LPLA - Earnings call transcript Q4 2019 | LPL Financial Holdings Inc.

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Operator

Good afternoon and thank you for joining the fourth quarter and full year 2019 earnings conference call for LPL Financial Holdings Inc.

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 will appreciate if analysts would limit themselves to one question and one follow-up. 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 strategy 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 in matters in to to results the the latest timing Safe may contemplated Statements or and

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

measures found at reconciliation comparable the such the to refer a GAAP investor.lpl.com. be earnings please of release, can company's non-GAAP to which figures, For

will I that, Mr. over call With turn Arnold. now to the

Dan Arnold

you our to Catherine everyone Hi. thanks joining for and Thank today. call

a with framework, financial we each quarter drive value. this quarter, within As mission-driven and solid business Working of long-term growth strategy will extraordinary thoughtful we delivered we culture a growth. execution and discuss believe and combined another

our new fourth with a total net store rate. assets growth of review advisor to start as retention growth quarter steady drivers of in which new and sales in high markets the a sales Organic respect to growth, With to drove new annualized strength organic well as $X.X X.X% Let's fourth the brokerage same-store billion. translates quarter. assets billion, combined of equity the higher advisory with business drove and $XXX of

from ago. new net year, up the organic grew year assets at per For X.X% X.X%,

financial results. Turning to our

year-over-year fourth drive profit up to and for in with gross XX% continue solid growth year. the We the quarter topline X%

staying also focused the leverage. operating investing remain while on business on to disciplined expenses drive in We

full XX% intangibles, $X.XX. $X.XX a to fourth for a increase the to result, prior EPS, year year-over-year XX% As grew to quarter to contributed and

operate to growing in secular continue independence we with favorable broadly, towards more marketplace trends market and a solutions. the at Looking large advisory and

economic the our view spending the solid employment and of of business of and current economic terms the that many renewed of is engagement. supportive with growth drivers are In investment combined backdrop, investor and economy such consumer as core

we the in macro investing continue drive our environment, event in positions growth. remain to while So well flexible, organic changes balance strength the of business and of the sheet us model to

framework With mind, that thought investing. to some in to it on we be color strategic use would we helpful where are our provide

and markets strategic both drove our capabilities Our efficacy first independent institutional in team and was to and expanding to recruiting AUM solid traditional while we our which affiliation highest billion, over year. the levels business year traditional the models. also outcomes With of of for play differentiated within our respect $XX our the Fourth $XX involves winning our full our the total are recorded. have recruited bringing development markets, billion quarter quarter

our continue also to development the models. on make new of We affiliation progress

received and the over model third encouraged pipeline market well expect good next from our few We which practices interested it I of offering. generated highlight quarter, now our we have advisors. bringing months premium we will This to has couple new advisors. in of growing our are After feedback and join prospective the quarter, first this committed been will by

traditional time. affiliation over markets drive models look combined our ahead, results with enhanced can recruiting new performance we we As believe our in

pricing also in the in We and and continued our capabilities invest help differentiate marketplace. advisors to win to

industry lower of the been solutions continued our have in focused investments pricing commissions. towards our on retail In approach the platforms advisory same transaction years, several and trends advisory we and are past costs. secular XXXX, the Over taking trading light

success of fee advisory all our this on to pricing of out ETF and offering our the advisors. of rolled hybrid transaction transaction our we no this in the both extend We fund made on no available a ETF the solution. of quarter, part fourth to lower platforms mutual corporate order fee builds effort, in a offering As that benefit

Now an industry-leading create ability retain enhances let's play are our second our where strategic working attract to we turn advisors. that service to experience to and

client As of improvements our the making investing beginning at launched enhance of XXXX, doing and continuous program, on experience. to advisor which the to context, we business ease focused and differentiate works

two we NPS drove score our over years. As by past a points up XX result, the

care are providing their engage As client of routing we the also program, response issues. we continuing for into offering effort us, made ease This and of our progress piloting into with but client a we fourth service In system case scaling our of voice quarter, only for an care move channels enterprise-wide into development the are complex model includes the multiple intelligent our interactive we transforming XXXX, in by inquiries doing case our team management adding management and capability. to model. not a business new advisors

listening dialogues retention ongoing our that transactional management experience client remain as as and their NPS well service care that the model our to advisors results. we and focused unique hear applying service and as a industry experience, We deliver feedback to Through improve. is to on can further work surveys, from wealth enhance and advisor their to continues NPS we

In and outsourced them they on enhance grow, as how third focused independent their and advisor helping such we solutions capital strategic new spirit, is generation. business with advisors businesses. solutions, digitized focused operate in innovations workflows, are marketplace that lead Our play protect the helping

This the want highlight digitizing I to we have progress made on quarter, advisor workflows.

integration spend solutions solution flexibility workflows efficiency provide At across point, through their the automating roughly their time. because fourth the and halfway practices, Redtail. several lower benefits from third-party cost are on important we these offerings our we Salesforce and As this CRM overall component to notable the of CRM with a a by drive effectively as to is A initiative. Together, more This best of two all workflows. offerings integrated milestone all quarter their was CRM primary leveraging well reminder, advisors are client Microsoft of greater the six is free embedded of to advisors as leading opportunity approximately module foundational free XX% option where the use including a data focused for workflows. a the powered three to

quarter, Over number achieved based solution we planning this MoneyGuide two to tools integrating planning by for help clients. workflow flexibility, the the costs goals key free financial that into lower and our invest And prospects leading offering, three solution milestone used CRM past goals eMoney. the planning offerings, another our integrated this of an them. Much mean are by in expanded clients advisors most integrating that set which we to did financial turns with third-party options provides planning greater from like financial the and suite and capabilities,

This, to businesses. scalability the position digitize we practices. rest clients of primary their of value efficiency the to them turn, deliver continue work their will As to the enhance be better and workflows, to and advisors grow to will their continue in able to greater

are our shareholder and combining summary, of value. and year We we pleased serve strategy, remain profitable create focused and drive culture another to quarter to growth long on and deliver advisors term In business execution growth. financial

Matt. I that, over call the With will to turn

Matt Audette

you today's with Thank Dan. everyone call. right. And on am All to glad I speak

highest value. to we year our we long-term recruiting drove combined proud XXXX Organic reached trillion. higher our growth than three in their and and of with of our history. levels and quarterly quarters total for are at results, asset within M&A what equity accomplished Looking assets full shareholder markets This framework $X driving more

drive expenses growth to invest staying for also to on while We operating disciplined continued leverage.

reduced Additionally, we Overall, increased on feel strategy $X.X fixed balances term sensitivity the repurchases is positive good about and front, which head rates. active through short into same capital and rate the momentum further dividends. time, on XXXX. billion as deployment driving ICA our corporate we the our the shareholders interest over our returning we debt, our portions we share At remained to to results and

turn to up year $X.XX total brought $X.XX, results, let's with to QX, which a year our in It to from Now starting XX% full intangibles. was EPS prior our ago.

X% or rate. of recruited $XXX were brought total and net up to full year-over-year. billion, X.X% QX, year billion, quarter from were $XX up in growth and assets, $XX.X at a with brokerage total And which we XX% new finished XX% assets advisory our billion Looking in the sequentially a ago. billion QX $X.X annualized assets assets Total year

Looking at our business mix.

net quarter. billion trends to new assets growth centrally advisory to $X our Within annualized of assets, this total see platforms, rate. primarily an or driven Advisory managed $X.X positive growth were continued a billion XX% assets increased annualized of We XX% advisory inflows rate. XX% or by

our on results. move to million, X% sequentially. let's $XXX $X or Now was down Gross profit financial million QX

primarily was bonus million $XXX fees production $X Looking The at up offset expense. net increase the QX. fees, were seasonally by Commission of by components. partially million advisory and QX, higher advisory from in payout driven higher

or Moving driven Sponsor on million of $XXX revenues were average revenues. X% fee $X usage to asset-based transaction platforms. sequentially, and our up in greater levels primarily by asset no million higher QX,

QX. Turning by million primarily to driven average partially million, decline rates, They higher from interest cash client The term $XXX balances. X% lower revenues. cash down or was were by $X short sweep offset

end XX% of portfolio XX% up up billion $X.X more $X.X extension $XX.X ICA of QX increased program. also our to balances sequentially. at as balances. QX, duration or billion billion were ICA the fixed at This to range of balances from Looking of our They $XX.X Total and we to XX%. the our billion, ICA brought target mix into rate continued fixed XX% rate than

client Looking cash yields. at

yield points points, down by in Fed ICA QX the driven primarily cuts was basis XXX sequentially, and Our rate basis September October. July, XX three

remaining balances we a than floating which that the contracts QX, to QX effect would overall rate in was the ahead rate will Looking also in growth of October yield I lower have our highlight have the portfolio. in ICA cut.

XXX floating our factors, This client changes further rates, to we fixed expect balances. short-term around rates be the QX of our assumes deposit rate these in mix points. basis yield versus ICA no Given or

reached $XXX sales business quarter. QX at partially I our subscribers revenues on conference in down XXX the decrease also to transaction our would were approximately in ETF was growth fee million, towards conference million and no that end the was national the QX. of lower highlight by year. by our transaction of The driven revenues. launched This sequentially. end $X They following fourth the primarily Moving fee solutions, offset we platform decline which

the impact we which full quarter be the will $X by run-rate will million with per of QX revenues to estimate $X program, this reduce million first transaction So quarter.

with our to million. expenses, outlook of million bringing to starting $XXX core turn was which $XXX to $XXX G&A. in million was G&A our let's It full within range core million, year QX, Now $XXX

solutions. business to this for expanding pace year of priorities as to drive shared are we growth. we organic affiliation to faster areas our this models capabilities our and our Turning our scaling few expect investments our that to grow will on enhancing slightly plan at And advisors, investments XXXX, focus continue for we quarter, last A a year.

the we XXXX specifically, million. core million More for planning $XXX in range to $XXX of G&A are

of driving invest to on course growth. flexible will we changes respond We what opportunities are the our excited to remain based environment. about today, we see But to in to continue organic

As will a likely be similar core $XXX to for fourth QX, variable expect of be additional in to million, as offset in total by range decline a investments G&A quarter sequential our compensation. we our growth

in conference Turning offset They were sales transition $XX by higher by This million, conference national lower partially back following to down was our expenses promotional expenses. QX million $XX assistance. driven sequentially. QX,

largest we have expense as to increase in $XX conferences two anticipate of advisor we will the promotional ahead QX, to Looking our year million, of QX. around

in compensation relatively Looking It share-based flat to million QX. was QX, $X at expense.

Looking the highest awards. stock quarter our our of of timing year given ahead, annual tends to QX be the

sequentially. this anticipate dollars expense by a increase will we few So million

It offset costs. slightly lower interest The expense. down to rates, million, by from decrease $X of driven interest debt $XX Turning mostly was million was by QX. average refinancing

approximately current As $XX expense debt balances rates. interest our QX, we expect and for be will given interest million

to sheet. million remained strong was our Cash use X.XX on for Moving in and was available balance $XXX times. It our corporate QX. ratio leverage

deployment. to Turning capital

advantage organic investing growth and taking when foremost, remain and of opportunities to appropriate capital shareholders. for priorities returning M&A first Our

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

$XXX for year-over-year our billion kept authorization capital XXXX. excess to addition down share we roughly us $X two investments growth, for our by $XXX in on to our us million track to which million of count shareholders. X% drove over complete share In to This and years. returned This repurchases included QX, brought

QX, to in the also of million through million to million which In capital full dividends We $XXX total, returned or us $XX year. quarterly $XX shareholders XXXX $X.XX were share. our regular approximately capital brought per for returns

staying business strong and to assets while organic to financial to drive focused excess and delivered on capital pleased year on expenses and and are returning quarter profit, In we growth closing, another have shareholders. results. of gross disciplined We growing investing remain

operator, that, questions. please for call With open the

Operator

our And with question comes Instructions]. Katz [Operator Citi. from Bill first

is line open. Your

Bill Katz

you very questions Thank this Okay. the much for evening. taking

to through maybe like So within and you define where left your off about is? Matt, on us between how And a of the more and helps maybe spending quantify when what you you expenses. the then maybe specificity framework ranges walk is you high what that, just in Can off conference macro start were can QX? much low sort little

Matt Audette

Sure.

spending conference bit on of the there assistance from that. transition the is the a think think mean I but point, may driver So the increase. is component primary primary the little conference second I of the naturally be I

in think capabilities spending XXXX and those contributors service, that I look Bill, organic I are where really growth. were technology when and were drive the you think the we the of big helping in at areas on spending,

So spending, we are the those from in new XXXX. that and bit on. handful comp. think I a really like on categories towards and of things. scaling the models, from some more And the platforms. focused drive on on I that and are range are look when same affiliation building you pivot There the really at a business things focused we advisory the little things solutions It's of is developing And color look of think interesting variable there up range we

our where the spending gate spending things the throughout out There is year. we lay and

the are pull we macro or high have we compelling push towards the land the back we as lower investments a the range. macro in the that is supportive even end the So investments can see opportunities of of more compelling as us the towards if are we if thought, end and that And and range. could

choose how so you we on a helps hopefully give that. that And little color

Bill Katz

was maybe Okay. where wondering potentially offset whether maybe into levels, the the helpful. New That's if to sort engagement the of then I And of client balances and net a buying behavior could follow-up be cash yield? shrinkage in you Year. of to as just terms of sort just it on speak trending

Matt Audette

Sure. Yes.

as we January so we what think what February, But release in color you I of will have kind metrics far. seen we on know. have, I some think

a As market I think up. we expect have that's would seen what in you

in strength assets increasing. we assets So have and seen

slightly cash saw some days December have We seen market. that in say, I down February. I into in would or upmarket it, January in the the versus see you we but also of have call would will go customer give seeing But that and as we cash a sweep we grow that would is, metrics December. what I you to would back got expect couple I it, in classify to again, go are an say that of we

Bill Katz

Okay. Thank you.

Operator

comes Thank you. And Research. question next Chubak our Wolfe from with Steven

open. line is Your

Steven Chubak

afternoon. good Hi

don't start outlook. why Matt, the So just a with on ROA I off question

well some know ROA, that channels advisory as in managed relative strong peers. profit of centrally assets. as another better historically especially translated those into have growth gross to of had You your quarter I

more we recently just line, at This saw bit of where the resulted we and pressure least what have quarter, a relative components hoping on unpack little in maybe to contraction? that seen was that some

Matt Audette

Sure. Yes.

movements. driven the some all transaction and that cash right. revenues are you fees revenue by is when in quarter profit right. nice year, and I think the at up year-over-year seeing or is QX last like at even growth market Not there, But gross year-over-year, client year versus year-over-year. themselves. are up can movements The look metric, when streams look full The quarter create Things we year. asset there whether the noise, you XX% the X%

in So were markets look equity what They were large. happened when up QX, up X%. pretty at you

full If you year, look were at the they XX%, right.

you So are metric that, and definitely when streams noise. driven at all when market for market movements increases some the good while business, can it that revenue create the look not are by

you effect, the drop look opposite you there. some the XXXX, in the see saw of When ROA markets, we a end had you Now right. when at increase

can metric highlighted. keep in that all that market are having noise are just the we we that when even when at from a that looking there you will I particular drivers quarter you be So are mind in positive the

So any there add you Dan, to maybe if is that? wanted color

Dan Arnold

No.

math the shifts. to that, you add these continue strategy I advisors. you we is, positive value the thing mix only do focus that add think got create respect right. we would And And our to to trying where see our I with on and to

So value and managed you advisory. associated transition the where centrally the mentioned, or that risk an you corporate advisory seeing as outsourcing of, towards example, see, with as are you the even our platform

I we creating higher. help that is on focus to recognizing adding will, so up you value, continue drive those And and that which ROA if that's is think what will controllable, trends

Steven Chubak

just organic And it. growth. me follow-up Got one on for

Now really it's at a continued healthy clip.

share are taking to as your speak growth organic look in that's digit How ability levels the of was we I And terms IBD evolving growth maybe XX%. opportunity. sustain hoping Your confidence of IBD single within channel? market you assets the to to mid ahead of could XXXX? north pace them the

Dan Arnold

Yes. think on. our the center dead And is you It's know, of great what a question. focused it's strategy I in

three We do that. is to driving fronts think three an organic time. aspiration on of upward I or growth and over And have areas about focused think which back strategy we that our over to

sales. we up over year. quarter, over was I billion First, you year here of have got billion in which billion $XX have $XX $XX sorry, prior AUM right. the recruited momentum, fourth good store the mean new in We full the

business and help enhance us improve capabilities you opportunity year-on-year. team, the continuing believe efficacy And growth good differentiate. we see is further new our of developing to development by So that there

in drive add you continue new then our in participation broadening up models in our movement significant sales. a affiliation combination creating store new of creates traditional where in other advisors now overall a across And channels. these participate more complementary appealing markets. way to marketplace you our just That model opportunity are recruiting able creates more think to that continue that enhance to the to by the to We to

think, second, area the see of area retention. in opportunity The we of is I

show there. continue to results Our improvement

us reflected years, XX.X%. improve over as good believe look of XX% the And to good gone a last trend. is is There That's continuing run We the right momentum to play there. from two up we the second experience with you increase to service our at numbers. strategic years. to again, If has last that that experience gong if continue over improve by score our in NPS couple retention the come service improved retention along

we focused our this so year, of on new model. are And this transformation adding service

to already with You we our interesting add policies and you improve were opportunity that an enhancing around which we the enhance over and procedures, doing time. baseline end up, retention think, work improving technology, of to

to get steady our you ways to category consistently we We last the is have help the advisors of challenged innovate wanted couple increase that which And be same-store the of ourselves over sales. growth to and area better then has And new to that last been practices. years. look, of their

their we to with businesses tools So solutions they lever we grow able new are this working are business These help to do ways all and focused they which the think advisor is heighten really are to same-store probability sales. their on, help that will go that capital transform them how advisors operate a deep that, as digitizing we to where on are of solutions workflows.

you put encouraged over capture multiple all of sort of when growth those enhance time. that to continue NNA improve and the to are organic our opportunities orders together, So, we by

I helps. hope that So

Steven Chubak

Dan. comprehensive answer, A

questions. for thanks So taking

Operator

with you. Blostein Sachs. question Thank Goldman our next from Alex And comes

is line Your open.

Alex Blostein

guys. evening Good Hi.

Another follow-up around expenses.

margin comments macro XXXX. steady meet objectives your is when way nimble the around XXXX? still the being responses guys to to for and you guys it on the you environment So in stays guess Matt, described expansion the from growth your organic to reasonable you But expenses assuming and I anticipate comes appreciate EBITDA environment it side,

Matt Audette

of I Yes. that factors a lot I there impact mean think is Alex, that.

focused I a us, driving for on value I over on long take step the EBITDA back term. we think are when the margin

you three, when look ago, our margins were the in XXs. years I four think that low

year, XX%. If in you this call at look it, were they the,

had we expansion So some nice there.

I we investing on on long term. focused the think organic are growth, when are for focused we

quarter bit So margin have I time a investing saw of where comfortable for I are periods place think are a of in if term think we EBITDA step you take we little staying where where you long like there on back growth, margin. short are you this a healthy

the lots in is there. that, confidence long factors predict. our impact hard so different would of think could that to Near I that be expansion term So term,

Alex Blostein

on business or on Dan give us And the business you of Got of could I it. enough. things, initiatives Matt, update side some stand. the an Fair was then where hoping either guys service

last of year. I think handful rolled there's been a obviously them out

the all revenues likely this I through coming to think are year. start

of kind frame revenue be maybe for So us that meaningful how this contribution LPL help could year?

Dan Arnold

to think I make sure. you are solutions. the And Yes. to business want referring I just

Alex Blostein

Yes. That's right, yes.

Dan Arnold

Terrific. Okay.

start certainly, yes, Matt, maybe add will can you you any So and I like. color

year with a to So ended the look, fine it, point which was up XXX over the subscribers, put we XXX year. on

that's see I there key were year. to the hypothesis solutions opportunity sort the really a see value positive point of from and that adding to The prove that's think intended. trying that really is last we what resonating and think the an build being that experimentation were are and And the trend. advisors value our we overall I proposition we with as interesting in

that demand for build like as way. were infrastructure a if things thoughtful drive for foundation and awareness on automation solutions. minute, about Think that dedicating the were the a effective a we team to efficiency the to where drive the and in quarter, scale developmental to or drill we and sales think really I you move down in in phase to specifically still fourth we continuing

do move well into to that as more move we we to we sure operational this as phase And so this make think XXXX. that's we important

of grow spend clients from practices we comes their operate So the value businesses. to free with I think helping contribution uptime time solutions, their the encouraged and as you these by advisors that at existing are look

are So trends from that using today. coming these seeing we are those positive services

new are We appeal are they that also model. it solutions seeing add overall and help attract the these unique of advisors the to

And we finally, gross starting then contribute to start say, to profit. as it see, you are to

and of to so, a think we operational focused phase these remain year. of we And scaling. began in on ahead, will moving focused out transition what we And more developmental from as growing to I that phase we an more look are call really on I solutions make this where

that hope I helps. So

Alex Blostein

Yes. That helps. Thanks.

Operator

And our Jerry next Thank with question O'Hara comes from you. Jeffries.

Your line is open.

Jerry O'Hara

Thanks. Really just one for me.

Just recruited kind supplemental and pretty of trend your the over has looking at year. slide sequentially the strong been assets, the past

if you Just guess elaborate I maybe of a little what's broad Thank just or what's or those on drivers bit curious a a from general, just could resonating you. what perspective. some working from are

Dan Arnold

Yes.

are macro and kind So recruiting pipeline. good we environment making we progress sort headline of itself maybe me maybe a a that is of we that feel and level the let our take state. find in from about And the the solid then

those. me a of let you little So give maybe on color both

we see remains environmental the continue obviously opportunity. strong an creates that and From trend standpoint, to and towards independence

of stable. Over of been level advisors their them movement that the the see year, then finally, independent to rate space higher help will in has capabilities I in continue last advisor relatively of the think we And businesses. run search

see or solid up is we trends those so would again environment. obviously pretty And what a make

continue we are and that our advisors differentiate meet approach the searching what of for. When you those look needs help click space to opportunity more to capabilities independent add at and the set, us down that in

stable I addition, platform. think have in you very a

And and so of is very appealing. the capabilities stability combination

how With that team such that and respect development that enhance to also capabilities our business the digitize rates. increase invest into our we opportunity team this and of continue we and could of efficacy stepping win automate to group and and

that's leverage over there new so team's to great they of tools to the their strategy to do and new work. how our make continue and XXXX element done part add enrich And we capabilities continue job a and progress and

we And cater greatly opportunity channels. other search that movement in I models these channels, model were to where coming to the create finally, then we new opportunity appeal see to who think we the right. about these independent other advisors the is in out affiliation really and of haven't those think to participated other And of have an of channels, in advisors

affiliation then And models, later in to market the in so one with year. go those market respect to to we this ones second will one and market, we quarter go

to We are receiving the recruiting proposition our efforts. to encouraged associated expand continue we with to those good and with they feedback are value our respect that ability contribute programs will to

So the feel we in as a our forward. nutshell, good about and results from year pipeline move last we

Jerry O'Hara

for That's it helpful color. me. That's you. Thank

Operator

next from our And you. comes Thank with question Siegenthaler Craig Credit Suisse.

is line Your open.

Craig Siegenthaler

Thank you. everyone. Good day long evening morning It's been or here. a good

update So portfolio of timing the just one, behind an the first on and migration to from maybe the floating fixed. on

Matt Audette

Craig. Sure

floating We to $X we meaning we billion opportunity to bit little a potential from moving the anticipated, year. I ended in fixed of earlier So think fourth had billion quarter. if that over we ago, you look at, move talked about than a $X.X of up the quarter

that of what of of it. year about rate And we is think the most think rest the probably the towards coming say I this quarter the to was So about number more were really contracts second given the half a round good another would that floating opportunity, term way $X acceleration billion and up. it's moved just near of I

Craig Siegenthaler

the specifically assistance. update eyeing then Got on it. transition I and just quick front a recruiting the am And

amortizations the the model the transition for cost And we amortization think over should year? were XX% assistance full I how year-over-year. up

Matt Audette

Yes. Sure.

really standpoint, are a we from Craig, changed. market I in where assistance transition think hasn't

is although economics individually. that every are year are similar. The deal the pretty zone, underwritten we So in paying amortizations five are the typically

the right. level have throughout the to that I fourth a build that the just going that and $XX.X call primary year this think strength with in the billion. So about be And on the talked recruiting we being little recruiting I increase driver is quarter of already think itself, the of

So that's probably the rates of of been the the primary timing have consistent. amortization driver pretty of the TA and

Craig Siegenthaler

you. Thank

Matt Audette

Sure.

Operator

with you. Chris from question comes next And Wells Thank Harris Fargo. our

open. is line Your

Chris Harris

guys. Thanks

expense for promotional in year? can a large that So has third quantify question. be few is, affecting first there of of if quarter revenue part Or will that there you the some another That's us? this that talked that the conference one be you conferences in And expense? forward there Part QX? Shouldn't pulled to quarter. the about two, are the been offsets that

Matt Audette

Yes.

quarter. you almost our year about that. to always when conference third no is think Chris, is in the change So of largest conference, the There

three QX to other Our two that fees. the and typically the and happen Those revenue one and most one typically is be the in QX. in number it, transactions QX both two with associated happen, conference in the just meaning in That happens happens has QX.

little So bit a two there might with the in associated but are QX, not happening much. that be

Chris Harris

you. Thank Okay.

Matt Audette

Sure.

Operator

Thank you. JMP from question Devin with Securities. And comes Ryan our next

Your line is open.

Devin Ryan

guys. Hi Great.

Dan Arnold

Devin. Hi

Devin Ryan

Most to your cash. asked. just client wanted on I been ask one have

a guys in up You nice had the year-end. step

We have guess does year-end, curious, was seeing But starts? from that as just you typically well. some money behavior it year typical where there seen are reasonable. beyond feel the Or net like that flows still and calendar kind that just buying are of I others now what back we seems once

obviously given So to that a unpack of kind that just trying a positive bit it's trend. little

Matt Audette

Yes. Devin. Sure

would we what expect have up what think in in market. is seen January you So an so I far

There slightly far still cash of say two or so just balances are think go I see respect you or data far would down left the but into is slightly. days to down market. to so are So that in couple is cash get a is of cash some starting January. cash, I to one with back headline

Devin Ryan

talking I now you then allowing position affiliate one a or are just just probably typically, increase And like? of kind any you follow-up to approaching affiliation LPL moving option specific some them for to of kind of options Okay. hoping the you am are you various options. in maybe are it evolve presenting how newer that approaching are curious would are will to to advisors in When firm they of I terms quick advisors, as forward? going affiliation the Or Terrific. option? as understand affiliation but the

Dan Arnold

think about actually their And different an affiliation when to new be which them to of you that that the Yes. for could them. be that's business, offer to work changes a can their easier efficient evolving think within this allows them by more business which and would be here as firm see much best flexibility something much they are staying the platform. on advantage ways have to or way to to and that that to them while recruit continue We about able in their

we mantra best available of can them. them and their our our are flexibility So to it. they the which they how meet ones be in have the solutions practices alternatives for to of them is, decide we That's evolution and should whole see and where

Devin Ryan

Great. you. Okay. Thank

Operator

comes you. And Thank question from Worthington Ken next our with JPMorgan.

is Your line open.

Ken Worthington

Hi. and Good evening thank you.

advisor or at further, couple are management firm things. last consolidation management companies wealth and think A interestingly, through say, one, increase broker quarters? Maybe more flowing from cost are seeing is the your in space broadly. We of more the recruiting seeing wealth at hearing of this the all I level? you over valuation maybe couple to the

Dan Arnold

Yes.

add Let you can me and any start color. then Matt,

valuations, So seen activity I as pretty the places upweight you we it in that say, marketplace. in to as think last and different the might seen steady think we we have definitely year And about I out where we opportunities describe over with have respect the explore. them, an think I in

and is from sense Our operational it in discipline, the and that as at standpoint. makes you make deal go a financial a sure know, and strategic, always look

tend we things. around to a how think so about rigor we good And those take sustained

within that places other M&A I activity may does we makes stay still of where an three I the will And lot where There's acquisition lines. it we find And those places really not. think value what where strategy marketplace? interesting that think some disciplined we sense across opportunity. a where to are relative the find there that mean occurs

We opportunities a are like and we as and transaction. continue acquisition like did look capabilities Allen an acquisition solution to that would call and Co. from what that relative as for things the we well accelerate our advance AdvisoryWorld growth to

opportunities. have to selective have you proactive are there. exploring and think you got to got you be that out think they in have and But got look So we those we to be

approach. we to of with to Relative front acquisition any on the relative the respect acquisition any to the recruiting really the or see don't recruiting correlation tie cost front,

is I a down level. at advisor consideration think there individual the fair

don't practice advisor practice, how a level. necessarily another it might that. that correlated we an the up If value see you acquiring But you and are practice, about higher at think macro

Ken Worthington

much. very Thanks Great.

Operator

Cyprus And our Thank you. from Morgan next Michael Stanley. comes with question

open. is line Your

Michael Cyprus

Hi. Good afternoon. Thanks for taking the question.

Just could that's curious an the M&A how in happening some to custodians? are those industry RAA in the get thoughts you and that opportunity set of of larger some the pure your RAAs offer RAA what, And given space, be value put on your key view, that some thinking versus proposition could what RAA about LPL be for some potentially attract might to the of in the advisors would motion? assets

Dan Arnold

Yes.

think is in So that space. do advisory that opportunity pure acknowledge there one, we I

One our capabilities to the the And you are on on creating building differentiate relative affiliation practice, now and see the that the just is strategic RAA-only support our I solutions. all might to to a down way solution firm. play business practice what that call an everything right capital to of supporting from models building where XXX% more inside providing we are is opportunity we are capabilities focused that that digitized number three we workflows,

that that second we have risk the own be to us can solution them provide an we to opportunity allows be think or that is I RAA-only outsource their RAA. and a

that platform, their inside then believe versus overall And integrated to think by RAA leveraging both technology think integration is that differentiated we those, able itself available those integration the the creates we of vertical we mean crosses to So we to manage custodian platforms, that creating What vertical certain are options. own outsourcing as place an on risk choose infrastructure having think is continue that they some fully the us we and solutions and about the of can to make well advisors, advisory both we another advantage. our flexibility in our that to is support optionality to how being types differentiate. I being as investing would as innovate

be areas. primary the those So would

Michael Cyprus

Great. the And guidance. on ICA just maybe yield

said points quarter. think for XXX basis you the first I

extensions? you today are broadly rest the around and just Just curious about speaking floating assuming thinking the maybe trending reinvestment new then of that rates? and rate the curious yields on the the what are And through stable how fixed fixed year or

Matt Audette

Yes. range mean floating you rate cut basis as as typically in at funds points, of driven you I call the get I the of it, the on are just you where QX by guidance XXX the on see, I now, XXX and basis where rates think full I the currently. mean low for that's the just would of market. right quarter of zone Fed October kind XX end premium the in kind point well sitting effect around that

On and the seen few the out we side, have a inverted I fixed think even flatten points. curve

So on lower day. side, are you the on any that or rate given probably think at fixed I actually level

of have lower. We put a typically deposits five-year our bit little the curve be in and plan those would the

can think view XXX guidance of the take will year, our I just for first time a move things I that. one the the that But for given number quarter quarter. we rest at is think the that of

Michael Cyprus

you. Thank Great.

Matt Audette

Sure.

Operator

with we from Thank you. question And have William Chris Blair. Shutler a

is line open. Your

Chris Shutler

that was segment. afternoon. guys. how I follow-up Hi should the it's economics but to affiliation about I Good know A model? in the think we RAA early, curious, LPL on

Matt Audette

on depends affiliation definitely side. I It when you on about there. obviously back get that's Yes. you our Chris, going to advisory early. this to think ROA, I think when all the mean be primarily

little focus but advisory the bit key returns on. So are I think to it's earlier, the probably area a

Chris Shutler

on let's is advisor to profit in give quarters tranches on get in a like brought gross ramp Okay. years the versus sense sense there brought to ROA, on the comparing any way loans big And platform really timeframe. advisors recent see, Just a profit us two looks ROA advisors Matt, for what to similar the before a today then began? using the of the a couple those trying and ago recruited gross assets

Matt Audette

driver going be mix, mean I Sure. to I think right. is the big

So platforms mix use. have it they that depends on they and the asset the

way you best solutions, think say brokerage point point basis of is And is, advisory basis dollars going range, there. low dollars range. essentially using basis are point low the XX that you folks add in are right. then dollars, start I four And XX even the that's be it range, in to low five up using platform, to in on XX to, the our you managed the can points about advisory basis think all to from business them, are

the the So depends it really they use. all on of mix services that

time. time long the that over gives versus mix I I where think think more how a advisory, it's a back ago, go asset changed of was sense brokerage you you If

Chris Shutler

Okay. Thank you.

Matt Audette

Sure.

Operator

time. Thank remarks. for I closing further you. at would showing am to call turn Dan to no the this I any And like questions back

Dan Arnold

Yes. again Thanks the for Catherine. taking join we look us to And and everyone with time afternoon a quarter. to thanks to this Have you great next speaking forward day.

Operator

this concludes gentlemen, and participating. you Thank for conference Ladies today's call.

now You Everyone day. disconnect. may have a great

LPL Financial (LPLA) 31 Jan 202019 Q4 Earnings call transcript