LPLA - Earnings call transcript Q4 2018 | LPL Financial Holdings Inc.

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Operator

Good afternoon and thank you for joining the Fourth Quarter and Full Year 2018 Earnings Conference Call for LPL Financial Holdings Incorporated.

Joining the call today are our President and Chief Executive Officer, Dan Arnold; and Chief Financial Officer, Matt Audette. Dan and Matt will offer introductory remarks and then the call will be opened for questions. The company would appreciate if analysts would limit themselves to one question and one follow-up each. The company has posted its earnings press release and supplementary information on the Investor Relations section of the company's website investor.lpl.com. and forward-looking operating statements and results, well other include future LPL plans, will management as and that financial outlook, opportunities call statements, about including Financial's, as foresees. Today's risks potential business strategies Such and subject forward-looking may actual to beliefs materially. differ that are results uncertainties statements to current and or management's cause reflect estimates risks the filings earnings The those statements. caption forward-looking forward-looking the appreciate company contained press as factors cause disclosures release under that refers SEC differ the such listeners operating actual, Harbor to of company's well important those financial, from as and matters in to to results, the the latest timing Safe may contemplated statements or or

Regulation G. the call, will the non-GAAP company SEC financial discuss During by also measures governed

to at investor.lpl.com. call that, turn of GAAP company's over Arnold. non-GAAP comparable to the to now reconciliation figures, With found release, refer such which be Mr. the earnings measures the I will can please For

Dan Arnold

led Thank we joining you, growing business intangibles favourable from NPH, complete Latif, benefit and excellence. EPS today. and a priorities us grow organically, executing focused This on our our remained In of core to This with for strategic call year. our interest prior positioned to on the of to focus thank combination you, everyone expenses rate of disciplined prior $X.XX, from up environment. XX% and the stay onboarding XXXX, over

growth. fourth our stayed revenue expenses more quarter, major across Now, results. on with we of growth our a profit in in increasing And investment also starting year-over-year all let's look lines. as increased of organic while our result closely progress at Gross financial disciplined XX% our

prior was $X.XX. quarter to As a fourth EPS result, intangibles

a the quarter than brokerage up translates which of assets greater growth $X.X rate. business NPH, X.X% of was assets billion combination fourth $XXX impact annualized equity by quarter, organic new organic advisory net inflows which the increase This fourth and our lower billion, advisory was billion, rate. This of included the and growth from to our were driven $X to annualized X.X% assets Moving markets. In X% or growth year-over-year. were performance,

our our solutions, assets. to their on corporate increase advisors enhance managed which and advisory, asset for centrally return As use mix, continue of

also some market fourth perspective share want We in to the the volatility on quarter.

we equity while this diversified saw in market immune are streams some transaction not client and markets Now natural our cash to when revenue declined. We increased movements, as balances December, volumes provide hedges. our

increasing lowering balance positioned short-term to and leverage continuing and sweep execute increases and to growth. drive sheet create of sheet to We strength our our volatility strategy market ICA This business better balances. our cash also the portfolio our balance markets model absorb to long-term invest our operate capacity volatile and of duration by our while in combination

to focus differentiate move strategic our grow advisors their on new In we growth, recruiting think were primary which forward. let's results were with Now executing primarily business the and recruited highest well believe transition $XX.X drivers advisors sustainable and for development $X.X help The aligning driving existing have bringing as was us returns. we billion respect to providing helping about our with billion core performance recorded. our enhancing assets total of drive fourth our changes structural assistance growing to year, advisors priorities new will excellence. financial annual core repeatable outcomes With types quarter, these remarks going our the that our of as and will team business as the and Today, business we more improved We of of new the better a our assets. return and advisors, existing capabilities on adding that grow businesses. to

on and those we look we our ahead, executing solid well looks opportunities. our is pipeline As believe team

on as Let's practices our marketplace. the this, areas: capabilities practice In the advisor are to efforts to they advice order optimize new focused a next help do management for key growth, to catalyst advisors to increase we and their our move in win three their enriching how so that provide digitizing modernizing and lower their and scalability, of can business. quality they costs execute differentiate

As these part primary to and efforts, of advisor is five workflows vision our digitize the practices.

is clients. one prospects The into first turn transforming how advisors

portfolio workflow to working client generation and single process several digital goals this based are We including with a on-boarding. multi-step planning, into CRM; analytics, components integrate proposal

step, we'll technology its analytics modeling. technology, at digital proposal acquired the and this believe with the investment We industry-leading no of AdvisoryWorld solutions To each for portfolio this provide required For we delivery generation, their our workflow approach charge. advisors accelerate in the will ClientWorks. help of practices help will a our which We're advisors also enrich to their embedding scalability quality them and the in advice and of planning-centered turn increase grow. to efficiency by our helping advisors

cost. to more for evolving planning out context take all will to position help goals. planning-centered changing space differentiate from embedded We enable advisors new advisors believe goals these savings on month and roll growth. next more the marketplace management a address, long-term to approach As be will efficiently our will target in focusing planning we of in the our based will ClientWorks contribute provided with will it a and as are at our across this which advisors This their retail easily our clients life needs to a To win investors wealth no solution solution.

ClientWorks client and version new transforming excellence. to of reporting. and X.X core to over continue account capabilities. and Let's the on capabilities that increase enhancing priority Within time. our our introducing improvements we with our the advisors system. X.X, driving evolve evolving In platform we the fourth performance these that is operating transfers think new functionality, and ClientWorks, Version In resiliency about focused by value we strategic the included increasing now search invest turn quarter, our of in our are to enhance navigation model will streamline continuous improvement, as executing this platform culture. second We service and

continue will parties platform artificial ecosystem also intelligence integrate envision an goal features platform. of a additional plan third broader X.X control Version industry-leading into with as advisor and learning, We that and workflows. such over turning machine with for this to the We incorporate ClientWorks in

last was Turning our improvements help policies on to delivering ClientWorks. improvement, streamline year focus enhance that continuous processes, modernize and

our result, the a year. service improved through As performance

While operational use. meaningful addressing of establishing friction on efficiencies volumes continuous order was which driven that continue upgrading to structural Examples a advisory by progress our fewer dedicated making larger team primarily these include, to becoming annuity out volumes system. opportunities. our system easier of and escalation our To and on made increased, taking a more a trends improving we call ClientWorks change reinforce decreased, entry permanent our service These ensure capability, becomes improvement while improvement also platforms. by operational

us. it We to to with will consistently stay and do will that focused business make simpler on easier continue delivering improvements

Looking ahead, we a service for model. have our large agenda

Our of industries wealth respected differentiated year, our to leverage experiences. service outside to evolve service a can't space. companies to more care aspiration service customer intend Starting we manage they in in service vision, their management current And get model. end to learn us advisors else this is led model to other this thinking how deliver to a and model the our our anywhere experience to that rethink

The professionals can our can intelligence of the variety Our to This improve questions model methods. us use of model, highly their advisors get using in more was Semerjian management resources. and different right Customer Oracle. for service information has the to helped veteran, flexibility change from shift team customer our are lead Dayton answers join trading hired human Dayton a vision way a year that channels where at accountable and to model, trained Officer, and who a Intel the who and organization. is vision Care to of experience as highly is implement accessible. XX and consistent senior customer our we the get a a care will leadership for case on will other also He gives This ensure skilled is February digital and to Instead Technologies. experience, service and leverage a deliver Director more Chief of service service at more a finish. XX. center CA Managing accurate advisors' the a prior in model operations to team solutions managing catalyst model of our service management they We've and new where for call new start inquiries a multi-channel artificial the a

We wish him many March. of transition, well years and Tom for his the past we in contributions be Gulley thank in his will part retirement. Tom As three retiring this over

so thinking taking late by and closing, executing efforts important culture, a our our step instilling last approach client-centric want alignment. mindset, year a this logic-based which our We're journey support structured took our care mission here of when a to transform our We Before clear in review to introduced we is an to mission-driven instrumental advisors, it serve all We I strategy. our clients. they of statement. can and advisors. take new to we take and employees of are to We simple make wanted to their that care

come. excellence. create we set the for the value. introducing growth capabilities to pleased develop and to drive want to our In with work on our recognition We evolving Matt. business that plan our rewards success growth new a We extraordinary many to attract transform quarter that, Looking turn solid foundation focused and to our our core teams years of ahead, deliver talent culture executing to I'll our financial With on new service are our serve as business and mindset and creating over to focus us will positions of for call behavior-based programs and We believe and values, culture advisors, shareholder how efforts remain to growing another profitable reinforce shape. the and the culture we on focus year. believe will instill this long-term well that the will of strategic priorities we summary, part

Matt Audette

XXXX strong and assets you, expenses on finished to Thank stayed Dan, growth. on quarter AdvisoryWorld another with with grew and call. earnings glad We everyone operating today's leverage. business and disciplined acquired of We to drive I'm organically, speak

our level QX double was a year from to result, nearly EPS a As our prior intangibles $X.XX, ago.

assets. billion, down billion, were starting of We equity strategy XXXX. net finished by quarterly at of execution which now advisory Let's QX highest review these are and in new for quarter assets sequentially, We depth, continued $XXX total we the our and as of markets. level X% in brokerage throughout growth greater our we was decline on to new Total trend driven net our growth our results business with assets QX $X.X the increasing and focus pleased results, with continue

centrally-managed and $X organic primarily were corporate advisory growth driven or in a platforms. results Looking inflows These assets billion, X% were at growth Net annualized to greater by new detail. rate. our

conversions and three Our in also advisory. in positive These from that benefit brokerage assets on trends time, converting included advisory, our results greater results growth $X.X corporate return billion advisory highlight brokerage from to assets centrally-managed over our platforms. profit of usage to gross

$XXX QX sequentially. X% let's or million, by Now and our trailing starting to sweep This was in revenues, by profit. financial lower with commissions million, increases turn and partially cash up $XX gross transaction driven offset revenues. It results, was primarily sponsor

fees of advisory up $XXX to declined and million deferred by market negative a advisor our rate, million was they the impact commission net mark-to-market $XX expense. to increase a QX in drove The QX, lower in from were payout driven commission payout, as QX. Moving

Prior on $X is bonus gross driven seasonal increase in so reminder, commissions effect million, deferred net the a commission primarily fees to offset expense, were advisory expense. this As zero. down other decline profit net by production is revenue, and of the

highlight primarily corporate that fees gross offset QX, This advisory investment. broaden the $X and additional this X. would to on advisory advisory reduce are quarter X% by would the we about they that assets Also, January quarter services priced off ahead price million prior at to per improved will platform time, will profit pricing corporate which cost in initially. previously effective our pricing announced Looking QX. Over believe would attract the declined our investment reduction of by assets, we about we I

$XXX million $X QX, down assets. Turning Sponsor asset-based driven primarily back to average revenues QX million, were and revenues. by from lower

sequentially, as cash to XX% sweep yields or our revenues. were Moving $XXX in and balances up grew They million, both QX. $XX million,

more Looking primarily hold by $X.X rebalances; were up repositioning This portfolios advisors at was to sequentially. $XX.X billion, cash driven client billion cash. they

decreased Looking moving their billion the and balances client cash by into have January. back in so ahead, begun have advisors market $X over sweep far

and the December basis increase fed our Looking at hikes September XX rate points was made yields duration by cash on our for ICA in and program. our sweep QX, yield from points, XXX driven up we was QX. the basis This progress extension ICA

rate deeper the ICA reminder, interest as portfolio will begin quarter are rate more fixed our shifting we balances cycle. to have a last As into

our to executed more rate of portfolio. QX, ICA During mix about rate several we of which XX% brought fixed fixed contracts our balances up

we Looking contracts up renewal not do have ahead ICA for in many XXXX.

So, do not balances increase rate our year. further balances additional have to shift many time, even opportunities while fixed to we expect we over this

we Looking in to we from QX offset moved ahead the as recent will to fixed have the by our deposit ICA QX, balances rates. rates a yield, quarter hike, as the December rate partially benefit higher increase in well full

those our and we QX be basis yield assuming ICA to no expenses our points. interest further rates, anticipate changes rate XXX Given or factors will around deposit

conference QX from and as revenue transaction revenue of QX more on expected move to were from than increased slightly million by market heightened volatility. now offset transaction was $X million, fee $XXX decline They the from revenues. Let's levels up

expenses, $XXX technology. our to and Core of Prior primarily Core turning was million This $X million investments those sequentially. by increased driven million in G&A. service expense In to Core AdvisoryWorld. starting is QX, G&A, $X acquisition our related including Now G&A with to costs

million full related which million to $XXX prior $XXX For to was to G&A was outlook range within AdvisoryWorld Core year our $XXX costs million. XXXX, of

Looking we growth. and in service invest forward disciplined to on to expenses plan drive while to help technology to stay continuing XXXX,

million Our are of range spending initial from $XXX outlook plans million. unchanged our $XXX to

outlook reminder, taxes. the updating to are million. annual of of of XXXX include be we $XXX million. a our year are in as G&A $XXX slightly payroll can And increase for one AdvisoryWorld our quarters range $X Core QX However, increases the to to a operating which seasonal expenses approximately million This the outlook higher given

decrease to expenses, This promotional offset assistance. sequentially. they was a million, expense, slightly on by in transition driven Moving were by primarily conference or down $XX million XX% increased QX $X

conferences will QX, in of our year one conference to March. expect larger about of million $X we ahead Looking by advisor expense have we increase as the

recruiting. also expect assistance amortization driven $X by to transition million, quarter fourth We by increase about our

totaled was coverage. for expense $X by portion primarily not to the increase was Now from a regulatory up turning $XX which expenses, they captive eligible QX. driven a for million of The million QX, matter for

As regulatory difficult makes a of predict. to inherently nature reminder, the expenses them

based of on or and available or Our the expense in up move captive actual could size down and timing any quarter given matters year coverage.

It million QX, compensation $X from expense. QX. was Moving in to share-based $X million down

our first Looking level grants the the equity ahead, timing of makes typically compensation year. quarter the fourth share-based quarter, level the the of lowest year. the of In highest

as look QX expect sequentially. dollars based So by share we to compensation increase million few we at a

interest million $XX flat for was QX. to in expense, QX it As relatively

quarter. the QX, $X rose to the in rates by expense and interest QX expect of end increase ahead loans about LIBOR Looking as to reset towards we our million

Looking at our EBITDA our to margins profit. relative gross

prior year. EBITDA Over the past from the generated we million, year, XX% of up $XXX

expenses continue year-over-year Over drive period, the manage to XXX to we same XX.X%, margin EBITDA points basis leverage. up our was as operating

to capital on management. Moving

was net of times, million sheet QX. credit and times balance X.X was X.X X.XX is remained times. our which of leverage end to ratio the two Cash QX use strong lower our times agreement from corporate $XXX in target for available Our at range down

Turning deployment. to capital

priorities remain organic first Our to arise capital taking and shareholders. for M&A foremost opportunities investing if of advantage returning they and growth

to advisors advisors LPL, and our recruiting Looking our investments grow technology. enhancing helping on at focused new growth, organic are our existing

clients. million accelerate prospects This investment digital that in turn our we help M&A, $XX more AdvisoryWorld. deployed efficiently could As workflows advisors for development to industry-leading our will acquire into

QX to addition and to returned of excess share through dividends. our million million repurchases investments we in $XXX of growth, capital $XX In for shareholders

in to sequentially XX.X X% year-over-year. million X% repurchases Our down QX average our reduced and share count continued

returned For over XXXX, we roughly years. we repurchases $XX billion and more $X December, through authorization a shareholders Also $XXX repurchase million $X.X dividends. two reminder as of in to share completing it we than announced anticipate early our billion share increased and million to we that in

stock Just are and as repurchases have from across well we note other on all XXXX. have organic the allocation capital M&A strong growth depending In in on of opportunities could capital that investing our returning to our financial delivered pace price. vary please closing, as movements we that, we With pleased and quarter-to-quarter organic business We QX focused shareholders. on excess profit, assets call and growth for and expenses for open and growing drive staying while remain to operator, results disciplined questions. gross the

Operator

Chubak Thank of you, Wolfe sir. of question [Operator Steven line first Instructions] comes from the Research. Our

is Your open. line

Steven Chubak

afternoon. Good Thanks.

Dan Arnold

afternoon. Good

– Steven Chubak

with a the kick So things off on recruitment wanted outlook. question to

thoughts lot that quarter a So I you get progress asset should momentum, Dan, the think you're on the updated on impact maybe landscape to really new of was guess, growth. organic about I recruitment, sustainability good record to and have that current for want first the and seeing hoping the there. of off, seen volatility? just But recruiting your congratulate the might Certainly, competitive you from how and quarter fourth we market of

Dan Arnold

Yeah.

So question, the let back take with first I'll maybe and circle then second one. of part your me the

think I we pipeline. So as look our solid. feel I forward, if looks you the about at in remarks, good It said

little with about? second we entered why half you got So think best QX QX were color of of of our and at the momentum a a so and we we've the Well, to the we about as how on the were recruiting those that year, year. quarters maybe look end think lot record, as

drive with pace also but we entered momentum, with think, and bigger to think about stronger I we what recruiting. with about to results ourselves we're that. we do that challenge so to and how a And do think respect think continue bigger to I we at a challenging how produce that than do XXXX stronger into improving

team of I in continued that the at evolution or performance and the of look we back of year those drivers second the work and that primary our when results so, business half And think development of the those of peel actually sort changes performance. returns. and the New we that again, think work we matched assistance with structural are are on continue to financial our carry aligning to transition and Year. forward enhancing into sustainable, and And And improving repeatable the

on So higher and results that challenge we to based recruiting, to recruiting. better feel continuing sustaining on respect work that to good context pace relative goals produce with ourselves our and to and based about to

it. to kind the that's If of I I'm second So happy something, to half of question. the your back come miss

at into The prospective for competitive first and continue reach and today part strategy and a our based we've solution of committed advisors. of us us. It go-to-market model hybrid traditional ensures that think an your to broad and look models. a corporate we and offering go-to-market to breadth appealing RAA very space is We question of the the landscape, to we're competitive relative and on set in institutional a the to continuing solution. that's gives investing evolving smarter a nice marketplace, And go to those got each solution

I where coming think access set of we it there’s to see capabilities. LPL an who other when enhance an is perhaps independents continues opportunity an see come have – enhance from our to from opportunity

We continue and to both benefit from warehouses model, from to see in independent so the movement recruiting from the an regionals. employee-based success an model we the

has remains competitive in and that pretty sort opportunities as So past. of the landscape set, it consistent

there I missed Let see and if your anything in question? me pause

Steven Chubak

inputs floating can points current on Matt, just the out ICA One three the wanted hoping key and That into the detail that. the some to switching over very was XXX gave on Certainly, we really of model. spread much you was cash basis Dan. is look on balances. build extensions. you thank some nice for surprise. you dig just you the to I Maybe guide a to fixed positive update, was so commentary differential as And a provide

versus for level year; fixed is renewal spread up of current ICA year. versus And longer second this about optimal float? of extensions for is and The of the floating? we level third differential, ICA the target fixed the this should just the one; how So think a the long-term two, third, extensions term, target

Matt Audette

You're take This challenging is exciting. with question, three-part me that. Steven. I'll

the spreads, early and in we if you four So, December where fourth look you just the at duration current key at in quarter, we the around did executed years. look we where of put we metrics in when executed

swap it at the the was in where was was the at XXX look fund point, the curve low when XXXs. that you range low fed If in

basis range, so of at look curve, you XXX look you about that call certain it's on it’s may point time. to depending spread points today what when So points inverted, it's that at. XX at be flat at it the in And the, spot basis

it's basis So big one at surprise least pretty but to we going I'm back execute XXX a drivers of where not meaningful, you. is But occurred, come was that it's from to XX XX the of sure that which before really points.

when I – at of look think part we level the so one.

renewal. opportunity the that two, little. I lot in I always there's going don't there. a had tactical happen We QX amount in of XXXX up meaningful have level But things there really So, wouldn't in do. as assume of opportunity is coming much XXXX. very had We is mean, contracts to that part really could you for we a

always we to make on because want yield depending and think the while at percent six perfect long-term curve. same fixed time the forth the being term, the to have example percent a weeks but I a move I is something higher we target last you as do think want in are wherever we to we XX% to strong higher we're market that to be emphasize longer can sure land, I number want but longer in we five, term And today, movements with high those sense, range amount, at a flexible. fixed, But than not think make specific and get for don't likely we would sense. will and Over we the makes where I think back

all them. of I So think three I got

Steven Chubak

you for so Thanks questions. Nailed all the that, much taking Appreciate Matt. three.

Operator

Thank you.

from comes question next with Katz Our Citi. Bill

Your open. is line

Bill Katz

the taking for much very Thanks Okay. questions.

the for staying moment, Just the on a core guidance. for thanks deposit theme

might program. guidance the in effect presume of this difference quarter the Just I the the and be one thing, expansion between quarter the net last supplement

sure terms that's phasing now what if happens XXXX, potential more Just true, yield in of make flatter of your in rate but into broadly deposit we're behaviorally if for minds? a core sort curve with want the cuts to trends any if

Dan Arnold

I cash. on of a deposit It's you're that couple that's either. metrics not lot got the coif at out $XX of and beta. lower key the would $XX guide, on expect think exactly recent behavior, going really put change It that's XX% the deposit I don't I I side, it. the million think million to was we really think Yeah, $XX in million in lower you are highlight about to seen I referring fixed to on we the change down of I we probably deployment point average beta, And at cash the we’re you're level the we don't look you and rates. from left-hand relatively million to that and on see including move rebalances position did rate-sensitive a are in in a mean balances, really $XX that the referring a any or hikes On for for difference behavior. think like when balances, higher late in it they if one, and like small these or position around most for operating mean, high December. the are held page operational Maybe higher same haven't we we've market a cash it final the too last saw balances awaiting

Bill Katz

bounced Dan well. maybe on Matt triangulation, for you’re where are return But just growth buyback hand and -- given you point in the that from profit at really other And this little, improving but capital strong are making, M&A, the versus investment then in gross terms has hand and as guess you stock other the and really the your and for a question just time? I your on technology between another trends good investments Okay. on one just that seeing of you're need developing is the back just the organic

Matt Audette

off. start I'll it Bill. Yes,

I that and capital. think investments I on capital growth allocation that organic to return you far in for framework see service I talked and a walked experience is drive allocating by a And when bear that the really has a best capital prepared dynamics that return or capital the think in advisors customer our our we're and I starting and lot just are his deploying really and things even think experience the results is we and through better for how mean experience through, of about where unchanged. in on you it care you're out capabilities great Dan think the remarks to factoring think capital.

acquisition quarter. we'll area is strategy that strategic is you M&A help and and financial side, the I the operational a unchanged. look this helps We our We'll philosophy We think to it that from do On think forward. at can a move an that or add things can lens growth. do capability our AdvisoryWorld us lens lens like saw do with

that think unchanged. really So, we don't I see

if share it's about over area million with years, caveat the move you the you I per think level point quarter on third the deploying see of that the billion it capital low on $XXX share two purchases repurchases, on in $X course, And consistently authorization our that, around. us that take can range.

capital we results think it. good I from the feel organic we're about and how So, coming notably, and where are deploying side most on and

Bill Katz

Okay. Thank you.

Operator

Thank you.

comes of Our the Credit of Siegenthaler Suisse. line Craig next from question

please. question Your

Craig Siegenthaler

everyone. evening Good

to one, IFP first to my your retain want and ability we get just For your advisors? on update

Dan Arnold

take Dan. Yes, one, it’s sure I'll that

similar what we about quarter. rates short, progress retention And and last talked are the we're in making so, to

advisors timeframe by the somewhere with us will us. The this you started around color Advisory decision and out are those assets assets context, me the change staying manage as dealers. as made to that a process $XX they approximately give of vary a look need little stay advisors and have of as whether and the billion Assets. So, first decision in assets, make more or with let just did IFP assets a reminder, To-date managing of two-thirds the can those with Brokerage at quarter to if XX% you about broker that those

leaves and choice. on that are making process make in advisors still spirit an of focused what working about the Now educating through and them their we're on options informed the we're helping that the of sure are a them third alternatives

hopefully, a So, good to we you gives that are. update where as

I when think own subject ready to be IFP is transition will the of that broker/dealer. date actual -- their start to

not our -- but science best a the that's perfect So, estimate. quarter, there's first in around

Craig Siegenthaler

follow-up. Thanks Dan. And just as my

tweaks your seen you've transition those quarter you just several in if wanted just assistance changes? any recruiting far last based see offering if comment and made on You changes to I could results to your on so

Dan Arnold

Yes.

provide some anything you please that you color helpful. I'll and is So, Matt add think then

mix respect last financial around for hybrid I we assistance, think about and to with that does returns, the balance year marketplace. is transition experiment have on align And to year. returns think the second think But RAA much our that do principle out at day transition aligning certainly smarter of think being how around a pretty we've right? of how saw position half financial end the continued the corporate that in heavier I I core of that we to with as the that bigger the the we contributor that assistance versus the in we as of tweak RAA

don't you think I see know that add or place to you that's that. So anything realignment based biggest I probably if changes. on rebalancing those some to Matt, the want

Matt Audette

you keep to need Again, going. No.

Craig Siegenthaler

guys. Thanks,

Operator

Thank you.

of Blostein next Sachs. question comes Our Goldman from Alex

open. is line Your

Alex Blostein

Hey, Good Hey. evening. guys.

Dan Arnold

Hey, Alex.

Alex Blostein

data versus trends guys helpful -- guess, quarters in How last I you provided in guys around two for is much through reflecting ROA you guess row. recruited and $X was come as you can much profit sort us how the I that these advisory sort and of the billion, The have help brokerage question First and asset breakdown might again the in think on reflect, of balances gross for assets. a assets already around quite any of impact is of so that in? guys the they client

Matt Audette

typical first on so new advisory come coming that Alex, I those the mean, think start. the -- over Yes, I'll recruited I six months. assets our onboard, are ramp in

usually, typically come that. advisors in in fourth half six no following similar So I slower quarter last so little the ramps, second proxy December give that especially advisors best quarter nuance only think months that for the that's probably you as is throughout The move. the billion quarter. the can to a how bit dynamic the $X the And really

mix bit standpoint, bit mix. than standpoint, little the brokerage then brokerage is higher. have on typically advisory we've through you a do our little overtime the mix think recruiting see a as overall is usually from the a I a talked we higher asset brokerage recruiting And side, but mix from conversions, some

Alex Blostein

to competition the move down? little is is bit in year talk deposits it. we rate just an bit follow-up a way? or question for kind sort Thanks. a more ICA spread no not Can with incremental paid something is up the kind an going interest think hikes or the guys bank yield sort brokerage rates little of that there over then up the could is opportunity ICA on if cycle, you rate run a that like there or rest dynamic. is the around to what’s XXX should And pick of of reasonable about about of yield the that highlighted today? for of there you And Got benchmark Whether

Matt Audette

Yes.

mean, on I over that think years, type deposits on deposits, bank I I proxy. move for those think, up several as the seen definitely over fed spreads competition fund past demand you've a just or using of the

up basis around over in bouncing rate You and go to move points X back were started moving they the funds. fed – points basis to XX before

-- depends look markets. get up. I what can at when, is on moved definitely the market needs it's in its but think There It today, typically when you XX-plus. we technical the who

even if different that's banks funds movement that but respect little basis we’re probably or our there, bit that anything rates. your not a There's always way. with could there's out in first drive rates -- movements the your fixing placed a always think to points, deposit more that no assuming no question, movements is changes with part Funds relatively more so can of bit. be move it the to little minor, but estimate hikes, in can I XXX changing

Alex Blostein

very Thanks Great. much.

Operator

comes from Bolu line Bernstein. question the of Next of Christian

open. is line Your

Christian Bolu

Matt. Good afternoon, Dan and

Dan Arnold

afternoon. Good

Christian Bolu

clearly to around X% are slowed you meaningfully months. guys growth prior tracking December, in Regarding in X% the

we've to January trend? going So lift curious equity December? in growth the in is seen And drove up back what as markets then slowdown

Dan Arnold

pretty I a think which standpoint. whole to you NAA question. as is the quarter solid quarter good a a That's as Yeah. trend a good you said, upward, thing. continued if seen from And take We've

a illogical I to so of reasons. One, advisors not for of think the slowdown that's gather typically in we couple you definitely saw number the and of a December seasonal impact for see opportunities just the holidays assets. reduce to

which focus type a again impact. on with planning of of the year-end, also You've the tax similar has a coming heavier see

existing in you markets some the sales. And impact going saw continue helping focused we were NNA, that the same-store turned of January. to volatility. manage through of definitely the into I early to advisors think their had then add as downside on part which on December, market to that an that clients

I that certainly mid-January that contribute and though, we NNA believe back growth we to you recruiting about. we And two hit helpful up, add see to sales think solid factors forward. talked going same-store those when the to are solid will you pipeline began ramping NNA that

helps? that hopefully So,

Christian Bolu

number then a tick Advisory going a like for that? just That's good I very that And to Yeah. here forward? points. that Matt. basis just helpful. think And of points curious couple a basis question Is clean-up yields guess, drove what about to, XXX down maybe a

Matt Audette

naturally Yeah. moves I from quarter-to-quarter. I number mean, think around that

or So normal. it’s full you pick-up XXXX, XXXX relatively basis is down or two on pretty basis flat. at When a point drop year look versus

more quarters you that that quarterly future at well. have just and I look as as could So always in noise,

Christian Bolu

Thank Okay. you.

Operator

Thank you.

line the comes Blair. Chris Our Shutler from of of next question William

line Your is open.

Chris Shutler

Hey, afternoon. guys. Good

Dan Arnold

Hey, Chris.

Chris Shutler

into starting tapping couple In dealer only that of one think effort, and recent area a RAA see months, or at warehouses of off the seen around also. I competitors your we've broker are weeks

whether point, yourselves give fee and you Just RAA update an only in space us some on how? at playing the see so if

Dan Arnold

advisors Yeah. It's out the question. again are. one are constantly where set from in differently. moving us the marketplace, advisors we the challenge give our go-to-market And in opportunities strategy. And We're that are where lies if competing XXX,XXX-plus opportunity we're either exploring that to not about good a registered across think those where a about and would model to that another think

a portfolio, at should different think models to certainly, that how only so And tend look respect we would and add or about to then, that. is backdrop the think only. the we fee-based explore how I with them our – to RAA We

that platform of continue have they exists our We model if that a where We someone today broker can today. operate type license can to support facilitate wants solution. to and and drop their on

challenging and is a is though doing question solution out the you on such materially can tell compelling have of in marketplace? What we're we we the we it it? I Can rethink just we're the would we offering that competitive it? improve today. that. reposition a ourselves retransform So So more we Can in into it process

more that considering enhancing So an to interesting do relative improving our today. offering we should that, and on it's but think come possibility be we

Chris Shutler

in can I talk Okay. the a Thanks quick could cash then, quarter? of about what amount the the up the in And Dan. statement? on ones. lot. – reduction couple What's And the sneak headcount if Thanks loans show that quarter in you the would was in of advisory a the advisor flow

Dan Arnold

one You take and the... I'll the take loan

Matt Audette

Yeah.

we’ll we the have have information out Chris, you It be that one in that have So – XX-K, soon. will today. for we the loan

Chris Shutler

Matt you an it's disclosing number? think And important you because could – about going Could that forward

Matt Audette

Of course.

Dan Arnold

with count bit the standpoint down was such look consistency with XX a and QX And decline, quarter from count the to our right. at – quarter-to-quarter. illogical All retention recruiting the solid respect around to respect for you sorry, from advisor and when advisor our a things

a give retirement So previously a advisors sort plan on balances, quarter IFP. of in the focused you make so didn't the noise make drivers they and lot -- the a that advisor XX we They advisory in difference and count. standpoint, of around advisory XX were they left our certainly with brokerage assets were but from that tend lot not of have to had

through second typical the the that about we group aligned just to you’ll leave cost yearend year. then some process process go previously have into thirdly, of discussed that low was, The we've finally, had going producing advisors. XX decide a going been where small don’t want weren’t there. that the driver had noise and next we renewal business and of about they And their with separation strategically kind fixed the because that advisors we was some of advisors left XX incur of from the through hybrids And licenses to

and you asset the or those of would correlate the the noise advisors those to recruiting number out, the those you you sum back in creates NNA, terms So the what retention. with begin that up when a growth When summarize numbers. from see better in growth, the overall of

Chris Shutler

All lot right. Dan. Thanks a

Operator

you. Thank

comes Fargo. Your next question from of Wells Chris Harris

please. question Your

Chris Harris

guys. Thanks

net cash balances time, At So a up customer they quarter. your -- buyers cash it lot of securities. balances were looks the in the like same went customers actually

that, the a wouldn't advisors if balances? were little I just in you growth wondering have explain think So such cash you dynamic if would could that significant buyers, bit? net

Matt Audette

Sure Yeah. Chris.

the net and key of for months the you majority said of we if quite metrics, the in in in selling had put we saw grew first So that at -- but December. month you actually time time the when month, look at in look you if the some December well that of cash grew, the

all primary look least when $X at and month. in of it So then, in that December you less you been a trends, what the selling as hovering together, October, that And at net driver was billion with quarter-over-quarter. we've in dropped the put about net the big buying when $X as a buying $X well by billion to quarter that’s billion November net zone

that That's the that's the driver what probably up. drove cash So change. key

Chris Harris

picks think your of can around, we assume here That on bit your makes that up rate, little that quarter advisory I a assets rate hybrid. grow just Should time? base continue the about And jump trend than payout over any if corporate follow-up kind you. payout we in know and quick faster bigger sense. Got one base to

Matt Audette

Yes.

years, I When past little be change. minor, pricing difference bit the two more couple lot likely at made changes think so historically, mix we driver. big a drove to big, the the really more is it's those not a between in a you there of look the

Chris Harris

lot. a Thanks Okay.

Operator

you. Thank

JMP of Securities. Devin of comes Ryan Your from the question line next

Your open. line is

Devin Ryan

right. Great. afternoon, Good All guys.

Dan Arnold

Hey, Devin.

Devin Ryan

of ICA this on understand the extension to just and maybe the trying isn't and contracts one, there another of why Just much mechanics the year.

a have rates, still to you fixed still period tied short-term have sounds of commitment roughly that it are time. a two-thirds like You for but

I'm existing could And a contracts duration we should banks? of duration is? the on the something then, thinking some potentially be to get average extend So just those trying that about? not just with you of sense short what is Or length

Matt Audette

Yes.

to in duration a your well of period that there's very exact question. for of commitment it Right? on But opportunity We the rates. the but contracts, There's think the a out floating there's So XXXX. break you're rest are little the I right. though So of didn't time. at there have you even certain hit contracts funds

the there On the second interested part to side commitment can of floating certainly could your in certainly counterparty from Right? question, moving happen. opportunities. fixed, that a if be other if the is of there's Even

the we'll not So mind there rate environment, materially. I’d keep to remarks, that might Also, was technical my point or earlier the in prepared that but right. some opportunities, be interest in add

where it's more I potential where XXX only be sitting we curve, think today, on if we’re think might that the point are steepness December sitting XX. in in than I focused with here early

think going keep rate well. to we're as in the mind interest environment I So

Devin Ryan

Yes.

Okay. It Appreciate the And just a then, color. follow-up the makes sense. on commissions.

pretty volatility quieter but step investors get, healthy which based a would we allocations derisked the just have So trailing back been as automatic which I bit. potentially thought reduced have during of little because and could commissions the market, activity, sales bit kind a

was benefit get terms new of sustainable it if more I'm that guys speaks just a a And seeing? somehow you trend sales just curious, better or a that sense then in seasonal of and So was be are to anything I'm it volatility. really might does helping what that trying from to

Dan Arnold

and commissions really create about think over that's flows stability And going activities. brokerage commission-based fair -- of the frankly great think, you've assets as sales-based think the may advisors, And for we and quite bringing just obviously new these be more to quarters. both the about drivers to new recruit I are opportunities that, those Yes, three brokerage the questions. as seen that past in primary is they're you some

brokerage timing first arising on -- an two clients, clients, with more where around the advisors solutions commission-based been also the with for I are would to in some may think, that always be that are and little I maybe in more solution points use how certainly significant and brokerage I you the think see problems front, for gives The a that you is, see existing the see, the edges renewals progress seasonality of then fourth I you just quarter, occurred as a But probably help of thing advisor final some in traditional forward that's drivers. done. these than opportunity. made, September different that insurance that And more which the contributor. a existing that's I willingness to finally, certainly of using potential a think solve to the has volatility opportunities more some potentially regulatory think,

point So bit you get around the again that's minor a a lift, edges. but little of

first are key ones. the So drivers those two

Devin Ryan

Last just little of one regulatory an as of charges, seen quick some well. great. Okay, your for We've in and here. modeling seen bit uptick we've that a peers

model forward, about just XXXX the once certain over around just just we’re is really specific Or And on to if think how did speaks XXXX reasonable I be to but know step you kind again curious in idiosyncratic, intensifying have topics? bigger that I'm that? trying a it going so just something of advising because up you would situations, to go

Matt Audette

deploying the therefore and we premiums. going referenced, late that of the captive primary an predict quarter really risk of we year-over-year it combined our driver we those you up. are we're compliance it's mean But prepared us, in premiums. good overall, lowering made we've Yeah, us we the you going think the the for or coverage growth be insurance standpoint, overall that size to feel the to combination always always and up driver. to and talked remarks. potential investments saw that be with comes and when increase little for think about from the and our outside the at more I for the always profile been hard come and to captive And of like look there, about in the There's trend technology I increase I about our has there That's this bit a really things

Devin Ryan

you. helpful. it. Thank Very Got

Operator

Thank you.

Michael Our Please next the question Cyprys ahead. Stanley. from line of Morgan of comes go

Michael Cyprys

for Thanks afternoon. question. the good Hey, taking

circle the acquisition. Just AdvisoryWorld back wanted to on

Just a you invest the need capital strategically, how if in making technology could about thinking curiously to acquisition about and allocating to the that technology-related are just you companies the continually and talk and renting, core acquisitions that you're area? licensing that continually to capabilities scale get in that going to say invest the software firm versus from expertise in those of kind benefit that and a larger has acquiring you

Dan Arnold

lot, Yeah, that some me just I so please so miss it if some a unpack ask and of there's again. let of

take AdvisoryWorld that feel advisor a our the workflows work that to the -- to technology market strategy was made us around we so we're through good opportunity there, respect some practices. just it of it integrating and take some variety which different that those in was to quickly, the route accelerate So, the wanted bring and capabilities speed acquisition look on, then, did doing overall this lot the an sense that digitizing logic really for that to an could acquisition around with very we week. relative They to of work we of

new no to but a for that more our ClientWorks for. first step, accessible step which it to them the the was brand in is than in There that charging was an fee that encouraging. get which and And that example. in leverage advisors, first integration easily make into integration it point So as the were that's is then quick creates

And and platform know that businesses. to their to a advisors going to so it of some that help we take and give capabilities, foundational again to relative iterate them good philosophy, improve on our market is operate we inside, to accelerate the can continue something speed once materially these

other AdvisoryWorld would would I hold technology that true capabilities. you tell So story. that's the relative to

influence overall and capabilities think we're strategy, also make important out the in where new component to that's can we about, but marketplace of open That's the the in have at in our hey, about -- either commercially is through, those technology think, build looking actually ongoing that tools very and but really technology to established on organizations to can investment with access good I and organization and into we technology, works. the it’s up and a development. and building even develop and big really we world big own partnership smaller an available what transform we yes, And that's strike integrate a finding the advisor or a are not I think how our ecosystem have just that that integrated I've key. our

we'll future. is think figure that. from all as not corner thing have we a fast-moving do final technology continue that It's standpoint So, need we having capabilities that do the The a I believe the on to to out a marketplace. we

You've got nimble. to state

stay You’ve agile. got to

options You’ve your keep to and exploring got in head alternatives. up your

we capabilities to new complement what expertise got might and Silicon like places completely may we that access bring that to do or we've internally. so And partnerships strategic outside have certain to might in. some capability Valley develop go It

got relative pace water we've So, multiple our in innovation. of breadth and the technology the ores increase to the trying

keeps solve of that we a the of on is, point there, We're the trying I I and that what work not to solve I in point, and important that want ensures key all innovating. make we’re work specific us We're one we clear And the that for. back prioritization then we’re optimizing clear think from I sake We an trying focus sure to is make to on think purpose. problems. you to for do the innovating portfolio. with of go that specific

away. if hit fire I hope question, I So, your not,

Michael Cyprys

super. just ask more follow-up of If much Indeed, on a color. a Thanks technical I modeling issue. the a could so for

bit can in on little there the expense. Just little production walk volatility have You’ve you We production expense separate maybe just expense, mentioned the a there. commission pieces through better can three there? the you understanding a in get bit

and ratio out think If be level would Thank the that three payout the helpful. you just here you. those help from lines of the mechanics how about flush to within can

Matt Audette

Yes. base The mean as rate that bonuses right, I on -- build the production the as year payout Sure. lends label advisors' defined, the production. bonuses based base I the itself. throughout are think is

I'd where at. you So, that's look encourage one to

to that is If of, individual you're XX at XX an page each of highlight knowing idea did table, spoke months that through our release kind that the the bonus, The the about in an there in looking production pricing trailing will one going the of as the XXXX. do QX up thing remarks changes show the it's at you that that quarter. in build gives XXXX one we we today of would in base begin both that prepared increase bottom I and

So, payout, gets prepared when months I that's item growing just at about that where item revenue last throughout that year. mark-to-market in the the that's here. XX remarks, a spoke you you look it's why a gross that trailing and really The non-GDC profit sensitive offset row, or see the it’s that

noise. look the That's that's payout So, mark-to-market about line. at piece relevant to just most sensitive and the I'd encourage below in you really thinking payout, GDC

Michael Cyprys

very you Great. Thank much.

Matt Audette

bet. You

Operator

Sir? Thank for you. call over to Mr. And at turn this back closing to Arnold any time, like I'd remarks. the

Dan Arnold

you to this thanks day. operator. join their look we everyone a us Yes. with quarter. And for taking time to speaking Thanks again to next forward so great much, And Have afternoon.

Operator

Ladies for your Thank you concludes gentlemen, conference. participation. today's this and

this You may at lines disconnect time. your

LPL Financial (LPLA) 1 Feb 192018 Q4 Earnings call transcript