needed to be able to custody alts directly with us, and so we partnered with SS and C. We built a robust custody platform to be able to ingest up to 1,500 different alts. So as you move from to our firm, we can actually service and custody those alts.

The second then is building a more robust selling agreement, set of, alts with with for which we have go forward selling agreements. And so we’re up to 90 different alts, and and we think about the the top players being the wires. They sit at about a 30 different selling agreements. And so we’ve got a gap that we should close by the end of this year in terms of selling agreements for advisers basically having access to inventory that they can purchase. And then the third was our sales process.

And so can you do that all online? Is there esig? And our old process used to be a bit more of an offline process, wet signature. And so we’ve just deployed that over the course of the first quarter, a significantly enhanced selling experience or buying experience, if you will. And so now in terms of the capabilities, we feel very good.

And like I said, by the end of the year, we’ll have closed the gap to wirehouses in terms of the inventory available for sale. You asked, though, the second part of that question is, when will it become a more material component of you know, make a material contribution? And I think, you know, that one probably looks a little bit different than other firms. That for us is so much about opening access to a broader set of advisers. Again, probably the number one reason why our house advisers would have disqualified us was our banking capabilities and and and how narrow they were.

So we’re building that out, and that will take that off the table by mid next year. But alts was the second. And so now we’ve taken that off the table. And so if you go back to that consideration set, again, there’s one thing to get a total addressable market that has opened up. But inside of that TAM, you actually have to have what can you serve with distinction.

And I think that’s where you’ll see this open up for us more is opening up a continued widening of the aperture to more complex advisers who are using alts as a as a material component of their business. So that’s the primary orientation. Secondary orientation is that we’ve had a number of advisers who probably weren’t ingesting and using alts in their portfolios as broadly as you might have seen at other firms, and that will probably take a little bit longer to bake in. We’ve got a 22 person sales team that works out there directly with advisers inside of our ecosystem to help them, you know, utilize alts inside of a portfolio as they construct them.

Christian, SEC: Okay. Good stuff. Maybe let’s just step back a little bit and just think more broadly about wealth management. As you look over the next, I don’t know, call it five years, are they only I don’t know if it’s emerging technologies, regular changes, you know, just the way or client expectations Yeah. That you think will significantly change wealth management, and, how’s LPL positioned for those?

Rich Steinmeyer, CEO, LPL Financial: Yeah. So maybe I’ll start, less so with technology. I’m I’m happy to go to technology. Maybe I’ll hit that second. But I think the first thing is, you know, I think you’re gonna see an acceleration of the move to independence.

I I just think that there used to be this perception in the marketplace that there were haves that were the wires as well as some of the regionals, and there were have nots, which was this trade of, okay. If I move to independence, I’m gonna be compromising the capabilities. And I think you see us as an at scale player that can go toe to toe with any other firm in wealth management. All of a sudden, there is a question which is, why are you gonna sit at a 40% payout? Why are you gonna sit where the firm that you sit with, as you choose to leave them, they’re gonna make it they’re gonna try to destroy your life’s work?

As you sit with for most advisers, that’s their single largest asset is their business. Why would you sit with a firm that chooses to make you a competitor of theirs that comes to market with silly ads that talk about how advisers or brokers and all this nonsense? Why would you not wanna be with a firm who acknowledges that we serve you, who acknowledges that it is your business, who has every bit of capability that all of those other firms have that actually is going to outinvest? Today, we outinvest any other firm in wealth management discreetly for wealth management. Why would you not wanna be with a firm that only does wealth management instead of propping up an investment bank, an asset manager, a retail bank, or a commercial bank?

As we talk about investments, they go directly to supporting advisers business. And so I know I’m talking about LPL, but I think LPL is starting to shape the movement in the industry. So if you deconstruct the movement to the independent model, what you’ll see in that is that’s a lot of the movement to LPL. And I think that should accelerate because I think the perceptions and and don’t I often say these things like, don’t miss this. Well, you should do what you should miss whatever you wanna miss.

But us launching our brand in the marketplace is a watershed event. Commonwealth was a watershed event because it is a validating event to acknowledging that this firm is exceptional. And launching our brand in the marketplace, we would have never done five years ago because advisers wouldn’t have wanted us to. They want us to. They’re they were calling for us to be more relevant in the marketplace.

And so we’re able to do that over the last couple of weeks. We will sustain that investment in the brand. It is a validating event to get us into greater consideration. And so I think what you’re going to see is the movement to independence is going to accelerate because the barriers to movement are going to drop, and those value propositions are not keeping pace. This is the traditional competitors in the marketplace are not really changing how they compete, and we’re changing the face of competition.

And so I would expect that to accelerate. The other thing maybe you’re the caveat that maybe everybody wants to talk to is the application of AI, advanced capabilities, I think, at first to drive efficiency and ultimately to drive productivity of advisers. But I would I would kinda put this in a ball that says, does your firm have the capacity to invest in those capabilities? Because if they don’t, I don’t think you’re gonna see that pull through, and we do have the capacity to do that level of investment.

Christian, SEC: May maybe just on your competition point, what is there a when you look at advisers that choose not to come to LPL, is there a particular theme that they that they that they call out?

Rich Steinmeyer, CEO, LPL Financial: Well, I think perceptions have a long time to change. You know, McDonald’s can go make themselves real like, have the freshest menu and, you know, you know, never frozen patties and all this other stuff and, you know, have juice bars if they wanted to, and there still will be perceptions of McDonald’s as how people grew up with McDonald’s. And so and then not dissimilar fashion, I think there are any number of advisers who have a perception of what LPL is. They view it as a firm that served, you know, smaller advisers. By the way, we serve small advisers with pride.

I would tell you, I am really proud that we serve smaller advisers because it gains greater access to American families to advice through a financial adviser. And so we don’t run away from that. But I will tell you there are perceptions that says, okay. That firm is large. It serves, on balance, smaller advisers, and those perceptions are are dated.

And I think that’s what you that’s what you run into is that’s why I talk about consideration maybe more so than I talk about TAM because consideration is the active evaluation of our firm. And as we get into active evaluation with advisers, like I said earlier, we do really well. But there is you you’ve got to change perceptions of the firm. That’s why the brand campaign is important. It’s important for our advisers because it’s validating.

It’s also important for other advisers to wake up and take a relook at this firm. I think it has a lot more to do with a legacy over thirty six years that we’re really proud of, but folks view us in a light that might be a little bit dated from where the firm is today.

Christian, SEC: Alright. So wait for that Super Bowl ad next year. Oh, yeah. Definitely. You you I mean, you you talk a you talk a lot about consideration, and you talked about trying to be the best firm in wealth management and Commonwealth being a a big driver or at least enabler enabler of that.

What what does that mean exactly if if we look look out five, ten years? How can you be the best best firm? How will we measure that?

Rich Steinmeyer, CEO, LPL Financial: Yeah. So I view the best firm as the greatest value exchange to your client. And, again, please note that I’m calling our advisers our clients because it’s our job to serve them, which in and of itself is slightly different actually, materially different than most firms that compete in the marketplace. But how you become the best firm in wealth management is that and this is little bit of some of the things I said before. You have the easiest operating environment in which the advisers can thrive.

You have the greatest flexibility to allow them as their business evolves to be a counterparty to them instead of binding in the way that they operate their business to be constrained to the way that you choose to allow them to operate their business. You have economics that reflect the value creation that they generate with their clients. You have capabilities that are uncompromised and and in many cases, the leading capabilities in the marketplace. And you have a service experience that serves them incredibly well. And and there’s probably a little bit of room to go for us on that service experience, which is we’ve got to figure out how we solve problems for advisers, not just answer their questions.

That’s part of why Commonwealth is so important to us because they do that in spades, and so we have to ingest that. But, ultimately, in the end, you know, there’s an element here. Being the best firm in wealth management means that you’re willing to take yourself out and make that as the standard. You meaning you’re willing to call it. That that is a you you asked about the the management team.

We feel very convicted about being the uncompromised best firm in wealth management. And we’ve got to cascade that into all of our employees because that sets a standard of care that that is uncompromised. And I think that’s the next leg on our journey is enhancing the experiences delivered to advisers to an uncompromised level. And and there’s still more work to do there, but it used to be about that we were gapped in capabilities, and we still have some gaps. But it is much more now about a mindset for us being exceptional.

And I think recognizing that, you know, I say this to the folks at our firm, you know, pretty often, we should feel really good about how we compete in the marketplace. We should have our chins up and our chest out because we’re a really, really great firm, and we serve advisers with distinction. And I think if you keep that going and you stay humble and you listen and you build capabilities with an unmatched value exchange, I think you can do great things. And and for us in the end, Christian, it’s about shaping the industry. You wanna be with the firm who’s actually in the front, in the lead, changing the industry.

Liquidity and succession changes how we think about firms moving across multigenerations versus being with a firm that’s in the wake of that that’s having to deal with the chop. I think it is much more interesting and much more galvanizing to be the firm at the front. It means you take risks. It means you go out with Commonwealth and you set a 90% retention target, and you go figure out how to get it done. But you take that risk, and it is a managed risk because the expectation is you lead, not follow.

And that’s the expectation with this firm. We expect to lead wealth management, not follow other firms.

Christian, SEC: Okay. You know, back to strategy and and m and a acquisitions have been a big part of your strategy. May maybe just help us understand why it’s a it’s a core part of the LPL strategy. And then on the financial front, how are you able to continuously find accretive deals? Yeah.

And what is a very competitive market for adviser acquisition?

Rich Steinmeyer, CEO, LPL Financial: Well so let me I’ll take those in turn. Why is it important? Well, one, we’re in a consolidating industry. And so you have to make a choice as to whether you wanna be a consolidator or you wanna be consolidated. We’ve chosen to be a consolidator.

We’ve also found that, as I mentioned, we’ve built a capability to onboard advisers from those firms to where we can actually retain more because of our experience. So because we’re so well organized, that we actually give them a really it’s not completely frictionless, but it’s certainly much less friction than than transitioning to other firms. And and as well, I think, you know, so many of our acquisitions, when the advisers find out that it’s LPL that’s doing the acquisition, there’s a there’s a sense there’s a tangible sense of relief that it is like, oh, thank goodness, because it could have been another firm. It could have been another firm that’s gonna trade again in another six years. And and so I think there’s an element there where the conditions for our success are set up, and we’ve invested in the capabilities to be successful.

But maybe I’ll get to that second part you asked about. How are we able to be to to have designed our financials so that we can do it in a disciplined fashion? The truth is that’s why operating margin is so important. Because, ultimately, what we care about is the buyer’s multiple, and the seller cares about the seller’s multiple. And if we can build where synergies are driven dramatic difference in the operating environment and the cost structure to operate from the sellers versus ourselves, we’re able to build a greater spread in buyer to seller multiple, which allows us to be more competitive in deals than other firms might be able to.

And so right now, we feel quite good about our ability to be competitive. But as we continue to drive op margin, I think you get a chance for us to be more competitive with other deals as as prices I I think prices are rational right now, but in different environments, I think. So that’s why that’s one other ancillary reason why op margin is so important to us.

Christian, SEC: How do you think about risks from m m and a? Whether it’s attrition, financial risk, what is the risk of continuous continuous m and a?

Rich Steinmeyer, CEO, LPL Financial: I I I think the primary risk is that you set a model that says there’s a retention percentage, and it’s based on the retention percentage, and you get challenged to get into that percentage. It’s why it’s important that as we go through diligence, our corp dev team is deeply embedded in that diligence process, and and and we know what we need to look for to identify the types of advisers that are likely to join our firm. And, again, some of that is you’ve gotta take a leap of faith. But if you’ve seen, we’ve demonstrated continually that we’ve performed at our expectations, if not outperformed our expectations. But that’s the risk, I think, primarily because so much of the you know, you you ask about

We have a pretty good sense of how we’re going to deliver those synergies. So much of that’s gonna be moving to self clearing, our technology platform, you know, not having to have dupes of things. We look at those corporate functions that are gonna be duped. And so you can you can pencil out a lot of that in the spreadsheet before you go through with the transaction itself. And then you gotta get into you basically get into a right to recruit event, which is privileged, and you have greater access.

You have the ability to tell your story. You have the ability to ingest the data, to build a seamless transition because you’re largely gonna go through a tape to tape. And so, you know, for us, that usually means around 95% plus in not having to repaper, which is a huge advantage. But you’ve gotta go out there. And and maybe one of the things I wouldn’t lose sight to is we have the single largest recruiting team in the marketplace by far, by the way.

And so we’re able to swing capacity at these large events. There’s not a lot of other firms that can go after 2,900 advisers and still keep regular way recruiting moving. And so our ability and capacity not only to ingest a large transaction, but also stay in the marketplace versus fully pulling our recruiters out of the marketplace, I think is I think is differentiating relative to other firms. And so I think there’s a lot of other firms. I don’t know.

I don’t how many firms could do a transaction with 3,000 advisers to be recruited? I I don’t think there’s a lot that can do that transaction. Not

Christian, SEC: well. Okay. As a reminder, you can still ask a question if you want by a pigeonhole. Maybe just a couple more here, Rich. More on the macro.

Yeah. Obviously, it’s been a very volatile environment, just just broadly speaking, in equity markets. How are you how are advisers adjusting to that volatility? Any impact you’re seeing in terms of, recruiting or retention?

Rich Steinmeyer, CEO, LPL Financial: I I mentioned it. I I we have now seen in the data a bit of a staunching of the movement of advisers. And and I and I mentioned this on our earnings call. Usually, for us, what we see in that is it is not a that folks are choosing not to move altogether. They’re deferring the movement.

And it it it makes logical sense because there’s an element when you think about a singular move, not a tape to tape conversion, where advisers don’t wanna be out of the marketplace for their clients. And and and while you can make it as seamless as possible, you’re usually talking about thirty to ninety days where advisers have some degree of actions that they’ve gotta take, And maybe an adviser’s left back at the previous firm and and, you know, liberation day happens, they feel like they’re not there for their clients. And so you can see when you see heightened volatility, I think you often see that for a short term duration, and I’m hopeful that we’re beginning to move out of that volatility. But you’ll see a short duration of staunching of movement of advisers, and we’re seeing that in the data now. I we got that data last week.

And and so I think that’s the primary thing. In terms of advisers, look. Ultimately, in the end, sustained volatility is really good for advisers because self directed clients realize they need professional advice. And so we saw that during the pandemic. I would imagine we’re starting to see that with our same store sales in the in the beginning of this year.

You see a movement up in same store sales because you see new clients coming into advisers in larger numbers, and you see less attrition of the clients of the advisers leaving. And so that’s usually the ancillary benefit you’re going to get is that advisers that is a really rich and robust time for advisers to show up for their clients, and also to show up for folks who are in an environment that probably doesn’t have a rich, you know, advice culture.

Christian, SEC: Okay. And lastly, just on the business model, you know, nice top line, you know, margins are becoming a part of the story. The model, though, is inherently, prone to equity market and interest rate cycles. How should we think about the business model resiliency to those cycles? And more importantly, are there changes, you envision for the business model over the next sort of three to five years that can help dampen some of that volatility?

Rich Steinmeyer, CEO, LPL Financial: Well, I mean, you’ve got some natural hedges in there. Right? So when when you see, equity markets, you may see, as you see rich and running equity markets, you may see a pullback in cash levels. Now, again, we’ve been in an anomalous event because we’ve had heightened rates for sustained period of time. And so it’s amazing.

We we didn’t talk about cash at all, and I appreciate that. But I I do think you have some natural hedges as you see some pullback in equity markets. Oftentimes, that’s offset with a flow into cash balances and then heightened percentage in cash balances. And so the business model itself has natural hedges. As you think about the evolution of the model itself, it’s a pretty resilient model.

I mean, it’s been pretty resilient. And I think the big delta was if I wasn’t at an independent player and you’re asking that question, I would say the big thing that challenges the model broadly is actually the the value proposition of independence relative to that legacy w two construct that has lower payouts and doesn’t have ownership book ownership. And but but we happen to sit on the side or my firm happens to sit on the side that is, you know, probably the benefited and privileged side of that delta and change in in the market.

Christian, SEC: Fantastic. With that, I think we’ll end it. Thank you very much, Uresh.

Rich Steinmeyer, CEO, LPL Financial: Yeah. Thank you, Christian. It was great to be here. Thank you so much.

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