LPL Financial (LPLA) 4 May 182018 Q1 Earnings call transcript

Good evening and thank you for joining the First Quarter 2018 Earnings Conference Call for LPE (sic) [LPL] (00:00:15) 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 would be opened for questions. The company would appreciate if each analyst would limit their questions to one question and one follow-up. The company has posted its earnings press release and supplementary information on the Events section of investor.lpl.com. as forward-looking and statements results, other and as include future LPL business may potential plans, expenses, and revenue, financial well call statements, management about including Financial's strategies risks Today's that opportunities foresees. other and operating reflect statements or estimates risks current subject actual results beliefs may uncertainties that management's cause are to to forward-looking Such and and differ materially. and that to to the or or in in cause press from release contained appreciate financial Safe the filings those statements. SEC factors disclosures listeners the Harbor refers operating latest company the may matters The actual timing contemplated those company's to forward-looking earnings results such of differ

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

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

call. Thank core we you, about executing XXXX the strategic Altogether, and thank everyone excellence. quarter you of with on to Sanya, NPH advisors, progress joining assimilating good and onboarding with we business made our financial generated growing the focused and growth. We quarter. results the we priorities feel another our We first began business, of and and our for in

It provide. quality of testament LPL model the marketplace to retail advisors the service now our that the in Their among recently leading was advisors. by found they in appeal business turn our solution recognized Cogent. Let's the XX distributors. third-party This net business in to results, our starting clients differentiated with is a a advisors first ranked loyalty customer study and the of

the and and the assets. from of quarter. $XXX growth Assets, combination organic fourth Advisory or from This the and ago, quarter Moving NPH onboarding XX% with up driven was a finished X% Brokerage by to a year billion we of

was This $X.X rate. advisory new net growth, or primarily assets new net assets billion, more of growth billion. detail total organic at annualized in $X.X driven Looking were by XX% a

assets to January. NPH. On XX% result, in supported our the into went was effect a platform, now that XX%, total advisory by of changes As are strategic our advisory growth pricing annualized corporate assets prior

Additionally, centrally as quarter, portfolio our advisors billion services were to scale business. nearly $X to inflows managed this outsourced continued drive into their management leverage

drive we our Our contributed $X with billion as quarter recruiting consistent platforms. first advisory, net assets of We while first to are these assets, of and XX%. in recruited utilization efforts new centrally corporate, retention production results our greater to quarter, was managed the believe strategy our approximately

Turning to February. NPH, who we in had the second wave advisors in net quarter, new this by driven of $XX billion assets primarily onboarded

approximately up Looking total the be and quality assets of to at our waves leverage the them new billion advisors of we they assets have billion. $XX excited net together, both and expect advisors, services. attracted $XX opportunities support to platforms continue to as we and X,XXX the to NPH from We're and added we about

will that new we identified opportunity either recruiting M&A. Additionally, advisor in capabilities, during or acumen, strengthened M&A areas our enhance acquisition, and created our of future this onboarding,

our trailing year-over-year, financial advisory XX% to driven increased by leverage growth Moving Gross quarter. growth cash and profit to in in the and continued sweep. fees, operating sponsor first results, double-digit we revenues, drive commissions,

straight second they to NPH, commissions for sales were quarter. sequentially prior up As for the

greater to depth. year twice nearly which this a of EPS We from review our our financial is disciplined performance $X.XX, on combination in also Matt level will led remain ago. expenses,

as organic remain by opportunities as focused reviewed providing on differentiate growth, have that organic financial respect our results, growth, pricing. on growth. advisors the enhanced well are and that exploring we our with discuss helping to and I'd Now to With operationally. with them focused business marketplace and core capabilities business us align with and win strategically, competitive financially, like strategic starting in driving M&A we priorities We

capabilities, to their enhance their tools to serve at growth. specifically advisors contribute more we solutions Looking continued and to and our clients help effectively

available their reminder, and a roll hybrid our our impact the to lineups as NTF offering be we clients. in rolled most by This similar fund management both more we summer, the on neutral advisors greater capability be compelling cost will help corporate in to platform, it solutions access over no-transaction-fee program new to we mutual the competitive drive sponsor network and be expect lowered of a we In mutual term, lower mutual for increase roughly transaction our solution plan a anticipate fund and fund appeal will believe is marketplace. This on management, NTF near This offset profit. XXXX, one for revenue, our time, network. will we a flows. the clients gross enhance financial As simplified the of but us, this active advisors or expect retail can of platform. for out the active increased for NTF and We of out advisory revenue which of

Let's next turn to pricing.

changes in years, few utilization of extend outsource growth this we assets Building platforms. have advisors contributed lowered we costs the their for portfolio January on centrally to through and and will outcomes, greater advisory these platforms. management XXXX, to corporate these last the managed have strategy. our and on These risk Over

will can we temporary a to to advisors to our including corporate transition will in cost with the to the more additional We million for strategy, recruiting this assets. with in assistance. effectively quarter, continued We increase outsource management believe risk million innovate now corporate us. $XX In also platform, assets lower platforms more advisory our as price attract the of $XX advisors first

over and more As context, make our structural valuable. competitors, our platform a advantage the assets combination have we scale capabilities as on our of self-clearing

We also positions organic invest strong a that sheet have to in growth. us balance

financially use practices a generating of on services. compelling result, testing temporary staying approach, increase impact more would disciplined With As for our investment. transition while in that are return we assistance this a the a of we are recruiting advisor

While we our growth. will in believe future are this organic contribute efforts, we early to

with second excellence. Let's priority, turn strategic now to executing our

technology increasing clients quality the and and do of for our it easier on focused and making to are We us. business their with advisors service,

technology our where We when initiative, service simplifying model are and relevant clients to XXX information and need days enhancing interactions. it. of and launched of our ClientWorks wins procedures, and timely interactions, friction with take goals focus, provide client out our improving policies in our service and XXX modernizing we with platform, the Aligned this

enhance like in execute over expect by a introduced For will trading necessary experience we to of more these operating XX%. our to support this and can these growth. other that effect advisor's efficient million our to steps support long-term invest have compounding example, $XXX simplify reduces experience, year trade time, initiatives. we April, and technology a wins number over in a environment, the that plan Over We

a closing, would to topics. update Before on you few thought regulatory helpful be it I

read have settlement First, framework. blue you may our about sky

matter with small As funds, that issue vast business, this income of of not a and matter. fixed related part a our is including transactions, equity insurance, mutual represent control business. annuities context, this is The in individual issue listed relatively exchange historical which (XX:XX:XX) to certain securities, and majority most our

any which Matt compliance will about are seriously, to this think We investors compliance are our offering we us how matter. obligations remediation and invested this affected. We management helping address focused have on our cover and take have who capabilities, now to been financially. in may risk

brokerage turn best vacated, let's rule appears the brokerage accounts. interest for to be introduced for for Next, fiduciary fiduciary It the the SEC standard will accounts. a has standard DOL likely proposal while a

rule, we reminder, in both for a the disclosure DOL standard care believe and In As choice. and product accounts. of a implemented retirement taxable across operational brokerage changes we preserving many preparation and our for higher platform,

their and the our differentiate outcome rule. their As to well-positioned the support a result, of practices, of clients are we SEC believe advisors regardless

their standard. and they progress with to will We a interest our as prospective provide actively work SEC insight, on best the continue

Finally, reduce proposal broker-dealer oversight on to responsibility activity. outside advisory FINRA a issued

hybrid about a million to our RIAs outside We oversee choice. offering to how and corporate both at Strategically, a financial are costs. operate those preserves enables a which of only their their have well-positioned the From they are of rule, serve of $X and also for assets custodians, annually practices platform charge support supportive we our and $XX we billion concept clients. hybrid advisors, as advisors choice perspective, this and

serve have for of to year the because final Irrespective time. timing, to rule not In rulemaking of an excellence. continuing Matt. value. strategic business advisors. and to are on We FINRA priorities I'll our pleased period growth provide As well of with our working committed the to and quarter a With strategy choice this plan for with to We our regulatory extended that, growth. the timeline, long-term may and summary, business of focused to on shareholder and drive and another positions we're us over comment matter advisors call and process, remain to turn create start our growing profitable with the we our we believe support core earnings public executing of

today's share to QX, nearly a Dan. good ago. in everyone We with on the you, call. I'm Thank per to And year earnings glad had start year speak from doubling a

disciplined leverage. We to continued drive profit, and while remaining to expenses on operating gross assets grow

a result, intangibles As prior QX EPS was $X.XX. our to

our $X.XX. at prior EPS look to to prior we if results was intangibles Additionally, NPH,

We financial year business strong with are a to and the start pleased outcomes.

assets, equity billion, onboarding, net Advisory net Assets. billion in results billion assets $XX new quarter, NPH. the We billion new to including or up sequentially, were and of NPH markets. by Brokerage Let's $XX.X at greater by and offset billion $XX now from $X.X finished driven with partially our organic quarter business the $XXX go Total lower organic growth for starting and X% depth,

increased rate. detail. XX% billion assets organic annualized corporate to This were $X.X at totaling or advisory, Now billion assets inflows advisory, from our of or to on $X.X look our total and annualized growth advisory brokerage let's conversions NPH more the were rate. two-thirds new an XX% assets. $X.X billion prior Net advisory included in to in of a XX% Within growth platform,

a gross brokerage results assets rate. time, highlight more managed to to trends for $X.X moving over centrally on more platforms, advisory, advisory, These and within profit on our return inflows and that platforms. As converting three positive managed assets our centrally XX% annualized billion corporate from assets or increased to benefit

we our as pleased and quarter, this help with lower growth. price drive capabilities the are progress and made investments We enhanced

NPH end from to and $X.X QX expect remaining we and back of $XX included assets of quarter. up of total, transfer, from business billion we we new continue $XX.X to billion assets have some transfer second through that X to net results, to we QX, brokerage, In onboarded $XX.X billion the our of advisory in Wave as expect have brokerage billion total assets. to direct Turning the

$X.X to assets seeing $X.X also for convert our conversions from to to brokerage QX. in bringing are the begin with quarter, billion NPH billion We first total advisory,

to Let's major from QX increases $XXX Prior across It turn next or with of all million was our NPH, up was million, gross or up XX% sequentially. $XX $XXX $XX to million, XX% gross profit. it categories. profit million QX,

Moving Sales payout slightly, net by to QX. $X it rate points, increased to expense. to commissions, two which asset were despite $XX NPH, increased Last they a our increases also to reminder, rose $XXX fees, about by year, in trading million along driven trailing increase QX. fees commission sequentially, amounted $XX million or in which commissions levels. of payout. from XX% up seasonally than sequentially. And production higher XX% as were average QX a primarily fewer and to Prior or basis days prior MPH up XX and QX, They million advisory million advisory with in

by the increased to and January, reductions lower covered, million which went our commission last $X we Dan in corporate effect expense the pricing about into price and Turning first year quarter. the advisory this platform announced

advisory We positive as the are nearly XXXX. net results, at in are QX they rate were assets growing seeing corporate double new

a and January, we production Overall, this quarter. driven as and The reduce we in faster by that our million increased As will change. our pricing note, platform our payout, rate, component it per gross by will compelling, more is highlighted a by bonus go of for which initially change is about pricing corporate even about return pricing $X XXXX benefit the assets. payout on pricing will total estimate basis payout a gross bonus next effect at points, this reflected that quick Dan into profit change grow Year-over-year, an primarily rate profit new make lower believe rate. XX increase

cash levels, and million were sweep asset-based As sponsor for from $XX sponsor fees, include primarily contracts. revenues which $XXX up favorable sponsor as by as repricing QX, driven higher revenues, well our within million, asset

in down as were higher as X.X%, QX assets or in was having finished the overall $XXX driven XX% $XX They as yields. sweep rates interest as revenues. highly sequentially, lower percent cash by our of investors short-term well market, primarily remaining QX. cash at This than onboarded, million, as Client cash our assets million level to percent Moving from up X.X% assets QX that average. a NPH engaged of increased a

our from rate Looking QX, at March yield the yields, basis XXX benefits ICA points QX up cash points, basis sweep from by hikes. primarily driven and XX December was

As our think about ICA of April, into of a rate average. or about in will to in went remaining we have X we equivalent QX basis hike, that beta XX% an client partially March effect yield, benefit by the deposit offset on the rates increase points deposit

yield will increases rate changes in to interest rates, anticipate our mid-XXX-basis-point ICA our the we deposit or from range. QX be benefits further no Assuming

fee or and $XXX driven two primarily revenues, were sequentially, by transaction QX $XX to on XX% up they million million, factors. Moving

is for QX and volumes seasonally transaction both fees. better IRA First,

elevated, was volatility and in February, that high especially led and levels. Second, transaction January to

detail, QX sequentially, million million. up revenues Looking at increased IRA in more fees $X and transaction $X were

ahead seasonal decrease IRA QX, would a expect Looking fees. in to we

in for to March and April. As normalized already we saw volatility, return levels

those see levels to return we to QX, expect would also we if levels. lower in revenue transaction So continue

Now core of $XXX $XXX costs. G&A NPH starting NPH, $X In turning slightly onboarding and million with down from Prior NPH to rate including QX. QX, to $XX run expenses, expense of core G&A. million, million G&A core costs million, was was

increase to over investments continue rest the we core to QX As planned. expect NPH to ahead the look G&A levels we our to year, as for prior of

rate As for per run from be quarter. NPH, about to $XX core G&A expect our we million ongoing

some of expect have through of will to we the the costs $XXX to $XXX Additionally, remaining G&A onboarding continue NPH for rest million Altogether, year. million core we XXXX.

QX down or Prior They to XX% QX, $XX $X on sequentially. was were sequentially. million or $XX up in expenses. $X NPH million, costs, promotional Moving promotional million to million X%

for cash driven onboarding as by loan primarily promotional $X As $XX and NPH million, forgivable of costs, million well they as costs were amortization. assistance,

driven Looking our assistance, recruiting be primarily depending by to NPH, success. ahead QX, to prior will our expense level transition varies quarter-to-quarter of promotional on which

about major we we advisor our increase expenses million, held in our one as to Additionally, conference expect $X conferences of by April.

promotional expenses, to the primarily NPH loan expect quarterly forward for rate As we driven million, approximately run be $X going by forgivable amortization.

million the $X we totaled They for captive million up quarter. sequentially, by insurance primarily in last expenses. regulatory driven to QX, that $X mentioned now Turning increase premiums

to Additionally, as terms general legacy agreed Dan said, on state we a with regulators have matter.

years, costs majority difficult makes a company client We next reminder, inherently captive that be expect insurance the of our existing these nature work costs few cover will be covered the affected. we plans, remediate as may we transactions to to the by them to with spending predict. our of some expenses any along expect over regulatory as And within

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

in million the quarter, the timing prior up of driven by was annual compensation, $X it share-based $X grants. to QX, from Moving million

anticipate will QX. be to level our QX ahead, we similar Looking

QX. of million per half to rate to was $X intangibles in Turning amortization of starting from recorded million second December. of continued price about in in $XX NPH as the it and purchase up QX, we sequentially, recorded We $XX million the intangibles, in quarter, expense the run expect first half QX, we the

short-term expense, million interest it up interest by $X for rates. As sequentially, was million, driven $XX increased

in to Looking (XX:XX:XX) ahead, sequentially, late rose LIBOR million debt and we QX, to floating million expect rate throughout increase rates our March. $X QX as interest expense $X repriced

taxes. to Turning

of tax expected in XX% matter effective rate and XX% our This which prevailed. because option of range items, state exercises is discrete two XX%. a we stock to was Our QX below

to of still way for year. tax forward, range a XX% the to think Going of rest about is our best the XX% rate the

is our now Turning and which prior onboarding to run costs EBITDA, rate assistance. cash to financial NPH

transaction together, $XX then, these hikes, of estimate accretion declined. of time of but assets annual based of has Since at increased, rate prior Taking a million the macro we've estimate $XX August. factors had we rate Our the and rate was run run has environment of the the million. S&P two annual EBITDA as now cash percent EBITDA on last

expect rate by $X an on we we year, annualized million to timing, of million for the to $XX end rate run generated approximately and As continued QX, the roughly the run in EBITDA reach basis. of or

Moving on to capital management.

remained Our QX. balance net $XX sheet for times. declined Cash $XXX million, million was up corporate strong in leverage as use QX, to from our X.X available

QX, regular in of We to twice in advantage opportunities taking our feel $XX investing and deployment returning capital they repurchased of million quarter. growth, in M&A good we shareholders. and operating if financial shareholder and capital We the million also business amount and We In please dividends. and on QX, disciplined are $XX closing, priorities And about remain from we another growth paid deploying organic gross remain: open quarterly shares to have approximately drive our for last and create With delivered on of staying operator, leverage, questions. the strong results returns. quarter in to focused that, QX. to expenses capital for pleased assets arise, call growing profit,

you. Thank

Our first Steven question Nomura comes from Instinet. of Chubak

now line Your is open.

Hi. afternoon. Good

good afternoon. Hey,

have some to off wanted pressure Matt, your on cited higher some cash of on yields competitors on a given pricing question deposit signs early upward just beta, start So, with alternatives. of

I'm changes recently. your like then initial about two we a And the money your still caps, I fee as new on to know caps DCA rates How highlighted exceeded should the items those think their market you and yields ICA had guidance retained well? the of XX% reasonable You've looks terminal wondering is term. if XX% separately, end? at just expectation XX% to just medium beta, that it that

Sure.

we've I probably XX% this still at you view. right. had beta, hikes So cycle, in think our think think it's the look mean, played I expect, I I when that's think as XX% would one on out I six to the

bottom, The hikes, then last to really think first didn't few three were move coming move you over as hikes folks people the I seen folks off the start most – up. and you've

So sense XX%, we any have any this for and to think most different seen on think I made we XX%, in at behavior. change haven't the recent us, that I don't really and us, to view hike XX%

about to think right, we XX% at a I'd also, feel confident I why emphasize just range, it's So but it's range a that's XX%. that,

haven't the different On have so accounts the about those changed, a rates it only ends the caps more different of impact up fee that accounts, money so weighted average caps, market, basis I different I'm reminder, on money themselves. number, points sure balances the would that's right, being think really in that's DCA, the as it thing markets, DCA, not account, per And there. then is you balances know, on the a it's a mix

So move per effectively hasn't changed. hit hike. can that account rate the around, rate fee this with cap last We it

more be forward, based of going they So to that are economics, the number fee. about the accounts going on

three covers right. think I So that questions, the

think X of sell appetite, at You a favorable questions targets the to caught to you times EBITDA capital management should to NPH, rates, markets that there accretion but I'm past? with just I encouraging. spoke here, target's of acquisition certainly the priorities, that, and But you've follow-up ask then some does the me inform X your and cited want we nested inform it in given my How related I'm the to both of just wondering, and with experience going one. just your tailwinds to within, bunch leave about, to of your including M&A, higher willingness potential given how

Yeah.

think interested. when us I at I to we things high changed. it's for do validated our thoughts that I I up, M&A, that's consolidation. both and, and strategically, a M&A the think, something a acquisition, tell jump ripe Dan, go financially, the look haven't as when the And our operationally, I'll can you, view those you we think if So we all would space, would about our if in. be think on level just line first, point, NPH I mean, obviously environment match

So add Dan, – if to I you'd don't anything that?

potential think you see, thoughtful we think balance ready I well-positioned and And about readiness always from to be from the us any and standpoint well-said. a operationally, agile are to we size. that's a for of sheet no, to got relative as is – standpoint, Yeah, opportunity we and most a be financial nimble I think we

think of relevant do I that a in making work about standpoint, start we from year that for think end integration place the being sure we there. think readiness as an when to that a operational towards more we good we're timeframe still well, still and the

That's questions great, guys. strong a for and my on congrats taking Thanks quarter.

you. thank Yeah,

you. Thank

comes Bill Katz from next of Our Citigroup. question

Your line is now open.

well as you the this taking Thank Okay. for evening. questions

quarter be and of at out Downer NPH sort Debbie as after March, would to like a from Just those coming count to catalyst look but in about think the if of flattish growth items you looks I the organic be good well, look financial away what (XX:XX:XX) stripping amount also do to a advisor the transaction back of the onboarding at how what going? and both get

Dan, so a first, and any so couple things, that certainly this is Bill, let to add you color Matt, take a this. stab at me Yeah,

the the advisors with was sometime a year, of From more we respect That timeframe, NPH, we down renew industry. that to the number primarily not So XX advisor did exited a to the their licenses in who January occur many timing, it quarter. than in large in to that for low-producing December. was due this saw count, of occurs typically did December and January to

will, counts to respect quarter. you with if noise, some creating that's the So in advisor

formula and Of advisor is that the production, organic count parts we range which assets, prior-year $X for in which of billion was recruited both XX% of impacted course, retention, then of are our growth. the other things standard the important of our

of you for March. of brokerage by There advisory quarter, was think at I were and outflows noise think in good roughly brokerage if saw which billion, in NNA that driven outflows quarter, for the $X you billion $X was flows. bit the the look a the I primarily

that March look relative XX%, to if attrition, had that again, was over we full quarter, said, of think in With advisors, if focused in it us we lumpiness it will, from much our of markets, advisors I growth overall so right, the but to also core to then at grow, particular bit core are you with a on what though respect in focused you helping on very our and as new noise, certainly lumpiness and supporting focus, comes just a You have. adding had and March, our retaining we month. respect bit our and growth that existing some and

And so that hasn't our we forward about changed drive go and we think past that that you've formula seen as quarters, few in growth we markets. using building good same momentum over and the to core feel

Okay. of It's on which as sort be OBA, economic you it a on to to out there's the its for the own. of in hybrid then you follow-up, lot I helpful. think help think move And that's address platform discussion RIA outlook just as a (XX:XX:XX), still as well been potentially general, looking just – sizable the a whether I

drivers the nested hybrid, recruiting Thank (XX:XX:XX) back structural do shift of of just the think you if for as that question, for second and So step understand in the part you. some then the profit we also ROA given the maybe changes? sort dynamic sorry pricing about as question, well of how gross the of and us help the sort

Yeah.

lot there's there. So a

think opportunity on you the question. client corporate It and assets. is the get don't – and the belief have the best, to look, more a I it there can both XX% – – platforms. But, it really roughly They I So advisors that the new right our if more you we hybrid to coming we can important. continue I and of broaden will platforms of represents are guess we flows having great please, and versatility and do my get business our to if our advisory to grow a appeal, – today, will, in RIA all,

And they from which us strategic positioning gives choose the capabilities and to may leverage of so, that that's how to of standpoint a a of flexibilities advisors lots platform. our cast think our broad a net. we use to It and good thing

to ensure advisors that an invest So across help win opportunity platforms. create both we will to continue both and in differentiate to they

make RIA this both trade content those do I think in has with been trying think to what see both cost to the a worked of sort investments the well they to corporate a to capabilities and price lower more take significant to is and need, we've couple regulated giving made that environment, years, capabilities appealing. it. add bring In the And a you investment of or advisors them. us down of its the of RIA rising last the I in has a entity but cost terms coupled complexity, themselves having on lower corporate at for also regulatory not leveraging good platforms

platform which types of that flexibility hybrid appeal tried those have their recognize the platform advisors, investments appealing. will and to like those larger same We right be feel RIA we've of to we that solution and to for so practice. manage who So make economics can same flexibility the of the them gives to that to such continue that will a we make advisors provide certain or more that either At better and that the time, set needed practices advisor. are that there build

And so driving strategically, about that to is and and and supporting may our thinking those think is what how we clients. approach both serving engage offerings

partners invest we'll hybrid good so and any platforms helped practice. committed and been strengthen other enterprises, our that broad around think those helping a or partner. large don't I we see to clients year was change we them last win, in as and these your through these help like both now I in work think built think continue hope And that to that enterprise a the enterprise. we're did corporate large them any question. We policy clients, bigger opportunity, they've overall just about concern great grow we that second spirit, see alignment which great them over do with that helping these at another specific again, question, how us larger made serving to answered changes, to I We that

Thanks so much.

Yeah.

Thank you.

Our of Conor next Goldman from question Sachs. Fitzgerald comes

now open. line Your is

like more offering Hey. this Dan, transition make tradeoff terms why Any excited you're the assistance impactful do increasing in maybe you you making then be attract and characteristics to questions your maybe permanent? just for could net on and of higher try market in how comments term, growth, the if sense now? something more more it the financial think Is to the in not asset the assistance near rate, appreciate transition on that. this so seeing you on of versus advisors that's there increasing of your new two

Good question, Conor. Yeah.

principle here in to effective right, we're be more is environment. that our our believe will different way, agile current strength So the we strategies use with experimenting in so a

so a it. pivoting term outcomes, then a initiative. as would extent successful And view our informed you that? that iterative so learning, we an cycle we'll our balance want the bit this outcomes process, will. longer, effectiveness I then for to the that we and based assess of to we'll so reducing our think add focused on were what anything it's think it's And motion. as more assess longer as progress, do, about we and insight on But you it simplifying I too do this get little message, that's think exactly And we I sheet, advisors to think strategy Matt, early and this effort, really And don't the complexity in of mentioned, that know, if to is as sales the exploring, our quarter, to we else leveraging about

discipline the perspective, one just mean, I think emphasize I focused organic financial deploying of from do to the underwriting I it best Sure. just And We growth we capital that's quite that drives organic Conor, compelling. return are this is growth. And where come on with we returns. mean, a at would think is – from in a opportunities discipline at we and buckets of that transition biggest financial a that assistance.

judgment whether So this a if keep continue at I we'll on I time to build to think then think going. is compelling, call to it makes point, see we make Dan's that sense

Hopefully that Conor. question, answers your

contracts Matt, are preference reasons maybe tied the know you. of for most banks. to And talked It that's a of rates most ICA the short-term of then, Thanks. is about one why you've one for your does. I

update if continue So thoughts banks that starting to just willing to your changing, of thinking positioning contracts. to be sheet and the normalize of is balance rates on potentially interest short-term that any how are And enter duration or more want sensitivity the here. on about as company an you're just – into of get the any to updated rate longer if

Yes.

So it I right. we – much, hasn't today hasn't think are changed where

the largest, curve, the at – when others look funds on are tied the of balances so end types interest rates to, the think (XX:XX:XX). that different short our and is of the the I still you are ged

So that hasn't really changed.

is where I near I think at much risk are rate rates, and to the there's zero whatever you think very obvious, downside, to perspective, terminal about long-term little and at the you when to if you're that zero or think we're a number on I funds state fed risk is, the downside higher. of be the we you're when cognizant just the going pick our to or level, out cycle, think if number

– to ultimately we then think have I that, what we'll be. where provide. on match view the market's up a view recognize that our we would have to to and And just willing to So think prefer you I

we on and we long-term that's the now So to we end curve, be. the where like of I think our short where are to view be that's right as continue positioned

Really helpful color. Thanks.

Yeah.

you. Thank

Doug Our next from question of comes SunTrust. Mewhirter

Your line is now open.

kind the had me. a I a – broad Good other been a more question. sort trivial of strategic it's And of afternoon. almost a one but bugging question, one's

First, those a just expect revenues, whether quarter flat wasn't you quarter. And this and sure in that out was a I whether portion been had question, a million million of it recast about of I revenues or noise if with at you've only other another was about $XX category, other it we just noticed running would trivial is line? $X.X just noise, that into and the rebound

Hey, Doug, it's Matt.

interest other, and So are row? you referring income that to

the so for – Interest expense For $X.X $XXX,XXX in your of net just the line, was income, – statement. income other – other million. the interest

(XX:XX:XX). them follow We'll Yeah.

Yeah.

page at. you're what you not sure are number I'm What on? looking

follow can huge It's issue. We later. up a not

on You're the...

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line management X. P&L you. at I going got I'm that looking – I on is was where there – the item nothing No, slide sorry, is

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number in So is typically offset that the payout.

So I'd that at just slide gross encourage to the noise gets out in profit. look you or X page where netted view,

So nothing there. there's be concerned to about

you I had Dan, how the progress make or in whether course adjustment sort the I good do or build which – doing of of think alternative encouraged kind that, know product or new a the very the would SEC to the your better, should any is you And, helpful. look Fund Only which you some didn't by you proposal, with to I would development? would just of rule may SEC very with midstream, build. time fit compliance to a you know environment? product affecting lot it's that maybe say, It's platform, Mutual you're an been you stay would rule SEC taken Okay.

to that time and to tend rule vacated doing Good Only principle think really date what think creative Mutual to regulatory adjust And DOL to being has around, lots would since likely to we it, change. I still around that, were And rollout it question. and the the the would the the us how the now or SEC's That of use better then that that we Again, pivot any ultimately taking the figure we get up or product development the products to rulemaking itself, and rule – will then need adjustments clarity – we're or understand timing pause SEC solution. and to in try in it, moved believe which process. to and the relative product appeal would better we with certainly of then was alter the hence how is of Fund and with to associated in Yeah. trying (XX:XX:XX) we it. plans a to solution, solution make allow if we out our relative on

So, around rule a before information it's make to we see of get wait determinations. those a more insight itself the bit can and and

my Okay, thanks. That's questions. all

Thank you.

KBW. Dai Our next comes of from question Ann

Your now is open. line

a afternoon. and thanks, for Hi, question good Dan. Maybe

us away deal Guess, the I'm just take give lessons kind and if perspective you've NPH you on reflect some mostly closed back that that So, on pros from of transaction. future the the from go to from meaningful what feedback and wondering wanted I could deals? for of now more that and and just got maybe advisor cons we're learned some or you

Yeah.

about go-forward think as then went into of with building learn use it high maybe some we on a of basis. think opportunity a we So, at deal, thoughtfulness the acumen I we level, to course an as the could that

that was our in. premise going So,

to well I we deal, had to some in think resources of some before relative efforts. right as making process, add respect incremental lessons around recruiting integration with innovation. respect and learned to and integration As our some with and conversion we that with that I up direct different to ultimately, structure we I simplicity learned and to with got When of the associated think be frankly, data, both back we recruiting got think human and as a ended speed certainly to very one. on we quite had solid good to a the advisors of reflect back things we that things, it, interesting enough and capital valuation some strategy onboarding way things deal sure had proving and try transaction, the We've onboarding the support looked than ever lessons those those any to assets. innovate value We over approach

about and be in future our of our both retention may the as as experience. situation on the rates, of M&A the those may we So an opportunity, think places quality iterate enhance onboarding some tweak or well improve the we where ever in where approach to

very That's a of ratios. My just color. on follow-up Okay. I that. couple appreciate helpful is

So and on have I looks payout come think that the price quarter-over-quarter, SAM decrease would it. I was first that to like it the base flat ratio, just in portfolio, the roughly with up with expected

little, there assets ticked then up a so that? specific specific something it felt on NPH on same So was impacted coming And rates to corporate as board there that else anything like anything well? fee or advisors' corporate,

Ann. Sure, This is Matt.

that shows actually in the up on rate. SAM base bonuses So production pricing increase, the

So why almost release, there. basis in points. if entirely showing XX was up It you that increase that's that year-over-year up look pricing was for the

in seen for growth item. the line On the the the centrally that side, in mix it's corporate managed really we've platforms, up and primarily show fees that

centrally that drove mix really that and managed second growth it's success increase. the So of a really and

it me. That's Okay. Thank you. for

Thank you.

JMP Securities. comes of Our Devin next question from Ryan

Your line is open. now

Thanks. Great.

just of higher a like RIA, licensing the the then and on the of reduces and seems relationships made, SEC considerations best considerations is example, trying of about what standards thinking good some changes that, of opportunities the So be pure guys? to know here there of still are good supportive, appreciate the appeal held Maybe maybe in with And the maybe some on pretty afternoon. other of higher details. manufacturers. from industry should a to follow-up will it's don't this? interest, But just any being would you other which I it maybe side you be RIA (XX:XX:XX) about like, in third-party that devil or comments we kind the there. some for or the costs think be are if that for continuing education, So if

Yeah.

that So, having do I think think we it's and creating helpful non-qualified process, for that We early and because of I it's how hard, work across terms Devin, And clients it's in the the both business. little consistency and helpful in it. a advisor supervise would right. both their is it's on work industry SEC qualified this smart, the and think manage manage overall in how the in

which the approach in brokerage think I that great to we continue we think potentially the like preservation the how advisory, enforced we've I advisors advisors for and held of good a this that good we will Certainly, compliance mix historically be that ecosystem, the is a think With that pivot regulation, so that that we make and that think thing So reasonable between thing. And to and sure assume think ensure a has advisory or our think way in that accountable through would this good thing continue believe mix the really we to choice. then way to that again what a that and I for be We of provide shift, right. that thing SEC clients, it's much would with and choice. that utilization think brokerage the hard the registered continue. have use which provided would be, aligned it's think for mix is is appealing and dually with positive registered, that think types exactly more to would would basically we an a those to be of advisors, is dually maintaining they both solutions. we option to believe all we would taking to rule that predict be respect is respect between the I exact providing and reasonable that reasonable choice, It's can the but

how advisory advisors' ultimately also is that we're way the to in expand whether utilization needs forward, use of what as extent that can be place ensure to respect I we you those can but use great certainly create both differentiated the we value the serve there, that deliver continue to that capabilities the a think then to for able and driver support a those think appealing see such we we to advisors way. or more do. to with comply, place take brokerage, regulatory we and and to big a clients to going their we that of innovation them (XX:XX:XX) and advisory And as that environment across key of we a

want detail there's no And kind number I on can that? the Great. to here, other asset. just you remind sure quick (XX:XX:XX) million, (XX:XX:XX) connected fees Thank just that to $X a appreciate activity Thanks, it. business of guess maybe what the make follow-up you. Got is, administrative Dan. and us asset

outside the think for all that I Yeah, this. oversight with provide we eliminated. of oversight to that of would the provide be assets would to rule business, business around activity advisory platform premise their didn't have fee charge we if that the the broker-dealers the that itself associated That's question be the that and

that we have billion, hybrid amount as a in up and not where that's were $XX asset so, know, And held assets show advisory RIAs, does are that our count, roughly small in off-platform obviously. of referencing you our we

a roughly so charge we assets. with year $X those million And associated

dialogue create and advantageous So typically supportive we timeline be of that's of that of We use debate in whether ultimately which an will away, and create think a the hybrid will and the advisory place of the custodial dialogue platforms, will of of this outcome. end extended believe a go through. where $X our and that of capabilities regardless would debate merits to there and we set we We're assuming occur, and an the around differentiate million lot in go that the sort up revenue rule think of both the lot rule, can of or corporate, which goes this capabilities not around a the capabilities will on. premise discussion rule we our the that believe our and that

it. Got

Okay, great. disclosure. for Thanks

you. Thank

Credit Siegenthaler Suisse. Our next question of comes Craig from

open. now is line Your

in Jordan Siegenthaler. is Friedlander Craig for This Hi. filling

quick a for one here. Just me

well annuity Given we DOL pickup as as sales? rule continued see a could rising backdrop in rate the the variable being vacated,

quarters in peel growth two driven when both question, we for commissions. Matt of our and think in back, commissions, and the sequential was a by some seen right, much commissions, that NPH, we've I Yes, good past but it's growth the year-over-year, ex-NPH when you overall think that about sequentially referenced overall

think was quarter, active indication of funds, use If management. increasing first at we primarily by mutual you driven of that look is which

more more some innovation there's in more As the we a logical appealing And as that sales. around could The create benefits, and there momentum space, then protection that look volatility I some innovation forward, think could building you product two for believe interest with reasons. to environment, annuity with in downside say be that's offer the I you do that higher VA are product momentum that second thing think the typically that benefits think between the variable and is, rate downside and the annuities more correlation with we in see annuities variable variable appealing. that protection marketplace, capabilities

Great. Thanks, Dan.

Thank you.

Our Shutler next question William comes Blair. from Chris of

line Your open. now is

afternoon. Hey, guys, good

to loans. million $XX the assistance advisors, offered forgivable NPH million On was cash, $XX transition

that drive a roughly the I it million so heard mean NPH period so, half for say, – a loans, average short? if why and NPH I two and think does that forgivable is is going investing why you $X about amortization, on is years higher so to Matt, of quarter the

Yeah.

an of zone little longer So I'd it's advisory-by-advisory (XX:XX:XX) transition amount is in more tell I than – basis. noise in it's I on really there's and that, the that think assistance bit a time think the the little in you, of bit a in (XX:XX:XX), three

think reflective that but the how dialogue I three-year just So in little a bit more longer that, it's of range. went, than it's

mean, expect to much incremental LIBOR? seems LIBOR, couple some shifted in less last rates Is the little just of assets quarters, Okay. Fair from seen talked you'd I possibility enough. to with benefit you based And that move we've (XX:XX:XX) then, guess, could points you given the the than XXX basis of I the Matt, ICA, LIBOR about one going in on be you that how changes being a over three-month realize more LIBOR? based that mid-XXX on maybe if Thanks. a on

Yeah.

additional no from deposit that to assuming think I or interest changes benefits our So key rates. was the rates guidance on

where interest So forecast rates trying we're go. – to to or not going not we're predict

of to state benefit goes be that's (XX:XX:XX) I of the the just But think full It's what get. up, think and course obvious, would rate just where predict and incremental up. could that to the that the go curves just fed it'd we benefit if getting funds up go hike of I hard goes we if LIBOR rate reflective had.

first from basically? (XX:XX:XX) quarter the

No, incremental would take we hike assuming I is that's saw, mid-XXX the benefits than just say, the would other to expect. points that basis we no what

– some that. or then you if you're if be see LIBOR, assume above assuming from So you would another hike benefits it

right. All you. Thank

Thank you.

Harris Chris Wells Our next question Fargo. from comes of

now is line open. Your

Thanks.

I think but don't and press reports independent specifics, to departure the LPL. into relates the financial got of potential really partners was tied that earlier, to topic this from we So to alluded

about those guys from So to I give whether the how financial accurate. just to thinking should be impacts want about were us, for reports guys press And maybe a talk you then, comment to you that departure? we

Yeah.

start So it. on that, let the with and Matt I'll Matt it for color then turn financial – me to over

to think, choices the next Consequently, of set with a we So mutually own accurate year decided was them. situation up. IFP working reports terms months, where the aligned unique we've to some their to take color plays compelling on are affiliation, press so associated a out have with may were broker-dealer with full to with starting not likely stay strategically They how we're them meantime, ways. give in Matt, and over we'll part their that In will LPL, understand believe advisors are see I offer their we a help the XX to we and financials. you want that

Sure. Yeah.

billion compelling average just time. We a plays with. just LPL, $XX to have Dan the how roughly And they just little see that about directional about and emphasize what just advisory. – The return it, we've (XX:XX:XX) are stay get and closed we'll with think input AUM assets to split just us, we how I believe over that I'd out so really So got there. at below in evenly on return offer a those brokerage have, between to

timing have the What's might departure of a when of Do the occur? the sense timing, guys? you

platform take not their do months, so hard I exact to we make think sort on but directional agreed It's about that's they think broker-dealer, because be we've the a said why that's fair they to exact, to our creating to that, of that's stay are have be it'll XX way as to meant directionally, them preparations it.

Got you. Thank you.

you. Thank

of Our Michael comes Stanley. Morgan question next Cyprys from

Your line open. is now

question. afternoon. Thanks the Hi. Good for taking

you today, you X if competitive could How a do for new months, that's who in there the XX marketplace the out recruiting today do competing advisors? those environment past with moving see yourselves evolved advisors see and or little you to for more today talk most over fewer about curious advisors. bit the Just

think a look to from capabilities recruits, that or I of I'll that may larger to source go independents answer independents both advisors make that you we may be a the scale are to so or continue broker-dealer more if it opportunity for Yeah, see or have that stability. our to of sorry, back recruit change part looking traditional – first, and

be for opportunity tends that source continues to – So a of us.

model We also or leaving advisors those be employee-based of the looking opportunity go have may to that warehouse recruiting independent. an and

of the a much still looking continue banks that those capabilities. house, and structural leverage our So which trend, side bit for and into credit either of to see is are again we on exploring a unions percentage, we this more course, business, or who a maybe with institution smaller broker-dealer were that getting

on and focus So sources across of good opportunities them. we be those to for board still continue us, the

less focus the the appealing bit marketplace do our a combination and quarter. run an see who value recruiting believe and the momentum you respect still bit IRAs on price people tends seen at when still resonates, of advisor I had be of scenario. throughout the a with out we I of quarter, see options as still alternatives. look and environment, and a accounts quarter. with and NPH, good that people typically, we it, first associated on movement to to the And I quarter, and building capabilities to think in model from you that with first of certainly into But when think into exploring servicing that we've qualified advisors came tax first lot their season, in steady focus headwind a it's on are – tend of we in to our we focus overall their tend

the typically in making those practice. second as less a is focused on pivot market, The is occurs a and you well in get their or thing little as clients people when serving there are less strategic little volatility a flexibility supporting in that movement,

traditional appeal those that hopefully associated summarize, our across recruit to out and with we color. a to we're we markets opportunity the we typically competition gives see But continue seeing model. seeing little still you So whereas that's there, three continue same in,

you [indiscernible] sense amongst share just of wallet from existing advisors? your customer (XX:XX:XX), base new new the as side assets how for And [advisory] of for the the the just coming (XX:XX:XX) quick the give – on net can is business, Thanks advisor color. on a advisor customers assets much coming net Great. new coming (sic) at a net – us the follow-up increased versus new from

think – new or directionally, quarter store, we from Sure, call and Yeah. was was, mean, driver it, it standpoint, it I as we say from a I this there. that think two-thirds call about I'd (XX:XX:XX) same-store same-store the

months over so? past And changed Two-thirds has that much or same-store? XX the

Yeah, a and that I we've same-store number growth, in think bigger the contribution build seen past that overall assets invest than and traditionally help support new over we we the perhaps both capabilities and make have our to continue to to historically it advisors' that year net has. or

with that encouraged we're trend. so And

to that on gives perhaps of going half around be would the a if think I more give you building of that it about. two-thirds, trend comment, I talking just directional Matt's a sense it, I'm like was to magnitude order you

for Thanks my questions. color Great. the and taking

you. Thank

JPMorgan. comes Our Ken of Worthington next from question

Your now open. line is

Thank me you at in for here Hi. squeezing end. the

legal saw seeing you're legal, quarter of one. we some curious mentioned headlines current terms what on issues, I I'm uptick legal issues. an In some more this legacy on you extent Dan, think to in engagement

protocol the seeing cryptocurrencies, you as volatility losses market, (XX:XX:XX) Thanks. or guess, fix action two, more either? there's on So definitely engagement things either legal the have given and I unwinds? broker increase then the are legal here like any seen first, And in you

Yeah.

more protocol non-protocol macro, is maybe we're specifically, firms, to to walk not, question both asked, protocol the recruit done issues, answer bit we I'll let and specifically, that. up So we you a back and me which have so historically respect from with initial

So we that kind of process. understand

we've So seen tick nothing up there.

We within ecosystem. are trading cryptocurrency not allowing our

I concerns, more risk So macro step associated nothing investment. there function that overall standpoint. have in we or overall challenges from macro with that change not risks, business speculative with we're associated outsized our level, a seen seeing or think On a any

always been time-to-time, entity, nothing that ordinary either from As there's the that has as things out but asked. more outsized activity come relative a up current or regulated of to you

Thank much. Awesome. very Okay. you

I turn for session. does question-and-answer Thank you. closing like call to Mr. the would our Arnold now to this And conclude any back over remarks.

time just to quarter. thank We And with Thanks, everyone to much. this for Yes. afternoon. we and so join I taking Sanya. Thanks speaking you wanted the it, us appreciate again to look next forward

and today's conference. in concludes for gentlemen, This program. today's you Ladies thank participating

Everyone, disconnect. day. may You all great have a