Q3 2023 LPL Financial Holdings Inc Earnings Call

Yeah.

Good afternoon, and thank you for joining the third quarter 2023 earnings conference call for LPL Financial Holdings, Inc.

The call today are our president and Chief Executive Officer, Dan Arnold and Chief Financial Officer, and head of business operations, Matt Audette.

Dan and Matt will offer introductory remarks, and then the call will be opened for questions. The company would appreciate if analysts limit themselves to one question and one follow up each the company has posted its earnings press release and supplementary information on the Investor Relations section of the company's website investor LPL Dot com.

Today's call will include forward looking statements, including statements about LPL financial's future financial and operating results.

Outlook.

Strategies and plans as well as other opportunities and potential risks that management foresees.

Such forward looking statements reflect management's current estimates or beliefs are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward looking statements. The.

For more information about such risks and uncertainties. The company refers listeners to the disclosures set forth under the caption forward looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission.

During the call. The company will also discuss certain non-GAAP financial measures for a reconciliation of non of such non-GAAP financial measures to the comparable GAAP figures. Please refer to the company's earnings release, which can be found at investor that L. P. L. Dot com with that I will now turn the call over to Mr. Arnold.

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

Over the past quarter, our advisors continue to provide their clients personalized financial guidance on the journey to help them achieve their life goals and dreams.

To help support that important work, we remain focused on our mission taking care of our advisers. So they can take care of their clients.

This quarter, we continued to see the appeal of our model growth due to the combination of our robust in future platform stability and scale of our industry leading model.

Our capacity and commitment to invest back into the black.

As a result, we continue to make solid progress in helping advisors and enterprises solve challenges and capitalize on opportunities better than anyone else and thereby serve.

Most appealing player in the industry.

With respect to our performance we delivered another quarter of solid results. While also continuing to make progress on the execution of our strategic plan.

I will review both of these areas starting with our third quarter business results.

In the quarter total assets remained at one two trillion as continued solid organic growth was offset by lower equity markets.

Third quarter organic net new assets with 33 billion, representing 11% annualized growth.

This contributed to organic net new assets over the past 12 months of 97 million, representing approximately a 9% growth rate.

In the quarter recruited assets were 31 billion, including $12 billion bank of the West and Commerce.

Our prior to large enterprises Q3 represents a quarterly record for recruitment.

This outcome was driven by the ongoing enhancements to our model as.

As well as our expanded addressable market.

Looking at same store sales, our advisers remain focused on taking care of their clients and delivering a differentiated experience.

As a result, our advisors are both winning new clients and expanding wallet share with existing clients.

Combination drove solid same store sales in Q3.

With respect to retention, we continue to enhance the advisor experience through the delivery of new capabilities and technology as well as the evolution of our service and operations functions as a result asset retention for the third quarter and over the last 12 months was approximately 99%.

Our third quarter business results led to solid financial outcomes of $3 74 of adjusted EPS, an increase of 19% from a year ago.

Operator: Good afternoon and thank you for joining the third quarter 2023 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 and Head of Business Operations, Matt Audette. Dan and Matt will offer introductory remarks and then the call we open for questions.

Let's now turn to the progress we made on our strategic plan.

Now as a reminder, our long term vision is to become the leader across the advisor center marketplace, which for us means being the best at empowering advisors and enterprises to deliver great advice to their clients and to be great operators of their business.

This well.

Operator: The company would appreciate if analysts would limit themselves to one question and one follow-up each. The company has posted its earnings press release and supplementary information. On the Investor Relations section of the company's website, investor.lpl.com. Today's call will include forward-looking statements, including statements about LPL Financial, Future Financial and Operating Results, Outlook, Business Strategies, and Plans as well as other opportunities and potential risks that management for these. Such forward-looking statements reflect management's current estimates or beliefs in a subject to known and unknown risks and uncertainties that may cause actual results with the timing of events to differ materially from those expressed or implied in such forward-looking statements.

Gives us a sustainable path to industry leadership across the advisor experience organic growth and market share.

To execute on our strategy, we organize our work around two primary categories horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate with us and vertical integration, where we focus on providing capabilities that solved for a broader spectrum of the advisor needs.

And with that as context, let's start with our efforts around horizontal expansion.

This work involves meeting advisors and enterprises, where they are in the evolution of the business.

By creating flexibility in our affiliation models such that we can compete for all 300000 advisers in the marketplace.

Operator: The more information about such risks and uncertainties, the company refers listeners to the disclosure set forth under the caption, forward-looking statements in the earnings press release, as well as the risk factors and other disclosures contained in the company's recent following the Securities and Exchange Commission. During the call, the company will also discuss certain non-gap financial measures or reconciliation of such non-gap financial measures to the comparable gap figures. Please refer to the company's earnings release, which can be found at investor.lpl.com.

As a result, this component of our strategy helps contribute to solid growth in our traditional markets, while also expanding our addressable market.

Over the third quarter, we saw strong recruiting in our traditional independent market, Adam adding approximately $13 billion in assets.

As a result of the appeal of our model and the efficacy of our business development team, we maintained our industry leading win rates, while also expanding the breadth and depth of our pipeline.

Dan Arnold: With that, I will now turn the call over to Mr. Arnold. Thank you, Tonya, and thanks to everyone for joining our call today. Over the past quarter, our advisors continue to provide their clients with personalized financial guidance on the journey to help them achieve their life goals and dreams. To help support that important work, we remain focused on our mission of taking care of our advisors so they can take care of their clients.

With respect to our new affiliation models.

Strategic well employ and our enhanced our <unk> offering we delivered our strongest quarter to date recruiting roughly $5 billion in assets in Q3.

Subsequent to launching these models a few years ago, we have continued to enhance their capabilities.

Thus further differentiate their value add.

Add to that the growing awareness of these models in the marketplace and that combination is creating more demand from prospective advisers.

Dan Arnold: This quarter, we continue to see the appeal of our model grow due to the combination of our robust and future platform, the stability and scale of our industry leading model, and our capacity and commitment to invest back into the platform. As a result, we continue to make solid progress in helping advisors and enterprises solve challenges and capitalize on opportunities better than anyone else, and thereby serve as the most appealing player in the company.

As a result, we expect to see a sustained increase in growth within our new affiliation models.

Next the traditional banking credit Union space continues to be a consistent contributor to organic growth.

As we added approximately $1 billion of recruited assets.

<unk>.

During the quarter. We also continued to make progress with large enterprises Onboarding bank of the West and Commerce.

Dan Arnold: With respect to our performance, we deliver another quarter of solid results, while also continuing to make progress on the execution of our strategic plan. I'll review both of these areas starting with our third quarter business results. In the quarter, total assets remained at 1.2 trillion as continued solid organic growth was offset by lower equity markets. Third quarter organic net new assets with 33 billion, representing 11% annualized growth. Now this contributed to organic net new assets over the past 12 months of 97 billion, representing approximately a 9% growth rate.

The early feedback from these transitions has been positive as we continue to apply the learnings from previous Onboarding to further enhance the experience.

Looking ahead, we are confident that our industry, leading onboarding experience match with the expanding appeal of our model positions us well as a compelling alternative in this part of the market.

In Q3, we also announced that Prudential financial would onboard its retail wealth management business through our enterprise platform in the second half of 2024.

This milestone reinforces the appeal of our value proposition for enterprises and reflects our commitment to help solve for the unique and complex needs of a broad spectrum of institutions.

Dan Arnold: In the quarter, recruited assets were 31 billion, including 12 billion from Bank of the West and Commerce. A prior to large enterprises, Q3 represents a quarterly record for recruiting. This outcome was driven by the ongoing enhancements to our model, as well as our expanded adjustable market. Looking at same-store sales, our advisors remain focused on taking care of their clients and delivering a differentiated experience. As a result, our advisors are both winning new clients and expanding wallet share with existing clients.

Looking ahead, we are encouraged by the momentum and strong pipelines across the enterprise market.

Now within our vertical integration efforts, we are focused on delivering a comprehensive platform capabilities services and technologies that help our advisers differentiate and win in the marketplace neuron thriving businesses now.

Over the past quarter, we continued to make progress across several key fronts on this part of our strategy, including continuing the journey to build a world class wealth management platform.

This work includes evolving and enhancing our advisory platforms through simplified and lower pricing enhanced trading capabilities value added services like tax management and.

Dan Arnold: Combination, the drove solid, same-store sales, and Q3. With respect to retention, we continue to enhance the advisor experience through the delivery of new capabilities and technology, as well as the evolution of our service and operations functions. As a result, asset retention for the third quarter and over the last 12 months was approximately 99%.

And the expanded investment choice and flexibility within our UMH.

These efforts will help our advisers continue to provide more value for the clients and the differentiated more personalized way.

Dan Arnold: Our third quarter business results led to solid financial outcomes of $3.74 of adjusted EPS, an increase of 19% in the year ago.

Now as an additional part of our vertical integration strategy, we continued to expand and enhance our services portfolio and are encouraged by the evolving appeal of our value proposition and the seasoning of this business.

Dan Arnold: Let's now turn to the progress we made on our strategic plan. Now as a reminder, our long-term vision is to become the leader across the advisor center marketplace, which for us means being the best at empowering advisors and enterprises to deliver great advice to their clients and to be great operators of their business. Doing this well gives us a sustainable path to industry leadership across the advisor experience, organic growth, and market share.

As a result of solid demand in Q3, the number of advisors utilizing our services group continued to increase and we ended the quarter with approximately 3700 active users up 26% year over year.

Dan Arnold: Now to execute on our strategy, we organize our work around two primary categories, horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate with us and vertical integration, where we focus on providing capabilities that solve for a broader spectrum of advisor needs.

As a reminder, our recent innovation in this portfolio is our liquidity and succession solution, which is resonating with existing LPL advisors, where to date, we have deployed approximately $275 million of capital flows 20 deal.

And with the benefit of our learnings and insights. We recently began offering this solution to advisors that are external to LPL and are encouraged to see the early interest building.

Finally, this service is also enriching the appeal of our model and by doing so providing another differentiated solution to support our advisor recruiting efforts.

Dan Arnold: With that is context, let's start with our efforts around horizontal expansion. This work involves meeting advisors and enterprises where they are in the evolution of the business by creating flexibility in our affiliation models, such that we can compete for all 300,000 advisors in the marketplace. As a result, this component of our strategy helps contribute to solid growth in our traditional markets while also expanding our adjustable months. Over the third quarter, we saw strong recruiting in our traditional independent market, adding approximately 13 billion in assets.

In summary in the third quarter, we continued to invest in the value proposition for advisors and their clients, while driving growth and increasing our market leadership.

As we look ahead, we remain focused on executing on our strategy to help advisers further differentiate and win in the marketplace and as a result.

Drive long term shareholder value.

That I will turn the call over to Matt.

You, Dan and I'm glad to speak with everyone on today's call.

In the third quarter, we remained focused on serving our advisors growing our business and delivering shareholder value.

Dan Arnold: As a result of the appeal of our model and the efficacy of our business development team, we maintained our industry leading win rates while also expanding the breadth and depth of our pipeline. With respect to our new affiliation models, strategic wealth, employee, and our enhanced RAA offering, we delivered our strongest quarter-to-date recruiting roughly 5 billion in assets in Q3. Subsequent to launching these models a few years ago, we have continued to enhance their capabilities and thus further differentiate their value.

This focus led to strong organic growth in both our traditional and new markets and we continue to make progress with our liquidity and succession solution.

Dan Arnold: Add to that, the growing awareness of these models in the marketplace and that combination is creating more demand from prospective advisors. As a result, we expect to see a sustained increase in growth within our new affiliation. Months. Next, the traditional banking credit union space continues to be a consistent contributor to organic growth, as we added approximately one billion of recruited assets in Q3. During the quarter, we also continue to make progress with large enterprises, onboarding Bank of the West and commerce.

In addition, we onboard at bank of the West and Commerce Bank and are preparing to onboard the wealth management business of Prudential.

We accomplished all of this while continuing to invest in our industry leading value proposition.

So as we look ahead, we continue to be excited about the opportunities we have to help our advisers differentiate and win in the marketplace.

Now, let's turn to our third quarter business results total advisory and brokerage assets were $1. Two trillion unchanged from Q2 as continued organic growth was offset by lower equity markets.

Total organic net new assets were <unk> 33 billion or approximately an 11% annualized growth rate.

Our Q3 recruited assets were 31 billion, which included 12 billion from bank of the West and Commerce.

Prior to these large enterprises. This was a quarterly record for overall recruiting as well as for our new affiliation models, which contributed 5 billion in the quarter.

Dan Arnold: The early feedback from these transitions has been positive, as we continue to apply the learnings from previous onboarding to further enhance the experience. Looking ahead, we are confident that our industry-leading onboarding industry match with the expanding appeal of our model, positions us well as a compelling alternative in this part of the market.

As for our Q3 financial results the combination of organic growth and expense discipline led to adjusted EPS of $3 74.

Gross profit was $1 $10 million up $20 million or 2% sequentially.

As for the components Commission and advisory fees net of payout were $219 million up $1 million from Q2.

Dan Arnold: In Q3, we also announce that potential financial would onboard its retail wealth management business to our enterprise platform in the second half of 2024. This milestone reinforces the appeal of our value of propositions for enterprises, and reflects our commitment to help solve the unique and complex needs of the broad spectrum of institutions. Looking ahead, we are encouraged by the momentum and strong pipelines across the enterprise market.

In Q3, our payout rate was 87, 3% up 60 basis points from Q2 due to typical seasonality and the on boarding of bank of the west and Commerzbank.

Looking ahead to Q4, a reminder, that the production bonus increases throughout the year and is typically highest in Q4.

So we anticipate our payout rate will be approximately 88%.

With respect to client cash revenue was $378 million down $18 million from Q2 as cash balances declined $3 billion to 47 billion.

Dan Arnold: Now, within our vertical integration efforts, we are focused on delivering a comprehensive platform of capabilities, services and technology that help our advisors differentiate and win in the marketplace and run thriving businesses. Now, over the past quarter, we continue to make progress across several key fronts on this part of our strategy, including continuing the journey to build a world-class wealth management platform. This work includes evolving and enhancing our advisory platforms through simplified and lower pricing, enhanced trading capabilities, value added services like tech management, and the expanded investment choice and flexibility within our UMA platform.

This marked the smallest quarterly decline we've seen this year.

Within our ICA portfolio, the mix of fixed rate balances increased to roughly 65% within our target range of 50% to 75%.

Our ICA yield averaged 318 basis points in the quarter down four basis points from Q2, driven by a decline in floating rate balances.

As for Q4 based on where client cash balances and interest rates are today, we expect our ICA yield to decline by roughly five basis points due to the mix impact of lower floating rate balances.

Dan Arnold: These efforts will help our advisors continue to provide more value for the clients in a differentiated and more personalized way. Now, as an additional part of our vertical integration strategy, we continue to expand and enhance our services portfolio and are encouraged by the evolving appeal of our value proposition and the seasoning of this business. As a result of solid demand in Q3, the number of advisors utilizing our services group continued to increase.

As for servicing fee revenue it was $136 million in Q3 up 13 million from Q2, primarily driven by revenues from our National Advisor Conference and irate.

Looking ahead to Q4, we do not have any large advisor conferences and expect seasonally lower IRR AP.

Given this we anticipate servicing fee revenue will decline by roughly $10 million sequentially.

Dan Arnold: In the end of the quarter, with approximately 3,700 active users of 26 percent year over year. As a reminder, a recent innovation in this portfolio is our liquidity and succession solution, which is resonating with existing LPL where to date, we have deployed approximately 275 million of capital to those 20 deals. And with the benefit of our learnings and insights, we recently began offering this solution to advisors that are external to LPL and are encouraged to see the early interest building. Finally, this service is also enriching the appeal of our model and by doing so, providing another differentiated solution to support our advisor recruiting efforts.

Moving onto Q3 transaction revenue.

Was $50 million up $3 million sequentially due to increased trading volume.

As we look ahead to Q4, we have seen an increase in trading activity in October.

So based on what we have seen to date, we would expect transaction revenue to increase by a couple million dollars sequentially.

Now, let's turn to our strategic relationship with Prudential.

In August we announced that Prudential onboard its retail wealth management business onto our platform.

Including the roughly 2600 advisors, serving approximately $50 billion of client assets.

The investments we are making in connection with this relationship will not only help us serve prudential and their advisors, but also improve the experience for our existing advisors.

And help unlock a broader opportunity to serve enterprise.

Dan Arnold: In summary, in the third quarter, we continue to invest in the value proposition for advisors and their clients while driving growth and increasing our market leadership.

With respect to the ongoing earnings benefit from Prudential, We continue to estimate a run rate EBITDA benefit of approximately $60 million once they are onboard.

Dan Arnold: As we look ahead, we remain focused on executing on our strategy to help advisors further differentiate and win in the marketplace, and as a result, drive long-term shareholder value.

Looking ahead, we will continue to provide updates on the progress, we're making as we prepare to onboard credential.

With that said in terms of the cost of transition. We continue to estimate total onboarding and integration costs of roughly $125 million with approximately $20 million expected in Q4.

Matt Audette: With that, I'll turn the call over to Matt. Thank you, Dan, and I'm glad to speak with everyone on today's call. In the third quarter, we remain focused on serving our advisors, growing our business and delivering shareholder value. This focus led to strong organic growth in both our traditional and new markets, and we continue to make progress with our liquidity and succession solution. In addition, we onboarded Bank of the West in Commerce Bank and are preparing to onboard the wealth management business of prudential.

Now, let's turn to expenses, starting with core G&A. It was $342 million in Q3 up 5 million from Q2.

Looking ahead, given our strong levels of organic growth and the variable costs associated with supporting that growth.

We're increasing the lower end of our 2023 core G&A range by $5 million.

Matt Audette: We accomplished all of this while continuing to invest in our industry-leading value proposition. So as we look ahead, we continue to be excited by the opportunities we have to help our advisors differentiate and win in the marketplace.

As a result, we now expect 2023 core G&A to be in a range of $1 $350 million to $1 307.

Moving onto Q3 promotional expense it was $140 million up $33 million sequentially as we hosted our largest advisor conference of the year during the quarter.

Matt Audette: Now let's turn to our third quarter business results. Total advisory and brokerage assets were 1.2 trillion, unchanged from Q2, as continued organic growth was offset by lower equity markets. Total organic net new assets were 33 billion, or approximately 11% annualized growth rate. Our Q3 recruited assets were 31 billion, which included 12 billion from Bank of the West in Commerce. Prior to these large enterprises, this was a quarterly record for overall recruiting, as well as for our new affiliation models, which contributed 5 billion in the quarter.

We also incurred roughly $6 million of Prudential related promotional expense in Q3.

Looking ahead to Q4, we expect conference spend to decline by approximately $20 million at.

At the same time, we will be ramping preparation for credential and expect related onboarding and integration cost to increase by roughly $15 million from Q3.

So overall, we expect Q4 promotional expense to be flat to down 5 million sequentially.

Turning to depreciation and amortization was $65 million in Q3 up $7 million sequentially.

Matt Audette: As for our Q3 financial results, the combination of organic growth and expense discipline led to adjusted EPS of $3.74. Gross profit was 1 billion, 10 million, up 20 million, or 2% sequentially. As for the components, commission and advisory fees net of payout were 219 million, up 1 million from Q2. In Q3, our payout rate was 87.3%, up 60 basis points from Q2, due to typical seasonality in the onboarding of Bank of the West in Commerce Bank.

Looking ahead to Q4, we expect depreciation and amortization to increase by roughly $5 million sequentially.

As for interest expense it was $48 million in Q3 up $3 million sequentially driven by the impact of higher short term interest rates on our floating rate debt and increased usage of our revolver.

Looking ahead to Q4, given current debt balances and interest rates, we expect interest expense to increase by approximately $1 million from Q3.

Matt Audette: Looking ahead to Q4, a reminder that the production bonus increases throughout the year, and is typically highest in Q4. So we anticipate our payout rate will be approximately 88%. With respect to client cash revenue, it was 378 million, down 18 million from Q2, as cash balances declined 3 billion to 47 billion. This marked the smallest quarterly decline we've seen this year. Within our ICA portfolio, the mix of fixed rate balances increased to roughly 65%, within our target range of 50 to 75%.

Regarding capital management, our balance sheet remains strong we ended Q3 with corporate cash of $309 million down 16 million from Q2.

Our leverage ratio was one three times up slightly from Q2.

As for capital deployment, our framework remains focused on allocating capital aligned with the returns we generate.

Investing in organic growth first and foremost pursuing M&A, where appropriate and returning excess capital to shareholders.

In Q3, we allocated capital across our entire framework.

We continue to invest to drive and support organic growth.

Matt Audette: Our ICA yield averaged 318 basis points in the quarter, down 4 basis points from Q2, driven by a decline in floating rate balances. As for Q4, based on where client cash balances and interest rates are today, we expect our ICA yield to decline by roughly 5 basis points, due to the mixed impact of lower floating rate balances. As for service in fee revenue, it was 136 million in Q3, up 13 million from Q2, primarily driven by revenues from our National Advisor Conference, and IRA.

Allocated capital to M&A within our liquidity and succession solution and.

And return capital to our shareholders repurchasing $250 million of shares.

As we look ahead to Q4, we plan to repurchase $200 million of our shares keeping us on track to execute on our $2 billion authorization over two years.

To summarize our balance sheet is strong and we are well positioned to drive value through our capital allocation framework.

In closing, we delivered another quarter of strong business and financial results as we look forward. We remain excited about the opportunities we see to continue investing to serve our advisers.

Matt Audette: Looking ahead to Q4, we do not have any large advisor conferences and expect seasonally lower IRAPs. Given this, we anticipate service and fee revenue will decline by roughly ten million sequentially. Moving on to Q3 transaction revenue, it was 50 million, up three million sequentially due to increased trading volume. As we look ahead to Q4, we have seen an increase in trading activity in October. So based on what we have seen to date, we would expect transaction revenue to increase by a couple million sequentially.

Grow our business and create long term shareholder value with that operator. Please open the call for questions certainly ladies and gentlemen, if you do have a question at this time. Please press star one one on your Touchtone telephone.

If you would like to remove yourself from the queue. Please press star one again.

Please hold for any questions.

And our first question will be coming from Steven <unk> of Wolfe Research. Your line is open.

Matt Audette: Now let's turn to our strategic relationship with Prudential. In August, we announced that Prudential will onboard its retail wealth management business onto our platform, including the roughly 2600 advisors serving approximately 50 billion of line asset. The investments we are making in connection with this relationship would not only help us serve Prudential in their advisors, but also improve the experience for our existing advisors and help unlock a broader opportunity to serve enterprise.

Matt Audette: With respect to the ongoing earnings benefit from Prudential, we continue to estimate a run rate EBITDA benefit for approximately 60 million once they are onboard. Looking ahead, we will continue to provide updates in the progress we are making as we prepare to onboard Prudential. With that said, in terms of the cost transition, we continue to estimate total onboarding and integration costs of roughly 125 million, with approximately 20 million expected in Q4.

Hey, good afternoon, Dan Good afternoon, Matt.

Good afternoon.

Wanted to start off with a question just on the organic growth outlook, the 11% and then they figure came in at the higher end of the 7% to 13% range you guys have talked about in the past I would say what really stood out was.

This strong result relative to a slowdown in M&A that we saw at some of your peers and I was hoping you could unpack what were the biggest contributors to the share gains in the quarter and with the recruited assets tracking up 40%. How confident are you that this level of organic growth can in fact be sustained.

Steven It's Dan let me take that.

Certainly we can build off of that.

That answers so look I think in the short term.

We've got a we've got a jumping off point that as you said is in a solid place a 11% growth for the quarter.

Matt Audette: Now let's turn to expenses starting with core DNA. It was 342 million in Q3, up 5 million from Q2. Looking ahead, given our strong levels of organic growth and the variable cost associated with supporting that growth, we are increasing the lower end of our 2023 core DNA range by 5 million. As a result, we now expect 2023 core DNA to be in a range of 1,350 million to 1,307. Moving on to Q3 promotional aspects, it was 140 million, up 33 million sequentially, as we hosted our largest advisor conference of the year during the quarter.

And probably just as importantly, we saw a diverse contribution across all of our advisor and enterprise models.

Not only the volume of growth.

The breadth.

Bursty of the sources of growth.

And I think if I highlighted a couple of things inside Q3 that.

Maybe are significant.

So that overall outcome. The first would be we continue to see low levels of attrition and up 1% one 5% zone.

Certainly a solid outcome and reinforces the appeal.

Matt Audette: We also incurred roughly 6 million of Prudential-related promotional expense in Q3. Looking ahead to Q4, we expect conference spend to decline by approximately 20 million. At the same time, we will be ramping preparation for Prudential and expect related onboarding and integration costs to increase by roughly 15 million from Q3. So overall, we expect Q4 promotional expense to be flat to down 5 million sequentially. Turning to depreciation and memorization, it was 65 million in Q3, up 7 million sequentially.

The execution quality of the operation day to day, and I think it's complemented by the solid performance new store sales, where we recruited $31 billion of assets for the quarter.

And if you if you click down on that 31 billion of assets I think.

If you look at that prior to large enterprises right Q through Q3 quarterly high of recruiting of $19 billion in assets, which is more than double a year ago and I think when you take out or back out some of the lumpier nature of some of the large enterprise recruiting down underneath that again, you see the <unk>.

Matt Audette: Looking ahead to Q4, we expect depreciation and memorization to increase by roughly 5 million sequentially. As for interest expense, it was 48 million in Q3, up 3 million sequentially, driven by the impact of higher short-term interest rates on our floating rate debt and increase usage of our revolver. Looking ahead to Q4, given current debt balances and interest rates, we expect interest expense to increase by approximately 1 million from Q3.

Steve that that growth and new store sales.

Well is it happening across all of our different.

Pfizer oriented models.

And you feel.

We feel pretty good about the sustainability of that.

And that opportunity set and so look at it.

The drivers of that right. So the flexibility of the affiliation model gives us and puts us in a position of.

Competing for potentially any advisor that's looking for a newer better home.

Matt Audette: Regarding capital management, our balance sheet remains strong. We ended Q3 with a corporate cash of 309 million, down 16 million from Q3. Our leverage ratio is 1.3 times up slightly from Q2. As for capital deployment, our framework remains focused on allocating capital aligned with the returns we generate, investing in organic growth first and foremost, pursuing M&A wear appropriate and returning excess capital to shareholders. In Q3, we allocated capital across our entire framework.

Continued expansion of our capabilities and help us differentiate our model and then you continue to invest in simplifying the onboarding to make it easier and easier to move and take friction out.

Matt Audette: We continued to invest to drive and support organic growth, allocated capital to M&A within our liquidity and succession solution, and returned capital to our shareholders, repurchasing $250 million of shares. As we look ahead to Q4, we plan to repurchase $200 million of our shares, keeping us on track to execute on our $2 billion authorization over two years. To summarize, our balance sheet is strong and we are well positioned to drive value through our capital allocation frame.

I believe we do those things well and it creates a key contributor to overall growth good solid.

Sustainable growth rate as we go forward, so I hope that helps.

That's really helpful color Dan.

For my follow up for Matt surprise surprise, a question on client cash.

<unk> cash levels were down, 5% and maybe more resilient than the sweep deposit declines that we saw of roughly 7% to 10%. It appears now that being said cash outflows did continue in September.

Client cash balances trending so far in October and are you anticipating any seasonal benefit the <unk> cash levels from tax loss harvesting.

Yes, Steven I think on this and maybe to answer the last part of your question first I think if history is a guide you typically do see some seasonal build in.

Matt Audette: In closing, we delivered another quarter of strong business and financial results. As we look forward, we remain excited about the opportunities we see to continue investing to serve our advisors, grow our business, and create long-term shareholder value.

At the end of the fourth quarter typically in December for some cash or tax loss harvesting. So I'd be surprised if we did not see that this year, it's pretty common.

Operator: With that operator, please open the call for questions. Certainly, ladies and gentlemen, if you do have a question at this time, please press star 11 on your touchtone telephone. If you would like to remove yourself from the queue, please press star 11 again. Please hold for any questions.

I think on the core of your question when we look at how things are going in October I would say that the headline is on cash on the cash sweep side as we continue to see some of the <unk>.

The stability that we started to see in the third quarter.

Pacifically.

And a reminder, that advisory fees, primarily come out in the first months of the quarter and Thats for October would be a little over $1 1 billion, which is going to immediately bring down cash but cash flows outside of that has been relatively flat you are almost at the end of the month. So that would put cash sweep at around $46 2 billion is really.

Steven Chubak: And our first question will be coming from Steven Schuback of Wolf Research. Your line is open. Hey, good afternoon, Dan. Good afternoon, Matt. Good afternoon.

Dan Arnold: So, why did I start off with a question just on the organic growth outlook. The 11% and an A figure came in at the higher end of the 7th to 13% range you guys have talked about in the past. I would say what really stood out was the strong result relative to the slowdown and an A that we saw at some of your peers and was hoping you could unpack what were the biggest contributors to the share gains in the quarter and with the recruited assets tracking up 40%. How confident are you that this level of organic growth can in fact be sustained?

Those adviser fees coming out.

And from a percent of AUM would put it right at three 8% of AUM, which would be the fourth month in a row that we were at that level.

So I think when we look at those trends and I think as we've talked a bit about before we're starting to get to a place where you've got the natural amount of cash necessary to really manage the account and of course. It could go down further from here, but I think youre starting to see those resistance levels that we've talked about before.

In those balances now some of the other drivers there and maybe just to speak to how organic growth is going because a lot of that drives and brings in cash as well when we look at what we've seen in October is really continuing some of those positive trends that Dan was just talking about in Q3.

Dan Arnold: Steven, let me take that. Certainly, we can build off of that answer. So, look, I think in a short term, we've got a jumping off point. It, as you said, is in the solid place of 11% growth in the quarter and probably just as importantly, we saw a diverse contribution across all of our advisor and enterprise models, which I think speaks to not only the volume of growth but the breadth and diversity of the sources of growth.

And keeping in mind that the.

The seasonal nature of the first month as well on organic growth of those advisory fees come out as well when you look at what we've seen so far for October.

Prior to any additional assets coming on board from bank of the West and Commerce organic growth's running in the 6% though.

That compares to 4% prior to large enterprises in October of last year. So we're continuing to see that strength, there and then theres about a 1 billion and a half of AUM left to come onboard from those two institutions and some of that may come in in October that would bias it up from there. So overall I think I'd summarize October is stability.

Dan Arnold: And I think if I highlighted a couple of things inside Q3 that maybe are significant to that overall outcome, the first would be we continue to see low levels of attrition and at 1% to 1.5% zone. That's certainly a solid outcome and reinforces the appeal and the execution quality of the operation day to day. And I think it's complemented by the solid performance and new store sales where we recruited 31 billion of assets for the quarter.

We are starting to show in cash sweep and organic growth continuing to come in at solid levels.

Dan Arnold: And if you click down on that 31 billion of assets, I think if you look at that higher to large enterprises, Q3 had quarterly high recruiting of 19 billion in assets, which is more than double a year ago. And I think when you take out or back out some of the lumpier nature of some of the large enterprise recruiting, you click down underneath that. Again, you see the diversity of that growth in the new store sales as well as it happening across all of our different advisor-oriented models.

That's great color, Matt Thanks for taking my questions.

And one moment for our next question.

Okay.

And our next question will be coming from Alexandra <unk> of Goldman Sachs. Your line is open.

Hi, all this is Luke on for Alex Thanks for taking the question. If we could start with Prudential, we've seen LPL expand into new channels, a number of times with the insurance channel being the newest one with the <unk> partnership can you just talk through how you expect this opportunity to expand over time and how you think about the Tam and then could you also refresh us on the.

P&L dynamics and the timing you're thinking there. Thanks.

Dan Arnold: And you feel pretty good about the sustainability of that that opportunity set. And so look, The drivers of that, right? The flexibility of the affiliation model gives us and puts us in a position of competing for potentially any advisor that's looking for a newer, better home. It's a continued expansion of our capabilities, a couple of differentiator model. And then, you know, you continue to invest in simplifying the onboarding to make it easier and easier to move and take friction out.

Let me start with answering that.

Matt will come in and maybe the second part of that.

Look at the headline level, if you take a step back and just look at the large enterprise opportunity set.

With respect to the bank space as you know we on boarded two new large enterprises this quarter and we continue to see.

<unk> set in that large enterprise space are those that continue to.

Dan Arnold: We believe we do those things well. And it creates a key contributor to overall growth and a good solid, sustainable growth rate as we go forward. So, I hope that helps. Yeah, it's really helpful color, Dan.

<unk> has its own broker dealers and <unk> and do the business in house.

And see an interesting Tam that would consider a different strategic approach and so.

Those wins reinforce that value proposition our continued investment in this and our experience in managing and working with these large enterprises that certainly helped us as we go forward in that part of the large enterprise space.

Steven Chubak: And for my follow-up for Matt, surprise, surprise, a question on client cash. 3Q cash levels were down 5%, nearly more resilient than the sweet deposit declines that we saw of roughly 7 to 10% appears. That being said, cash outflows did continue in September.

And as you said the the announcement of the crew win.

Opens up a different part of large enterprises.

In this case, perhaps insurance.

Matt Audette: How are client cash balances trending so far in October? And are you anticipating any seasonal benefit to 4Q cash levels from tax loss harvesting? Yes, Steven. So, I think on just, and maybe to answer the last part of your question first, I think if history is a guy you typically do see some seasonal build-in at the end of the fourth quarter, typically in December for some cash or tax loss harvesting. So, I'd be surprised if we did not see that this year. It's pretty common.

Solution sets and <unk> part of the market space and look for there. We think again, we take that similar chassis, we're building some personalized and interesting and customized solutions.

For Prudential that we think will resonate with other.

Solutions in that part of the space.

They've got similar needs.

From a value proposition standpoint, when you think about.

The improvement in driving efficiencies within their models shifting their risk profiles.

Matt Audette: I think on the core of your question, we look at how things are going in October. I'd say that the headline is on cash on the cash sweep side as we continue to see some of the stability that we started to see in the third quarter. And I'd specifically, in a reminder that advisory fees primarily come out in the first month of the quarter, and that's for October to be a little over 1.1 billion, which is going to immediately bring down cash, but cash flows outside of that has been relatively flat here almost at the end of the month.

Matt Audette: So, that would put cash sweep that around 46.2 billion is really the advisory fees coming out, and from a percent of AUM would put it right at 3.8 percent of AUM, which would be the fourth month in a row that we were at that level. So, I think when we look at those trends, and I think as we've talked a bit about before, we're starting to get to a place where you've got a natural amount of cash necessary to really manage the account, and of course it could go down further from here, but I think you're starting to see those resistance levels that we talked about before in those balances.

Enhancing economics, and even working to stimulate top line growth all things that I think similar large enterprises.

These are things that we're working on collectively with both banks and ultimately potential. So we think there is a relevant opportunity we think potential.

Opportunity is a catalyst.

To open up more discussions in that part of the space. So.

We think again the broader enterprise large enterprise market is an interesting continued durable growth opportunity for us.

Both on the bank side.

Broader insurance.

And then just following up on the financial debt dynamics are reminders are about $50 billion of fine assets we.

We would expect to onboard them in the latter part of 'twenty four.

And that's when our estimated run rate EBITDA of $60 million would start when they're when they are fully on boarded.

We know and that is really the onboarding and integration costs that estimate overall a $125 million.

Matt Audette: Now, some of the other drivers there, maybe just to speak to how organic growth is going, because a lot of that drives and brings in cash as well. When we look at what we've seen in October, I was really continuing some of those positive trends that Dan was just talking about in Q3. And in keeping in mind that the seasonal nature of the first month as well on organic growth with those advisory fees come out as well, when you look at what we've seen so far for October, prior to any additional assets coming on board from Bank of the West in Commerce, organic growth is running in the sixth percent, though.

If you look at what we've done so far in the third quarter and our guide for the fourth quarter that put broadly 25 of that in 2023 meeting.

The remaining 100 would come through in 2024.

Once they are onboard Ed again, we'd be back to that $60 million EBITDA run rate.

Awesome Super helpful. Thanks for walking through everything Theyre switching topics a bit for the follow up this quarter saw an acceleration of servicing fee revenues up 11% quarter over quarter can you just talk through what drove that and how do you think about revenue opportunities for existing services and then related to that you read.

Matt Audette: That compares to 4 percent prior to large enterprises in October of last year. So, we're continuing to see that strength there, and then there's about a billion and a half of AUM left to come on board from those two institutions, and some of that may come in in October, so that would buy us it up from there. So, overall, I think I had summarized October as stability starting to show and cash sweep and organic growth continuing to come in at solid levels.

Certainly expanded access for your outsource CFO services, what our high level expectations, Therefore, both FAA uptake and revenue opportunities. Thanks, Ken.

Yes, I'll take the first part of that and then Dan if you want to jump in on that.

CFO solutions, which I know is your favorite solution.

Steven Chubak: It's a great color, Matt. Thanks for taking my questions.

Operator: And one moment for our next question.

Fine as well.

I think so on servicing fees I would say there's two primary drivers I think the first is just seasonal factors that come through in the third quarter.

Had our largest our national advisor conference in the third quarter, and Theres revenues and fees that come along with that further product sponsors that are there and then second the third quarter is a seasonally high quarter for <unk>.

Alexander Blostein: And our next question will be coming from Alexander Blostein of Goldman Sachs. The line is open. Hi, all. This is Luke gone for Alex. Thanks for taking the question. If we could start with prudential, we've seen LPL expanded to new channels a number of times with the insurance channel being the newest one with the prud partnership. Can you just talk through how you expect this opportunity to expand over time and how you think about the TAM? And then could you also refresh us on the PNL dynamics and the timing you're thinking through there? Thanks.

So those two things came through but then second I think maybe that from a from a longer term standpoint is really organic growth of the business and we've got fees associated with that are specific to advisers on our platform. So as we continue to grow the number of advisers. We we serve and support you have got a recurring fees and things that come along with that.

And those show up here as well. So so those are the two broad drivers. So I think when you look ahead to Q4, that's why we expect.

Dan Arnold: Let me start with answering that and then Matt will come in and answer maybe just a couple of other questions. So look at that headline level. If you take a step back and just look at the large enterprise opportunity set with respect to the bank space. As you know, we onboarded two new large enterprises, this quarter and we continue to see the opportunity set in that large enterprise space of those that continue to act as their own broker dealers and RIAs and do the business in house.

The decline of $10 million is really that seasonality coming the seasonal factors coming out, but I think the core from a long term standpoint is the more we drive organic growth more we serve and support advisers on our platform. This this section or this item will that we will continue to grow.

It also includes the fees related to our services portfolio. So maybe let's turn it over to Dan to talk.

CFS.

Thanks, Matt.

So look if you think about our services portfolio to start with a broader context, and then we'll put down lenders.

Dan Arnold: And see an interesting TAM that would consider a different strategic approach. And so I think those wins reinforce that value proposition are continued investment in our experience and managing and working with these large enterprises. It certainly helped us as we go forward in that part of the large enterprise space. And as you said, the announcement of the crew when kind of opens up a different part of large enterprises. In this case, perhaps insurance solutions sets and or part of the market space.

Initially when we rolled out the solutions or the services portfolio.

The initial bundle of services, we're really more relevant for our larger practices.

And if you didn't have a complex practice.

Let's use as an example, our initial rollout of CFO solutions.

<unk>.

<unk> solution may not be relevant to you or it may be at a price point that makes it out of reach for us.

So learning through that sort of first iteration of round of innovation.

Dan Arnold: And look for there. We think again, we take that similar chassis. We're building some personalized and interesting customized solutions for credential that we think will resonate with other solutions in that part of the space. They've got similar needs from a value proposition. What we think about the improvement driving efficiencies within their models, shifting their risk profiles, enhancing economics and even working to stimulate top line growth. All things that I think similar large enterprises are looking to do.

We realized that a lot of the capabilities within the original CFO solutions.

Where needed we're all advisors and figure out how to package those in a different way at a lower price point and still create that leverage more value for our advisors.

Then that would be.

A good problem to solve for and one that will create real value for advisors and so that's what you saw with <unk>.

New rollout of what we call CFO essentials.

Again, it will reach a much broader set of our 22000, plus advisers are being much more applicable to them.

And we think meet their needs at a price point that makes sense and continued to.

Dan Arnold: These are things that we're working on collectively with both banks and ultimately with potential. So we think there is a relevant opportunity. We think potential opportunity is a catalyst to open up more discussions in that part of the space. So we think again that the broader enterprise large enterprise market is an interesting, continued, durable growth opportunity for both on the bank side and on the broader interest. And then just following up on the financial dynamics or reminders, there are about 50 billion of fine assets.

To drive the utilization and growth.

<unk>.

Of that overall kind of suite of CFO type solutions, we're doing that on the marketing side as well. So these are just I think places where we continue to innovate on our overall portfolio with.

With a fine point on that we now have 13 solutions and our overall services portfolio, which many of them are relevant across our <unk>.

Be relevant across our entire advisor base.

Got three more solutions that we will rollout in the near to intermediate term and another handful in each basin. So it continues to be a place.

Dan Arnold: We would expect to onboard them in the latter part of 24. And that's when our estimated run rate EBITDA is 60 million with start when they're fully onboarded. Between now and then is really the onboarding integration cost that estimate overall 125 million. And if you look at what we've done so far in the third quarter and our guide for the fourth quarter, that puts broadly 25 of that in 2023, meaning the remaining 100 would come through in 2024. And then once they're onboarded, you again would be back to that 60 million dollar EBITDA with me.

Alexander Blostein: Awesome, super outfall. Thanks for walking through everything there.

Of innovation for us.

Think there is still.

A good bit of opportunity to continue to help build leverage points for advisors and the spirit of helping them run driving business. So.

That's kind of the.

The context around CFO.

Essentials.

Okay, and one moment for our next question.

And our next question will be coming from Devin Ryan.

Alexander Blostein: Switching topics a bit for the follow-up. This quarter saw an acceleration of service and fee revenues, up 11% quarter over quarter. Can you just talk through what drove that and how do you think about revenue opportunities for existing services? And then related to that, you recently expanded access for your outsourced CFO services. What are high level expectations there for both FA uptake and revenue opportunities?

JMP Securities. Your line is open Devin.

Okay, Great Hi, Dan Hi, Matt.

Would love to just maybe start on the RIAA channel.

Really nice momentum, particularly on that new assets there in the quarter.

I guess, particularly in the corporate <unk>, So would love to just maybe dig a little bit into.

The drivers this quarter and then just the outlook and also weather.

Matt Audette: Thanks again. I'll take the first part of that and then Dan, if you want to jump in on the CFO solutions, which I know is your favorite solution. This is fine as well. I think so on service and fees, I'd say there's two primary drivers. I think the first is just seasonal factors that come through in the third quarter. We've had our national advisor conference in the third quarter and there's revenues and fees that come along with that for the product sponsors that are there.

The Schwab Ameritrade conversion was a factor this quarter or even just going forward as you kind of consolidate some of the large players. There just want to think about kind of some of the incremental opportunity for LPL.

Matt Audette: And then second, the third quarter is a seasonally high quarter for IRA fees. So those two things came through. But then second, I think maybe from a longer term standpoint, is really organic growth of the business. And we've got fees associated with that are specific to advisors on our platform. So as we continue to grow the number of advisors, we serve and support. You've got a recurring fees and things that come along with that in those show up here as well.

Hey, Devin this is Dan let me.

So to cover the.

Once that Youre exploring I think first and foremost if you look at overall just advisory growth in general right. You continue to see success and progress we have in both same store sales and new store sales across again all of our <unk>.

The Asian models, so that would cover your corporate or a hybrid.

<unk> solutions your pure solutions.

And I think.

We still see about 75 cents of every new dollar of invested go into advisory, So thats, where youre going to pick up the contribution from same store sales and you still see conversions of transitions from brokerage to advisory services. Those are the your tail winds that are that are overall driving that advisory growth I think if you pulled.

Matt Audette: So those are the two broad drivers. So I think when you look ahead to Q4, that's why we expect the decline of 10 million is really that seasonality coming, the seasonal factors coming out. But I think the core from a long term standpoint is the more we drive organic growth, more we serve and support advisor on a platform, this section or this item will continue to grow. Now it also includes the fees related to our services portfolio.

Back then and look at the different.

Affiliation models and how we're positioned in the marketplace.

Certainly the diversity of our different models continues to help us.

Attract.

Matt Audette: So maybe turn over Dan to talk about that. See if I solution. Thanks Matt. And so look at think about our services portfolio, just start with a broader context and then we'll put down on your specific question. And initially when we rolled out these solutions or the services portfolio, you know, the initial bundle of services were really more relevant for our larger practices. And if you didn't have a complex practice, let's use it as an example, our initial roll out of CFO solutions, then that solution may not be relevant to you or it may be at a price point that makes it out of reach for you.

A diverse set of advisors and advisers that quite frankly, do more and more advisory when they joined.

Matt Audette: And so learning through that sort of first iteration around the innovation, we realized that a lot of the capabilities within the original CFO solutions were needed for all advisors to figure out how to package those in a different way at a lower price point and still create that leverage point of value for our advisors. And then that would be a good problem to solve for and one that will create real value for our advisors.

And youre seeing that in the traditional space as we continue to attract more and more larger advisers with more complex practices, you look across our different new affiliation models right employee.

Strategic well in pure a lot of those will be breakaways from wires that will come with with significant advisory booked some if you just click down on those.

New affiliation models as we said this quarter represented a record in terms of recruiting a $5 billion of assets.

If you look back over the last 12 months, we've actually recruited 14 billion.

New assets to those affiliation models.

Which is.

Is 50% what we have overall recruited since they've been launched and certainly that mix of business.

It seems to have.

More significant percentages of their books and advisory.

Matt Audette: And so that's what you saw with this new roll out of what we call CFO's essentials that again, it will reach a much broader set of our 22,000 plus advisors are being much more applicable to them. And we think meet their needs at a price point that makes sense and continue then to drive the utilization and growth of that overall kind of suite of CFO type solutions. We're doing that on the marketing side as well.

Again, another driver and I think as we continue to.

Have success with those models as we continue to invest in that more and more fueling.

There's more and more awareness of them and thus more demand.

We certainly are well positioned to see that advisory business growth I think specifically relative to maybe your question around swabbing.

Ameritrade, it's probably more of a pure RIAA business and we do see that as a as a continued interest in place of which to compete and try to win so we continue to invest in our.

Matt Audette: These are just I think places where we continue to innovate on an overall portfolio. But the fine point on that, we now have 13 solutions in our overall services portfolio, which many of them are relevant across, or could be relevant across our entire advisory base. We've got three more solutions that we will roll out in the near to end of immediate term and another handful in incubation. So it continues to be a place of innovation for us. And we think there's still a good bit of opportunity to continue to help, still leverage points for advisors in the spirit of helping them run driving businesses. So that's kind of the context around CFO's assumptions.

Operator: Okay, in one moment for our next question.

Sure.

And our solution and our model to ensure that we create a differentiated solution.

That will help.

Help us.

Be positioned to win in capitalizing on whether it be market share opportunities created by consolidation or just ongoing demand for that type of solution and I think as we try to position ourselves as a more vertically integrated strategic partner that creates more value for the advisor, we think that positions us well to win.

Yeah.

An outsized share of market as we go forward in that space.

Alright, Thanks, Dan.

Follow up here just for Matt thinking about kind of the ICA yield glide path, maybe beyond <unk>. So you have $6 5 billion of contracts maturing next year, we're just modeling kind of random.

Devin Ryan: And our next question will be coming from Devin Ryan of JMP Securities. Your line is open, Devin. Okay, great. Hi, Dan. Hi, Matt. I'd love to just maybe start on the RIA channel. Really nice momentum, particularly on that new assets there in the quarter, and I guess particularly in the corporate RIA. So I'd love to just maybe dig a little bit into the drivers, this quarter, and then just the outlook and also whether, you know, the Schwab Ameritrade conversion was a factor of this quarter, or even just going forward as you kind of consolidate. Some of the large players there just want to think about kind of some of the incremental opportunity for LPL. It definitely is Dan.

Rolling off Ratably, but is there any sense again as we get closer there just more color on the cadence what that can look like and then as we think about also the base rate on ICA.

And even on the floating book today, how much improvement are you seeing it just seems like and were hearing that there is more demand in the bank system and so just kind of what the uplift might look like there. Thank you.

Yeah, Devin on the on the fixed rate side I think the.

Of that $6 5 billion about $5 billion rolls off in the first quarter and then the rest of it is evenly throughout the year, So about 2 billion a quarter.

And I think our plans a b III.

To reinvest reinvest that in new fixed rate contracts and saying, what we have been in that three to five years.

And I think when you look at the rates in that environment.

Dan Arnold: Let me, let me try to cover those sort of different points that you're exploring. I think first and foremost, if you look at overall just advisory growth in general, right, you continue to see success and progress we have in both same store sales and new store sales across again, all of our different types of affiliation models. So that will cover your corporate RIA, your hybrid RIA solutions, your pure RIA solutions. And I think we still see about 75 cents of every new dollar invested go into advisory.

Demand here is just as strong as it is on the floating rate side. So to your point on kind of spreads above the base rates. So if you look at where the curve is for three to five year money at this point you are in the.

Dan Arnold: So that's where you're going to pick up the contribution from same store sales. And you still see conversions or transitions from brokerage to advisory services. Those are your tailwinds that are that are overall driving that advisory growth. I think if you pull back then and look at the different affiliation models and how we're positioned in the marketplace, certainly the diversity of our different models continues to help us attract diverse set of advisors.

$4 50 to $4 70 range, but we are starting to see with the demand for deposit spreads on the fixed rate side as well. So you can you can think maybe more closer to or up to 500 basis points for those contracts. When they are rolling off on average at $2 50, So rounding up I'd say an opportunity to kind of double the earn.

<unk> on those balances as they mature.

The floating rate side I think we've seen we've seen spreads in the 15 to 30 basis point range, which I would say is historically high.

But we've probably seen that for the last couple of quarters, So you're starting to see that flow through on the floating rate side, but a broad point you can just seeing the pricing.

If you are a supplier of deposit side. The demand is there and the pricing is quite good.

Yes got it okay leave it there thanks guys.

Dan Arnold: And advisors that perfectly do more and more advisory when they join LPL. And you're seeing that in the traditional spaces we continue to attract more and more larger advisors with more complex practices. You look across different new affiliation models, right, employee, strategic wealth and pure RIA. A lot of those will be breakaways from wires that will come with significant advisory books. And if you just click down on those new affiliation models, as we said, this order represented a record in terms of recruiting of five billion of assets.

And one moment for our next question.

And our next question will come from Ben <unk> of Barclays. Your line is open.

Hi, Yes, good afternoon, and thanks for taking the question.

I wanted to follow up on some of the commentary on Ameritrade.

<unk> seen some kind of media press.

Indicating that there may be a pickup in sort of outbound to alternative custodians and other kind of services providers Im not sure. If that's something you can comment on but with great. If you could.

But even if not maybe another question along the same lines as if that were the case and you were seeing a pick up post labor day, how long does it typically take.

Dan Arnold: But if you look back over the last 12 months, we've actually recruited 14 billion in new assets to those affiliation models, which is 50% of what we've overall recruited since they've been launched. And certainly that mix of business that tends to have More significant percentages of their books and advisory is again another driver, and I think as we continue to have success with those models, as we continue to invest in, they come more and more appealing, there's more and more awareness of them and thus more demand, we certainly are well positioned to see that advisory business flow.

For an advisor who is showing.

Showing interest too to convert if you're successful there.

Yes, so for US I think I'd answer that more broadly that we see.

All registered advisers as an opportunity to potentially affiliate with one of our models.

And we obviously invest in a significant yeah.

Our business development team is out in the marketplace exploring those opportunities I think we continue to create real structural value that creates demand and appeal across our model is first and foremost the opportunity, but if youre doing that well.

And you have.

The efficacy of a good business development team will then when market opportunities may arise in the short run and we challenge ourselves to be agile and nimble to be able to capitalize on models, regardless of what they may be and when they may occur and so that's the combination that we think about how we go to mark.

Dan Arnold: I think specifically relative to maybe your question around Schwabben and Ameritrade, it's probably more the pure RIA business and we do see that as a, as a continued interesting place of which to compete and try to win, so we continue to invest in our, in our solution and our model, ensure that we create a differentiated solution that will, you know, help us be positioned to win and capitalize on whether it be market share opportunity that's created by consolidation, for just ongoing demand for that type of solution. And I think as we try to position ourselves as a more vertically integrated strategic partner that creates more value for the advisor, we think that positions as well to participate when, you know, on outside chair of market as we go forward in its face.

Alright, you create good structural differentiation in value you have a great team that can go tell that story and then we are agile and nimble when opportunities come up.

That may be created for whatever reason, so look when when theres transitions that occur in the marketplace just in general.

The broader question.

There is generally opportunity that may occur around the transition of assets.

From one custodian to another or one broker dealer from another.

And depending on the complexity that may occur in that transition. Typically then there is some opportunity that may arise post that whether that be because of <unk>.

Matt Audette: All right, thanks, Dan. Follow up here just for Matt. Thinking about kind of the ICA yield glide path, maybe beyond 4Q, so you have six and a half billion of contracts maturing next year. We're just modeling, kind of, you know, there's kind of rolling off radically, but is there any, you know, some sort of, you know, as we get closer there, just more color on the cadence, what that can look like.

New environment service challenges new technology, whatever the case may be change management challenges that may occur that may create some unrest.

And that may create some opportunity and again I think we try to be well positioned and well prepared.

Matt Audette: And then, you know, as we think about also the base rate on ICA and even on the floating book today, you know, how much improvement are you seeing? It just seems like in we're hearing that there's more demand in the bank system. And so just kind of what the uplift might look like there. Thank you. Yeah, David, on the fix rate side, I think of that six and a half billion, about a half billion rolls off in the first quarter and then the rest of it's evenly throughout the year.

Capitalize.

Reconversion post conversions, when those may occur and where that opportunity.

I hope that helps.

Yeah.

Yes understood.

Maybe one just quick follow up just on corporate cash for the last few quarters. It's been running ahead of your target level just to what degree is that maybe conservatism or just a matter of timing for the end of the quarter or is that.

More intentional any color you could share there would be helpful. Thank you.

Matt Audette: So about two billion a quarter. And I think our plans would be to reinvest, reinvest that in a new fix rate contract, same way we have been in that three to five years zone. And I think when you look at the rates in that environment, the demand here is just as strong as it is on the floating right side. So to your point on kind of spreads above the base rate. So if you look at where the, where the curve is for three to five year money at this point, you're in the, you know, 450 to 470 range, but we're starting to see with the demand for deposits spreads on the fixed rate side as well.

Yeah, you bet. So short answer is timing right I think when you look at our overall liquidity, it's more about managing our overall leverage ratio.

I think that the corporate cash balances end up being a little bit of timing simple as that.

Alright, I appreciate it thanks, so much.

Yes.

One moment for our next question.

Our next question will be coming from Dan Fannon of Jefferies. Dan Your line is open.

Thanks, I wanted to follow up on M&A in the outlook and just what the backlog looks like today, maybe versus last quarter or a year ago, and we've heard about more industry churn or churn for advisers picking up.

Matt Audette: So you can, you can think maybe, you know, more closer to or up to 500 basis points for those contracts when they're rolling off on average at 250. So, you know, rounding up, I'd say an opportunity to kind of double the earnings on those balances as they mature on the floating right side. I think we've seen, we've seen spreads in the 15 to 30 basis point range, which I'd say is historically high.

Would you echo that and what does that mean for potential acceleration in terms of <unk>.

Pfizer adds over the next kind of 612 months.

Yes, so look.

Matt Audette: But we've probably seen that for the last couple quarters. So you're sharing to see that flow through on the floating right side. But a broad point, you can just see in the pricing, the, you know, if you are a supplier of deposits, the demand is there and the pricing is quite good. Yeah, got it.

I think the headline as we said earlier from a recruiting standpoint, as we continue to see that as a <unk>.

As a as a solid.

Lever and driver of growth or a contributor to growth.

Both in the short run and longer term. So if I just put a little color on that for you.

Devin Ryan: Okay, leave it there. Thanks, guys.

Operator: In one moment for our next question.

When we look out at the environment.

Explore how we position ourselves to win we typically start with the opportunity set for.

Where you went to advisor movement.

Ben Budish: And our next question will come from Ben Budish of Barcliffe. Your line is open. Hi, good afternoon, and thanks for taking the question. I want to follow up on some of the commentary on Ameritrade. We've seen some kind of media press indicating that there may be a pickup and sort of outbound to alternative custodians and other kind of services providers. I'm not sure if that's something you can comment on, but would great if you could.

I would actually reflected as more flat over the last year, it's somewhere around five and a half a percent.

Sent movement or turnover, we haven't seen a big move up from that but it's more sustained and call it that range down for now.

What has happened is there has been a bit of a mix shift in some of the movement of our turnover, where we've seen the movement amongst.

Ben Budish: But even if not maybe another sort of question along the same lines is if that were the case and you were seeing a pickup post Labor Day, how long does it typically take for an advisor who is showing interest to convert if you're successful there? Yes, so for us, I think I answered that more broadly that we see all registered advisors as an opportunity to potentially affiliate with one of our models.

Independent market picked up.

Some of the movement has slowed down from the wires as an example.

That said given all of that.

I think what we do with challenge ourselves into two.

Or do you succeed regardless of the volume movement.

I think we continue to see our win rates improve despite the lower level of movement and with the diversification of our models right that mix shift that I spoke to is more of a neutral for us.

Ben Budish: And we obviously invest in a significant investment business development team is out in the marketplace exploring those opportunities. I think we continue to create real structural value that creates demand and appeal across our model. This first and foremost, the opportunity, but if you're doing that well. And you have the efficacy of a good business development team will then when market opportunities may arise in the short run. And we challenge ourselves via agile and nimble to be able to capitalize on those regardless of what they may be and when they may occur.

As again, we try to compete.

Competitively for all 300000 advisers that may move so.

The overall churn we've overcome those lower levels of churn, we do think that they will come back over time. There is there's lots of reason to believe that that number begins to pick up and more.

Turning back towards the norm and so if we can sustain higher win rates because we've got a more appealing model, we've gotten better at it.

At recruiting matched with the flexibility of our model I think we think that positions as well.

Ben Budish: And so that's the combination that we think about how we go to market, right? You create good structural differentiation and value. You have a great team that can go tell that story and then your agile and nimble when opportunities come up that may be created for whatever reason. So look, when when there's transitions that occur in the marketplace, just in general, back to you before the question, there's there's generally opportunity that may occur around the transition of assets from one custodian to another or one broker dealer from another.

As we go forward I.

If you look at the competitive landscape again, we haven't seen significant changes or material changes across the playing field there.

That said.

Ben Budish: And depending on the complexity that may occur in that transition, typically then there's some opportunity that may arise post that whether that be because of new environment service challenges, new technology, whatever the case may be, change management challenges that may occur that may create some unrest. And that may create some opportunity. Again, I think we try to be well positioned and well prepared to capitalize three conversions, post conversions, when those may occur and where that opportunity may occur.

What we talked about on the last question there are moments in time in the marketplace, where there may be some elevated movement because the organization is going through some strategic transition.

We always try to position ourselves there to get a bit of an over index gain on those opportunities when they may occur.

I think if you add all of that up and you look.

Out over the intermediate term.

If you look at our growing pipeline growing sort of.

Appeal of our different affiliation models.

The strength of our advisor recruiting matched with a nice complement of a bigger mandates in the enterprise marketplace.

We feel good about.

Our intermediate short and intermediate opportunity for recruiting and then longer term I think we go back to our structural.

Matt Audette: I hope that helps. Yeah, understood. Maybe one just quick follow up just on a corporate cash for the last couple, you know, a few quarters been running ahead of your target level. Just to what degree is that maybe conservatism or just a matter of timing for the end of the quarter was that more more intentional. Any college you could share there would be helpful. Thank you. Yeah, you bet your answer is timing, right?

Advantages and really back to our strategy where we.

We continue to see.

Growing appeal and demand for advice the attractiveness of the adviser.

The independent model matched with the desire to receive that model from a financial professional the overall demand for advice continues to give us a big tailwind to take our market leadership in the independent model singular focused on really understanding and innovating in it.

Matt Audette: I think when you look at our overall liquidity, it's more about managing our overall leverage ratio. I think that corporate cash balances end up being a little bit of timing. All right, appreciate it. Thanks so much. One moment for our next question.

Robust feature platform, we have the jump off from and then our Quebec capacity and commitment to invest back into the model.

And we think that certainly positions us long term capitalize on current large demand that exists today with the growing demand for advice. It is going to create more opportunity going forward and our ability to differentiate and win.

Dan Fannon: Our next question will be coming from Dan Fannon of Jeffries. Dan, your line is open. Thanks.

Dan Arnold: I wanted to follow up on NNA and the outlook and just what the backlog looks like today maybe versus last quarter or a year ago, and we've heard about more industry churn or churn for advisors picking up. And, you know, would you echo that and what does that mean for potential, you know, acceleration in terms of, you know, that advisor adds over the next, you know, kind of six, 12 months. Yeah, so look, I think the headline, as we said earlier, from the recruiting standpoint is we continue to see that as a, as a, as a solid lever and driver of growth or contributor to growth, both in the short run and longer term.

Okay.

That helps.

Yes, that's helpful and I guess, Matt just a follow up here on expenses. So first is the promo expense missed the guidance for the third quarter. So curious about what drove that and then as we think about G&A I know, there's elevated spend because of the environment and the solid organic growth.

And looking at Slide 24, it's obviously been on a trajectory higher for several years, if we think about longer term not so much for just 24, what is a reasonable growth rate do you think for G&A spend to maintain.

Dan Arnold: So, if I just put a little color on that for you, you know, when, when we look out at the environment, explore how we position ourselves to win, we typically start with the opportunity set where you went to advisor movement. I would actually reflect it is more flat over the last year and somewhere around five and a half percent movement or turnover, we haven't seen a big move up from that, but it's more sustained and call it that range bound for now.

These solid levels of organic growth.

Yes, I think just all hit the promo first I think when you look at our guide for Q3, which was in the 130 to 135 range. We came in at $1 40, really just a factor of the timing of the large enterprise Onboarding expenses, we had both bank of the West and Commerce come onboard in the quarter, that's the quarter, where those expenses.

They are typically the highest.

And then we started the integration on boarding work for Prudential, which we've got an overall estimate of $125 million and that is still our estimate just ramped up a little bit faster. So it's simply the timing of expenses associated with those I think.

Dan Arnold: What has happened is there's been a bit of a mix shift in some of the movement or turnover where we've seen the movement amongst independent market picked up where some of the movement has slowed down from the wires as an example. That's a given all of that look, I think what we do is challenge ourselves into to how do you succeed regardless of the volume of movement. I think we continue to see our win rates improve despite the lower level of movement and with the diverse patient of our models, right, that mix shift that I spoke to is more of a neutral point for us as is again, we try to compete.

Alright for Q3.

I think to your second question on an overall core G&A growth I mean, I think we we plan those investments in spending.

Each and every year with a focus on making sure we're investing in to drive and support organic growth.

Dan Arnold: Pedal of late for all 300,000 advisors that may move so the overall turn we've overcome those lower levels of turn we do think that they will come back over time there's there's lots of reason to believe that that number begins to pick up and more. Turn back towards the norm and so if we can sustain higher win rates because we've got a more appealing model we've gotten better at recruiting matched with the flexibility of a model.

Making sure we're balancing that with delivering operating leverage and then I think perhaps to the core of your question adjusting those levels based on the macro environment and I think thats, where we get to what we're doing this year is.

As having an up level of investment and spend that I think really helps improve our value proposition our capabilities to our advisers and is one of the drivers of our success in organic growth and I think when we think about that over the long term that things like that would be dependent upon the environment right. So if you remember from the the guidance of 13% to <unk>.

15% growth this year about 4% to 5% of that was really based on the opportunity of the environment. So I think when youre thinking long term I think thats, a bucket, where you can put aside and say we just be opportunistic.

For that amount.

If the environment was there and I think when we get back to what we're spending on and what we're doing this year, we think it's been a.

Dan Arnold: I think we think that positions as well as we go forward I think if you look at the competitive landscape again we haven't seen significant changes or material changes across the playing field there. That's it you know what we talked about in the last question there are moments in time in the marketplace where there may be some elevated movement because an organization is going through some strategic transition. And we always try to positions ourselves there to get a bit of an over index gain on those opportunities when they may occur I think if you add all of that up and you look out over the intermediate, term.

Quite the right decision and a good use of capital.

Thank you.

One moment for our next question.

And our next question will be coming from Michael Cyprus with Morgan Stanley. Your line is open Michael.

Great. Thank you. Good afternoon, maybe just continuing with expense related question is just on the promotional expense we've seen an uptick in recent years I understand there's been some investments made to support that.

We look out over the next couple of years, how should we think about sort of an underlying.

True run rate of expense growth for on the promotional side in order to maintain the organic growth that you guys are looking to achieve and I think on the promotional side. You also called out about $100 million of Onboarding for next year should we think about that all fully coming out in 'twenty five.

Dan Arnold: You look at our growing pipeline, the growing sort of appeal of our different affiliation models, the strength of our advisor recruiting matched with the nice complement of bigger mandates in the enterprise marketplace. And we go good about our intermediate short and intermediate opportunity for recruiting. And then longer term, I think we go back to our structural advantages and, you know, really back to our strategy where we continue to see growing appeal and demand for advice, the attractiveness of the advisor or the independent model matched with the desire to receive that model from the financial professional.

Yes, well I think when you look at the drivers it's really three things.

I think on that last point is on the $100 million for Prudential.

It related to large financial institutions and those institutions coming on board. So I think that when we think about our opportunity set I think we would expect to have those be an ongoing opportunity but to the to the core of your question. If there werent any in a year or there werent any large financial institutions coming on board. Those expenses will go away at $100 million is specific to <unk>.

Meaning once that's on boarded unless theres, others coming onboard you wouldn't have a spend level of that of that amount.

Dan Arnold: The overall demand for advice continues to give us a big tailwind. You take our market leadership in the independent model singular focused on really understanding and innovating and it robust feature platform we have to jump off from and in our capacity and commitment to invest back into the model. And we think that certainly positioned this long term capitalized on current large demand that exists today, but the growing demand for advice that is going to create more opportunity going forward in our ability to differentiate and then hope that helps.

But the other key drivers of the growth overall outside of the number of large financial institutions are enterprises, we have are coming on board.

There is really organic growth right and I think when you look at the amount of organic growth that we have the transition.

Assistance associated with that.

The amortization of that Thats, primarily what shows up in the growth for promotional and it's about the size of our recruiting I think we've talked about it a bunch on on this call. During this Q&A, but the amount of recruited AUM that we're bringing onboard has increased substantially.

And the capital that helps bring that on board and they expense shows up here.

Matt Audette: Yes, that's helpful. And I guess Matt just a follow up here on expenses. So first is the promo expense, miss the guidance for the third quarter. So curious about what drove that. And then as we think about GNA, I know there's elevated spend because of the environment and the solid organic growth. If we in looking at slide 24, it's obviously been on the trajectory higher for several years. If we think about longer term, not so much for just 24, what is the reasonable growth rate do you think for GNA spend to maintain, that these solid levels of organic growth?

The other one I would highlight to a much smaller extent is just conference spend right. That's based on the number of advisers, we havent firmed the bigger we get the more.

The more value there is an engagement with more of those folks in person at our conferences that would naturally rise.

But I think the two key things are.

Number of large financial institutions coming on board and then just the level and amount of our organic growth those will be the two big drivers.

Great. Thanks, and then just a follow up question on D&A I think you had called out about $200 million of platform investments to be capitalized I mentioned thats going to come through the DNA line, just how do we think about the timeframe and cadence for that to come through.

Matt Audette: Yeah, I think just I'll hit the promo first. I think when you look at our guide for Q3, which was in the 130 to 135 range, we came in at 140, really just to factor the timing of the large enterprise onboarding expenses. We had both Bank of the West and Commerce come on board in the quarter. That's the quarter where those expenses are typically the highest. And then we started the integration onboarding work for credential, which we've got an overall estimate of 125 million and that is still our estimate just ramped up a little bit faster.

Yes, and thats associated with Prudential as well. So if you think about Prudential overall of $325 million of investment.

As a reminder, this note there's no transition assistance that comes along with it Thats the total investment.

So the timing will be like typical to a large financial institution, it will be mostly leading up to and during the quarter of on boarding but there can also be some that comes across after that.

And then you get into based on the technology that we're putting in place which are typically amortization periods call. It in the four or five year. So once they're deployed.

Matt Audette: So it's simply the timing of expenses associated with those, I think it was a highlight for Q3. I think you're a second question on overall core GNA growth. I mean, I think we plan those investments and spend in each and every year with a focus on making sure we're investing to drive and support organic growth, making sure we're balancing that with delivering operating leverage. And then I think perhaps to the core of your question, adjusting those levels based on the macro environment.

So we should think about that 200 coming through over five years or is that roughly fair.

Yes, yes, once once it's deployed four or five years following that so I think thats a good way to think about it great. Thank you.

One moment for our next question.

And our next question will be coming from Kyle Voigt of <unk> Kyle Your line is open.

Matt Audette: And I think that's where we get to what we're doing this year is having an up-level of investment and spend that I think really helps improve our value proposition, our capabilities to our advisors. And this is one of the drivers of our success in organic growth. And I think when we think about that over the long term, that things like that would be dependent upon the environment. So if you remember from the guidance of 13 to 15 percent growth this year, about 4 to 5 percent of that was really based on the opportunity of the environment.

Hi, good evening.

Maybe just one on the regulatory environment. It sounds like the Dol is set to propose a new fiduciary rule very shortly obviously you don't have any many details at this point, but just wondering if you could comment high level on the state of the business today relative to 2016 remind us of some of the more meaningful changes that were already.

Matt Audette: So I think when you're thinking long-term, I think that's a bucket where you can put aside and say, we just be opportunistic for that amount if the environment was there. And I think when we get back to what we're spending on what we're doing this year, we think it's been a quite the right decision and a good use of capital. Thank you.

Operator: One moment for our next question.

Implemented ahead of the prior Dol rule that was ultimately vacated and will be great to kind of hear how you feel about potential expense needs to comply with any new rule proposal given the investments that were already need to comply with the prior rule.

Yes, So let me let me let me take that one and so look there is the Dol proposal that's under review at the.

White House office of management and budget.

And that's the procedural step as you know before the proposals released to the public comments. So theres not a lot of insight on what's contained inside of that I think theres been a lot of speculative dialogue about.

Michael Cyprys: And our next question will be coming from Michael Cyprys of Morgan Stanley, your line is open, Michael. Great, thank you. Good afternoon.

Matt Audette: Maybe just continuing with expense-related questions. Just on the promotional expense, we've seen an uptake in recent years, understand there's been some investments made to support that. Just as we look out over the next couple of years, how should we think about sort of an underlying true run rate of expense growth for on the promotional side in order to maintain the organic growth that you guys are looking to achieve? And I think on the promotional site, you also called that about 100 million of onboarding for next year. So we think about that all fully coming out in 25.

What that may be.

But I think we'll learn more as.

We move to the next step I think what we will do.

We do believe is that.

Once it moves public comment it's a long <unk>.

Process of which to work through ultimately.

Either some proposed changes that may occur from that and or not and so.

I think youll see.

Good public dialog about what's being considered.

Matt Audette: Yeah, well, I think when you look at the drivers, it's really three things. And I think on that last point, it on the 100 million for provincial. It related to large financial institutions and those institutions coming on board. So I think that when we think about our opportunity set, I think we would expect to have those be an ongoing opportunity, but to the to the core of your question, if there weren't any in a year, or there weren't any large financial institutions coming on board, those expenses would go away.

I think we did as you said did significant work back in 2016 and Hulu.

Cool innovation even around them.

Some products like mutual funds as an example that didn't ultimately wasn't ultimately utilized.

As we.

As the 2016 fiduciary rule was struck down and ultimately pivoted to the regulation best interest.

What is different and I think.

Matt Audette: That 100 million is specific to meaning once that's onboarded, unless there's others coming on board, you wouldn't have a spend level of that amount. But the other key drivers of the growth overall, outside of the number of large financial institutions or enterprises we have are coming on board, is really organic growth, right? And I think when you look at the amount of organic growth that we have, the transition assistance associated with that, and the amortization of that, that's primarily what shows up in the growth for promotional.

And by the way that will serve as a great baseline a lot of innovative work that we did some we use today and ranked by some were not using and we think it prepares us well of which to ultimately pivot <unk> adjust for whatever changes may occur in the rule I do think that.

The dialogue around the rule itself.

Is is.

As a bit of difference in context, the circumstances are different and.

As you know.

<unk> has just really been released out into the marketplace for a couple of years.

Matt Audette: And it's about the size of our recruiting. I think we've talked about it a bunch on this call and during this Q&A, but the amount of our crudered AUM that we're bringing on board is is increased substantially in the capital that helps bring that on board and the expense shows up here. The other one I'd highlight to a much smaller extent is just conference spend, right? That's based on the number of advisors we have at the firm, the bigger we get, the more, you know, the more value there is in engaging with more of those folks in person at our conferences, that would naturally rise. But I think the two key things are, number of large financial institutions coming on board, and then just the level and amount of our organic growth, those would be the two big drivers.

We do think it is.

It proposes a higher standard of care, which we are aligned with and we think the FCC has the right regulator to create that route.

It's a business both retirement and non retirement.

And consequently.

We think that because of that rule is in place the consideration set for that and allowing that to run its course and ensure that its effective and ultimately.

Establishing and aligning around that higher standard of care. We think has a lot of relevance in the dialogue will occur.

And.

Matt Audette: Great, thanks. And just a follow-up question on DNA. I think you had called out about 200 million of platform investments to be capitalized. I imagine that's going to happen for that to come through. Yeah, and that's associated with credentials as well. So if you think about a potential overall of 325 million of investment and a reminder, there's no transition assistance that comes along with it. That's the total investment. So the timing will be like typical to a large financial institution.

Go back to some of the proposals in 2016 I think there is the big risk.

It ultimately your takeaway choice and that begins to harm low and middle income investors, eliminating access to brokerage advice.

Smaller retirement accounts, which obviously systemically, it's not a good outcome.

Outcome would be.

Which I think you'll have a lot of pushback.

A lot of relevant CERN around that potential outcome. So we just believe the circumstances are different that have this sort of public debate.

Matt Audette: It will be mostly leading up to and during the quarter of onboarding, but there can also be some that comes across after that. And then you get into based on the technology that we're putting in place, which are typically amortization periods called in the four or five-year zone once they're deployed. So we should think about that 200 coming through over five years or so, roughly. That pair. Yeah, yeah, once it's deployed for five years following us, I think that's a good way to think about it.

Operator: Thank you. One moment for our next question.

Around the process all of that said if there are some changes.

Incrementally, we do think we're well prepared to.

The pivot and add those in.

And continue to.

Deliberate choice between both brokerage and advisory always wishes.

Which is another option.

And we think it'll serve investors.

So I hope that gives you a little color. The point is we don't really know yet I think there is something that is being considered and we think.

It'll be a good healthy debate will be well.

Kyle Voigt: And our next question will be coming from Kyle Voigt of KBW, Kyle, your line's open. Hi, good evening. Maybe just one on the regulatory environment. Sounds like the DOL is set to propose a new fiduciary rule very shortly. Obviously, we don't have many details at this point, but just wondering if you could comment high level on the state of the business today relative to 2016 or minus of some of the more meaningful changes that were already implemented ahead of the prior DOL rule that was ultimately vacated. And we'll be great to kind of hear how you feel about potential expense needs to comply with any new rule proposal, given the investments that were already made to comply with the prior rule.

Yeah.

Great. Thank you and then just for my follow up just on the liquidity and succession solutions.

We're now opening that externally I guess is there any way to frame how meaningful that could be relative to the size of the capital deployed internally they disclosed so far.

The second part of that question and I know this topic comes up from time to time, but curious if you could give us any updated thoughts on potentially offering your broader business solution suite externally.

Yeah. So look I think let me take the strategic part of that and then.

I will turn it over to Matt.

Aspira <unk>.

Address your capital question so.

Dan Arnold: So let me, let me, let me take that one and so look, there is a DOL proposal that's under review at the White House Office of Management and Budget. And that's the procedural step, as you know, before the proposal is released to the public comments. So there's not a lot of insight on what's contained inside of that. I think there's a lot of spectra of the dialogue about what that may be.

Look.

Liquidity in succession solution that we came up with was.

On the premise of solving a big need right a third of advisors potentially retiring over the next 10 years, certainly a relevant problem to solve and the team did a great job of coming up with a differentiated creative solution that has ultimately been very appealing.

Two existing LPL advisors that were facing that same problem challenge and I think because of its differentiated nature.

Dan Arnold: But I think we'll learn more as, you know, we, we move to the next step. I think what we, what we do believe is that once it moves to public comment, it's a long process of which to work through ultimately. Either some proposed change that may occur from that end or not. And so, I think you'll, you'll see a good public dialogue about what's being considered. That said, I think we did, as you said, did significant work back in 2016 and had some school innovation even around some products like mutual funds as an example that didn't ultimately wasn't ultimately utilized as we.

It made sense for us to take those learnings and insights and then build potentially offer that outside of our platform.

In doing that.

High probability that those assets.

If we offered it to the external marketplace. We then move to the LPL platform that would be the concept as another way to motivate them to move to our platform.

Because of the demand and the interest that we've generated internally.

Because of the learnings that we've had just in the.

Basically 45 days, we've been in market around it.

Thats going to.

Have some interest.

And broadly appealing to the outside marketplace.

Dan Arnold: As the 2016 fiduciary rule was struck down and ultimately pivoted to the regulation best interest. What is different, and I think, and by the way, that will serve as a great base on a lot of innovative work that we did. Some we use today in ranked B.I. Some we're not using and we think it prepares us well of which to ultimately pivot and or adjust for whatever changes may occur in the rule.

We will learn more hard to size right now because we just don't have enough data to support that.

We do think it's appealing and another way to attract assets to the LPL platform and be a smart deployment of capital and.

So that's kind of where we are now in that journey more to come as we learn more but.

But at least that's how we think about its strategic with respect to our other services that we may offer.

Outside of the platform.

I think we continue to.

Dan Arnold: I do think that that the dialogue around the rule itself is is is is is a bit difference in context, the circumstances are different. And as you know, reg B.I, has just really been released out into the marketplace for a couple of years and we do think it is a is a it poses a higher standard of care, which we are aligned with. And we think the SEC is the right regulator to create that rule across all parts of business, both retirement and non retirement.

Have have set that aside as a future possibility, we continue to see opportunity internally on with respect to.

Our growing number of advisers on the LPL platform and innovating on new solutions.

Dan Arnold: And consequently, we think that because of that rule is in place, the consideration set for that and allowing that to run its course and ensure that it's effective in ultimately, and establishing and aligning around that higher standard of care. We think has a lot of relevance in the dialogue that will occur. And, you know, if you go back to some of the proposals in 2016, I think there is the big risk that ultimately you take away choice.

And expanding that portfolio set versus broadening the distribution outside of the LPL.

Platform, So think about that as our near term focus is continuing to add more services and supporting our growing platform here I do think it's a relevant question.

Point to ask could you could you.

Logically why that outside of the model.

<unk> you want to take.

Yeah, Kyle I think that I mean, the headline is that we don't I wouldn't see any different level of capital deployment, taking it external other than to highlight when youre, taking this externally you're really doing two events, there's a recruiting event as well as the <unk> LLS transaction liquidity succession solution. So think about from a capital deployment standpoint, a good framework.

Be that knowing that those two things would be occurring but I think the headline point is nothing from a capital standpoint that would be different than we've talked about before these are relatively small amounts of capital deployment on an individual level. It's more about as Dan was covering the strategic connection of this capability.

Dan Arnold: And that begins to harm low and middle income investors by limiting access to brokerage advice, those smaller retirement accounts, which obviously in systemically is not a good outcome. It would be a big, unintended consequence, which I think will have a lot of pushback and a lot of relevant concern around that potential outcome. So we just believe the circumstances are different to have this sort of public debate and open review around the process.

From an advisor standpoint in our long term growth.

Great. Thank you both.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Dan Arnold: All that said, if there are some changes incrementally, we do think we're well prepared to pivot and add those and continue to deliver choice between both brokerage and advisory. So we always believe this principle choices have an option. And we think it will serve investors more than that. So I hope that gives you a little color. The point is, we don't really know yet. I think there is something that is being considered and we think it'll be a good, healthy debate. We'll be well prepared.

Okay.

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Dan Arnold: Great. Thank you. And then just for my follow-up, just from the liquidity and succession solutions, you know that you're now opening that externally. I guess is there any way to frame how meaningful that could be relative to the size of the capital deployed internally they disclose so far. And then second part of that question, and I know this topic comes up from time to time, but curious if you give us any updated thoughts on potentially offering your broader business solution suite externally.

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Dan Arnold: Yeah, so look, I think let me take the strategic part of that and then I'll turn it over to Matt to ask your capital to address your capital question. So look, I think in succession solution that we came up with was on the premise of solving a big need, right? So we made a third of advisors essentially retiring over the next 10 years, certainly a relevant problem to solve. And he did a great job of coming up with a differentiated creative solution that has ultimately been very appealing to existing LPL advisors that were facing that same problem of challenge.

Dan Arnold: And I think because of its differentiated nature, it made sense for us to take those learnings and insights and then they'll potentially offer that outside of our platform. In doing that, I probability that those assets and if we offered it to the external marketplace would then move to the LPL platform, that would be the concept as another way to motivate them to move to our platform. Because of the demand and the interest that we've generated internally and because of the learning that we've had just in the basically 45 days, we've been in market around it.

Dan Arnold: We think it's going to have some interest and be broadly appealing to the outside marketplace. We'll learn more hard to size right now because we just don't have enough data to support that. We do think it's a feeling in another way to attract assets to the LPL platform and be a smart deployment of capital in order to be so. So that's kind of where we are now in that journey more to come as we learn more, but at least that's how we think about it strategically.

Matt Audette: With respect to our other services that we may offer outside of the platform, I think we continue to have set that aside as a future possibility. We continue to see opportunity internally on with respect to our growing number of advisors on the LPL platform and innovating on new solutions and expanding that portfolio set versus broadening the distribution outside of the LPL. So think about that as our near term focus is continue to add more services, and supporting our growing platform here. I do think it's a relevant question at some point to ask, could you logically apply that outside of that or from the budget? You want to take it back?

[music].

Matt Audette: Yeah, Kyle. I think that, I mean, the headline is that I wouldn't see any different level of capital deployment taking it external other than to highlight when you're taking this externally. You're really doing two events. There's a recruiting event, as well as the LNS transaction of the putting succession solution. So think about from a capital deployment standpoint, a good frame would be that knowing that those two things would be occurring. But I think the headline point is nothing from a capital standpoint.

Matt Audette: That would be different than we've talked about before. These are relatively small amounts of capital deployment on an individual level. It's more about as Dan was covering the strategic connection and of this capability from an advisor standpoint in our long-term growth.

[music].

[music].

Good afternoon, and thank you for joining the third quarter 2023 earnings conference call for L.

P L Financial Holdings, Inc. Joining the call today are our president and Chief Executive Officer, Dan Arnold and Chief Financial Officer, and head of business operations, Matt Audette.

Dan and Matt will offer introductory remarks, and then the call will be open for questions. The company would appreciate if analysts limit themselves to one question and one follow up each the company has posted its earnings press release and supplementary information on the Investor Relations section of the company's website investor LPL Dot com.

Today's call will include forward looking statements, including statements about L. P L financial future financial and operating results.

Outlook business strategies, and plans as well as other opportunities and potential risks that management foresees.

Such forward looking statements reflect management's current estimates or beliefs are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward looking statements.

More information about such risks and uncertainties. The company refers listeners to the disclosures set forth under the caption forward looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission.

During the call. The company will also discuss certain non-GAAP financial measures for a reconciliation of non of such non-GAAP financial measures to the comparable GAAP figures. Please refer to the company's earnings release, which can be found at investor that L. P. L. Dot com with that I will now turn the call over to Mr. Arnold.

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

Over the past quarter, our advisors continue to provide their clients personalized financial guidance on the journey to help them achieve their life goals and dreams.

To help support that important work, we remain focused on our mission of taking care of our advisers. So they can take care of their clients.

This quarter, we continued to see the appeal of our model growth due to the combination of a robust and future platform.

Ability and scale of our industry leading model.

And our capacity our commitment to invest back into the black.

As a result, we can.

Continue to make solid progress in helping advisors and enterprises solve challenges and capitalize on opportunities better than anyone else and thereby serve as the most important player in the industry.

With respect to our performance we delivered another quarter of solid results. While also continuing to make progress on the execution of our strategic plan.

I'll review both of these areas starting with our third quarter business results.

In the quarter total assets remained at one two trillion as continued solid organic growth was offset by lower equity markets.

Third quarter organic net new assets with 33 billion, representing 11% annualized growth.

This contributed to organic net new assets over the past 12 months of 97 million, representing approximately a 9% growth rate.

In the quarter recruited assets were 31 billion, including $12 billion bank of the West and Commerce.

But prior to large enterprises Q3 represents a quarterly record for recruiting.

This outcome was driven by the ongoing enhancements to our model as.

As well as our expanded addressable market.

Looking at same store sales.

<unk> remained focused on taking care of their clients and delivering a differentiated experience.

As a result, our advisors are both winning new clients and expanding wallet share with existing clients.

Combination that drove solid same store sales in Q3.

With respect to retention, we continue to enhance the advisor experience through the delivery of new capabilities and technology as well as the evolution of our service and operations functions as a result asset retention for the third quarter and over the last 12 months was approximately 99%.

Our third quarter business results led to solid financial outcomes of $3 74 of adjusted EPS, an increase of 19% from a year ago.

Kyle Voigt: Great. Thank you, Bill.

Let's now turn to the progress we've made on our strategic plan.

Now as a reminder, our long term vision is to become the leader across the advisor centered marketplace.

Operator: And this concludes today's conference call. Thank you for participating.

Which for us means.

Being the best at empowering advisors and enterprises to deliver great advice to their clients and to be great operators of their business.

Operator: You may now disconnect. Thank you.

Doing this well.

Operator: . Daniel Fannon, Michael[inaudible] I'm not sure.

It gives us a sustainable path to industry leadership across the advisor experience organic growth and market share.

Operator: I'm not sure. Good afternoon, and thank you for joining the third quarter, 2023 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 and Head of Business Operations, Matt Audette. Dan and Matt will offer introductory remarks and then the call will be open for questions. The company would appreciate if analysts would limit themselves to one question and one follow up each.

Now to execute on our strategy, we organize our work around two primary categories horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate with us and vertical.

Operator: The company has posted its earnings press release and supplementary information on the Investor Relations section of the company's website, investor.lpl.com. Today's call will include forward-looking statements, including statements about LPL Financial, Future Financial and Operating Results, Outlook, Business Strategies, and Plans as well as other opportunities and potential risks that management proceed, such forward looking statements reflect management's current estimates or beliefs in our subject to known and unknown risk and uncertainties that may cause actual results with the timing of events to differ materially from those expressed or implied in such forward looking statements.

Integration, where we focus on providing capabilities for a broader spectrum of the advisor needs.

And with that as context, let's start with our efforts around horizontal expansion.

This work involves meeting advisors and enterprises, where they are in the evolution of the business that.

By creating flexibility in our affiliation models such that we can compete for all 300000 advisers in the marketplace.

Operator: The more information about such risk and uncertainties, the company refers listeners to the disclosure set forth under the caption, forward looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent following the Securities and Exchange Commission. During the call, the company will also discuss certain non-gap financial measures or reconciliation of such non-gap financial measures to the comparable gap figures. Please refer to the company's earnings release, which can be found at investor.lpl.com.

As a result, this component of our strategy helps contribute to solid growth in our traditional markets, while also expanding our addressable market.

Over the third quarter, we saw strong recruiting in our traditional independent market, Adam adding approximately $13 billion in assets.

As a result of the appeal of our model and the efficacy of our business development team, we maintained our industry leading win rates, while also expanding the breadth and depth of our pipeline.

Dan Arnold: With that, I will now turn the call over to Mr. Arnold. Thank you, Tonya, and thanks to everyone for joining our call today. Over the past quarter, our advisors continue to provide their clients with personalized financial guidance on the journey to help them achieve their life goals and dreams. To help support that important work, we remain focused on our mission of taking care of our advisors so they can take care of their clients.

With respect to our new affiliation models.

Strategic will employ and our enhanced our <unk> offering we delivered our strongest quarter to date recruiting roughly $5 billion in assets in Q3.

Subsequent to launching these models a few years ago, we have continued to enhance their capabilities and thus further differentiate their value add to that the growing awareness of these models in the marketplace and that combination is creating more demand from prospective advisors. As a result, we expect to see a sustained increase in grow.

Dan Arnold: This quarter, we continue to see the appeal of our model grow due to the combination of our robust and feature platform, the stability and scale of our industry leading model, and our capacity and commitment to invest back into the platform. As a result, we continue to make solid progress in helping advisors and enterprises solve challenges and capitalize on opportunities better than anyone else, and thereby serve as the most appealing player in the company.

Within our new affiliation models.

Next the traditional banking credit Union space continues to be a consistent contributor to organic growth.

As we added approximately $1 billion of recruited assets.

<unk>.

During the quarter. We also continued to make progress with large enterprises Onboarding bank of the West and Commerce.

Dan Arnold: With respect to our performance, we deliver another quarter of solid results, while also continuing to make progress on the execution of a strategic plan. I'll review both of these areas starting with our third quarter business result. In the quarter, total assets remained at 1.2 trillion as continued solid organic growth was offset by lower equity markets. Third quarter organic net new assets with 33 billion, representing 11% annualized growth. This contributed to organic net new assets over the past 12 months of 97 billion, representing approximately a 9% growth rate.

The early feedback from these transitions has been positive as we continue to apply the learnings from previous Onboarding to further enhance the experience.

Looking ahead, we are confident that our industry, leading onboarding experience match with the expanding appeal of our model positions us well as a compelling alternative in this part of the market.

In Q3, we also announced that Prudential financial would onboard its retail wealth management business through our enterprise platform in the second half 2024.

This milestone reinforces the appeal of our value proposition for enterprises and reflects our commitment to help solve the unique and complex needs of a broad spectrum of institutions.

Dan Arnold: In the quarter, recruited assets with 31 billion, including 12 billion from Bank of the West and Commerce Bank. Prior to large enterprises, Q3 represents a quarterly record for recruiting. This outcome was driven by the ongoing enhancements to our model, as well as our expanded adjustable market. Looking at same-store sales, our advisors remain focused on taking care of their clients and delivering a differentiated experience. As a result, our advisors are both winning new clients and expanding wallet share with existing clients, combination, the drove solid, same-store sales, and Q3.

Looking ahead, we are encouraged by the momentum and strong pipelines across the enterprise market.

Now within our vertical integration efforts, we are focused on delivering a comprehensive platform capabilities services and technologies that help our advisers differentiate and win in the marketplace neuron thriving businesses now.

Now over the past quarter, we continued to make progress across several key fronts on this part of our strategy, including continuing the journey to build a world class wealth management platform.

This work includes evolving and enhancing our advisory platforms through simplified and lower pricing enhanced trading capabilities value added services like tax management and.

Dan Arnold: With respect to retention, we continue to enhance the advisor experience through the delivery of new capabilities and technology, as well as the evolution of our service and operations functions. As a result, asset retention for the third quarter and over the last 12 months was approximately 99%. Our third quarter business results led to solid financial outcomes of $3.74 of adjusted EPS, an increase of 19% from the year ago.

And the expanded investment choice and flexibility within our UMH.

These efforts will help our advisers continue to provide more value for their clients and the differentiated more personalized way.

Now as an additional part of our vertical integration strategy, we continued to expand and enhance our services portfolio and are encouraged by the evolving appeal of our value proposition and the seasoning of this business.

Dan Arnold: Let's now turn to the progress we made on our strategic plan. Now as a reminder, our long-term vision is to come the leader across the Advisor Center marketplace, which for us means being the best at empowering advisors and enterprises to deliver great advice to their clients and to be great operators of their business. Doing this well gives us a sustainable path to industry leadership across the Advisor experience, organic growth, and market share.

As a result of solid demand in Q3, the number of advisors utilizing our services group continued to increase and we ended the quarter with approximately 3700 active users up 26% year over year.

As a reminder, our recent innovation in this portfolio is our liquidity and succession solution, which is resonating with existing LPL advisors, where to date, we have deployed approximately $275 million of capital flows 20 deal.

Dan Arnold: Now to execute on our strategy, we organize our work around two primary categories, horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate with us, and vertical integration, where we focus on providing capabilities that solve for a broader spectrum of advisor needs. Now with that is context, let's start with our efforts around horizontal expansion. This work involves meeting advisors and enterprises where they are in the evolution of the business by creating flexibility in our affiliation models, such that we can compete for all 300,000 advisors in the marketplace.

And with the benefit of our learnings and insights. We recently began offering this solution to advisors that are external to LPL and are encouraged to see the early interest building.

Finally, this service is also enriching the appeal of our model and by doing so providing another differentiated solution to support our advisor recruiting efforts.

In summary in the third quarter, we continued to invest in the value proposition for advisors and their clients, while driving growth and increasing our market leadership.

As we look ahead, we remain focused on executing on our strategy to help advisers further differentiate and win in the marketplace and as a result.

Dan Arnold: As a result, this component of our strategy helps contribute to solid growth in our traditional markets while also expanding our adjustable markets. Over the third quarter, we saw strong recruiting in our traditional independent market, adding approximately 13 billion in assets. As a result of the appeal of our model and the efficacy of our business development team, we maintained our industry leading win rates while also expanding the breadth and depth of our pipeline.

Drive long term shareholder value.

I'll turn the call over to Matt.

Thank you, Dan and I'm glad to speak with everyone on today's call.

In the third quarter, we remained focused on serving our advisors growing our business and delivering shareholder value.

This focus led to strong organic growth in both our traditional and new markets and we continue to make progress with our liquidity and succession solution in.

Dan Arnold: And with respect to our new affiliation models, strategic wealth, employee, and our enhanced RAA offering, we delivered our strongest quarter-to-date recruiting roughly 5 billion in assets in Q3. Subsequent to launching these models a few years ago, we have continued to enhance their capabilities and thus further differentiate their value. Add to that, the growing awareness of these models in the marketplace, and that combination is creating more demand from prospective advisors. As a result, we expect to see a sustained increase in growth within our new affiliation models.

In addition, we onboard a bank of the West and Commerce Bank and are preparing to onboard the wealth management business of Prudential.

We accomplished all of this while continuing to invest in our industry leading value.

So as we look ahead, we continue to be excited about the opportunities we have to help our advisers differentiate and win in the marketplace.

Now, let's turn to our third quarter business results total advisory and brokerage assets were one two trillion unchanged from Q2 as continued organic growth was offset by lower equity markets.

Total organic net new assets were <unk> 33 billion or approximately an 11% annualized growth rate.

Dan Arnold: Next, the traditional banking credit union space continues to be a consistent contributor to organic growth, as we added approximately 1 billion of recruited assets in Q3. During the quarter, we also continue to make progress with large enterprises, onboarding Bank of the West, and commerce. The early feedback from these transitions has been positive, as we continue to apply the learnings from previous onboardings to further enhance the experience. Looking ahead, we are confident that our industry-leading onboarding experience matches with the expanding appeal of our model, positions us well as a compelling alternative, and this part of the market.

Our Q3 recruited assets were 31 billion, which included 12 billion from bank of the West ecommerce.

Prior to these large enterprises. This is a quarterly record for overall recruiting as well as for our new affiliation models, which contributed 5 billion in the quarter.

As for our Q3 financial results the combination of organic growth and expense discipline led to adjusted EPS of $3 74.

Gross profit was $1 $10 million up $20 million or 2% sequentially.

As for the components Commission and advisory fees net of payout were $219 million up $1 million from Q2.

Dan Arnold: In Q3, we also announce that the potential financial with onboard its retail wealth management business to our enterprise platform in the second half of 2024. This milestone reinforces the appeal of our value proposition for enterprises and reflects our commitment to help solve the unique and complex needs of the broad spectrum of institutions. Looking ahead, we are encouraged by the momentum and strong pipelines across the enterprise market.

In Q3, our payout rate was 87, 3% up 60 basis points from Q2 due to typical seasonality and the Onboarding of bank of the West and Commerzbank.

Looking ahead to Q4, a reminder, that the production bonus increases throughout the year and is typically highest in Q4. So.

So we anticipate our payout rate will be approximately 88%.

With respect to client cash revenue was $378 million down $18 million from Q2 as cash balances declined 3 billion to 47 billion.

Dan Arnold: Now within our vertical integration efforts, we are focused on delivering a comprehensive platform of capabilities, services, and technology that help our advisors to differentiate and win in the marketplace and run thriving businesses. Now over the past quarter, we continue to make progress across several key fronts on this part of our strategy, including continuing the journey to build a world-class wealth management platform. This work includes evolving and enhancing our advisory platforms through simplified and lower pricing, enhanced trading capabilities, value added services like tax management, and the expanded investment choice and flexibility within our UMA platform.

This marked the smallest quarterly decline we've seen this year.

Within our ICA portfolio, the mix of fixed rate balances increased to roughly 65% within our target range of 50% to 75%.

Our ICA yield averaged 318 basis points in the quarter down four basis points from Q2, driven by a decline in floating rate balances.

As for Q4 based on where client cash balances and interest rates are today, we expect our ICA yield to decline by roughly five basis points due to the mix impact of lower floating rate balances.

Dan Arnold: These efforts will help our advisors continue to provide more value for the clients in a differentiated and more personalized way. Now as an additional part of our vertical integration strategy, we continue to expand and enhance our services portfolio and are encouraged by the evolving appeal of our value proposition and the seasoning of this business. As a result of solid demand in Q3, the number of advisors utilizing our services group continued to increase and we ended the quarter with approximately 3,700 active users up 26% year over year.

As for service and fee revenue it was $136 million in Q3 up 13 million from Q2, primarily driven by revenues from our National Advisor Conference and irate.

Looking ahead to Q4, we do not have any large advisor conferences and expect seasonally lower IRR AP.

Given this we anticipate servicing fee revenue will decline by roughly $10 million sequentially.

Moving onto Q3 transaction revenue.

Was $50 million up $3 million sequentially due to increased trading volume.

Dan Arnold: As a reminder, a recent innovation in this portfolio is our liquidity and succession solution, which is resonating with existing LPL advisors. Where to date, we have deployed approximately 275 million of capital plus 20 deals. With the benefit of our learnings and insights, we recently began offering this solution to advisors that are external to LPL and are encouraged to see the early interest building. Finally, this service is also enriching the appeal of our model and by doing so, providing another differentiated solution to support our advisor recruiting efforts.

As we look ahead to Q4, we have seen an increase in trading activity in October.

So based on what we have seen to date, we would expect transaction revenue to increase by a couple million dollars sequentially.

Now, let's turn to our strategic relationship with Prudential.

In August we announced that Prudential onboard its retail wealth management business onto our platform.

Including their roughly 2600 advisors, serving approximately $50 billion line ASUR.

The investments we are making in connection with this relationship will not only help us serve prudential and their advisors, but also improve the experience for our existing advisors.

And help unlock a broader opportunity to serve enterprise.

Dan Arnold: In summary, in the third quarter, we continue to invest in the value proposition for advisors and their clients while driving growth and increasing our market leadership. As we look ahead, we remain focused on executing on our strategy to help advisors further differentiate and win in the marketplace and as a result, drive long term shareholder value.

With respect to the ongoing earnings benefit from Prudential, We continue to estimate a run rate EBITDA benefit of approximately $60 million once they are onboard.

Looking ahead, we will continue to provide updates on the progress, we're making as we prepare to onboard credential.

With that said in terms of the cost of transition. We continue to estimate total onboarding and integration costs of roughly $125 million with approximately $20 million expected in Q4.

Matt Audette: If that, I'll turn the call over to Matt. Thank you, Dan, and I'm glad to speak with everyone on today's call. In the third quarter, we remain focused on serving our advisors, growing our business and delivering shareholder value. This focus led to strong organic growth in both our traditional and new markets, and we continue to make progress with our liquidity and succession solution. In addition, we onboarded Bank of the West and Commerce Bank and are preparing to onboard the wealth management business of prudential.

Now, let's turn to expenses, starting with core G&A. It was $342 million in Q3 up 5 million from Q2.

Looking ahead, given our strong levels of organic growth and the variable costs associated with supporting that growth.

We're increasing the lower end of our 2023 core G&A range by $5 million.

Matt Audette: We accomplished all of this while continuing to invest in our industry leading value proposition. So as we look ahead, we continue to be excited by the opportunities we have to help our advisors to differentiate and win in the market. Now let's turn to our third quarter business results. Total advisory and brokerage assets were 1.2 trillion, unchanged from Q2, as continued organic growth was offset by lower equity markets. Total organic net new assets were 33 billion, were approximately 11% annualized growth rate.

As a result, we now expect 2023 core G&A to be in a range of $1 $350 million to 1 billion 307.

Moving onto Q3 promotional expense it was $140 million up $33 million sequentially as we hosted our largest advisor conference of the year during the quarter.

We also incurred roughly $6 million of credential related promotional expense in Q3.

Looking ahead to Q4, we expect conference spend to decline by approximately $20 million at.

At the same time, we will be ramping preparation for Prudential and expect related onboarding and integration cost to increase by roughly $15 million from Q3.

Matt Audette: Our Q3 recruited assets were 31 billion, which included 12 billion from Bank of the West and Commerce. Prior to these large enterprises, this was a quarterly record for overall recruiting, as well as for our new affiliation models, which contributed 5 billion in the quarter. As for our Q3 financial results, the combination of organic growth and expense discipline led to adjusted EPS of $3.74. Gross profit was 1 billion, 10 million, up 20 million, or 2% sequentially.

So overall, we expect Q4 promotional expense to be flat to down 5 million sequentially.

Turning to depreciation and amortization was $65 million in Q3 up $7 million sequentially.

Looking ahead to Q4, we expect depreciation and amortization to increase by roughly $5 million sequentially.

As for interest expense it was $48 million in Q3 up $3 million sequentially driven by the impact of higher short term interest rates on our floating rate debt and increased usage of our revolver.

Matt Audette: As for the components, commission and advisory fees neted payout were 219 million, up 1 million from Q2. In Q3, our payout rate was 87.3%, up 60 basis points from Q2 due to typical seasonality in the onboarding of Bank of the West and Commerce Bank. Looking ahead to Q4, a reminder that the production bonus increases throughout the year, and is typically highest in Q4, so we anticipate our payout rate will be approximately 88%.

Looking ahead to Q4, given current debt balances and interest rates, we expect interest expense to increase by approximately $1 million from Q3.

Regarding capital management, our balance sheet remains strong we ended Q3 with corporate cash of $309 million down $16 million from Q2.

Our leverage ratio is one three times up slightly from Q2.

Matt Audette: With respect to client cash revenue, it was 378 million, down 18 million from Q2, as cash balances declined 3 billion to 47. This marked the smallest quarterly decline we've seen this year. Within our ICA portfolio, the mix of fixed rate balances increased to roughly 65% within our target range of 50 to 75%. Our ICA yield averaged 318 basis points in the quarter, down 4 basis points from Q2, driven by a decline in floating rate balances.

As for capital deployment, our framework remains focused on allocating capital in line with the returns we generate.

Investing in organic growth first and foremost pursuing M&A, where appropriate and returning excess capital to shareholders.

In Q3, we allocated capital across our entire framework.

We continue to invest to drive and support organic growth.

Allocated capital to M&A within our liquidity and succession solution and return capital to our shareholders repurchasing $250 million of shares.

Matt Audette: As for Q4, based on where client cash balances and interest rates are today, we expect our ICA yield to decline by roughly 5 basis points due to the mix impact of lower floating rate balances. As for service and fee revenue, it was 136 million in Q3, a 13 million from Q2, primarily driven by revenues from our National Advisor Conference and IRA fee. Looking ahead to Q4, we do not have any large advisor conferences and expect seasonally lower IRA fee.

As we look ahead to Q4, we plan to repurchase $200 million of our shares keeping us on track to execute on our $2 billion authorization over two years.

To summarize our balance sheet is strong and we are well positioned to drive value through our capital allocation framework.

In closing, we delivered another quarter of strong business and financial results as we look forward. We remain excited about the opportunities we see to continue investing to serve our advisers.

Grow our business and create long term shareholder value with that operator. Please open the call for questions certainly ladies and gentlemen, if you do have a question at this time. Please press star one one on your Touchtone telephone.

Matt Audette: Given this, we anticipate service and fee revenue will decline by roughly 10 million sequentially. Moving on to Q3 transaction revenue, it was 50 million up 3 million sequentially due to increased trading volume. As we look ahead to Q4, we have seen an increase in trading activity in October. So based on what we have seen to date, we would expect transaction revenue to increase by a couple million sequentially.

If you would like to remove yourself from the queue. Please press star one again.

Please hold for any questions.

Okay.

And our first question will be coming from Stephens you back.

Matt Audette: Now let's turn to our strategic relationship with Prudential. In August, we announced that Prudential will onboard its retail wealth management business onto our platform, including the roughly 2600 advisors serving approximately 50 billion of client assets. The investments we are making in connection with this relationship would not only help us serve Prudential in their advisors, but also improve the experience for our existing advisors, and help unlock a broader opportunity to serve enterprise.

Wolfe Research your line is open.

Hey, good afternoon, Dan and good afternoon, Matt.

Good afternoon.

Wanted to start off with a question just on the organic growth outlook, the 11% and then they figure came in at the higher end of the 7% to 13% range you guys have talked about in the past I would say what really stood out was.

This strong result relative to a slowdown in M&A that we saw at some of your peers and I was hoping you could unpack what were the biggest contributors to the share gains in the quarter and with the recruited assets tracking up 40%. How confident are you that this level of organic growth can in fact be sustained.

Matt Audette: With respect to the ongoing earnings benefit from prudentials, we continue to estimate a run rate EBITDA benefit for approximately 60 million once they are on board. Looking ahead, we will continue to provide updates in the progress we are making as we prepare to onboard prudential. With that said, in terms of the cost transition, we continue to estimate total onboarding an integration cost of roughly 125 million, with approximately 20 million expected in Q4.

David as Dan Let me take that.

Certainly we can build off of that.

That answers so look I think in the short term.

We've got a we've got a jumping off point that as you said, it's in a solid place a 11% growth for the quarter.

Matt Audette: Now, let's turn to expenses starting with core DNA. It was 342 million in Q3, up 5 million from Q2. Looking ahead, given our strong levels of organic growth, and the variable cost associated with supporting that growth, we are increasing the lower end of our 2023 core DNA range by 5 million. As a result, we now expect 2023 core DNA to be in a range of 1,350 million to 1,307. Moving on to Q3 promotional expense.

And probably just as importantly, we saw a diverse contribution across all of our advisor and enterprise models.

Not only the volume of growth.

The breadth and diversity of the sources of growth.

And I think if I highlighted a couple of things inside Q3 that maybe are significant.

To that overall outcome. The first would be we continue to see low levels of attrition and up 1% one 5% zone.

Matt Audette: It was 140 million, up 33 million sequentially, as we hosted our largest advisor conference of the year during the quarter. We also incurred roughly 6 million of prudential-related promotional expense in Q3. Looking ahead to Q4, we expect conference spend to decline by approximately 20 million. At the same time, we will be ramping preparation for prudential and expect related onboarding and integration costs to increase by roughly 15 million from Q3. So overall, we expect Q4 promotional expense to be flat to down 5 million sequentially.

Certainly a solid outcome and reinforces the appeal and bill.

The execution quality of the operation day to day I think is complemented by the solid performance new store sales, where we recruited $31 billion of assets for the quarter.

And if you if you click down on that 31 billion.

Assets I think.

If you look at that prior to large enterprises right Q through Q3 quarterly high of recruiting of $19 billion in assets, which is more than double a year ago and I think we take out are back out some of the lumpier nature of some of the large enterprise recruiting.

Matt Audette: Turning to depreciation and memorization, it was 65 million in Q3, up 7 million sequentially. Looking ahead to Q4, we expect depreciation and memorization to increase by roughly 5 million sequentially. As for interest expense, it was 48 million in Q3, up 3 million sequentially, driven by the impact of higher short-term interest rates on our floating rate debt and increase usage of our revolver. Looking ahead to Q4, given current debt balances and interest rates, we expect interest expense to increase by approximately 1 million from Q3.

Repeat that again, you can see the diversity of that that growth and new store sales.

As well as it's happening across all of our different adviser oriented models.

And you feel.

We feel pretty good about the sustainability of that.

But that opportunity set and so look at it.

The drivers of that right. So the flexibility of the affiliation model gives us puts us in a position of.

Competing for potentially any advisor that's looking for a newer better home. It's the continued expansion of our capabilities and help us differentiate our model and then you continue to invest in simplifying the onboarding to make it easier and easier to move and take friction out.

Matt Audette: Regarding capital management, our balance sheet remains strong. We ended Q3 with corporate cash of 309 million, down 16 million from Q2. Our leverage ratio is 1.3 times, up slightly from Q2. As for capital deployment, our framework remains focused on allocating capital aligned with the returns we generate, investing in organic growth first and foremost, pursuing MNA where appropriate and returning excess capital to shareholders. In Q3, we allocated capital across our entire framework.

Matt Audette: We continued to invest to drive and support organic growth, allocated capital to MNA within our liquidity and succession solution, and return capital to our shareholders, repurchasing 250 million dollars of shares. As we look ahead to Q4, we plan to repurchase 200 million dollars of our shares, keeping us on track to execute on our $2 billion authorization over two years. To summarize, our balance sheet is strong and we are well positioned to drive values through our capital allocation frame.

We believe we do those things well.

It creates a key contributor to overall growth good solid.

Sustainable growth rate as we go forward, so I hope that helps.

Okay, that's really helpful color Dan.

For my follow up for Matt surprise surprise, a question on client cash.

<unk> cash levels were down 5% at maybe more resilient than the sweep deposit declines that we saw of roughly 7% to 10%. It appears now that being said cash outflows did continue in September.

Our client cash balances trending so far in October and are you anticipating any seasonal benefit the <unk> cash levels from tax loss harvesting.

Yes, Steven I think on this and maybe to answer the last part of your question first I think if history is a guide you typically do see some seasonal build in.

Matt Audette: In closing, we delivered another quarter of strong business and financial results. As we look forward, we remain excited about the opportunities we see to continue investing to serve our advisors, grow our business, and create long-term shareholder value.

At the end of the fourth quarter typically in December for some cash or tax loss harvesting. So I'd be surprised if we did not see that this year, it's pretty common.

Operator: With that operator, please open the call for questions. Certainly, ladies and gentlemen, if you do have a question at this time, please press star 11 on your touchtone telephone. If you would like to remove yourself from the queue, please press star 11 again. Please hold for any questions.

I think on the core of your question. When you look at how things are going in October yes, I'd say that the headline is on cash on the cash sweep side as we continue to see some of the <unk>.

Stability that we started to see in the third quarter.

Specifically.

A reminder, that advisory fees, primarily come out in the first months of the quarter and Thats for October would be a little over $1 1 billion, which is going to immediately bring down cash, but cash flows outside of that it's been relatively flat youre almost at the end of the month, so that would put cash sweep at around $46 2 billion is really the.

Steven Chubak: And our first question will be coming from Steven Chubak of Wolf Research. Your line is open. Good afternoon, Dan. Good afternoon, Matt. Afternoon. So, wanted to start off with a question just on the organic growth outlook. The 11% and an A figure came in at the higher end of the 7th to 13% range you guys have talked about in the past. I would say what really stood out was the strong result relative to the slowdown in an NA that we saw at some of your peers.

Those adviser fees coming out.

And from a percent of AUM would put it right at three 8% of AUM, which would be the fourth month in a row that we that we're at that level.

So I think when we look at those trends and I think as we've talked a bit about before we're starting to get to a place where you've got the natural amount of cash necessary to really manage the account and of course. It could go down further from here, but I think youre starting to see those resistance levels that we've talked about before.

Steven Chubak: And was hoping you could unpack what were the biggest contributors to the share gains in the quarter. And with the recruited assets tracking up 40%. How confident are you that this level of organic growth can in fact be sustained? Steven, let me take that. Certainly, we can build off of that answer. So, look, I think in this short term, we've got a jumping off point. It, as you said, is in the solid place of 11% growth for the quarter.

In those balances now some of the other drivers there and maybe just to speak to how organic growth is going because a lot of that drives and brings in cash as well when we look at what we've seen in October is really continuing some of those positive trends that Dan was just talking about in Q3.

And keeping in mind that the.

The seasonal nature of the first month as well on organic growth of those advisory fees come out as well when you look at what we've seen so far for October.

Steven Chubak: And probably this is importantly, we saw a diverse contribution across all of our advisor and enterprise models, which I think speaks to not only the volume of growth, but the breadth and diversity of the sources of growth. And I think if I highlighted a couple of things inside Q3 that maybe are significant to that overall outcome, the first would be we continue to see low levels of attrition. And that 1% to 1.5% zone.

Prior to any additional assets coming on board from bank of the West Commerce organic growth's running in the 6% though.

That compares to 4% prior to large enterprises in October of last year. So we're continuing to see that strength, there and then theres about a 1 billion and a half of AUM left to come onboard from those two institutions and some of that may come in in October that would bias it up from there. So overall I think I'd summarize October is stability.

Steven Chubak: That's certainly a solid outcome and reinforces the appeal and the execution quality of the operation day to day. And I think it's complemented by the solid performance and new store sales where we recruited 31 billion of assets for the quarter. And if you, if you click down on that 31 billion of assets, I think if you look at that higher to large enterprises, right. Q3 had, Q3 had quarterly high recruiting of 19 billion in assets, which is more than double a year ago.

We are starting to show in cash sweep and organic growth continuing to come in at a solid level.

That's great color, Matt Thanks for taking my questions.

And one moment for our next question.

Okay.

And our next question will be coming from Alexandra <unk> of Goldman Sachs. Your line is open.

Hi, all this is Luke on for Alex Thanks for taking the question. If we could start with Prudential, we've seen LPL expand into new channels, a number of times with the insurance channel being the newest one with the <unk> partnership can you just talk through how you expect this opportunity to expand over time and how do you think about the Tam and then could you also refresh us on the.

Steven Chubak: And I think we take out or back out some of the lumpier nature of some of the large enterprise recruiting to put down underneath that. Again, you see the diversity of that growth in new store sales, as well as it happening across all of our different advisor oriented models. And you feel, you feel pretty good about the sustainability of that, that opportunity set. And so look, the drivers of that, right, the flexibility of the affiliation model gives us and puts us in a position of, of a competing potentially any advisor that's looking for a newer, better home.

P&L dynamics and the timing you're thinking through there. Thanks.

Let me start with answering that.

Matt will come in and answered maybe the second part of that.

Look at the headline level take a step back and just look at the large enterprise opportunities set.

With respect to the bank space as you know we on boarded two new large enterprises this quarter and we continue to see.

Steven Chubak: It's a continued expansion of our capabilities, a couple of differentiator model. And then you know you continue to invest in simplifying the onboarding to make it easier and easier to move and take friction out. We believe we do those things well, and it creates a key contributor to overall growth and good solid, sustainable growth rate as we go forward. So I hope that helps. It's really helpful color, Dan.

<unk> set in that large enterprise space of those that continue to.

<unk> has its own broker dealers and <unk> and do the business in house.

And see interesting Tam that would consider a different strategic approach and so.

Those wins reinforce that value proposition our continued investment in this and our experience in managing and working with these large enterprises that certainly helped us as we go forward in that part of the large enterprise space and as you said the the announcement of the crew win.

Dan Arnold: And for my follow up for Matt, surprise, surprise, a question on client cash. Three Q cash levels were down 5%, admittedly more resilient than the sweet deposit declines that we saw of roughly seven to 10% appears. Now that being said, cash outflows did continue in September. How are client cash balances trending so far in October? And are you anticipating any seasonal benefit to four Q cash levels from tax loss harvesting? Yes, Steven.

Opens up a different part of large enterprises and.

In this case, perhaps insurance.

Dan Arnold: So I think on just, and maybe to answer the last part of your question first, I think if history is a guy you typically do see some seasonal build in at the end of the fourth quarter, typically in December for some cash or tax loss harvesting. So I'd be surprised if we did not see that this year. It's pretty common. I think on the core of your question, we look at how things are going in October.

Solution sets.

Part of the market space and look for there. We think again, we take that similar chassis. We're building some personalized interest and customized solutions.

For Prudential that we think will resonate with other.

Solutions in that part of the space.

They've got similar needs.

From a value proposition standpoint, when you think about them.

Driving efficiencies within their models shipped.

Shifting their risk profiles.

Dan Arnold: I'd say that the headline is on cash on the cash sweep side as we continue to see some of the stability that we started to see in the third quarter. And I'd specifically in a reminder that advisory fees primarily come out in the first month of the quarter and that's for October, be a little over 1.1 billion, which is going to, you know, immediately bring down cash, but cash flows outside of that has been relatively flat here almost at the end of the month.

Enhancing economics, even working to stimulate top line growth all things that I think similar large enterprises, but these are things that we're working on collectively with both banks and ultimately potential. So we think there is a relevant opportunity we think central.

Opportunity is a catalyst.

To open up more discussions in that part of the space. So.

Dan Arnold: So that would put cash sweep that around 46.2 billion is really the advisory fees coming out. And from a percent of AUM would put it right at 3.8 percent of AUM, which would be the fourth month in a row that we were at that level. So I think when we look at those trends, and I think as we've talked a bit about before, we're starting to get to a place where you've got a natural amount of cash necessary to really manage the account.

We think again the broader enterprise large enterprise market is interesting continued durable growth opportunity for us.

Both on the bank side.

Robert.

And then just following up on the financial debt dynamics are reminders are about $50 billion of fine asset we.

We would expect to onboard them in the latter part of 'twenty four.

And that's when our estimated run rate EBITDA of $60 million would start when they when they are fully on boarded.

Dan Arnold: And of course it could go down further from here, but I think you're starting to see those resistance levels that we talked about before in those balances. Now, some of the other drivers there, maybe just to speak to how organic growth is going because a lot of that drives and brings in cash as well. When we look at what we've seen in October, I was really continuing some of those positive trends that Dan was just talking about in Q3.

We know and that is really the onboarding and integration costs that estimate overall a $125 million.

You look at what we've done so far in the third quarter and our guide for the fourth quarter output broadly 25 of that in 2023.

The remaining 100 would come through in 2024.

Dan Arnold: And in keeping in mind that the seasonal nature of the first month as well on organic growth with those advisory fees come out as well. When you look at what we've seen so far for October prior to any additional assets coming on board from Bank of the West and Commerce, organic growth is running in the sixth percent, though. That compares to 4 percent prior to large enterprises in October of last year.

Once they're onboard it again would be back to that $60 million EBITDA run rate.

Dan Arnold: So we're continuing to see that strength there. And then there's about a billion and a half of AUM left to come on board from those two institutions. And some of that may come in in October, so that would buy us it up from there. So overall, I think I'd summarize October is stability starting to show and cash sweep and organic growth continuing to come in at solid levels. It's a great color, Matt. Thanks for taking my questions.

Awesome Super helpful. Thanks for walking through everything Theyre switching topics a bit for the follow up this quarter saw an acceleration of servicing fee revenues up 11% quarter over quarter can you just talk through what drove that and how do you think about revenue opportunities for existing services and then related to that.

Operator: And one moment for our next question.

Certainly expanded access for your outsource CFO services, what our high level expectations, Therefore, both FAA uptake and revenue opportunities. Thanks, Ken.

Yeah I'll take the first part of that and then Dan if you want to jump in on the.

CFO solutions, which I know is your favorite solution.

Your line as well.

I think so on servicing fees I would say there's two primary drivers I think the first is just seasonal factors that come through in the third quarter.

We've had our largest our national advisor conference.

In the third quarter, and Theres revenues and fees that come along with that for the product sponsors that are there and then second the third quarter is a seasonally high quarter for <unk>.

Alexander Blostein: And our next question will be coming from Alexander Blostein of Goldman Sachs, Yelena Hi, all. This is Luke on for Alex. Thanks for taking the question. If we could start with ProDential, we've seen LPL expanded to new channels a number of times with the insurance channel being the newest one with the Pro Partnership. Can you just talk through how you expect this opportunity to expand over time and how you think about the TAM.

So those two things that came through but then second I think maybe that from a from a longer term standpoint is really organic growth of the business and we've got fees associated with that are specific to advisers on our platform. So as we continue to grow the number of advisers. We we serve and support you have got a recurring fees and things that come along with that.

Alexander Blostein: And then could you also refresh us on the PNL Dynamics and the timing you're thinking through there? Thanks. Let me start with answering that and then Matt will come in and answer maybe a second. Look at that headline level. If you take a step back and just look at the large enterprise opportunity set with respect to the bank space, as you know, we onboarded two new large enterprises, this quarter and we continue to see the opportunity set in that large enterprise space of those that continue to act as their own broker dealers and RIAs and do the business in house and see, you know, an interesting TAM that would consider a different strategic approach.

And those show up here as well so those are the two broad drivers. So I think when you look ahead to Q4, that's why we expect.

The decline of $10 million is really that seasonality coming the seasonal factors coming out but that I think the core from a long term standpoint is the more we drive organic growth more we serve and support advisers on our platform. This this section or this item will that will continue to grow.

It also includes the fees related to our services portfolio. So maybe I'll turn it over to Dan to talk about that.

GFS.

Thanks, Matt.

So look if you think about our services portfolio to start with a broader context and then we'll put down on your specific question. Initially when we rolled out these solutions are the services portfolio.

Alexander Blostein: And so I think those wins reinforce that value proposition are continued investment in our experience and managing and working with these large enterprises that certainly help us as we go forward in that part of the large enterprise space. And as you said, the announcement of the true win opens up a different part of large enterprises. In this case, perhaps insurance solutions sets and or part of the market space and look for there, we think again, we take that similar chassis.

The initial bundle of services, we're really more relevant for our larger practices.

And if you didn't have a complex practice.

Let's use as an example, our initial rollout of CFO solutions, then that solution may not be relevant to you or it may be at a price point that makes it out of reach for yield.

Learning through that sort of first iteration of round of innovation.

We realized that a lot of the capabilities within the original CFO solutions.

Alexander Blostein: We're building some personalized and interesting customized solutions for credential that we think will resonate with other solutions in that part of the space. They've got similar needs from a value proposition standpoint, you think about the improvement driving efficiencies within their models, shifting their risk profiles, enhancing economics and even working to stimulate top line growth. So all things that I think similar large enterprises are looking to do, these are things that we're working on collectively with both banks and ultimately potential.

Where needed, we'll all advisors and figure out how to package those in a different way at a lower price point and still create that leveraged more value for our advisors and then that would be up.

A good problem to solve for and one that will create real value for our advisors and so that's what you saw with <unk>.

New rollout of what we call CFO essentials.

Again, it will reach a much broader set of our 22000, plus advisers or be much more applicable to them.

And we think meet their needs at a price point that makes sense and continued to drive the utilization and growth of <unk>.

Alexander Blostein: So we think there is a relevant opportunity, we think potential opportunity is a catalyst to open up more discussions in that part of the space. So we think again, the broader enterprise, large enterprise market is an interesting, continued, durable growth opportunity for us both on the bank side and on the broader interest. And then just following up on the financial dynamics or reminders are about 50 billion in finance that we would expect to onboard them in the latter part of 24.

Of that overall kind of suite of CFO type solutions, we're doing that on the marketing side as well. So these are just I think places where we continue to innovate on our overall portfolio.

With a fine point on that we now have 13 solutions and our overall services portfolio of which many of them are relevant across our <unk>.

Could be relevant across our entire adviser base we have.

Got three more solutions that we will rollout in.

In the near to intermediate term and another handful in each basin. So it continues to be a placement of innovation for us and we think there is still good.

Alexander Blostein: And that's when our estimated run rate EBITDA is 60 million with start when they're fully onboarded. Between now and then is really the onboarding integration cost that estimate overall 125 million. And if you look at what we've done so far in the third quarter and our guide for the fourth quarter, that puts broadly 25 of that in 2023, meaning the remaining 100 would come through in 2024. And then once they're onboarded, you again would be back to that 60 million dollar EBITDA run rate. Awesome, super out full. Thanks for walking through everything there.

A good bit of opportunity to continue to help build leverage points for advisors and the spirit of helping them run driving businesses.

That's kind of the.

The context around the CFO.

Essentials.

Okay, and one moment for our next question.

And our next question will be coming from Devin Ryan.

Dan Arnold: Switching topics a bit for the follow-up. This quarter saw an acceleration of service and fee revenues, up 11% quarter or over quarter. Can you just talk through what drove that and how do you think about revenue opportunities for existing services? And then related to that, you recently expanded access for your outsourced CFO services. What are high level expectations there for both FA uptake and revenue opportunities? Thanks again. Yeah, I'll take the first part of that and then Dan, if you want to jump in on the CFO solutions, which I know is your favorite solution.

Of JMP Securities. Your line is open Devin.

Okay, Great Hi, Dan Hi, Matt.

Would love to just maybe start on the RIAA channel.

Really nice momentum, particularly on that new assets there in the quarter.

And I guess, particularly in the corporate <unk>, So would love to just maybe dig a little bit into.

The drivers this quarter and then just the outlook and also weather.

The Schwab Ameritrade conversion was a factor this quarter or even just going forward as you kind of consolidate.

Some of the large players theyre just more to think about kind of some of the incremental opportunity for LPL.

Dan Arnold: This is fine as well. I think so on service and fees, I'd say there's two primary drivers. I think the first is just seasonal factors that come through in the third quarter. We've had our large or national advisor conference in the third quarter and there's revenues and fees that come along with that for the product sponsors that are there. And then second, the third quarter is a seasonally high quarter for IRA fees.

Dan Arnold: So those two things came through. But then second, and I think maybe the from a longer term standpoint is really organic growth of the business. And we've got fees associated with that are specific to advisors on our platform. So as we continue to grow the number of advisors, we serve in support. You've got a recurring fees and things that come along with that in those show up here as well. So those are the two broad drivers.

Hey, Devin this is Dan let me.

We try to cover those.

Duplex that youre exploring I think first and foremost if you look at overall advisory growth in general right. You continue to see success and progress we have in both same store sales and new store sales across again all of our different types of affiliation.

Filiation models, so that would cover your corporate or AA or hybrid array solutions your pure E solutions.

And I think.

We still see about 75.

Every new dollar of invested go into advisory, so thats, where youre going to pick up the contribution from same store sales and you still see conversions are transitions from brokerage to advisory services. So those are the your tail winds that are that are overall driving that advisory growth I think it would be.

Dan Arnold: So I think when you look ahead to Q4, that's why we expect that the decline of 10 million is really that seasonality coming, the seasonal factors coming out. But I think the core from a long term standpoint is the more we drive organic growth, more we serve in support advisor on our platform, this section or this item will continue to grow. Now it also includes the fees related to our services portfolio.

Pulled back then and look at the different.

Affiliation models and how we're positioned in the marketplace.

Certainly the diversity of our different models continues to help us.

Attract.

Dan Arnold: So maybe we'll turn over Dan to talk about that. Thanks Matt. And so look, think about our services portfolio to start with a broader context. And then we'll put down on your specific question. Initially when we rolled out these solutions or this services portfolio, you know, the initial bundle of services were really more relevant for our larger practices. And if you didn't have a complex practice, let's use it as an example, our initial rollout of CFO solutions, then that solution may not be relevant to you or it may be at a price point that makes it out of reach for you.

A diverse set of advisors and advisers that quite frankly, do more and more advisory when they joined LPL.

Dan Arnold: And so learning through that sort of first iteration around the innovation, we realized that a lot of the capabilities within the original CFO solutions were needed for all advisors to figure out how to package those in a different way at a lower price point and still create that leverage point of value for our advisors, then that would be a good problem to solve for and one that would create your value for our advisors. And so that's what you saw with this new rollout of what we call CFO's essentials.

Dan Arnold: That again, it will reach a much broader set of our 22,000 plus advisors or be much more applicable to them. And we think meet their needs at a price point that makes sense and continue to drive the utilization and growth of that overall kind of suite of CFO type solutions. We're doing that on the marketing side as well. So these are just, I think, places where we continue to innovate on that overall portfolio, for the fine point on that, we now have 13 solutions in our overall services portfolio, which many of them are relevant across or could be relevant across our entire advisory base.

And youre seeing that in the traditional space as we continue to attract more and more larger advisers with more complex practices, you look across our different new affiliation models right employee.

<unk>.

Strategic well in pure a lot of those will be breakaways from wires that will come with with significant advisory book.

If you just click down on those.

New affiliation models as we've said this quarter represented a record in terms of recruiting a $5 billion of assets.

If you look back over the.

The last 12 months, we've actually recruited 14 billion.

And new assets to those affiliation models.

Which is.

Is 50% what we have overall recruited since they've been launched and certainly that mix of business.

It seems to have.

More significant percentages of their books and adviser.

Again, another driver and I think as we continue to.

SaaS.

With those models as we continue to invest in that more and more fueling.

There is more and more awareness of them and thus more demand.

We certainly are well positioned to see that advisory business growth I think specifically relative to maybe your question around swabbing.

Ameritrade, it's probably more of a pure RIAA business and we do see that as a as a.

Continued interesting place of which to compete and try to win so we continue to invest in our.

Sure.

And our solution and our model to ensure that we create a differentiated solution.

That will help.

Help us.

Dan Arnold: We've got three more solutions that we will roll out in the near to intermediate term and another handful in incubation. So it continues to be a place of innovation for us, and we think there's still a good bit of opportunity to continue to help build leverage points for advisors in the spirit of helping them run driving businesses. So that's kind of the context around CFO's assistance.

Be positioned to win and capitalize them, whether it be market share opportunities created by consolidation or just ongoing demand for that type of solution and I think as we try to position ourselves as a more vertically integrated strategic partner creates more value for the advisor, we think that positions us well to participate.

Alexander Blostein: In one moment for our next question.

Eight win.

And outside share of market as we go forward in that space.

Alright, Thanks, Dan a follow.

A follow up here just for Matt thinking about kind of the ICA yield glide path, maybe beyond <unk>. So you have $6 5 billion of contracts maturing next year, we're just modeling kind of random.

Operator: And our next question will be coming from Devin Ryan of JMP Securities. Your line is open Devin. Okay, great. Hi, Dan. Hi, Matt. We'd love to just maybe start on the RIA channel. Really nice momentum, particularly on that new assets there in the quarter. And I guess particularly in the corporate RIA. So we'd love to just maybe dig a little bit into the drivers this quarter and then just the outlook and also whether, you know, the Schwab Ameritrade conversion was a factor this quarter or even just going forward as you kind of consolidate.

Kind of rolling off Ratably, but is there any sense as we get closer there just more color on the cadence what that could look like and then as we think about also the base rate on ICA.

And even on the floating book today, how much improvement are you seeing it just it seems like and we're hearing that there's more demand in the bank system and so just kind of what the uplift might look like there. Thank you.

Yeah, David on the on the fixed rate side I think the.

Of that $6 5 billion about $5 billion rolls off in the first quarter and then the rest of it's evenly throughout the year, So about 2 billion a quarter.

And I think our plans would be.

Operator: Some of the large players there just want to think about kind of some of the incremental opportunity for LPL. Hey, Devin. So, Dan, let me, let me try to cover those sort of good points that you're exploring. I think first and foremost, if you look at overall just advisory growth in general. Right, you continue to see success and progress we have in both same store sales and new store sales across again all of our different types of affiliation models.

III invest reinvest that in new fixed rate contracts. The same way we have been in that three to five years.

And I think when you look at the rates in that environment.

Demand here is just as strong as it is on the floating rate side. So to your point on kind of spreads above the base rates. So if you look at where the curve is for three to five year money at this point you are in the.

Operator: So that will cover your corporate RIA, your hybrid RIA solutions, your pure RIA solutions. And I think we still see about 75 cents of every new dollar invested go into advisory. So that's where you're going to pick up the contribution from same store sales. And you still see conversions or transitions from brokerage to advisory services. Those are your tailwinds that are that are overall driving that advisory growth. I think if you pull back then and look at the different affiliation models and how we're positioned in the marketplace, certainly the diversity of our different models continues to help us attract a diverse set of advisors.

$4 50 to $4 70 range, but we are starting to see with the demand for deposit spreads on the fixed rate side as well. So you can you can think maybe more closer to or up to 500 basis points for those contracts when they're rolling off on average at $2 50, So rounding up I'd say an opportunity to kind of double the earnings.

Those balances as they mature.

On the floating rate side I think we've seen we've seen spreads in the 15 to 30 basis point range, which I would say its historically high.

But we've probably seen that for the last couple of quarters. So youre starting to see that flow through on the floating rate side, but a broad point you can just see in the pricing.

If you are a supplier of deposit side. The demand is there and the pricing is quite good.

Yes got it okay, maybe there thanks guys.

Operator: And advisors that perfectly do more and more advisory when they join LPL. And you're seeing that in the traditional spaces we continue to attract more and more larger advisors with more complex practices. You look across a different new affiliation models, right, employee strategic wealth and pure RIA. A lot of those will be breakaways from wires that will come with significant advisory books. And if you just click down on those new affiliation models, as we said, this quarter represented a record in terms of recruiting a five billion of assets.

And one moment for our next question.

And our next question will come from Ben <unk> of Barclays. Your line is open.

Hi, Yes, good afternoon, and thanks for taking the question.

Wanted to follow up on some of the commentary on Ameritrade.

Seen some kind of media press.

Indicating that there may be a pickup in sort of outbound to alternative custodians and other kind of services providers Im not sure. If that's something you can comment on but with great. If you could but.

But even if not maybe another question along the same lines as if that were the case and you were seeing a pick up post labor day, how long does it typically take.

Operator: But if you look back over the last 12 months, we've actually recruited 14 billion in new assets to those affiliation models, which is 50% of what we've overall recruited since they've been launched. And certainly that mix of business that tends to have More significant percentages of their books in advisory is again another driver, and I think as we continue to have success with those models as we continue to invest in, they come more and more appealing, there's more and more awareness of them and thus more demand.

For an advisor who is showing.

Showing interest too to convert after successful there.

Yes, so for US I think I'd answer that more broadly that we see.

All registered advisers as an opportunity to potentially affiliated with one of our models.

And we obviously invest in a significant yeah.

Our business development team is out in the marketplace exploring those opportunities I think we continue to create real structural value that creates demand and appeal across our model is first and foremost the opportunity, but if youre doing that well.

And you have.

Operator: We certainly are well positioned to see that advisory business flow. I think specifically relative to maybe your question around Schwabben and Ameritrade, it's probably more the pure RIA business and we do see that as a continued interesting place of which to compete and try to win, so we continue to invest in our solution and our model to ensure that we create a differentiated solution that will help us be positioned to win and capitalize on whether it be market share opportunities that's created by consolidation, we're just ongoing demand for that type of solution.

The efficacy of a good business development team will then when market opportunities may arise in the short run and we challenge ourselves to be agile and nimble to be able to capitalize on models, regardless of what they may be and when they may occur and so that's the combination that we think about how we go to mark.

Alright, you create good structural differentiation and value you'll have a great team that can go tell that story and then you are agile and nimble when opportunities come up.

That may be created for whatever reason, so look when when theres transitions that occur in the marketplace just in general.

The broader question.

There is there is generally opportunities that may occur around the transition of assets.

Operator: And I think as we try to position ourselves as a more vertically integrated strategic partner that creates more value for the advisor, we think that positions as well to participate and win an outside share of market as we go forward in this space. All right, thanks Dan.

From one custodian to another or one broker dealer from another.

And depending on the complexity that may occur in that transition. Typically then there is some opportunity that may arise post that whether that be because of <unk>.

Devin Ryan: Follow up here just for Matt, thinking about the ICA yield glide path maybe beyond 4Q. So you have six and a half billion of contracts maturing next year. We're just modeling kind of rather, you know, this kind of rolling off radically. But is there any, you know, something as we get closer there, just more color on the cadence what that could look like, and then as we think about also the base rate on ICA and even on the floating book today, you know, how much improvement are you seeing?

New environment service challenges new technology, whatever the case may be changed management challenges that may occur that may create some unrest.

And that may create some opportunities and again I think we try to be well positioned and well prepared.

Capitalize.

Reconversion post conversions, when those may occur and where that opportunity.

I hope that helps.

Devin Ryan: It just seems like in we're hearing that there's more demand in the bank system. And so just kind of what the uplift might look like there. Thank you. Yeah, David, on the fix rate side, I think of that six and a half billion, about a half billion rolls off in the first quarter and then the rest of it's evenly throughout the year. So about two billion and a quarter. And I think our plans would be to really invest, reinvest that in a new fix rate contract, the same way we have been in that three to five years zone.

Yes understood.

Maybe one just quick follow up just on the corporate cash for the last few quarters. It's been running ahead of your target level just to what degree is that maybe conservatism or just a matter of timing for the end of the quarter or is that.

More intentional any color you could share there would be helpful. Thank you.

Yeah, you bet. So short answer is timing right I think when you look at our overall liquidity, it's more about managing our overall leverage ratio.

I think that the corporate cash balances end up being a little bit of timing simple debt.

Devin Ryan: And I think when you look at the rates in that environment, the demand here is just as strong as it is on the floating right side. So to your point on kind of spreads above the base rate. So if you look at where the where the curve is for three to five year money at this point, you're in the, you know, 450 to 470 range. But we're starting to see with the demand for deposits spreads on the fix rate side as well.

Alright, I appreciate it thanks, so much.

Okay.

One moment for our next question.

Our next question will be coming from Dan Fannon of Jefferies. Dan Your line is open.

Thanks, I wanted to follow up on M&A in the outlook.

Devin Ryan: So you can, you can think maybe, you know, more closer to or up to 500 basis points for those contracts when they're rolling off on average at 250. So, you know, rounding up, I'd say an opportunity to kind of double the earnings on those balances as they mature on the floating right side. I think we've seen, we've seen spreads in the 15 to 30 basis point range, which I'd say is historically high.

Just what the backlog looks like today, maybe versus last quarter or a year ago, and we've heard about more industry churn or churn for advisers picking up.

Would you echo that and what does that mean for potential acceleration in terms of <unk>.

<unk> adds over the next kind of six to 12 months.

Yes, so look.

Devin Ryan: But we've probably seen that for the last couple quarters. So you're starting to see that flow through on the floating right side. But a broad point, you can just see in the pricing the, you know, if you are a supplier of deposits, the demand is there and the pricing is quite good. Yeah, got it. Okay. Leave it there. Thanks, guys.

I think the headline as we said earlier from a recruiting standpoint, as we continue to see that as a.

Matt Audette: In one moment for our next question.

As a solid.

Lever and driver of growth or a contributor to growth.

Both in the short run and longer term. So if I just put a little color on that for you.

When we look out at the environment.

Explore how we position ourselves to win we typically start with the opportunity set for.

Where you went to advisor movement.

Operator: And our next question will come from Ben Budish of Barcliffe. Your line is open. Hi, good afternoon, and thanks for taking the question. I want to follow up on some of the commentary on a merit trade. We've seen some kind of media press indicating that there may be a pickup and sort of outbound to alternative custodians and other kind of services providers. I'm not sure if that's something you can comment on, but would great if you could.

I would actually reflected as more flat over the last year at somewhere around five and a half a percent.

Sent movement or turnover, we haven't seen a big move up from that but it's more sustained and call it that range down for now.

What has happened is there has been a bit of a mix shift in some of the movement of our turnover, where we've seen the move in a months.

Operator: But even if not maybe another sort of question along the same lines is if that were the case and you were seeing a pickup post-labor date, how long does it typically take for an advisor who is, you know, showing interest to convert if you're successful there? Yes, so for us, I think I answered that more broadly that we see all registered advisors as an opportunity to potentially affiliate with one of our models.

Independent market pick up.

Some of the movement has slowed down from the wires as an example.

That said given all of that.

I think what we do with challenge ourselves into two.

Do you succeed regardless of the volume movement.

I think we continue to see our win rates improve despite the lower level of movement and with the diverse patients of our models.

Operator: And we obviously have invested in a significant business development team. This is out in the marketplace exploring those opportunities. I think we continue to create real structural value that creates demand and appeal across our model. This first and foremost, the opportunity, but if you're doing that well and you have the efficacy of a good business development team will then when market opportunities may arise in the short run, then we challenge ourselves via Agil and Nimble to be able to capitalize on those regardless of what they may be and then they may occur.

Mix shift that I spoke to is more of a neutral for us.

As again, we try to compete.

Competitively for all 300000 advisers that may move so.

The overall churn we've overcome those lower levels of churn, we do think that they will come back over time. There is there's lots of reason to believe that that number begins to pick up and more.

Turning back towards the norm and so if we can sustain higher win rates because we've got a more appealing model, we've gotten better at it.

At recruiting matched with the flexibility of our model I think we think the acquisitions as well.

Operator: And so that's the combination that we think about how we go to market. You create good structural differentiation and value. You have a great team that can go tell that story and then your Agil and Nimble when opportunities come up that may be created for whatever reason. So look, when there's transitions that occur in the marketplace just in general, back to you, the broader question, there's generally opportunities that may occur around the transition of assets from one custodian to another or one broker dealer from another.

As we go forward I think if you look at the competitive landscape again, we haven't seen significant changes or material changes across the playing field there.

That said.

What we talked about on the last question there are moments in time in the marketplace, where there may be some elevated movement because the organization is going through some strategic transition.

Operator: And depending on the complexity that may occur in that transition, typically then there's some opportunity that may arise post that, whether that be because of new environments, service challenges, new technology, whatever the case may be, change management challenges that may occur, that may create some unrest, and that may create some opportunity. And again, I think we try to be well positioned and well prepared to capitalize, pre-conversions, post-conversions when those may occur and where that opportunity may occur.

And we always try to position ourselves there to get a bit of an over index gain on those opportunities when they may occur.

I think if you add all of that up and you look out over the intermediate term.

You look at our growing pipeline growing sort of.

Appeal of our different affiliation models.

The strength of our advisor recruiting matched with a nice complement.

Bigger mandates in the enterprise marketplace.

We feel good about.

Our intermediate short and intermediate opportunity for recruiting and then longer term I think we go back to our structural.

Operator: I hope that helps. Yeah, understood. Maybe one just quick follow-up, just on a corporate cash for the last few quarters, and running ahead of your target level. Just to what degree is that maybe conservatism or just a matter of timing for the end of the quarter, is that more intentional any college you could share there would be helpful. Thank you. Yeah, you bet. Short answer is timing, right? I think when you look at our overall liquidity, it's more about managing our overall leverage ratio. I think that corporate cash balances end up being a little bit of timing. Simple as that. All right. Appreciate it.

Ben Budish: Thanks so much.

Advantages.

So really back to our strategy where we.

We continue to see.

Growing appeal and demand for advice the attractiveness of the adviser.

The independent model matched with the desire to receive that model from a financial professional the overall demand for advice continues to give us a big tailwind to take our market leadership and the independent model singular focused on really understanding and innovating in it.

Robust feature platform, we have the jump off from and then our Quebec capacity and commitment to invest back into the model.

Matt Audette: One moment for our next question. Our next question will be coming from Dan Fannon of Jeffries. Dan, your line is open. Thanks. I wanted to follow up on NNA and the outlook and just what the backlog looks like today, maybe versus last quarter or a year ago, and we've heard about more industry churn or turn for advisors picking up, and would you echo that? And what does that mean for potential acceleration in terms of that advisor adds over the next six, 12 months?

And we think that certainly positions us long term capitalize on current large demand that exists today with the growing demand for advice. It is going to create more opportunity going forward and our ability to differentiate.

Okay.

That helps.

Yes, that's helpful and I guess, Matt just a follow up here on expenses. So first is the promo expense missed the guidance for the third quarter. So curious about what drove that and then as we think about G&A I know, there's elevated spend because of the environment and the solid organic growth.

Matt Audette: Yeah, so look, I think the headline, as we said earlier from the recruiting standpoint, one is we continue to see that as a solid lever and driver of growth, or contributor to growth, both in the short run and longer term. So if I just put a little color on that for you, you know, when we look out at the environment, explore how we position ourselves to win, we typically start with the opportunity set, where you went to, if the advisor movement, I would actually reflect it as more flat over the last year and somewhere around five and a half percent movement or turnover.

And looking at Slide 24, it's obviously been on a trajectory higher for several years, if we think about longer term not so much for just 24, what is a reasonable growth rate do you think for G&A spend to maintain.

These solid levels of organic growth.

Yes, I think just all hit the promo first I think when you look at our guide for Q3, which was in the 130 to 135 range. We came in at $1 40, really just a factor of the timing of the large enterprise Onboarding expenses, we had both bank of the West and Commerce come onboard in the quarter, that's the quarter, where those expenses.

They are typically the highest.

Matt Audette: We haven't seen a big move up from that, but it's more sustained and call it that range bound for now. What has happened is there's been a bit of a mixed shift in some of the movement or turnover where we've seen the movement amongst the independent market pick up where some of the movement has slowed down from the wires as an example. That's a given all of that. Look, I think what we do is challenge ourselves into how do you succeed regardless of the volume of movement?

And then we started the integration on boarding work for Prudential, which we've got an overall estimate of $125 million and that is still our estimate just ramped up a little bit faster. So it's simply the timing of expenses associated with those I think what I would highlight for Q3 I.

I think to your second question on an overall core G&A growth I mean, I think we we plan those investments in spending.

Each and every year with a focus on making sure we're investing in to drive and support organic growth.

Making sure we're balancing that with delivering operating leverage and then I think perhaps at the core of your question adjusting those levels based on the macro environment and I think thats, where we get to what we're doing this year is.

Matt Audette: I think we continue to see our win rates improve despite the lower level of movement. And with the diversification of our models, right, that mixed shift that I spoke to is more of a neutral point for us as again, we try to compete incredibly for all 300,000 advisors that may move. So the overall turn, we've overcome those lower levels of turn. We do think that they will come back over time. There's lots of reason to believe that that number begins to pick up and more turn back towards the norm.

As having an up level of investment and spend that I think really helps improve our value proposition our capabilities to our advisers and is one of the drivers of our success in organic growth and I think when we think about that over the long term that things like that would be dependent upon the environment right. So if you remember from the the guidance of 13%.

15% growth this year about 4% to 5% of that was really based on the opportunity of the environment. So I think when youre thinking long term I think thats, a bucket, where you can put aside and say we'd just be opportunistic.

Matt Audette: And so if we can sustain higher win rates because we've got a more appealing model, we've gotten better at recruiting matched with the flexibility of our model. I think we think that positions as well as we go forward. I think if you look at the competitive landscape, again, we haven't seen significant changes in material changes across the playing field there. That's it. You know, what we talked about in the last question, there are moments in time in the marketplace where there may be some elevated movement because an organization is going through some strategic transition.

For that amount.

If the environment was there and I think when we get back to what we're spending on and what we're doing this year, we think it's been a while.

Quite the right decision and a good use of capital.

Thank you.

One moment for our next question.

And our next question will be coming from Michael Cyprus of Morgan Stanley. Your line is open Michael.

Great. Thank you. Good afternoon, maybe just continuing with expense related question is just on the promotional expense we've seen an uptick in recent years I understand there's been some investments made to support that just as we look out over the next couple of years, how should we think about sort of an underlying.

Matt Audette: And we always try to position ourselves there to get a bit of an over index gain on those opportunities when they may occur. I think if you add all of that up and you look out over the intermediate, term. You look at our growing pipeline, the growing sort of appeal of our different affiliation models. The strength of our advisor recruiting matched with the nice complement of bigger mandates in the enterprise marketplace.

True run rate of expense growth for on the promotional side in order to maintain the organic growth that you guys are looking to achieve and I think on the promotional side. You also called out about $100 million of Onboarding for next year should we think about that all fully coming out in 'twenty five.

Yes, well I think when you look at the drivers it's really three things.

Matt Audette: And we feel good about our intermediate short and intermediate opportunity for recruiting. And then longer term, I think we go back to our structural advantages and you know, really back to our strategy where we continue to see the growing appeal and demand for advice. The attractiveness of the advisor or the independent model matched with the desire to receive that model from a financial professional. The overall demand for advice continues to give us a big tailwind.

I think on that last point is on the $100 million for Prudential.

It related to large financial institutions and those institutions coming on board. So I think that when we think about our opportunity set I think we would expect to have those be an ongoing opportunity but to that to the core of your question. If there werent any in a year or there werent any large financial institutions coming on board. Those expenses will go away at $100 million is specific to Prudential.

Meaning once that's on boarded lessors, others coming onboard you wouldn't have a spend level of that of that amount.

But the other key drivers of the growth overall outside of the number of large financial institutions are enterprises. We have are coming on board. There is really organic growth right and I think when you look at the amount of organic growth that we have the transition assistance associated with that and the amortization of that thats, primarily what shows up.

Matt Audette: You take our market leadership in the independent model singular focused on really understanding and innovating and it robust feature platform we have to jump off from and in our capacity and commitment to invest back into the model. And we think that certainly with positions as long term capitalized on current large demand that exists today but the growing demand for advice that is going to create more opportunity going forward and our ability to differentiate and then book that helps. Yes, that's helpful.

And the growth for promotional and it's about the size of our recruiting I think we've talked about it a bunch on on this call. During this Q&A, but the amount of recruited AUM that we're bringing onboard has increased substantially and.

And the capital that helps bring that on board and the expense shows up here.

The other one I would highlight to a much smaller extent is just conference spend right. That's based on the number of advisers, we havent firmed the bigger we get the more.

Dan Fannon: And I guess Matt just a follow-up here on expenses. So first is the promo expense missed the guidance for the third quarter. So curious about what drove that. And then as we think about GNA I know there's elevated spend because of the environment and the solid organic growth. If we in looking at slide 24 it's obviously been on the trajectory higher for several years. If we think about longer term not so much for just 24 what is the reasonable growth rate you think for GNA spend to maintain you know that these solid levels of organic growth.

Dan Fannon: Yeah I think just I'll hit the promo first I think when you look at our guide for Q3 which was in the you know 130 to 135 range we came in at 140 really just to factor the timing of the large enterprise onboarding expenses. We had both bank of the Western commerce come on board in the quarter that's the quarter where those expenses are typically the highest and then we started the integration onboarding work for potential which we've got an overall estimate of 125 million and and that is still our estimate just ramped up a little bit faster.

The more value there is an engagement with more of those folks in person at our conferences that would naturally rise.

But I think the two key things are number of large financial institutions coming onboard and then just the level and amount of our organic growth those will be the two big drivers.

Great. Thanks, and then just a follow up question on DNA I think you had called out about $200 million of platform investments to be capitalized I mentioned thats going to come through the DNA line, just how do we think about the timeframe and cadence for that to come through.

Yes, and thats associated with Prudential as well. So if you think about Prudential overall of $325 million of investment.

As a reminder, this note there's no transition assistance that comes along with it Thats the total investment.

So the timing will be like typical to a large financial institution, it will be mostly leading up to and during the quarter of on boarding but there can also be some that comes across after that.

And then you get into based on the technology that we're putting in place which are typically amortization periods call. It in the four or five year. So once they're deployed.

Dan Fannon: So it's simply the timing of expenses associated with those I think was what I'd highlight for Q3. I think here's second question on on overall core GNA growth. I mean I think we we plan those investments and spend in you know each and every year with a focus on making sure we're investing to drive and support organic growth. Making sure we're balancing that with delivering operating leverage and then I think perhaps to the core of your question adjusting those levels based on the macro environment and I think that's where we get to what we're doing this year is having an up level of investment and spend that I think really helps improve our value proposition our capabilities to our advisors and is one of the drivers of our success in organic growth.

So we should think about that 200 coming through over five years or is that run rate is that fair.

Yes, yes, once once that's deployed four or five years following that so I think thats a good way to think about it okay. Thank you.

One moment for our next question.

And our next question will be coming from Kyle Voigt of <unk> Kyle Your line is open.

Hi, good evening.

Maybe just one on on the regulatory environment. It sounds like the Dol is set to propose a new fiduciary rule very shortly obviously you don't have any many details at this point, but just wondering if you could comment high level on the state of the business today relative to 2016 remind us of some of the more meaningful changes that were already in.

Dan Fannon: And I think when we think about that over the long term that things like that would be you know dependent upon the environment right so if you remember from the you know the guidance of 13 to 15% growth this year about 4 to 5% of that was really based on the opportunity of the environment. So I think when you're thinking long-term I think that's a bucket where you can put aside and say we just be opportunistic for that amount if the environment was there and I think when we get back to what we're spending on what we're doing this year we think it's been a quite the right decision and a good use of capital. Thank you.

Implemented ahead of the prior Dol rule that was ultimately vacated.

Matt Audette: One moment for our next question.

We will be great to kind of hear how you feel about potential expense needs to comply with any new will proposal given the investments that were already need to comply with the prior rule.

Yes, So let me let me let me take that one and so look there is a Dol proposal that's under review at the.

White House office of management and budget.

And that's the procedural step as you know before the proposals released to the public comments. So theres not a lot of insight on what's contained inside of that I think theres been a lot of speculative dialogue about.

Operator: And our next question will be coming from Michael Cyprys, of Morgan Stanley, your line of open Michael. Great. Thank you. Good afternoon. Maybe just continuing with expense related questions. Just on the promotional expense, we've seen an uptake in recent years, understand there's been some investments made to support that. Just as we look out over the next couple of years, how should we think about sort of an underlying true run rate of expense growth for on the promotional side in order to maintain the organic growth that you guys are looking to achieve?

Operator: And I think on the promotional site, you also call that about 100 million of onboarding for next year. Should we think about that all fully coming out in 25? Yeah, well, I think when you look at the drivers, it's really three things. And I think on that last point, it on the 100 million for provincial. It related to large financial institutions and those institutions coming on board. So I think that when we think about our opportunity set, I think we would expect to have those be an ongoing opportunity, but to the core of your question, if there weren't any in a year, or there weren't any large financial institutions coming on board, those expenses would go away.

What that may be.

But I think we'll learn more as.

We move to the next step I think what we.

What we do believe is that.

Once it moves public comment it's a long.

Process of which to work.

Through ultimately.

Either some proposed changes that may occur from that and or not and so.

Operator: That 100 million is specific to credential, meaning once that's onboarded, unless there's others coming on board, you wouldn't have a spend level of that amount. But the key drivers of the growth overall, outside of the number of large financial institutions or enterprises we have are coming on board, is really organic growth. And I think when you look at the amount of organic growth that we have, the transition assistance associated with that, and the amortization of that, that's primarily which shows up in the growth for promotional.

I think youll see.

Good public dialog about what's being considered.

I think we did as you said did significant work back in 2016.

Cool innovation even around.

Some products like mutual funds as an example that didn't ultimately wasn't ultimately utilized as we.

As the 2016 fiduciary rule was struck down and ultimately pivoted to the regulation best interest.

What is different and I think.

And by the way that will serve as a great baseline a lot of innovative work that we did some we use today and ranked by some were not using and we think it prepares us well.

Which to ultimately pivot <unk> adjusted for whatever changes may occur in the rule I do think that.

The dialogue around the rule itself.

As is.

The difference in context, the circumstances are different.

As you know.

<unk> has just really been released out into the marketplace for a couple of years.

Operator: And it's about the size of our recruiting. I think we've talked about it a bunch on this call and during this Q&A, but the amount of our CriterDUM that we're bringing on board is increased substantially in the capital that helps bring them on board, and the expense shows up here. The other one I'd highlight to a much smaller extent is just conference spend, right? That's based on the number of advisors we have at the firm, the bigger we get, the more value there is and engaging with more of those folks in person at our conferences.

We do think it is a.

It proposes a higher standard of care, which we are aligned with and we think the FCC has the regulator to create that rule.

Parts of business, both retirement and non retirement.

And consequently.

We think that because of that rule is in place the consideration set for that and allowing that to run its course and ensure that its effective and ultimately.

Operator: That would naturally rise. But I think the two key things are number of large financial institutions coming on board, and then just the level and amount of our organic growth. Those would be the two big drivers. Great, thanks.

Establishing and aligning around the higher standard of care, we think has a lot of relevance in the dialogue will occur.

And in.

Matt Audette: So just a follow-up question on DNA. I think you had called out about 200 million of platform investments to be capitalized. I imagine that's going to come through the DNA line. Just how do we think about the time frame and catering for that to come through? Yeah, and that's associated with potential as well. So if you think about potential overall of 325 million of investment, in reminder, there's no there's no transition assistance that comes along with it.

We go back some of the proposals in 2016.

There is the big risk.

It ultimately your takeaway choice and that begins to harm low and middle income investors, eliminating access to brokerage advice.

Those smaller retirement accounts, which obviously.

Systemically is not a good outcome.

How come it would be great.

Matt Audette: That's the total investment. So that the timing will be like typical to a large financial institution. It will be mostly leading up to and during the quarter of onboarding, but there can also be some that comes across after that. And then you get into based on the technology that we're putting in place, which are typically amortization periods called in the four or five-year zone once they're deployed. So we should think about that 200 coming through over five years or so. Yeah, yeah, once it's deployed for five years following us, I think that's a good way to think about it. Thank you.

Which I think you'll have a lot of pushback.

Operator: One moment for our next question.

A lot of relevant CERN around that potential outcome. So we just believe the circumstances are different that have this sort of public debate.

Around the process all of that said if there are some changes.

Incrementally, we do think we are well prepared to.

Vivid and add those in.

And continue to.

Deliberate choice between both brokerage and advisory we always believe is principal twist as another option.

And we think it'll serve investors.

So I hope that gives you a little color. The point is we don't really know yet I think there is something that is being considered.

It'll be a good healthy debate will be well.

Kyle Voigt: And our next question will be coming from Kyle Voigt of KBW. Kyle, your line's open. Hi, good evening. Maybe just one on the regulatory environment. Sounds like the DOL is set to propose a new fiduciary rule very shortly. Obviously, you don't have many details at this point, but just wondering if you could comment high level on the state of the business today relative to 2016 or minus of some of the more meaningful changes that were already implemented ahead of the prior DOL rule that was ultimately vacated.

Yeah.

Great. Thank you and then just for my follow up just on the liquidity and succession solutions.

Now opening that externally I guess is there any way to frame how meaningful that could be relative to the size of the capital deployed internally they disclosed so far.

Kyle Voigt: And we'll be great to kind of hear how you feel about potential expense needs to comply with any new rule proposal given the investments that were already made to comply with the prior rule. So let me, let me, let me take that one and to look there is a DOL proposal that's under review at the White House Office of Management and Budget. And that's the procedural step, as you know, before the proposal is released to the public comments.

And then second part of that question and I know this topic comes up from time to time, but curious if you could give us any updated thoughts on potentially offering your broader business solution suite externally.

Yes, So look I think let me take the strategic part of that.

I'll turn it over to Matt.

<unk>.

To address your capital question so.

The liquidity in succession solution that we came up with was.

The premise of solving a big need a third of advisers essentially retiring over the next 10 years, certainly a relevant problem to solve and the team did a great job of coming up with a differentiated creative solution that has ultimately been very appealing.

Kyle Voigt: So there's not a lot of insight on what's contained inside of that. I think there's a lot of spectra the dialogue about what that may be, but I think we'll learn more as, you know, we, we move to the next step. I think what we, what we do believe is that once it moves to public comment, it's a long process of which to work through ultimately either some proposed change that may occur from that end or not.

Two existing LPL advisors that were facing that same problem challenge and I think because of its differentiated nature.

It made sense for us to take those learnings and insights and they built essentially offer that outside of our platform.

In doing that.

High probability that those assets.

If we offered it to the external marketplace. We then move to the LPL platform that would be the concept as another way to motivate them to move to our platform.

Kyle Voigt: And so, I think you'll, you'll see a good public dialogue about what's being considered. That said, I think we did, as you said, did significant work back in 2016 and had some full innovation even around some products like mutual funds as an example that didn't ultimately wasn't ultimately utilized as we, as the 2016 fiduciary rule was struck down. And ultimately pivoted to the regulation best interest. What is different, and I think, and by the way, that will serve as a great base on a lot of innovative work that we did.

Because of the demand and the interest that we've generated internally.

Because of the learnings that we've had just in the.

Basically 45 days, we've been in market around it.

I think thats going to.

Have some interest.

Can be broadly appealing to the outside marketplace we.

We will learn more hard to size right now because we just don't have enough data to support that.

We do think it's appealing and another way to attract assets to the LPL platform and be a smart deployment of capital.

So that's kind of where we are now in that journey more to come as we learn more.

Kyle Voigt: Some we use today in ranked B.I. Some we're not using and we think it prepares us well of which to ultimately pivot and or just for whatever changes may occur in the rule. I do think that that the dialogue around the rule itself is is is is is a bit different in context, the circumstances are different. And as you know, reg B.I, has just really been released out into the marketplace for a couple of years and we do think it is a is a it poses a higher standard of care, which we are aligned with.

But at least that's how we think about strategic with respect to our other services that we may offer outside of the platform.

I think we continue to.

Have have set that aside as a future possibility, we continue to see opportunity internally with respect to.

Our growing number of advisers on the LPL platform and innovating on new solutions.

And expanding that portfolio set versus broadening the distribution outside of the LPL.

Platform, So think about that as our near term focus continued to add more services and supporting our growing platform here I do think it's a relevant question at some point to ask could you could you.

Kyle Voigt: And we think the SEC is the right regulator to create that rule across all parts of business for retirement and non retirement. And consequently, we think that because of that rule is in place, the consideration set for that and allowing that to to run its course and ensure that it's effective and ultimately, establishing and aligning around that higher standard of care. We think has a lot of relevance in the dialogue that will occur.

We apply that outside of model.

Roger you want to take.

Yeah, Kyle I think the headline is that I wouldn't see any different level of capital deployment, taking it external other than to highlight when youre, taking this externally you're really doing two events, there's a recruiting event as well as the LLS LLS transaction liquidity succession solution. So think about from a capital deployment standpoint, a good framework.

Kyle Voigt: And, you know, if you go back to some of the proposals in 2016, I think there is the big risk that ultimately you take away choice. And that begins to harm low and middle income investors by limiting access to brokerage advice. It's not a good outcome. It would be a big, I mean, which I think you'll have a lot of pushback and a lot of relevant concern around that potential outcome. So we just believe the circumstances are different to have this sort of public debate, noten the view around the process.

That knowing that those two things would be occurring but I think the headline point is nothing from a capital standpoint that would be different than we've talked about before these are relatively small amounts of capital deployment on an individual level. It's more about as Dan was covering the strategic connection of this capability.

From an advisor standpoint in our long term growth.

Great. Thank you both.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Kyle Voigt: All that said, if there are some changes incrementally, we do think we're well prepared to pivot and add those. And continue to deliver choice between both brokerage and it, as we always believe is principle choices of other option. And we think it'll serve investors much better. So I hope that gives you a little color. The point is, we don't really know yet. I think there is something that is being considered and we think it'll be a good, healthy debate will be well prepared.

Dan Arnold: Great. Thank you. And then just for my follow-up, just some of the liquidity and succession solutions, you know that you're now opening that externally. I guess is there any way to frame how meaningful that could be relative to the size of the capital deployed internally they disclose so far. And then second part of that question. And I know this topic comes up from time to time, but curious if you give us any updated thoughts on potentially offering your broader business solution suite externally.

Dan Arnold: Yeah, so look, I think let me take the strategic part of that and then I'll turn it over to Matt to ask your capital to address your capital question. So look, I put it in succession solution that we came up with was on the premise of solving a big need right, a third of the advisors, potentially retiring over the next 10 years, certainly a relevant problem to solve. And he did a great job of coming up with a differentiated creative solution that has ultimately been very appealing to existing LPL advisors that were facing that same problem of challenge.

Dan Arnold: And I think because of its differentiated nature, it made sense for us to take those learnings and insights and then go potentially offer that outside of our platform. In doing that, I probability that those assets and if we offered it to the external marketplace would then move to the LPL platform, that would be the concept as another way to motivate them to move to our platform. Because of the demand and the interest that we've generated internally and because of the learning that we've had just in the basically 45 days, we've been in market around it.

Dan Arnold: We think it's going to have some interest and be broadly appealing to the outside marketplace. We'll learn more hard to size right now because we just don't have enough data to support that. We do think it's a feeling in another way to attract assets to the LPL platform and be a smart deployment of capital in order to do so. So that's kind of where we are now in that journey more to come as we learn more.

Dan Arnold: But at least that's how we think about it strategically. With respect to our other services that we may offer outside of the platform, I think we continue to have set that aside as a future possibility. We continue to see opportunity internally on with respect to our growing number of advisors on the LPL platform and innovating on new solutions and expanding that portfolio set versus broadening the distribution outside of the LPL platform.

Dan Arnold: So think about that as our near-term focus is continue to add more services, and supporting our growing platform here. I do think it's a relevant question at some point to ask, could you logically apply that outside of that or from the budget? You want to take it back? Yeah, Kyle. I think that, I mean, the headline is that I wouldn't see any different level of capital deployment taking it external, other than to highlight when you're taking this externally.

Dan Arnold: You're really doing two events. There's a recruiting event, as well as the LNS transaction of putting succession solutions. So think about from a capital deployment standpoint, a good frame would be that knowing that those two things would be occurring. But I think the headline point is nothing from a capital standpoint that will be different than we've talked about before. These are relatively small amounts of capital deployment on an individual level. It's more about as Dan was covering the strategic connection and of this capability from an advisor standpoint and our long-term growth. Great.

Operator: Thank you both. And this concludes today's conference call. Thank you for participating. You may now disconnect.