LPL Financial at William Blair Conference: Strategic Growth Insights

On Wednesday, 04 June 2025, LPL Financial (NASDAQ:LPLA) participated in the 45th Annual William Blair Growth Stock Conference, offering a strategic overview that highlighted its robust growth drivers and financial resilience. While showcasing significant asset growth and strategic acquisitions, the company also addressed market volatility and succession planning challenges.

Key Takeaways

• LPL Financial has doubled its assets under management (AUM) over the past five years, driven by high single-digit organic growth.
• Recent acquisitions, including Atria and Commonwealth, are expected to significantly boost earnings.
• The company maintains a disciplined approach to expense management and capital allocation.
• LPL’s business model includes natural hedges against market volatility, such as increased cash balances during downturns.
• A strong focus on liquidity and succession planning aims to address the anticipated advisor retirements in the coming decade.

Financial Results

• AUM Growth: LPL’s AUM has doubled in five years, with organic growth consistently in the high single-digit range and occasionally reaching low double digits.
• Acquisitions: Commonwealth is expected to add $415 million in run-rate EBITDA, while Atria contributes $150 million.
• Revenue and Earnings: Since 2020, assets have grown at 18% annually, with gross profit exceeding 20% growth. Adjusted EPS has outpaced gross profit growth.
• Cash Management: Cash balances rise during market pullbacks, serving as a hedge. These balances are strategically deployed into fixed-rate contracts to mitigate interest rate volatility.
• Balance Sheet: The company’s target debt to EBITDA multiple is 1.5x to 2.5x, maintaining an investment-grade credit rating.

Operational Updates

• Horizontal Expansion: LPL has broadened its affiliation models to attract a wider range of advisors, including strategic wealth for breakaway advisors and Linsco for independent employees.
• Vertical Integration: Tools and capabilities have been developed to support advisors throughout their lifecycle, enhancing monetization as services are utilized.
• Channel Growth: The independent advisor channel accounts for $1.3 trillion of the current $1.8 trillion AUM. The institutional channel has grown to nearly half a trillion from $200 billion in 2020.
• Integration Progress: The integration of Atria is underway, with four of seven broker-dealers converted. The Commonwealth acquisition is pivotal for its advisor-centric approach.
• Succession Planning: LPL’s liquidity and succession capability is designed to manage the expected wave of advisor retirements, which could involve nearly $10 trillion of AUM.

Future Outlook

• Growth Strategy: The focus remains on organic growth, mergers and acquisitions, and strategic capital allocation, targeting high single-digit organic growth rates.
• Market Opportunity: Significant growth potential exists in the independent and institutional channels, with the employee channel being the largest untapped market.
• Investment Priorities: Investments are prioritized to enhance growth and productivity, with a focus on expanding operating margins.
• Strategic Goals: LPL aims to be the premier firm in wealth management, providing a platform of choice for advisors seeking independence and comprehensive support.

Readers are encouraged to refer to the full transcript for a detailed understanding of LPL Financial’s strategic plans and financial performance.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Jeff Schmidt, Wealth Management Analyst, William Blair: Good morning, everyone. So why don’t we go ahead and get started? My name is Jeff Schmidt. I cover wealth management stocks here at William Blair, and I’d like to introduce LPL Financial. They’re the leading aggregator in the wealth management sector.

They have over 2,000,000,000,000 of client assets, and they’ve been one of our top picks for about two years now. I think the stock’s doubled over that time, so it’s it’s done done very well. We’re pleased to have Matt Audette with us. He’s the CFO to discuss the business. But before we begin, I just want

Matt Audette, President and CFO, LPL Financial: President too.

Jeff Schmidt, Wealth Management Analyst, William Blair: What’s president and CFO. My apologies. Forgot that one. But I do wanna, also point people to our website, WilliamBlair.com, for any research disclosures or any potential conflicts So with that, I will turn it over to Matt.

Matt Audette, President and CFO, LPL Financial: Alright. Thanks, Jeff. Morning, everybody. So I’ll just I’ll just start off with a couple of housekeeping items I think everybody is familiar with. I’m gonna spend about thirty minutes talking about LPL.

I will talk about some forward looking statements and estimates where actual results could vary materially. So please keep that in mind. And then we also have a fair bit of non GAAP disclosures we use to talk about our business. So you can see up on the screen and and can look those up to to give you the reconciliation to the relevant relevant GAAP measures. So, so with that, and as as Jeff highlighted, I think we’re we’ve got a a company and a business model and a, I think, a history of success, that we are quite proud of.

I’m coming up on, almost ten years with the firm, where the stock had kinda settled into the low twenties, at that time. And and I think we’re trading in the near, you know, you know, 3 eighties at this time, largely driven by a strategy, that I will talk through today that we, we we feel, quite confident that we continue to execute, and and focus, that the opportunity to continue to drive results, really is there. Now, what I will walk through, is really six key drivers of that that you see up on the screen. I will double click on each and every one of these. But just to kinda orient to the the overall highest level, I think, thesis on LPL and our strategy is relatively simple.

You know, first and foremost, we are an industry leader at scale, and we operate in a part of the business or part of the industry, that by its nature just has, structural tailwinds that are that are helping grow. You then add to that, really, our strategy, which is the next two items. Horizontal expansion strategy, which is really about us just broadening the number and types of advisers that we can serve, to pretty much be able to compete for any adviser operating in The United States, which call that around 300,000 advisers. In addition, our vertical integration strategy, which is really about integrating the tools and capabilities all within one firm as opposed to having to you know, someone that goes and plugs into a custodian needs to pull in a bunch of different things, that makes it more challenging. So it makes the value prop better, and keeps more of the overall economic pool involved in an adviser business, with LPL.

Fourth is gonna be our business model and how it’s resilient to macro moves. Right? In in the nature of our space, it’s very common to see, especially today, big swings in the equity markets, big swings in interest rates. And there’s some natural hedges to that in our business model that really brings us stability to the model, that until you kinda click down into that, you may not appreciate that. All four of those things are really about how we drive, our overall growth and our overall revenue.

You then combine that with a disciplined expense, management approach and investments to drive operating leverage, and it really produces some compelling cash flow. That lastly, I would highlight, we are a capital light business model, which is another way of saying we are not a bank. So we generate capital, It doesn’t need to be held up on the balance sheet. It can actually be deployed in a much more, deliberate way to drive value. We, of course, have capital requirements, but there’s just a lot more flexibility.

And I think these six things are really, what we have been focused on, the last, you know, five to ten years and what we’re gonna be focused on going forward. So with that, a little bit of an overview for of LPL for those that aren’t familiar with us. You can see who we are, who we serve, what we do, and our mission and values on the screen. I would highlight, just a a few of those things. I think the who we are has really expanded, into a top tier broad wealth management firm.

We are known as the number one independent broker dealer, a top custodian. But if you look at the breadth of what we now do, we compete with any firm that you could think of from a wealth management standpoint. Some quick data on who on, our size and scale. These numbers, do not include our most recent acquisition that we announced, which is Commonwealth. But when you add those two when you add that to that once we close, and begin to integrate that, we’ll be north of 30,000 advisers.

We’ll be north of 2,000,000,000,000 in assets. And maybe the last thing that would emphasize that really says who we are today versus anybody familiar with us, from from some time ago is our mission and values. Right? Our mission, which is focused on advisers or our clients. Many firms, it’s not very clear to advisers, are they the client, or are their customers actually the client of the firm that we’re at?

We are unambiguous and quite clear on who our client is, which is one of the many reasons that they come to us, and our ambition, which is simply to be the best firm in wealth management, not the best independent broker dealer or the top custodian, but the best firm in wealth management. Now, a little bit of data behind that. So if you look at just the the last five years, and how we’ve grown, right, our o overall AUM has has doubled. And I think that the manner in which that occurred is really, really important, which is the center panel, on the screen, which is organic growth. We lead the industry in organic growth.

We’re consistently in that high single digit organic growth range, and you can see a couple periods in the, in the low double digit range. And then you combine that with some strong operating margins you can see on the right hand side. And then in the bottom right hand corner, a very strong balance sheet with a low leverage ratio. I think you get a nice compelling financial picture. Now, with that, just to to get a little bit more into those secular, tailwinds in the in the part of the industry that we’re in.

If we move left to right across this slide, right, there continues to be a growing demand for advice. Right? You know, estimated to, continue to grow at that 7% CAGR that you see on the screen leading to, you know, 2027, a $38,000,000,000,000 marketplace. I think what’s most important on this page is the center on the right. The center is the independent channel where we operate, which is the bottom of that chart, and it is really the only part of the space that continues to capture share.

Right? Wirehouses in this in that, you know, kinda center of that of that chart continue to lose share. The regionals are maintaining, but the independent space is where advisers time and time and time again are choosing to move their practice, and that is where we are the leading player. And then on the right hand side of the page, I think this gives you a little bit of a sense on how we’ve expanded our offering. If you go back to, you know, about ten years ago, we were competing for a very small part of the overall wealth management space.

Right? You can see 4,000,000,000,000 of AUM, and it was just our traditional models. And I’ll I’ll go into the, some details on this on the on the next few slides. But we have added, tools, capabilities, and affiliation models really allow us to compete pretty much for the entire adviser mediated space. And, really, where that’s come from is twofold.

One is our horizontal expansion strategy, which is really just broadening the manner in which an adviser can actually affiliate with us. Then our vertical integration strategy, which is making sure that we’re building out all of those tools and capabilities to make sure the adviser experience is great, and they can actually focus on growing their business. Now more specifically on the horizontal right. Right? We had you know, our our firm is over 30 years old, and we were largely known for most of that history, which you see on the far left hand side, which is we operate in the traditional independent market.

And we also served and supported small banks and credit unions. And as, as our clients matured, as our ambitions matured, you start to move across the page to the right, and we started to build out new capabilities and new ways to join LPO. Strategic wealth is really targeted at the breakaway advisers. It helps them get from an employee model to independence and provides more, support and services to actually run their practice. You move to the right, Linsco.

Linsco is the first L in LPL. For those who don’t know, LPL is created by a company called Linsco and private ledger joining. So that is the the branding that we use for that model, but it’s an independent employee model. Right? Independent isn’t an affiliation model.

It really is a mindset. So if you wanna continue to be an employee, but you also wanna own your clients and have all the benefits of independence, there really wasn’t a place for us to put you. So we developed that model. And you can continue to move across the page all the way to starting to lay out a a private wealth affiliation model as our advisers, have grown themselves and have more and more, sophisticated clients, and and clients with more net worth where things like lending become more relevant, things like alternatives become more relevant. So if you take a step back and just reflect on this entire page, we really are in a position to serve the entire adviser mediated marketplace.

Now, if you look at the opportunity set, right, and where we operate, even in the spaces where we’re the dominant player, which is the independent channel on the left, when you factor in Commonwealth, we’re at, you know, 12% of the market and the institution market where we serve those banks and credit unions and other financial institutions that were 9%, still a very fragmented market. Meaning, the opportunity to grow from here, is pretty substantial. And then when you look at the biggest opportunity, which is in the center of the page, is the employee channel. In the employee market, we’re just scratching the surface. So if you just reflect on the growth that we’ve had the last ten years and you start to think about what’s the opportunity going forward, it remains quite compelling.

Now, if we move into, each of our two channels, so the vast majority of our assets are the are the independent adviser channel. So of that 1,800,000,000,000.0 we have today, you can see 1.3 of it is in this in this channel. And the value proposition is what we, in the center of the page is what we really have developed over the last five plus years. Right? Those flexible models that I just walked through, you can choose to affiliate with us in any way that makes sense to you.

Differentiated economics, meaning you come to us, you’re gonna be able to keep more of the economics that you generate as an adviser. And probably the most important one is book ownership. Right? If you’re an adviser with LPL, those are your clients, and it’s one of the things that matters the most to them. And then you add to that the capabilities and the services that we provide.

An independent adviser could come to LPL and really focus on growing their business, not be distracted by all those other things, that can take away from that. Now in addition to the adviser media channel, we have our institutional channel. So this is us doing really providing the same tools and capabilities, but for a financial institution that’s able to outsource all of that to us. Now it’s it’s smaller than the adviser media channel, but you can see visually on the right hand side, that it’s growing at quite the clip. Right?

So nearly half a trillion of AUM up from 200 just back in 2020. And and the key part of this, when you think about the value proposition from a financial institution’s lens, is really in the center part of the page. Right? They can plug into LPL. They can focus their time actually on accelerating their growth, reduce their cost, and out the risk management to us.

And probably the most important thing is the seamless conversion process. This is not something that’s very easy to do if you’re a large financial institution, one of our largest most recent ones, which is Prudential. It’s not easy to get from running this yourself onto a third party platform. So we’ve invested heavily, in making sure that we have the technology, the tools, and the people to do that in a pretty seamless way. So, with that, let’s let’s turn through and talk through our vertical integration.

So as we take through all those tools and capabilities and this slide just gives you a sense as to how those different things apply over the life cycle of an adviser. So it’s not about just supporting them, and getting them to independence, which is on the left side, which is where we used to focus. It’s about getting them independence. It’s about serving them and helping them grow their practice or optimize their practice. And it’s about helping them when they’re at the end and they wanna, you know, either transition it to the next generation, or they wanna sell it and monetize, their practice, which is typically the most valuable thing that they have on their personal balance sheet.

And we’ve developed tools and capabilities that support all of this, which I’ll double click on a a few of them, in some coming slides. Now if you look and think through how we monetize here, in, you know, a very simple comp context that makes sense as the more services that you provide, the more value that you provide, the more economics that we generate. Right? So if you think at the most basic service and offering that we have, which is the bottom left hand corner of the slide, that someone is just simply doing brokerage business with us. Right?

It’s transactional. It’s commission. On average, we’ll earn 15 to 20 basis points on that. But if any of you start to move up into the right on the more services that we provide, so an adviser providing advisory services we’re providing more, more of our platforms to serve and support that. When they go into our more, supported models, strategic wealth and Linsco, we’re providing more services to actually help them run that business.

When they go into our centrally managed platforms, which is which is when they can outsource the actual asset management or investment management to us. And then if they start using some of our services group services, like providing them with a with an admin or a head of marketing, and you start to add all that up, you can start to return in the 40 to 45 basis points on that same asset for someone who’s using all of these services. So it just gives you a rent it gives you an idea of the range of economics that can happen as as our clients start to use more and more of our services. Now, if we move into the resiliency of the business model. Right?

So I think when you look at a wealth management business model, there are factors that are outside of your control. Right? The two big ones that come up are gonna be the level of equity markets, the level of the markets overall. So equity markets, debt markets, as well as the level of interest rates. And I part of our business model is there’s just natural hedges to those, variables embedded in the model.

Right? Simplest example is equity market pullback. Right? What happens? Right?

Obviously, we’ve got a lot of our economics that are generated based on the level of AUM. But what typically happens when equity markets pull back, is advisors get a little bit defensive, and cash balances or the amount of assets allocated to cash simply goes up. Right? And that is an area where we monetize by placing those deposits with third party banks, not unlike a bank itself would earn, that offsets that. And so if if you look at some of the data there, if we just look on the left hand side of the page, this shows our cash balances, both the dollar amounts and the bars and then the percent of AUM that’s in cash during those time periods.

So if we just look at 2022 as an example, right, the last time, you know, super fun year, market’s just going down and grinding down every single month. Look at what happened with cash. Right? Cash balances both in dollars and percent of AUM came up and primarily offset the economics from from AUM going down. And then you move to the right on that slide.

As equity markets recovered and you started to get some strength there, you can see cash going back into the marketplace. Marketplace. Right? So there’s just a nice natural hedge to that embedded in the model. The other thing, that we don’t control, of course, is the level of interest rates themselves.

Right? So one of the way that we mitigate that, is actually deploying those cash balances into banks in fixed contracts. So even though, interest rates can move up and down, 2020 and COVID as an example, interest rates immediately went to zero. If you look on the right hand side of that chart, that shows how we have laddered out those cash sweep balances into fixed rate contracts. And we consistently deploy them to have a laddered portfolio typically focusing out three to five years.

And if you look at the very bottom right of that chart, you can see the the yields on those particular contracts. So if interest rates went to zero today, you can see how and what we would continue to earn on those balances over that period of time. Right? So it’s really a strong mitigant to any any macro volatility that you would have from interest rates. Now, with that, let’s move into expenses.

So we’ve got a very focused and, unchanged long term cost strategy, which is really focused ultimately on driving and deliberating operating leverage in the core businesses. Right? And we do that in two ways. One is we prioritize investments that drive growth. Right?

This is the most powerful way, to deliver that is drive organic growth in the business, but also make investments that drive productivity and efficiency, and then making sure overall that we are adjusting to the environment that we’re in. And I think if you look in the bottom left on what we’ve done over the last five years, I think shows us executing those principles in a bunch of different environments. From 2020 when, you know, COVID hit and the market pulled back, we really pulled back our levels of investment. To the next few years after that, as markets recovered, interest rates went up, cash balances were up, there was a lot more economics to deploy. So we’re very deliberate about investing in capabilities that could drive organic growth over the long term, but also invest in capabilities that could really pull through productivity efficiency and op margin expansion, at a later date.

And I think as we sit here today, you’re starting to see the benefits of those investments. Right? The organic growth numbers I went through earlier, like, a big driver of that are the investments that we made here in ’22 and 2023. And then as you start to see that organic growth continuing to main high at high levels with the growth the growth rates coming down to, you know, that six to seven and a half percent that we planned for this year, that really is a a benefit of that growth, but also those those investments in productivity and efficiency and cost really coming through, which helps pull those economics more to the bottom line. Now, if you turn to the to the last area, which is capital allocation or capital light model.

Right? And we’ve got a very deliberate focus on making sure we’re allocating capital to the areas that drive the best returns, and at the same time, may maintaining a strong and stable balance sheet, especially in a part of, the business, especially in the independent side, where you will see firms run highly levered balance sheets. That is something that that we think is, you know, from a long term value creation standpoint, is not good. So so we don’t do that. So if you look at the right hand side of this slide, it just sees how we approach allocating capital, which is very, you know, very simple.

The higher the returns, the more, you know, we’re more we’re focused on allocating capital to that area. Organic growth, by far generates the highest returns. M and A is is a close second, and then ultimately returning capital to shareholders. And those things can change over time, so we’re just very deliberate based on what the return dynamics look like as well as what the opportunity set looks like, within that. Now, if we click down on balance sheet strength, and I think this is a key one for our industry.

We are not a bank, so kind of bank capital ratios and things don’t really apply. It’s really a debt to EBITDA multiple. And if you look on the top right hand side, you can see we’re quite focused on running a strong balance sheet. We live in that one and a half to two and a half time zone, to really position us to be prepared for, any unexpected events in the macro, but also to be prepared for opportunities that present themselves from an m and a standpoint or or anything that would require a lot of capital that we key we think can drive value. We wanna make sure that we have the capacity to do that.

I think if you look in the bottom right hand corner, I think our our journey over the last five to ten years to really strengthen the balance sheet has really been recognized, a slow pace, but recognized, by credit rating agencies, that we’re an investment grade company. It’s really driven by, you know, everything that I’ve talked through here today combined with maintaining a leverage ratio that does allow us to be able to to be positioned for the for the unexpected. Now, a big part of where we have allocated capital, is in the m and a space. Right? Building on what I talked a little bit about earlier, even though we have a leading position, it continues to be a fragmented market.

So this just shows you, you know, going back all the way to 02/2017, the different types of deals and companies that we have acquired. And you can see visually, they’re getting bigger and bigger. So I think I’ll I’ll click down on on the two most, two of the most recent ones or two biggest ones, Atria and Commonwealth. Specific to Atria. So this is one where it’s it’s kinda kinda down the middle in the independent space.

Atria is a company that acquired seven different firms, really running a a a very similar business to us in the independent brokerage space. We announced this acquisition over a year ago. So we have closed, and we are now in the middle of the integration, and bringing those seven broker dealers onboard to our onboard to our platform. Platform. We’ve converted four, three more to go.

I mean, the headlines are that the integration and conversion is going quite well. You can see the size and scale over 2,000 advisers, over a hundred billion of client assets, and then the economics, on the bottom right, a hundred and 50,000,000 of run rate EBITDA. So this is the type of transaction that I think we’ve done many of. This is the largest, but something that I think we’re we’re quite good at. And advisers will get access to, all the technology and tools and capabilities that we put on our platform and not only drive the value that you see on the screen, but as we’re able to be on that on that stronger platform, be able to grow from here.

Now the most recent one we announced, is Commonwealth. And I think this one is as much an acquisition that is growth and financially motivated, but just as much, if not more strategic. And for those not familiar with Commonwealth, maybe just look in the bottom left hand side. I mean, they are the largest independently owned broker wealth management firm in our space, and really the standard bearer, for adviser centricity, adviser service. You can see their J.

D. Power, rankings, number one independent, for adviser satisfaction for eleven consecutive years, and really a firm that could have chosen anybody to sell to. I mean, there were a lot of folks interested in, inquiring it, not only because of its reputation, but now that we’re on the other side of of announcing that, we could tell you with certainty that that reputation is spot on on what a what a high quality team advisers, that they are. And I think when you think about, coming to OPL and matching up that adviser centricity and the focus that they have with our size and scale and technology. And you put those two things together.

The economics of just getting them onto the LPL platform, that you can see on on the right hand side, 3,000 advisers, nearly 300,000,000,000 of AUM, and the economics associated with that run rate EBITDA estimated to be 415,000,000. When you start to think about on the other side of that five years from now, ten years from now, and the growth that could come that could come from that, the capabilities that we’re going to integrate that they are very good at to bring to all of LPL. Just the strategic opportunity, I think, is is really, really compelling. One last key thing to click through, and then and then I’ll, and then I’ll wrap up, is specifically when I was talking earlier about life cycle of their practice. And you get to that last stage where they really are looking to monetize this asset they’ve built over over their life.

There really wasn’t a great way to do that in our industry. Advisors would either have to sell to a private equity firm. It was building up an aggregator, which they would begrudgingly do, in in our view because, ultimately, when you do something like that, your clients are gonna be disrupted. The team that you’ve built in that office is probably gonna be, disrupted as well. And it’s not the thing that advisers typically would wanna do.

And the other alternative would be to to find some other adviser to sell to. And if you’ve done really, really well and you’ve probably grown your business to a size and scale, there’s not a lot of people that could buy it. So there’s this gap in the marketplace, that we saw, and we are best positioned to actually solve that. So that’s what you see on the page is our liquidity and succession capability. And think of this as very simply as we are acting as a bridge between the the retiring generation and the next generation of advisers.

And it’s not a small population. If you look at that first bullet on the growing opportunity, a third of advisers are expected to leave the industry over the next decade. Right? And that is not a small number. Right?

You know, Rupert, that’s nearly 10,000,000,000,000 of AUM. And this offering is basically LPL stepping in, buying the practice, keeping it on our platform, and then we actually help oversee it, manage it, help either identify a successor if they don’t have one or train one up, if they do, ultimately allowing that adviser over time to earn or buy the business back. And at that point, you now have a next generation adviser that probably is gonna be on the LPL platform, for another twenty to thirty years. So it’s pretty compelling. You can see the stats at the top.

These are end up being relatively small deals at a time, 10 to 20,000,000. And and we think over the long term, this is gonna be something that that really helps, keep advisers at LPL, and it helps recruit advisers to LPL, as well, given this is something that’s really important for people to solve for. Because no adviser really wants to move, and when they do, they want it to be their last move. And I think we this really completes our offering set to allow people to make the move to LPL really their last move. So with that, I’ll just wrap up with some some stats.

Growth and and and earnings and economics have looked like at LPL for the last, you know, five or so years anchoring off 2020. You can see we, you know, we’re growing assets at 18% per year overall. Organic growth is a big driver of that, which you can see in those upper single digits, low double digits, leading to our revenue or gross profit in the bottom left hand corner growing at over 20% a year, and then EPS, or adjusted EPS growing at an even faster pace than that. So that’s what we’ve been able to deliver. I think when you when you take the totality of our focus and plan that I’ve covered here today, I think our confidence in driving, results like that going forward is is quite high.

So with that, we have a couple minutes for questions. Or We have one question. We have couple minutes for our question.

Jeff Schmidt, Wealth Management Analyst, William Blair: It’s not the, the breakouts are are in the, Adler Room across the lobby. So we’ll see you there in ten

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