Q4 2023 LPL Financial Holdings Inc Earnings Call

Yes.

Speaker Change: Good afternoon, and thank you for joining the fourth quarter 2023 earnings conference call for LPL Financial Holdings, Inc.

Operator: Good afternoon, and thank you for joining the fourth quarter 2023 earnings conference call for LPL Financial Holdings Inc. Joining the call today are 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 to questions. The company would appreciate it 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's 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 and 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.

Speaker Change: Joining the call today are our president and Chief Executive Officer, Dan Arnold and Chief Financial Officer, and head of business operations not all debt.

Speaker Change: Dan and Matt will offer introductory remarks, and then the call will be opened for questions. The company would appreciate it analysts limit themselves to one question and one follow up each.

Speaker Change: The company has posted its earnings press release and supplementary information on the Investor Relations section of the company's website investor LPL Dotcom.

Speaker Change: Today's call will include forward looking statements, including statements about LPL financial's future financial and operating results outlook business strategies and plans as well as other opportunities and potential risks that management foresees such.

Speaker Change: Such forward looking statements reflect management's current estimates or beliefs.

Speaker Change: And 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.

Operator: 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 Security and Exchange Commission. During the call, the company will also discuss certain non-GAAP financial measures. For reconciliation of such non-GAAP financial measures to comparable GAAP figures, please refer to the company's earnings release, which can be found at investor.lpl.com.

Speaker Change: 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.

Speaker Change: During the call. The company will also discuss certain non-GAAP financial measures for reconciliation 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 LPL Dot com with that I will now turn the call over to Mr. Arnold.

Operator: With that, I will now turn the call over to Mr. Arnold. Thank you, Amy, and thanks to everyone for joining our call today. Over the past quarter and throughout 2023, our advisors continue to provide their clients with personalized financial guidance on the journey to help them achieve their life goals. As we enter the new year, we thank our advisors for their continued commitment and dedication. While we remain focused on our mission... taking care of them so they can take care of their clients.

Arnold: Thank you Amy and thanks to everyone for joining our call today.

Arnold: Over the past quarter and throughout 2023, Alright advisors continued their clients with personalized financial guidance on the journey to help them achieve their life goals and dreams.

Arnold: As we entered the new year, we think our advisers for their continued commitment dedication while we remain focused on our mission.

Arnold: Care of them. So they can take care of their clients.

Arnold: During the fourth quarter, we continued to see the appeal of our model growth due to the combination of a robust feature rich platform stability and scale of our industry leading model.

Dan Hogan Arnold: During the fourth quarter, we continued to see the appeal of our model grow due to the combination of our robust and feature-rich platform, the stability and scale of our industry-leading platform, 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 keep lives on the road better than anyone else, and thereby serve as the most appealing player in the industry.

Arnold: Our capacity and commitment to the investment.

As a.

Arnold: 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 industry.

Dan Hogan Arnold: With respect to our performance... We delivered another quarter of solid results, while also continuing to make progress on the execution of our. I'll review both of these areas, starting with our fourth-quarter business. In the quarter, total assets increased to $1.4 trillion as continued solid organic growth was complemented by higher equity markets. Regarding organic growth,

Arnold: 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.

Arnold: Review both of these areas starting with our fourth quarter business results.

Arnold: In the quarter total assets increased to $1 four tree as.

Arnold: As continued solid organic growth was complemented by higher equity Mark.

Arnold: Regarding organic growth.

Dan Hogan Arnold: Fourth Quarter Organic Net Due Assets for $25, representing 8% annualized. This contributed to organic net new assets for the year of approximately nine. In the fourth quarter, we recruited assets for $17 billion, bringing our total for the full year to $80 billion.

Arnold: Fourth quarter organic net new assets were <unk> 25.

Arnold: Representing 8% annualized rate.

Arnold: This contributed to organic net new assets for the year of 100, representing approximately a 9%.

Arnold: In the fourth quarter recruited assets were 17 billion, bringing our total for the full year to $80 billion.

Dan Hogan Arnold: Prior to large enterprises, recruited assets for the full year were $67 billion, an increase of nearly 50% year-over-year and a new annual record. This outcome was driven by the ongoing enhancements to our model, as well as our expanded addressable model. 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 Combination, which drives solid same-store sales. At the same time, we continue to enhance the advisor experience through the delivery of new capabilities and technology and the evolution of our service and operations. As a result, asset retention for the full year was approximately 99%.

Arnold: Sorry to large enterprises recruited assets for the full year were 67 days.

Arnold: An increase of nearly 50% year over year and a new annual record.

Arnold: This outcome was driven by the ongoing enhancements to our model as well as our expanded addressable market.

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

Arnold: Lasers are both winning new clients and expanding wallet share with existing.

Arnold: The combination drove solid same store sales in Q4.

Arnold: At the same time, we continue to enhance the advisor experience through the delivery of new capabilities and technology and the evolution of our service and operations.

Arnold: As a result asset retention for the full year was approximately 99%.

Dan Hogan Arnold: Our fourth quarter business results led to solid financial outcomes with adjusted EPS of $3.51, which brought our full year total to $15.75, an increase of 36 percent year-over-year. Let's now turn to the progress we've made on our strategic plan. As a reminder, our long-term vision is to become the leader across the advisor-centered market. To do that, our strategy is to invest back into the platform, provide unprecedented flexibility in how advisors can affiliate, and to deliver capabilities and services to help maximize advisors' success throughout the life cycle of their business. Doing this well gives us a sustainable path to industry leadership across the advisor experience, organic growth, and market.

Arnold: Our fourth quarter business results led to solid financial outcomes with adjusted EPS of $3 51.

Arnold: Which brought our full year totaled $15.72.

Arnold: An increase of 36% year over year.

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

Speaker Change: As a reminder, our long term vision is to become the leader across the advisor centered market.

Speaker Change: Do that our strategy is to invest back into the black.

Speaker Change: Unprecedented flexibility in how advisors can affiliate with us and to deliver capabilities and services to help maximize adviser success throughout the lifecycle of their businesses.

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

Dan Hogan Arnold: Now, to execute on our strategy, we organize our work into two strategic categories, horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate with us, such that we compete for all 300,000 advisors in the marketplace, and Vertical Integration, where we focus on delivering capabilities, technology, and services that help our advisors differentiate themselves in the marketplace, the great operators of the business. Now, with that as context, let's start with our efforts around horizontal expansion. Over the fourth quarter, we saw strong recruiting in our traditional independent insurance companies, adding approximately $14 billion in assets.

Speaker Change: Now to execute on our strategy, we organize our work into two strategic category.

Speaker Change: As all expansion, where we look to expand the ways that advisors and enterprises can affiliate us such that we compete all 300000 advisors and the Mark.

Speaker Change: The vertical integration, where we focus on delivering capabilities technology and services that help our advisers differentiate and win in the marketplace.

Speaker Change: Great operators of the business.

Speaker Change: Now with that as context, let's start with our efforts around horizontal expansion.

Speaker Change: Over the fourth quarter, we saw strong recruiting in our traditional independent.

Speaker Change: Adding approximately 14 billion in asset.

Speaker Change: As a result of the ongoing appeal of our model and the evolution of our go to market approach, we maintained our industry leading win rates, while also expanding the breadth and depth of our pipeline.

Dan Hogan Arnold: As a result of the ongoing appeal of our model and the evolution of our go-to-market approach, we maintained our industry-leading win rates, also expanding the breadth and depth of our pipeline. With respect to our new affiliation models, strategic wealth, employee benefits, and our enhanced RAA offering, we delivered our strongest year to date, recruiting roughly $15 billion in assets, nearly double the total of the prior year. As we look ahead, we expect that the increasing awareness of these models in the marketplace and our ongoing enhancements to their capabilities will help drive sustained increases in their growth. Next, the traditional bank and credit union space continues to be a consistent contributor to organic growth as we added approximately $1 billion of recruited assets. In addition, large enterprises remained a meaningful source of recruiting in 2023 with the addition of Bank of the West and Commerce.

Speaker Change: With respect to our new affiliation models strategic will deploy and our enhanced our AI offerings, we delivered our strongest year to date recruiting roughly $15 billion in assets nearly double the total of the prior year.

Speaker Change: As we look ahead, we expect the increasing awareness of these models in the marketplace and our ongoing enhancements to their capabilities will help drive sustained increase in their growth.

Speaker Change: 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.

Yeah.

Speaker Change: In addition, large enterprises remain a meaningful source of recruiting in 2023 with the addition of bank of the West and Commerce.

Dan Hogan Arnold: In 2024, we continue to prepare to onboard the retail wealth management business of potential financial partners. Now, as a part of that process, our team has been on the road meeting with Prudential to provide them with a preliminary orientation to our platform, and the early feedback has been positive. Looking ahead, we are confident that the appeal of our value proposition for enterprises, matched with our track record of successful execution, positions us as well to help solve the needs of a broad spectrum of institutions. Now, within our vertical integration... We are focused on investing back into the model in order to deliver a comprehensive platform of capabilities, services, and technology that helps our advisors differentiate and win in the marketplace and Run a Thriving Business. As part of this effort, over the past quarter, we continued to make progress on our aspiration of delivering an industry-leading service. This work includes continuing to make our service model more flexible and efficient through a multi-channel approach. The purpose of which is to offer a broad spectrum of service options.

Speaker Change: For 2024, we continue to prepare to onboard the retail wealth management business potential financial.

Speaker Change: Now as a part of that process. Our team has been on the road meeting with Prudential advisors provide them a preliminary orientation to our platform.

Speaker Change: And the early feedback has been positive.

Speaker Change: Looking ahead, we are confident that the appeal of our value proposition for enterprises matched with our track record of successful execution positions us well to help solve the needs of a broad spectrum of institution.

Speaker Change: Now within our vertical integration efforts were focused on investing back into the model in order to deliver a comprehensive platform capabilities services and technology.

Speaker Change: To help our advisers differentiate and win in the marketplace around driving business.

Speaker Change: As part of this effort over the past quarter, we continued to make progress on our aspiration of delivering an industry leading services.

Speaker Change: This work includes continuing to make our service model more flexible and efficient through a multichannel approach to.

Speaker Change: For purposes of which is to offer a broad spectrum of service options, including human centric support digital capabilities and artificial intelligence. So that we can provide advisors the information they need in the channel that works best for them.

Dan Hogan Arnold: Including human-centric support, digital capabilities, and artificial intelligence so that we can provide advisors with the information they need in the channel that works best for them. In that spirit, over the last year, we have continued to expand our digital offering, including our digital hubs, which provide advisors with always-on support in centralized and intuitive formats. Our investments in this area enabled us to expand from two digital hubs to 11 over the last year, with the newest being our tax hub, which helps advisors process tax business in a streamlined and highly efficient way. But we're still in the early innings of the adoption of this capability.

Speaker Change: In that spirit over the last year, we've continued to expand our digital capabilities, including our digital hubs, which provides advisors always on support centralized intuitive form.

Speaker Change: Our investments in this area enabled us to expand to digital hubs to 11 over the last year with the newest being our tax up which helps advisors process tax business and a streamlined highly efficient way.

Speaker Change: While we are still in the early innings of the adoption of this capability set.

Dan Hogan Arnold: The percentage of advisors' interactions that went through digital channels has roughly doubled over the last year from 10% to 20%. And as we continue to refine these capabilities, we believe that digital... Now, as an additional part of our vertical integration... We continue to expand and enhance our services and are encouraged by the evolving appeal of our value proposition and the maturation of our capabilities. And as a result of solid demand, the number of advisors utilizing our portfolio of 14 available services continues to increase, and we ended the year with nearly 3,900 active users, up 27% from last year. Looking ahead, we remain focused on addressing the needs of a broader set of customers and are innovating on new services that will directionally double the size of our services portfolio over the next two years.

Speaker Change: <unk> of advisers interactions through digital channels has roughly doubled over the last year from 10% to 20%.

Speaker Change: And as we continue to refine these capabilities, we believe digital solutions can ultimately serve as much as 50% our service interactions.

Speaker Change: Now as an additional part of our vertical integration strategy, we continued to expand and enhance our service.

Speaker Change: We are encouraged by the evolving appeal of our value proposition and the seasoning of our capability.

Speaker Change: And as a result of solid demand the number of advisors utilizing our portfolio of 14 available services continues to increase and we ended the year with nearly 3900 active users up 27% a year ago.

Speaker Change: Looking ahead, we remain focused on addressing the needs of a broader set of advisors and are innovating on new services that will directionally double the size of our services portfolio over the next two years.

Dan Hogan Arnold: And one of the latest innovations in our service, Services Portfolio, was inspired by our broader efforts to tackle the advisor transition, which has historically been an industry-wide pain point, given the friction and complexity of changing firms. That said, rather than seeing the transition process as a headwind, we view it as an important strategic opportunity. The easier we can make it for advisors to change firms, the more it will drive up the advisor movement in the industry, where we are well positioned to benefit from being the market leader in recruiting. And to help address that opportunity, we have developed several new transition capabilities and solutions, including a live testing environment for advisors to familiarize themselves with our platform for transition. Fully automated stages of the onboarding process and a suite of transition services that include short-term admin, branding, and bookkeeping, which helps simplify the transition and onboarding, ultimately accelerate advisors' readiness.

Speaker Change: One of the latest innovations in our service.

Speaker Change: Services portfolio was inspired by our broader efforts to tackle the advisor transmission projects, which has historically been an industry wide pain point, given the friction and complexity changing firm.

Speaker Change: That said rather than seeing the transition process is a headwind we view it as an important strategic opportunity is the easier we can make it for advisers to change firms. The more it will drive up advisor movement in the industry, where we are well positioned to benefit as the market leader in recruiting.

Speaker Change: And to help solve for that opportunity, we have developed several new transition capabilities and solutions, including live testing environment for advisors familiarize themselves with our platform for transmission.

Speaker Change: Fully automated stages of the Onboarding process and a suite of transition services that includes short term admin branding bookkeeping support which helped simplify the transition in Onboarding journey.

Speaker Change: Ultimately accelerate advisors readiness.

Dan Hogan Arnold: Early feedback on these transition services has been positive, and they are proving to be a catalyst for additional subscriptions. 40% of advisors who use these end up subscribing to one or more of our other ongoing services. And as we move forward, we will continue to challenge ourselves to solve for advisors' needs at every stage of their practice in order to help them build the perfect business for themselves and ultimately maximize their success. In summary, in the fourth quarter and throughout the year, we continue to invest in our value proposition for advisors and their clients while driving growth and increasing our market. As we look ahead, we remain focused on executing on our strategy to help our advisors further differentiate in the marketplace, and as a result, but long-term, sure, with that, all over the map. All right. Thank you, Dan.

Speaker Change: Early feedback on these transition services has been passed.

Speaker Change: And they are proving to be a catalyst for additional subscriptions is 40% of advisors, who use these solutions end up subscribing to one or more of our other ongoing services.

Speaker Change: And as we move forward, we will continue to challenge ourselves to solve for advisors needs at every stage of their practice in order to help them build the perfect business for themselves and ultimately maximize.

Speaker Change: In summary in the fourth quarter and throughout the year, we continued to invest value proposition for advisers and their.

Speaker Change: While driving growth and increasing our market.

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

Speaker Change: But long term shareholder value with that I'll turn the call over to Matt Alright, Thank you, Dan and I'm glad to speak with everyone on today's call.

Matthew J. Audette: And I'm glad to speak with everyone on today's call. Before I review our fourth-quarter results, I would like to highlight our progress during 2020. Against an evolving market backdrop, we maintained our focus on supporting our advisors and their clients while executing on our strategic priorities. We continue to grow assets organically in both our traditional and new markets, successfully onboard new enterprise clients, and continue to make progress with our liquidity and succession solution. So as we enter 2024, we remain excited about the opportunities we have to serve and support our more than 22,000 advisors while continuing to invest in our industry-leading value proposition and drive organic growth. Now, let's turn to our fourth quarter business. Total advisory and brokerage assets were $1.4 trillion, up 9% from Q3.

Matt: Before I review, our fourth quarter results I would like to highlight our progress during 2023.

Matt: Against an evolving market backdrop, we maintained our focus on supporting our advisers and their clients, while executing on our strategic priorities.

Matt: We continue to grow assets organically in both our traditional and new markets.

Matt: Successfully onboard a new enterprise clients and continued to make progress with our liquidity and succession solution.

Matt: So as we enter 2024, we remain excited about the opportunities we have to serve and support our more than 22000 advisors, while continuing to invest in our industry, leading value proposition and drive organic growth.

Matt: Now, let's turn to our fourth quarter business results total advisory and brokerage assets were one four trillion up 9% from Q3 <unk>.

Matthew J. Audette: This continued organic growth was complemented by higher eq- Total organic net new assets were $25 billion, or approximately an 8% annualized growth rate. Our Q4 recruited assets were $17 billion, which brought our total for the year to $80 billion. Looking ahead to Q1, our momentum continues, and we are on pace to deliver another strong quarter of recruiting. As for our Q4 financial results, the combination of organic growth and expense discipline led to adjusted EPS of $3.51. Gross profit was $1.7 billion, down $3 million sequentially.

Matt: This continued organic growth was complemented by higher equity.

Total organic net new assets were <unk> 25 billion or approximately an 8% annualized growth rate.

Matt: Our Q4 recruited assets were $17 billion, which brought our total for the year to $80 million.

Matt: Looking ahead to Q1, our momentum continues and we are on pace to deliver another strong quarter of recruiting.

Matt: As for our Q4 financial results the combination of organic growth and expense discipline led to adjusted EPS of $3 51.

Matt: Gross profit was $1 7 million down $3 million sequentially.

Matthew J. Audette: Our payout rate was 87.6%, up 30 basis points from Q3 due to the seasonal build in production. Looking ahead to Q1, we anticipate our payout rate will decline to approximately 86.5% as the production bonus resets at the beginning of each year. With respect to client cash revenue, it was $374 million, down $4 million from Q3, as average client cash balances declined slightly during the quarter.

Matt: Our payout rate was 87, 6% up 30 basis points from Q3 due to the seasonal build in the production business.

Matt: Looking ahead to Q1.

Matt: We anticipate our payout rate will decline to approximately 86, 5% as the production bonus reset at the beginning of each year.

Matt: With respect to client cash revenue it.

Matt: It was $374 million down $4 million from Q3 as average client cash balances declined slightly during the quarter.

Matt: It was $374 million down $4 million from Q3 as average client cash balances declined slightly during the quarter.

Matt: Client cash balances ended the quarter at 48 billion up $1 billion sequentially, marking the first quarterly increase since the second quarter of 2022.

Matthew J. Audette: Client cash balances ended the quarter at $48 billion, up $1 billion sequentially, marking the first quarterly increase since the second quarter of 2022. Within our ICA portfolio, the mix of fixed-rate balances ended the quarter at roughly 60 percent, within our target range of 50 to 75 percent. As a reminder, during Q4, there were roughly $2.5 billion of fixed-rate contracts that matured. We placed $2 billion of these maturing balances into new, five-year contracts, yielding approximately 415 basis points, which is roughly 85 basis points higher than their prior yield. Looking more closely at our ICA yield, it was 317 basis points in Q4, down one basis point from Q3. As for Q1, it is based on where client cash balances and interest rates are today, as well as the yields on our new fixed-rate contracts. We expect our ICA yield to increase by approximately five basis points. As for service and fee revenue... It was $131 million in Q4, down $5 million from Q4. This decline was primarily driven by lower co- following our largest advisor conference of the year in Q3, as well as seasonally lower IRA.

Matt: Within our ICA portfolio the mix of fixed rate balances ended the quarter at roughly 60% within our target range of 50% to 75%.

Matt: As a reminder, during Q4, there were roughly $2 5 billion of fixed rate contracts that mature.

Matt: We placed $2 billion of these maturing balances into new five year contracts, yielding approximately 415 basis points, which is roughly 85 basis points higher than their prior yield.

Matt: Looking more closely at our ICA yield it was 317 basis points in Q4 down one basis point from Q3.

Matt: As for Q1 based on where our client cash balances and interest rates are today as.

Matt: As well as the yields on our new fixed rate contracts, we expect our ICA yield to increase by approximately five basis.

As for servicing fee revenue.

Matt: It was $131 million in Q4 down 5 million from Q3.

Matt: This decline was primarily driven by lower conference room.

Matt: Among our largest advisor conference of the year in Q3 as.

As well as seasonally lower IRA.

Matt: Looking ahead to Q1, we expect service and fee revenue to decrease by approximately $5 million sequentially on lower conference right.

Matt: Moving onto Q4 transaction revenue it was $54 million up $4 million sequentially due to increased trading volume.

Matt: As we look ahead to Q1 based on what we've seen to date, we would expect transaction revenue to increase by a couple million dollars sequentially.

Matt: Now, let's turn to expenses, starting with core G&A. It was $364 million in Q4, bringing our full year G&A to $1 billion $369 million.

This was within our outlook range and for the full year represents approximately 15% growth.

Matthew J. Audette: Looking ahead to Q1, we expect service and fee revenue to decrease by approximately $5 million sequentially due to lower conferences. Moving on to Q4 Transaction Revenue, it was $54 million, up $4 million sequentially due to increased trading. As we look ahead to Q1, based on what we have seen to date, we would expect transaction revenue to increase by a couple million sequentially. Now let's turn to expenses, starting with Core G&A. It was $364 million in Q4, bringing our full year for GNA to $1,369,000,000.

Matt: As a reminder, this included an opportunistic 5% of incremental spend focused on accelerating our capabilities as we took advantage of the favorable macro environment.

Matt: Now as we look ahead to 2024.

Matt: We plan to return to more normalized levels of spend.

Matt: Concentrating on investments that enable organic growth and drive operating leverage in our business.

Matt: In addition, our ongoing investments to scale, our business are driving greater efficiencies.

Matt: Pulling this together, we expect our 2024 core G&A growth rate to be roughly half the rate we saw through 2023 more.

Matt: More specifically, we intend to grow 2024 core G&A in a range of six and a quarter to 83 quarters percent.

Matthew J. Audette: This was within our outlook range and for the full year represents approximately 15% growth. As a reminder, this included an opportunistic 5% of incremental spend focused on accelerating our capabilities as we took advantage of the favorable macro environment. Now, as we look ahead to 2020,

Matt: As for Q1, we expect core G&A to be in a range of $360 million to $370 million.

Matt: Note that this core G&A spend is prior to expenses associated with Prudential.

As we move closer to Onboarding them towards the end of this year, we will provide an update on 2024 core G&A.

Matt: I'd just emphasize that we expect only a small amount of spend in 2024.

Matthew J. Audette: We plan to return to more normalized levels of..., concentrating on investments that enable organic growth and drive operating leverage in our business. In addition, our ongoing investments to scale our business are driving greater efficiency. Pulling this together, we expect our 2024 core G&A growth rate to be roughly half the rate we saw in 2020. More specifically, we intend to grow our 2024 core DNA in a range of 6 14 to 8 34 percent.

Matt: As the majority of these costs will be incurred in 2025.

Matt: Moving onto Q4 promotional expense it was $138 million down $2 million sequentially as lower conference spend was partially offset by higher prudential related onboarding and integration costs.

Matt: Looking ahead to Q1, we expect promotional expense to be roughly flat as we have one of our largest advisor conferences during the quarter, which will be offset by seasonal declines in marketing spend.

Matt: As for regulatory expense it was $9 million in Q4 looking.

Matt: Looking forward given the increased size and scale of our business, we would expect regulatory expense to be roughly $10 million per quarter.

Matthew J. Audette: As for Q1, we expect CoreGNA to be in a range of 360 to 370 million. Note that this core G&A spend is prior to expenses associated with credentials. As we move closer to onboarding them towards the end of this year, we'll provide an update on 2024 core G&S. However, I would just emphasize that we expect only a small amount of spend in 2024, as the majority of these costs will be incurred in 2025. Moving on to Q4 promotion, it was $138 million, down $2 million sequentially.

Matt: Looking at share based compensation expense it was $16 million in Q4 flat compared to Q3.

Matt: As we look ahead, we anticipate this expense will increase by approximately $6 million sequentially as Q1 tends to be our highest quarter of the year given the timing of our annual stockholders.

Matt: Regarding capital management, our balance sheet remained strong in Q4 with corporate cash of $184 million.

Matt: I would note that during the quarter, we completed our first investment grade debt offering.

Matt: Issuing $750 million of senior notes.

Matt: With that our leverage ratio increased to one six times and is within our target leverage range of one five to two five times.

Matt: Turning to how we deploy that capital our framework remains focused on allocating capital aligned with the returns we generate.

Matthew J. Audette: Its lower conference spend was partially offset by higher credential-related onboarding and integration. Looking ahead to Q1, we expect promotional expense to be roughly flat, as we have one of our largest advisor conferences during the quarter, which will be offset by seasonal declines and market. As for regulatory expense, it was $9 million in Q4. Looking forward, given the increased size and scale of our business, we would expect regulatory expenses to be roughly $10 million per person, excluding share-based compensation. It was $16 million in Q4, flat compared to Q3. As we look ahead, we anticipate this expense will increase by approximately $6 million sequentially, as Q1 tends to be our highest quarter of the year, given the timing of our annual stock. Regarding capital management, our balance sheet remains strong in Q4, with corporate cash at $184 million.

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

Matt: In Q4, we deployed capital across our entire frame as we continue to invest to drive and support organic growth.

Matt: Allocated capital to M&A within our liquidity and succession solution and returned capital to our shareholders repurchasing $225 million of shares.

Matt: As we look ahead to Q1, we plan to repurchase $200 million of our shares keeping us on track to execute our $2 billion authorization over two years.

Matt: Turning now to interest expense it was $54 million in Q4 up $6 million sequentially.

Matt: Looking ahead to Q1, given current debt balances and interest rates, we expect interest expense to increase by approximately $7 million from Q4.

Matt: 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.

Matthew J. Audette: I would note that during the quarter, we completed our first investment-grade deadlock by issuing 750 million of senior notes. With that, our leverage ratio increased to 1.6 times and is within our target leverage range of 1.5 to 2.5 times. Turning to how we deploy that capital, 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 Q4, we deployed capital across our entire framework as we continued to invest to drive and support organic growth, allocated capital to M&A within our Liquidity in Succession solution, and returned capital to our shareholders for purchasing 225 million dollars of shares. As we look ahead to Q1, we plan to repurchase $200 million of our shares, keeping us on track to execute our $2 billion authorization over two years. Turning now to interest expense, it was $54 million in Q4, up $6 million sequentially. Looking ahead to Q1, given current debt balances and interest rates, we expect interest expense to increase by approximately $7 million from Q4.

Matt: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compile the Q&A roster.

Matt: And our first question comes from Steven <unk> with Wolfe Research. Your line is open.

Steven: Good afternoon, Dan and Matt Thanks for taking the questions.

Steven: Maybe just to start off with a question on core G&A in organic growth the double digit organic growth you've achieved these past three years, it's really been bolstered in part by significant investments in the platform and core G&A has also grown at a double digit clip as well so the updated core G&A guide for 'twenty four.

Steven: Certainly surprised positively it does imply a significant moderation as you noted Matt in expense growth, but should we expect this lower G&A growth to drive a commensurate slowdown in organic or do you feel the M&A momentum can be sustained even with that moderation in G&A spend.

Matt: Yeah, Stephen I'll give you some color here, but the answer is going to be the latter I think the investments.

Matt: Our moderated our confidence and conviction around continuing to drive organic growth is just the same.

Matt: Now the details below that just building a little bit on what I shared in the prepared remarks that the cost strategy, our investment strategy remains driving investments prioritizing to drive organic.

Operator: 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. With that, operator, please open the call for questions. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Matt: Organic growth as well as driving productivity and efficiency and I think what's probably most relevant in this conversation is also adapting as the environment evolves. So if you look at to your point on 2023 and growing 15%.

Matt: Can you kind of break that into that 15% into three equal categories of about 5%. Each the first was really about serving and supporting the core business growth.

Operator: Please stand by while we compile the Q&A roster. And our first question comes from Steven Chubak with Wolf Research. Your line is open.

Matt: The second was about continuing to make investments to really improve our value prop through and establish ourselves in the in the new models and addressable markets to scale, our services things of that nature.

Dan Hogan Arnold: Good afternoon, Dan and Matt. Thanks for taking the questions. Maybe just to start off with a question on CoreGNA and organic growth. The double-digit organic growth you've achieved these past three years has really been bolstered, at least in part, by significant investments in the platform, and CoreGNA has also grown at a double-digit clip as well. So the updated CoreGNA guide for 24 certainly surprised positively. It does imply significant moderation, as you noted, Matt, in expense growth, but should we expect a slower GNA growth to drive a commensurate slowdown in organic growth, or do you feel the NNA momentum can be sustained even with that moderation in GNA expense? Yeah, Steven. I'll give you some color here.

Matt: That third category that 35% was really just being opportunistic about the market really accelerating investment.

Matt: And I think when you look at the guidance for 2020 for our plans for 2024, it's really pulling back in that third category. So we're continuing to make the investments to support organic growth, we're continuing to make the investments to improve our value proposition and capabilities and just those two things and this may get really to the core of your question that would typically lead to <unk>.

Matt: <unk> growth of 8%, 10% range.

Matt: But then you put on top of that the investments, we're making for productivity and efficiency, which do create capacity to invest each and every year are getting even better and its that final point that brings us down to the six and a quarter to 83 quarters. So hopefully that color helps there, but I think the headline point is our conviction on continuing to deliver organic growth.

Matthew J. Audette: But the answer is going to be the latter. I think the investments are moderated, and our confidence and conviction around continuing to drive organic growth is just, Now, the details below that, just building a little bit on what I shared in the prepared remarks. The cost strategy or investment strategy remains, you know, driving investments, prioritizing to drive organic growth, as well as driving productivity and efficiency. I think what's probably most relevant in this conversation is also adapting as the environment evolves.

Matt: This high single digits remains.

That's great to hear and for my follow up Matt I was hoping you could just provide an update on January trends I know, it's a seasonally weaker months typically for both M&A and cash.

Matt: Just with cash trend also stabilizing over the last six months just speak to your confidence level that some of the sorting headwinds, which have gotten a lot of air play are largely in the rearview.

Matt: Yes, I think I'll start on cash I mean, the headline is we really saw a cash start to stabilize.

Matthew J. Audette: So, if you look at, to your point on 2023 and growing 15%, you kind of break that 15% into three equal categories of about 5% each. The first was really about serving and supporting core business growth. The second was about continuing to make investments to really improve our value proposition, improve and establish ourselves in new models and addressable markets to scale our services, things of that nature. And that third category, that third 5%, was really just being opportunistic about the market and really accelerating investment. And I think when you look at the guidance for 2024, our plans for 2024, it's really pulling back in that third category. So we're continuing to make the investments to support organic growth; we're continuing to make the investments to improve our value proposition and capabilities.

Matt: In July so really if you look at the second half of the year, even by the month. We ended the year at a pretty similar level of where we ended ended July. So I think what we're seeing in January is really a continuation of that stability. So just a reminder of the seasonal factor that does hit in January as advisory fees typically hit primarily in the first month.

Matt: The quarter.

Matt: So those do reduce cash balances, it's around $1 2 billion.

Matt: Outside of that though we've continued to see stability.

Matt: So the amount of cash balance movement from customer activity was actually a slight increase in January.

Matt: You put that together and cash balances overall for the months are down $1 2 billion, but that's primarily driven by those fees and the activity is actually a slight increase.

Matt: So I think the headline is continuing to see stability on the cash sweep side.

Matt: On the organic growth side, and maybe just I'll give a little bit of context perspective on the overall quarter as well as the muscle January.

Matthew J. Audette: And just those two things, and this may get really to the core of your question, that would typically lead to 4G and 8G growth in the 8-10% range. But then you add on top of that the investments we're making for productivity and efficiency, which do create capacity to invest each and every year, are getting even better. And it's that final point that brings us down to the 6.25 to 8.75. So hopefully, the color helps there, but I think the headline point is our conviction on continuing to deliver organic growth in this high single digits remains. That's great to hear!

Matt: To your point on your first question when you look at the last three or four years of really driving and delivering that high single digit organic growth given the nature of Q1. The first quarter is usually a little bit lower so in those years. It was typically in the 6% to 7% zone.

Matt: So if we look at what we're seeing for Q1 'twenty four is really delivering something in a similar place that 6% to 7%.

Matt: The only thing I would highlight and the reason for this color is we would expect January would actually be a little bit lower than normal in the 1% to 2% Zone and then February and March actually to be higher than typical really at those high single digits really coming together at a 6% to 7% for the quarter.

Matthew J. Audette: And for my follow-up, Matt, I was hoping you could just provide an update on January trends. I know it's a seasonally weaker month, typically for both NNA and cash. And just with cash trends also stabilizing over the last six months, just speak to your confidence level that some of these sorting headwinds, which have gotten a lot of airplay, are largely in the rear view. Yeah, I think I'll start with cash.

Matt: And really the reason for that is the seasonal factors that we just talked about.

Matt: On the cash sweep side, meaning advisory fees hitting in the first months of the quarter as well as you have on the M&A front that normal slowdown in the first half of January because of the FINRA closing in the second half of December as well as advisers, taking time off you have those normal factors that come through in January.

Matthew J. Audette: I mean, the headline is we really saw cash start to stabilize back in July. So really, if you look at the second half of the year, even by the month, we ended the year at a pretty similar level to where we ended July. So I think what we're seeing in January is really a continuation of that stability. So just a reminder, the seasonal factor that does hit in January is advisory fees, which typically hit primarily in the first month of the quarter. So those do reduce cash balances.

Matt: Two things I would highlight though for this January 1st is recruiting.

Matt: Recruiting continues to be strong you may recall Q1 of last year, we set a new record in recruiting prior to large enterprises at around $13 billion. We're on track to exceed that in the first quarter. This year. So continued strength there just the timings are little shifted more towards February and March. So you got a little bit of weakness in January.

Matt: And then on the attrition side, a little bit of the opposite and that attrition is going to be a little bit heavier in January versus February and March as we had two practices that were acquired depart during the month.

Matthew J. Audette: It's around $1.2 billion. Outside of that, though, we continue to see stability. So the amount of cash balance movement from customer activity was actually a slight increase in January. So you put that together, and cash balances overall for the month are down $1.2 billion.

Matt: And Thats normal it happens from time to time, we just happen to have two in a single month of January outside of that our retention.

Matt: Remained consistently high with the levels, we've seen so lots of color there, but I would headlined it in we're looking at Q1 and continuing in that 6% to 7% zone and you're just going to have a little bit of a different shape to the quarter with January and that 1% to 2%.

Matthew J. Audette: But it's primarily driven by those fees, and the activity is actually a slight increase. So I think the headline is continuing to see stability on the cash sweep side. On the organic growth side, and maybe I'll give you a little bit of context and perspective on the overall quarter, as well as the month of January. To your point on your first question, when you look at the last three, four years of really driving and delivering that high single-digit organic growth, given the nature of Q1, the first quarter is usually a little bit lower. So in those years, it was typically in the 6% to 7% zone.

Speaker Change: Lots to unpack there, but thanks, so much for the detail of that.

Speaker Change: You bet.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Alexandra <unk> with Goldman Sachs. Your line is open.

Alexandra: Hey, good afternoon, everyone. Thanks for the question as well.

Alexandra: I was hoping we could talk a little bit about the large enterprise channels and you guys. It's been an area of significant success over the last couple of years.

Alexandra: So maybe talk a little bit about deal activity expectations for 2024 and in particular curious about the level of engagement you guys are seeing from insurance company clients on the back of the Peru deal. Thanks.

Matthew J. Audette: So, if we look at what we're seeing for Q1-24, it's really delivering something in a similar place at 6 to 7 percent. The only thing I would highlight, and the reason for this color, is that we would expect January to actually be a little bit lower than normal in the 1 to 2 percent zone, and then February and March actually to be higher than typical, really at those high single digits, really coming together at 6 to 7 percent for the quarter. And really, the reason for that is the seasonal factors that we just talked about on the cash sweep side, meaning advisory fees hitting in the first month of the quarter, as well as on the N&A front, that normal slowdown in the first half of January because of FINRA closing in the second half of December, as well as advisors taking time off. You have those normal factors that come through in January.

Speaker Change: Yeah, Thanks, Alex so.

Speaker Change: So look with respect to.

Speaker Change: Our large enterprise channel.

Speaker Change: We opened this market up back in 2020.

Speaker Change: Novel outsourcing solution and initially we targeted larger banks.

Speaker Change: And have seen some success up to this point, capturing about $85 billion of assets to our platform.

Speaker Change: If you look at the total market for banks and outsourcing of wealth management or wealth management, it's roughly in and around one trillion and we believe our experience reputation and capability.

Speaker Change: Capability, it's compelling solution that helps.

Speaker Change: <unk> to strengthen that pipeline and offer up an interesting durable growth opportunity as we move forward.

Speaker Change: That said at the same time.

Matthew J. Audette: Two things I would highlight, though, for this January. First, recruiting. Recruiting continues to be strong. You may recall that in Q1 of last year, we set a new record for recruiting prior to large enterprises at around $13 billion. We're on track to exceed that in the first quarter of this year, so continued strength there. Just the timing's a little shifted more towards February and March, so you get a little bit of weakness in January. And then on the attrition side, a little bit of the opposite, and that attrition is going to be a little bit heavier in January versus February and March, as we had two practices that were acquired part during the month. And that's normal. It happens from time to time.

Speaker Change: Took our solution that was targeted to banks.

Speaker Change: We made some additional investments in capabilities and personalized options, which enabled us to extend the appeal of that model too as you said the insurance companies.

Speaker Change: Or product manufacturers that operate wealth management solutions now that market represents an additional $1 five trillion of opportunity.

Speaker Change: And with the Prudential announcement, it was a catalyst for additional inquiries exploring the question so why aren't they outsourcing.

Speaker Change: And we continue to progress in these discussions and explore others.

Speaker Change: Still in the early stages, but we do believe this part of the pipeline will continue to evolve as well.

Speaker Change: So.

Matthew J. Audette: We just happen to have two in a single month of January. Outside of that, our retention remains consistently high at the levels we've seen. So lots of color there, but I would headline it. We're looking at Q1 and continuing in that 6% to 7% zone, and you're just going to have a little bit of a different shape to the quarter with January in that 1% to 7% zone. A lot to unpack here, but thanks so much for the detail.

Speaker Change: I summarize it as we move forward, we believe our market leadership capability set and deep IP for this enterprise channel.

Speaker Change: It's a really unique opportunity for us.

Speaker Change: Right.

Speaker Change: Great and a quick.

Speaker Change: Follow up for you, Matt So nice to see you guys moving forward with Reinvestments of the PCA maturities with $2 billion that you mentioned.

Matt: Demand holding up in the ICU channel for additional fixed maturities as we kind of think about the $6 $5 billion tranche, that's coming up this year and is there a way to sort of accelerate some of that reinvestment I know you provided a schedule what kind of how that shakes out over the course of the year, but any opportunity to move a little faster in keith's right.

Operator: You bet. One moment for our next question, and our next question comes from Alexander Blostein with Golden Saks. Your line is open. Hey, good afternoon, everyone.

Operator: Thanks for the question as well. Dan, I was hoping we could talk a little bit about the large enterprise channel for you guys. It's been an area of significant success over the last couple of years. So maybe talk a little bit about deal activity expectations for 2024. And, in particular, I'm curious about the level of engagement you guys are seeing from insurance company clients on the back of the Peru deal. Thanks.

Matt: To start moving lower to lock in wider spreads.

Speaker Change: Yeah, Alex I think on the on the demand the demand strong like if you look at the 2 billion that we did place.

Speaker Change: Into new contracts towards that towards the end of the quarter.

Speaker Change: We were able to place them in five year contracts, so that kind of the longest duration that the market typically offers which is where we prefer to be right now.

Speaker Change: And we're able to place them at a 30 basis point spread above where the curve is and I think we've talked about for <unk>.

Dan Hogan Arnold: Yeah, thanks, Alex. So, with respect to our large enterprise channel, you know, we opened this market up back in 2020 with a novel outsourcing solution. And initially, we targeted larger banks.

Speaker Change: A long time in this marketplace, there really were no spreads to the curve and sometimes they're even discount so I think thats probably the most.

Speaker Change: Empirical data that the demand is out there is strong and you see similar demand on the floating rate side as well.

Dan Hogan Arnold: All of this has been a success up to this point, capturing about $85 billion of assets. If you look at the total market for banks and outsourcing of wealth management, for wealth management, it's roughly in and around $1 trillion. We believe, you know, our experience, reputation, and capability set creates a compelling solution that helps continue to strengthen that pipeline and offer up an interesting, durable growth opportunity as we move forward. That said, at the same time, you know, we took our solution that was targeted at banks, and we made some additional investments and capabilities and personalized options that enabled us to extend the appeal of that model to, as you said, the insurance companies or product manufacturers that operate wealth management solutions. And now that market represents an additional $1.5 trillion of opportunity. And with the prudential announcement, it was a catalyst for additional inquiries exploring the question, so why aren't they health sources?

The second part of your question the opportunities to accelerate really arent there, it's kind of the nature of our fixed rate contract rate for the same reason.

Speaker Change: On both sides of the equation from a bank liquidity standpoint, where they get it on their side, it's not it's not a very common thing. So I wouldn't expect any opportunities to accelerate it but as you noted we have when you just look at the year, we've got $6 5 billion coming up.

Speaker Change: And if you look at the marketplace right now we'd be able to place them in an even higher rates and if that five year point is available we'll be excited to do it at there as well so market is good but acceleration opportunities probably not there.

Speaker Change: Got it alright sounds like a plan.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Kyle Voigt with <unk>. Your line is open.

Kyle Voigt: Hi, good evening.

Kyle Voigt: Just a question on the Prudential expenses.

Kyle Voigt: First just wanted to confirm that the $125 million of the integration and Onboarding expenses in the promotional line are one time and still expect it to entirely roll off by the start of 2025.

Kyle Voigt: And then can you just help frame the size of the incremental G&A growth and we should think about in 25, either on a percentage basis year on year or framing relative to the size of the <unk> expenses and promo that will be rolling off in 'twenty four.

Kyle Voigt: Yeah sure I mean, I think on the 125, yes. They are definitely one time and specific to <unk> Prudential onboard.

Dan Hogan Arnold: And we continue to progress in these discussions and explore others. They're still in the early stages, but we do believe this part of the pipeline will continue to evolve as well. So, you know, if I summarize it as we move forward, we believe our market leadership capability set and real deep IP for this enterprise channel creates a really unique growth opportunity for us. I'm excited.

Kyle Voigt: I think the majority of them will be in 2024. So if you look at what we spent so far in 'twenty three it's in the $25 $26 million range of that remaining 100 that will primarily be in 'twenty, four but just depending on the timing of when they come onboard.

Kyle Voigt: Some of that could could flow over into 2025 now the total amount wouldn't change it's just a matter it would still be 125.

Dan Hogan Arnold: Great. And a quick, quick follow up for you, Matt. So nice to see you guys moving forward with reinvestments of the six ICA maturities, the $2 billion that you mentioned. How is demand holding up in the ICA channel for additional fixed maturities as we kind of think about the six and a half billion dollar tranche that's coming up this year? And is there a way to sort of accelerate some of that reinvestment? I know you provided a schedule, kind of how that shakes out over the course of the year, but any opportunity to move a little faster in case rates just start moving lower to lock in wider spreads?

Kyle Voigt: It could some of it could just go into into 2025, but the majority would be in 2024.

Kyle Voigt: On the core G&A front, I think that the headline I would give you in kind of emphasized in our prepared remarks that the amount. We expect in 2024 is relatively small and it's all about the timing of when they come on board I think to your question of how to dimension. It I think I'd just go back to the estimated EBITDA when it's fully ramped which is around 60.

Kyle Voigt: And maybe just look at overall margins in our business around 50% that should give you a sense of the overall expenses.

Matthew J. Audette: Yeah, Alex, I think demand's strong. Like, if you look at the $2 billion that we did place into new contracts towards the end of the quarter, we were able to place them in five-year contracts, so kind of the longest duration that the market typically offers, which is where we prefer to be right now. And we were able to place them at a 30-basis point spread above where the curve is. And I think, you know, we've talked about this, for a long time in this marketplace, there really were no spreads above the curve, and sometimes there were even discounts.

Kyle Voigt: That would go along with it. So I think if you did something like that you'd be directionally correct. I would just emphasize that it's from a from a cost standpoint, it's likely to be primarily in 2025, just given the timing of when theyre going to come on board is towards the end of 2000.

Kyle Voigt: Okay.

Speaker Change: Understood. Thank you for that.

Speaker Change: And then just on a follow up I guess to ask on the M&A environment.

We're seeing a macro backdrop now that I expect to be more favorable for M&A in the sector markets are at all.

Speaker Change: All time highs were starting to see some clarity on interest rates at least relative to the past year or two so I'm. Just wondering if you could speak to the opportunities youre seeing in the market whether bid ask spreads between sellers and buyers, maybe narrowing and the number of or types of deals that youre seeing come across your desk now versus maybe this time last year.

Matthew J. Audette: So I think that's probably the most, you know, empirical data that the demand is out there is strong, and you see similar demand on the floating rate side as well. On the second part of your question, the opportunities to accelerate really aren't there. It's kind of the nature of a fixed rate contract, right, for the same reason on both sides of the equation from a bank liquidity standpoint where they get it on their side. But it's not a very common thing.

Speaker Change: Let me take a stab at that one stand then.

Speaker Change: Hopefully I'll get all your questions inside of there so.

Speaker Change: I think as you know M&A remains a core part of our strategy as a complement to our organic growth opportunities and to your question. We focus on three primary categories of opportunities.

Matthew J. Audette: So I wouldn't expect any opportunities to accelerate it. But as you noted, we have, you know, when you just look at the year, we've got $6.5 billion coming up. And if you look at the marketplace right now, we'd be able to place them at even higher rates. And if that five-year point is available, we'll be excited to do it there as well. So the market's good, but acceleration opportunities probably aren't. Got it.

Speaker Change: One is first to grow in our market. So potential acquisitions might include both broker dealers and <unk> as examples of that are.

Our bidding scatter good acquisition model in Rede acquisition, and then around capital.

Speaker Change: <unk> earlier this year. So those are good examples of how we might look across the marketplace for those opportunities.

Speaker Change: Look as the industry continues to consolidate we would expect.

Speaker Change: Consolidations.

Operator: All right. Sounds like a plan. Thanks. One moment for our next question. And our next question comes from Kyle Voigt with KBW. Your line is open. Hi, good evening.

Speaker Change: The second type of transactions that we will look at is to add capabilities.

Speaker Change: Capabilities, where we would.

Speaker Change: Ultimately evaluate and allocate.

Operator: Maybe just a question on prudential expenses. First, I just wanted to confirm that the $125 million of integration and onboarding expenses in the promotional line are one-time and still expected to entirely roll off by the start of 2025. And then can you just help frame the size of the incremental G&A growth we should think about in 2025, either on a percentage basis year-on-year or relative to the size of the PRU expenses in promo that will be rolling off in 2024? Yeah, sure, Kyle.

Speaker Change: And should we allocate capital to build buy or partner and to the extent this accelerates.

Speaker Change: Zara to.

Speaker Change: That vertically integrated feature rich platform and this is where we would look for an opportunity like that.

Speaker Change: <unk> ability transactions would include advisory world.

Speaker Change: And to remind you blaze is trading platform that we're turning into what we think will be.

Speaker Change: We are really industry, leading trading and rebalancing tool.

Speaker Change: We're making them available for our entire client base early in the spring.

Speaker Change: <unk> about that type of transaction.

Speaker Change: The third type of cat.

Matthew J. Audette: I mean, I think on the 125, yes, they are definitely one-time and specific to bringing Prudential on board. I think the majority of them will be in 2024. So, if you look at what we've spent so far in 2023, it's in the $25-26 million range. Of that remaining $100, that will primarily be in 2024, but just depending on the timing of when they come on board, some of that could flow over into 2025. Now, the total amount wouldn't change. It would still be 125.

Speaker Change: Category, or example of a transaction would be deploying capital against.

Speaker Change: This newest capability, whether it be in succession.

Speaker Change: Certainly gives us a path to put our capital to work in a way that meets our disciplined return thresholds.

Speaker Change: And then helps both internal and external advisors solve them.

Speaker Change: Important question around.

Speaker Change: This succession needs and requirements that we've talked a lot about over the next 10 years.

Speaker Change: And again I think in doing that.

Speaker Change: <unk> as well to not only do that internal advisors, but also.

Speaker Change: Essentially create that solution for those that are part of our enterprise.

Speaker Change: So if you just summarize all of that we consider M&A up.

Matthew J. Audette: Some of it could just go into 2025, but the majority would be in 2024. On the Core G&A front, I think that the headline I would give you and kind of, you know, emphasize in prepared remarks is that the amount we expect in 2024 is relatively small, and it's all about the timing of when they come on board. I think to your question of how to dimension it, I think I'd just go back to the estimated EBITDA when it's fully ramped up, which is around $60 million, and maybe just look at, you know, overall margins in our business, which is around 50%. That should give you a sense of the overall expenses that would go along with it. So, I think if you did something like that, you'd be directionally correct.

Speaker Change: <unk> opportunities.

Speaker Change:

Speaker Change: A core part of our strategy, but we will remain disciplined to make sure that the framework with which we assess them as they fit strategically financially culturally and operationally.

Speaker Change: And we will do it.

Speaker Change: The discipline around expenses.

Speaker Change: I hope that helps.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Devin Ryan with JMP Securities. Your line is open.

Devin Ryan: Okay, great. Thanks, so much a question for Dan was interested by the comments you made about some of the new service innovations.

Devin Ryan: Really to encourage advisors to move and I just moved to LPL.

Devin Ryan: I guess I took that more as.

Devin Ryan: LPL looking to win more advisors in motion, but if I look at industry churn, it's been pretty anchored at 5% to 6% in recent history. So I'm just curious based on what you just talked about whether it's some of the innovations in the services portfolio or just that youre seeing more broadly occurring in the industry that could really change at 5% to 6%.

Dan Hogan Arnold: I just emphasize that, from a cost standpoint, it's likely to be primarily in 2025, just given the timing of when they're going to come on board, is towards the end. Understandable. Thank you for that.

Dan Hogan Arnold: You just asked about the M&A environment; you know, we're seeing a macro backdrop now that I expect to be a bit more favorable for M&A in the sector. Markets are at all-time highs, we're starting to see some clarity on interest rates, at least relative to the past year or two. So just wondering if you could speak to the opportunities you're seeing in the market, whether the bid-ask spread between sellers and buyers may be narrowing, and the number of or types of deals that you're seeing come across your desk now versus maybe this time last year. You can take a stab at that one, Stan, and...

Devin Ryan: And it would seem like it would be a pretty big deal. It's Kevin So just love to get a sense of kind of what those innovations actually mean and then Kevin can add.

Devin Ryan: Move for either LPL reasons or industry reasons. Thanks.

Speaker Change: Yes, good question.

Speaker Change: So I think if we just sort of start with the first question around.

Speaker Change: Churn or.

Movement in the marketplace.

Dan Hogan Arnold: I hope that I'll get all of your questions inside of there. So, as you know, M&A remains a core part of our strategy as a complement to organic growth opportunities. To your question, we focus on three primary categories of opportunities. One is, www.lplfinancial.com, our Binning Scattered Good acquisition, Juan L. and Reed acquisition, and then Crown Capital, which we closed earlier this year.

Speaker Change: And we.

We continued to see advisor movement.

Speaker Change: Oh remained flat think about that in the in the range of 555% over the other part of the last couple of years, which as you know was below historic norms.

Speaker Change: Now there has been some mix shift and that turnover and where it's coming from.

Speaker Change: In fact in the last year, you've seen movement in the <unk>.

Speaker Change: <unk> independent market move up where theres been a slowdown as an example from the wires.

Dan Hogan Arnold: So those are good examples of how we might look across the market, www.lplfinancial.com all the way. The second type of transaction that we'll look at is to add capabilities, and these are... capabilities where we would ultimately evaluate and allocate capital. And should we allocate capital to build, buy, or partner?

Speaker Change: That said notwithstanding all of that I think we first and foremost looked at our overall win rates what is moving across all of our affiliation models.

Speaker Change: As a way to continue to understand there.

Speaker Change: We would appeal.

Speaker Change: They are hopefully growing appeal as we invest more into the platform for the model.

Speaker Change: And as we as we said earlier.

Dan Hogan Arnold: And to the extent this accelerates our desire to develop the http://www.lplfinancial.com.au trading platform that we're turning into what we think will be a really industry-leading trading and rebalancing platform that we're making available to our entire client base early in the spring. I am excited about that type of transaction and what we can do with it. The third type of category or example of a transaction would be deploying capital against this newest capability of liquidity and succession. It certainly gives us a path to put our capital to work in a way that both meets our discipline return thresholds and then helps both internal and external advisors solve a really important question around, you know, this. Succession needs and requirements that we've talked a lot about over the next 10 years. And again, I think in doing that, it could potentially create that solution for those that aren't part of our enterprise.

Speaker Change: Despite this lower movement and advisers looked at the relative market share, we're picking up and our win win rates you've seen those in.

Speaker Change: That's three years with that investment back into the model.

Speaker Change: And I think look for the newer models not only do we have.

Speaker Change: Here opportunities to enhance the capability set there is there.

Speaker Change: On a.

Speaker Change: Pressure journey, if you will in terms of our investment capabilities. They're also they're seasoning the growing awareness and credibility they have in the marketplace.

Speaker Change: It can also be a catalyst for higher win rates there. So it's not just even.

Speaker Change: That it's fit.

Speaker Change: Rowing seasoning around our right to win if you will with those new models and then finally your point I think.

Speaker Change: One of the things that we look at is.

Speaker Change: And we can't.

Speaker Change: Full movement of advisors in the marketplace, what could we do to contribute to this notion of concept, making easier open advisors move from one practice to another.

Speaker Change: Given that.

Speaker Change: We believe this is one of the big hurdles for advisors moving.

Speaker Change: You could solve that or begin to break that down and imagine that in different ways.

Dan Hogan Arnold: So if you just summarize all of that, we consider M&A opportunities. We will remain disciplined to make sure that the framework within which we assess them is a better fit strategically, financially, culturally, and operationally, and we'll do it with good discipline around that. I hope that helps. Thank you.

Speaker Change: And thus creates.

A much different rubric, if you will or the change management that sort of associated moving.

Speaker Change: That could be a real catalyst.

Speaker Change:

Speaker Change: And the industry and so that's the question I think we're trying to explore that I alluded to in my remarks, and we are using our services portfolio and some of the ways in which we.

Operator: One moment for our next question. And our next question comes from Devin Ryan with J&P Securities. Your line is open. Okay, great. Thanks so much.

Speaker Change: Learned how to add value to advisors and helping them operate their practices and realized that a.

Speaker Change: A bit and offered them while someone's.

Speaker Change: Version that actually could be a catalyst making.

Operator: Question for Dan: I was interested in the comments you made about some of the new service innovations and really encouraging advisors to move and, I guess, move to LPL. And I guess I took that more as, you know, LPL looking to win more advisors in motion, but if I look at industry churn, it's been pretty anchored at, you know, 5 to 6% recent history. So, I'm just curious based on what you just talked about, whether it's some of the innovations in the services portfolio or just that you're seeing more broadly occurring in the industry that could really change that 5 to 6% rate, and it would seem like it would be a pretty big deal if you could. So, I would love to get a sense of kind of what those innovations actually mean, and then whether that rate can move for either LPL Thanks.

Speaker Change: Easier.

Speaker Change: That change management.

Speaker Change: Thus.

Speaker Change: It's successful at doing that.

Speaker Change: Structurally well then you could see.

Speaker Change: The knock on effect, if you will potentially accelerating the movement.

Speaker Change: With our ability to recruit and our positioning of our models in the marketplace certainly that's a strategic opportunity for us. So that's how we pull that together I hope that color Ed.

Speaker Change: Yes.

Speaker Change: Yes, Thanks, Dan Thats, great color and I guess my follow up.

Speaker Change: It's just it's interrelated.

Speaker Change: So.

Speaker Change: Terrific momentum and recruited assets in 2023, and really the new affiliation models.

Speaker Change: Are clearly resonating in the market and I believe you said.

Speaker Change: $15 billion from those new channels in 2023, so that would seem to imply maybe the legacy channels would be around 50 billion to get to the 67 total Tom correct. There so.

Speaker Change: On the new affiliation channels.

Speaker Change: The contribution continues to scale and those mature should that like something similar to call. It the $50 billion from the legacy channels or I'm, just trying to size that because they are growing so quickly kind of what they look like they may be maturity or something thats more mature like or maybe well above.

Dan Hogan Arnold: Yeah, question. So I think if we just sort of start with the first question around, you know, churn or that movement in the market, and we continue to see advisor move, or remain flat.

Dan Hogan Arnold: Think about that in the range of five, five and a half percent over the last couple of years, which is, you know, below the historical norm. Now, there has been some shift in that turnover and where it's coming from. In fact, in the last year, you've seen movement in the traditional independent market move up where there's been a slowdown, as an example, from the wire. That said, notwithstanding all of that, I think we first and foremost look at our overall performance across all of our association models as a way to continue to understand their absolute appeal as well as their hopefully growing appeal as we invest more into the platform or the model.

Speaker Change: But just wanted to get some thoughts on kind of where we're coming from to where we're going just because there has been such tremendous growth there, especially when you split it out separately.

Speaker Change: Yes.

Great question, and I think as we think about those longer terms of what is that possibility I think we start with the size of each of those mark.

Speaker Change: We've broken down into the employee base market is the largest one of all and that 11 trillion.

Speaker Change: Trillion dollar range.

Speaker Change: When the second.

Speaker Change: And then.

Speaker Change: And then.

Speaker Change: Sort of Swiss model that we have as a subset.

Speaker Change: Yes.

Speaker Change: Coming out of an employee based model so.

Speaker Change: If you think about the opportunity set associated with those I think it will start with that broader market and then you begin to.

Dan Hogan Arnold: And as we said earlier, And I think, look, for the newer models, not only do we have higher opportunities to enhance the capabilities set there, but there is a, you know, Freshers' Journey, if you will, in terms of our investment capabilities there. Also, their seasoning, their growing awareness, and credibility they have in the marketplace can also be a catalyst for higher win rates there.

And drill down on.

Speaker Change: What's our right to win what's our ability to room, what are the capabilities necessary to.

Speaker Change: To grow our win rates inside those markets and then if you do that it's a reason to believe given the size of those markets relative to the traditional independent that even if we if we achieve out of the win rate or the success rate, we do in our traditional channel.

Dan Hogan Arnold: So it's not just even an investment; it's that growing seasoning around our right to win, if you will, with those new models. And then finally, your point: I think one of the things that we look at is, Hey, we can't completely control the movement of advisors in the marketplace. What could we do to contribute to this notion or concept of making it easier to help an advisor move from one practice to another?

Speaker Change: Those begin to make some sizable contributions.

Speaker Change: As you were estimating.

Speaker Change: Look more like a contribution.

Speaker Change: That's what I'm not suggesting that's we'll get there what I am suggesting that that's an opportunity that is for the continuing.

Speaker Change: Work into invest into them.

Speaker Change: Challenge ourselves to achieve.

Speaker Change: Achieve the type of win rates, we have on the independent side and these large anymore.

Speaker Change: I hope that helps.

Yeah, that's great. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Dan Fannon with Jefferies. Your line is open.

Dan Hogan Arnold: Given that being one of the big hurdles for advisors moving, boy, if you could solve for that or begin to break it down and imagine it in different ways and thus create a much different rubric, if you will, for the change management efforts sort of associated with moving from A to B, that could be a real catalyst to increase that movement in the industry. And so that's the question I think we're trying to explore and that I alluded to in my remark. We're using our services portfolio and some of the ways in which we've learned how to add value to advisors and help them operate, fund their practices, and realized that we tweaked them a bit and offered them someone else's version, that actually could be a catalyst to make it easier to go through that change, and thus, it's successful at doing that. www.lplfinancial.com www.lplfin So that's how we pulled that all together. I hope that color Yeah, thanks, Dan. That's a great color.

Speaker Change: Thanks.

Daniel Thomas Fannon: This quarter saw the biggest kind of quarter over quarter increase in sales based commissions looks to be somewhat driven by annuities. So curious about your outlook for that in the context of what the Dol has proposed how you think that might change behavior or not going forward.

Speaker Change: Yeah, Let me let me let me take that one thanks for the question we have seen some momentum frankly since rates have gone up.

Speaker Change: But you've seen the <unk>.

Speaker Change: Interesting growth in the utilization and public predictable growth in the utilization of fixed annuities.

Speaker Change: And then when the equity markets move and have volatility in them.

Speaker Change: Variable annuities can also be interesting opportunity to deploy capital.

Speaker Change: So I think it's been a it's been a nice tailwind for annuities for the better part of the year last year, plus and you're exactly right fourth quarter just reinforce that.

Speaker Change: I think as we go forward.

Speaker Change: The question around the deal well.

Speaker Change: Is.

Speaker Change: A good one relative to brokerage and advisory and I think as we think about that we go back to our playbook, we used in 15 and 16 timeframe where.

Speaker Change: No.

Dan Hogan Arnold: And I guess my follow-up is just interrelated to that. So your terrific momentum in recruited assets in 2023. And really, you know, the new affiliation models are clearly responding in the market. I believe you said 15 billion from those new channels in 2023. So that would seem to imply that the legacy channels would be around 50 billion to get to the 67 total, if I'm correct there.

As from a principal standpoint, we believe that maintaining choice for advisors clients is in their best interest.

Speaker Change: Our interest in making sure.

Speaker Change: We do the things necessary to preserve choice for advisers between brokerage and advisory and our ability to ensure that we can help them.

Speaker Change: Adequately do that.

Dan Hogan Arnold: So, you know, on the new affiliation channels, you know, the contribution continues to scale, and those mature, should that look like something similar to call it the $50 billion from the legacy channels, or I'm just trying to size, because they're growing so quickly, kind of what they look like, it may be maturity or something that's more mature, like that, or maybe maybe well above 50. But I just want to get some thoughts on kind of where we're coming from and where we're going, just because there has been such tremendous growth there, especially when you split it out separately. Thanks.

Speaker Change: Rules change relative to the eye and then again, if the Dol rule ultimately goes through and changes that slightly.

Speaker Change: Making sure that we're prepared to help them, where they can successfully continue to do that business.

Speaker Change: It's in the best interest.

Speaker Change: Yes.

Speaker Change: And I think.

Speaker Change: Hard to argue with making sure that we provide choice and then ultimately.

Speaker Change: Enables us to serve them well wait and see.

Speaker Change: Yes.

Speaker Change: That said.

Speaker Change: I do believe that in many cases annuities will continue to be used where they're needed.

Speaker Change: They make sense as a rollover option or where they make sense and help.

Speaker Change: When someone is we talked about earlier with downside protection.

Speaker Change: <unk>.

Speaker Change: <unk>.

Speaker Change: Outside of the equity markets.

Dan Hogan Arnold: Yeah, it's a great question. And I think, you know, as we think about those longer terms, and what that possibility is, I think we start with the size of each of those markets, you know, that we've broken down into the employee-based market is the largest one of all in that $11-12 trillion range. RIA won the second.

Speaker Change: Good places to use them I think that.

Speaker Change: But we will see though is in other areas, you'll probably see a bigger shift.

Speaker Change: The utilization of advisory.

Speaker Change: No.

Speaker Change: Uh huh.

Speaker Change: Tougher to do brokerage business there may be some places small accounts there may be other scenarios, where given the two options. The adviser ultimately utilizes an advisory solution.

Dan Hogan Arnold: Um, and then, and then, you know, the sort of Swiss model that we have is a subset, if you will, of www.lplfinancial.com has been drilled down on what our right to win is, what our ability to win is, and what are the capabilities necessary to continue to grow our win rates inside those markets. And then if you do that, it's reason to believe, given the size of those markets relative to the traditional independent, that even if we achieve half of the win rate or the success rate we do on our traditional independent channel. Those begin to make sizable contributions that, as you were estimating, you know, look more like a contribution on the independent side. So what I'm not suggesting is that we'll get there.

Speaker Change: In the best interest of the client, but also just in the <unk>.

Speaker Change: Sure.

Speaker Change: Making sure the business can be done.

Speaker Change: So we do believe that the trend.

Speaker Change: The investments in.

Speaker Change: <unk> platforms vertical integration, we have around our advisory offering.

Speaker Change: Again lines up well.

Speaker Change: Cool.

Speaker Change: So put a capstone on it.

Speaker Change: We'll make sure that we're positioned to enable brokers to be used I do think that.

Speaker Change: The Dol rule will create some headwinds on the.

Speaker Change: Percentage of brokerage business, but let's see.

Speaker Change: But it won't be.

Speaker Change: Complete change you'll still see utilized for some time.

Speaker Change: Hope that helps.

Speaker Change: Understood and then just as a follow up I think Dan you mentioned, 99% retention in 2023, and then Matt you called out January a couple of departures. So just curious if you can give some context around maybe what happens in January and if you think retention might be slightly different given the environment.

Dan Hogan Arnold: What I am suggesting is that it's an opportunity that is worthy of continuing to work on, working into investments, and challenging ourselves to achieve the type of win rates we have on the independent side in these large, I hope that helped. Yep, that's great. Thank you.

We think about 2024 more broadly.

Operator: One moment for our next question, and our next question comes from Dan Fannon with Jeffries. Your line is open.

Matt: Yeah, no our sense of it is is look we got to make sure we execute on our strategy we got into this mess.

Matt: And we've got to deliver.

Operator: Thanks. This quarter saw the biggest kind of quarter-over-quarter increase in sales-based commissions, and it looks to be somewhat driven by annuities. So, curious about your outlook for that and, in the context of what the DOL has proposed, how you think that might change behavior or not going forward. Yeah, let me let me let me take that one.

Matt: Attempt to deliver an extraordinary experience on a daily basis, we had solid trends there strengthening NPS scores evolving capability.

Matt: We expect that retention rate in that 98, 5% range to 99% range.

Matthew J. Audette: Thanks for the question. We have seen some momentum, frankly, since rates have gone up. But you've seen the interesting growth in the utilization and probably predictable growth in the utilization of per annuities, and then from the equity markets moving into volatility, variable annuities can also be interesting opportunities for. And so I think it's been a nice tailwind for annuities for the better part of the year, last year plus, and you're exactly right. The fourth quarter just reinforced that.

Matt: A good way to think about or good centering point it will on retention for this year outside of.

Matt: The example of what Matt use where someone sells to the practice.

Matt: And potentially solve for a succession solution and look that was the exact trigger that we launched our liquidity and succession program a year ago at Wassa.

Matt: A great opportunity to go solve that.

Matt: That many advisers had those two examples maybe we didn't launch hours in time enough to swing at those.

Matthew J. Audette: I think as we go forward. A question around the DOL, a good one relative to brokerage and advisory. And I think as we think about that, we go back to our playbook we used in the 15 and 16 timeframe where, um, you know, um, As from a principled standpoint, we believe maintaining choice for advisors and clients is in their best interest. Our interest in making sure that we do the things necessary to preserve a choice for advisors between brokerage and advisory and our ability to ensure that we can help them. We'll adequately do that as the rules change relative to Reg D.I., and then again, if the D.O.L.

Matt: And though we won't win them all we do believe we've got a really appealing differentiated solution.

Matt: Will position us well not only to help.

Matt: Help serve our clients and we're already on our platform.

Matt: Actually use it as a way to attract new assets platform because not only do we have a <unk>.

Matt: Rich value proposition, serving the daily needs. We also can help them with their succession. So that's how we are.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from the line of Ben <unk> with Barclays. Your line is open.

Ben: Hi, good evening and thanks for taking the question.

Matthew J. Audette: The rule ultimately goes through and changes that slightly, making sure that we're prepared to help them pivot where they can successfully continue to do that business where it's in the best interests of the client. Um, and I think it's hard to argue with making sure that you provide people with choice and then, ultimately, enable those advisors to serve them in an optimal way and meet the needs of the client. That said, I do believe that in many cases...

Ben: Most of mine have already been covered but maybe just one for Matt on the core G&A growth can you just talk a little bit about what gets you to the higher low end of the range. It sounds like the Prudential ramp is going to be not too impactful for this year. So what are the sort of factors that could drive that up or down and at what point in the year do you start to get a better sense of.

Ben: Where that shakes out thank you.

Yeah, I think the.

Ben: Typically drives us within the ranges of the costs associated with with supporting the growth that happens during the year. Thank.

Matthew J. Audette: The annuities will continue to be used where they are needed, where they make sense as a rollover option, or where they make sense in helping someone, as we talked about earlier with downside protection that's still participating and the upsides with the equity investment. Good places to use them. I think that's all. What we will see, though, is in other areas... will probably see a bigger increase for the Utilization of Advisory Services, just tougher to do. There may be some places, small accounts.

Speaker Change: Thank you look at Q4 of 23 of this quarter is a good example of where we came in within our range, but at the high end of the range and that was really about the variable cost associated with growing whether it's variable compensation associated with that growth of the direct cost to ramp up.

Speaker Change: So that's typically the driver.

Speaker Change: Within that range those things.

Speaker Change: A follow up I don't know.

Matthew J. Audette: There may be other scenarios where, given the two options, the appraiser ultimately uses the second option, still in the best interest of the client, but also in the spirit of. So we do believe that's a trend. The investments in our advisory platforms and vertical integration we have around our advisors' offering, again, lines up well, and puts a capstone on it. We will also make sure that we're positioned to enable brokerage to be used. I do think that the DOL rule would create some headwinds on the... Senate.

Speaker Change: Alright that was all I had thank you very much okay.

Nobody else gets you follow up Doug you just lost it.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Michael Cyprus with Morgan Stanley. Your line is open.

Michael J. Cyprys: Great. Thanks for taking the question I just wanted to come back to that some of your comments earlier just around the slower movement of advisors across the industry that you alluded to I'm curious, what's driving that what might change that at the industry level I hear you on some of the services portfolio of innovations that can help move in your favor for you guys, but just at the macro backdrop for the <unk>.

Matthew J. Audette: understood. And then just as a follow-up, I think Dan, you mentioned 99% retention in 2023. And then, Matt, you called out January a couple of departures. So just curious, we get some context around maybe what will happen in January. And if you think retention might be slightly different given the environment, And, you know, as we think about 2024, more broadly. Yeah, no, our sense of it is, look, we got to make sure we execute on our strategy. We have got to invest in our capabilities, and we have got to deliver. Attempt to Deliver an Extraordinary Experience on a Daily Basis

Speaker Change: Router industry, just curious what might lead that turned to pick up here versus slow down even further and then how do you see this sort of backdrop evolving if interest rates were cut.

Speaker Change: Yes, good questions.

Speaker Change: Do think.

Speaker Change: <unk> got a number of different things that might create a slight headwind on movement than at the aggregate.

Brought it down from I don't know, what historically, 7% kind of range or movement.

Speaker Change: We would expect.

Speaker Change: Thanks to return and normalize over a period of time.

Speaker Change: These little headwinds that I referenced some of it is still a bit of a hangover from COVID-19 and just some of the change in complexity that was created as people work through that.

Dan Hogan Arnold: We have solid trends there, strengthening NPS scores, and evolving capability. We expect that retention rate in that 98.5% range to 99% range to be a good way to think about or a good centering point, if you will, on retention for this year outside of the example of what Matt used where someone sells the practice to potentially solve for a succession solution. And look, that was the exact trigger that we launched our liquidity and succession program a year ago, a great opportunity to go solve that really important question that many advisors had. Those two examples; maybe we didn't launch ours in time enough to get a swing at those.

Speaker Change: I think as as one.

Speaker Change: <unk>.

Speaker Change: I think a second one as you know.

Speaker Change: You just got it you've had a volatile market with a lot of geopolitical uncertainty that surrounds it in advisors avoid sometimes making big strategic moves or pivot sort of adjustments in periods of time with them.

Speaker Change: Got to be focused on our clients and they don't want to create more change in the midst on.

Speaker Change: Certainty and I think that's been.

Speaker Change: Something that we've seen.

Speaker Change: Over the last couple of years.

Speaker Change: Some some uncertainty and I also think you'll see advisors also pivoting in a new world of how do they operate.

Dan Hogan Arnold: And though we won't win them all, we do believe we've got a really appealing differentiated solution that will position us well, not only to help serve our clients who are already on our platform, but actually use it as a way to attract new assets to the platform because not only do we have a rich value proposition that we serve and support on a daily basis, but we can also help them with their succession. That's how we're... One moment for our next question. And our next question comes from the line of Ben Buttisch with Barclays. Your line is open. Hi,

Speaker Change: Postpaid than what they learn from that what pressures does it put on their practices.

Speaker Change: Hum.

Speaker Change: Growing complexity of regulations may drive up costs.

Speaker Change: The whole digitalization of their businesses in their offices and what does that mean and how do they think about what is the best partner for them going forward.

Operator: Good evening, and thanks for taking the question. I think most of them might have already kind of been covered, but maybe just one for Matt on the core G&A growth. Can you just talk a little bit about what gets you to the higher low end of the range?

Speaker Change: What are the types of services are new to them to transform their practice I think just trying to assess what those options and alternatives are in the world.

Speaker Change: On one side and now you throw AI on top of that which is.

Operator: It sounds like the prudential ramp is going to be not too impactful for this year. So what are the sort of factors that could drive that up or down? And at what point in the year do you start to get a better sense of where that shakes out? Thank you.

Speaker Change: In the short run creates lots of noise and exuberance. Unfortunately, it is also a shiny penny that sometimes.

Speaker Change: It doesn't always lead to good productive outcomes.

So I think.

Speaker Change: As we get further down the road of assimilating some order to the house being flipped on its side in some cases and helping them really see where they can use technology really wisely wisely to drive productivity with again, either leverage tools or outsource risk management to lower their costs associated with <unk>.

Matthew J. Audette: Yeah, I think what typically drives us within the range is the cost associated with supporting the growth that happens during the year. I think you look at, you know, Q4 of this quarter is a good example where we came in within our range, but at the high end of the range. And that was really about the variable costs associated with growing, whether it's variable compensation associated with that growth or the direct cost to ramp up. So that's typically the driver within that range, those things. Do you want to follow up, Ben, or not? Sorry.

Speaker Change: A world that is getting tougher and tougher from a regulatory standpoint, but I really do think about hey, how do I drive growth and what do I need my value proposition to do that how do I leverage.

Speaker Change: Sure.

Speaker Change: I think those are those are some of the interesting questions because they are able to solve those and enables them to move forward in a little more informed way and thus.

Matthew J. Audette: That was all I had to do. Thank you very much. OK. All right. No one else can get your follow-up though, we just lost. One moment for our next question. And our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Speaker Change: At a faster pace. So those are some of the little I think skirmishes if you will.

Speaker Change: We're overcoming as we go forward in time that will help return.

Speaker Change: Maybe movement back to a more normal settlements.

Speaker Change: Great. Thanks for that and just as a follow up question for Matt on promotional expense.

Operator: Great, thanks for taking the question. I just wanted to come back to Dan on some of your comments earlier about the slower movement of advisors across the industry that you alluded to. Curious what's driving that?

Speaker Change: Just the large enterprise one timers over the past couple of years it looks like the underlying promo expense has been in the mid to high teens does that sound about right to you and arguably that's in the context of high singles organic growth. So another question. There if we expect that sort of organic growth to persist in the high single should we expect a similar mid to high teens pace of underlying.

Dan Hogan Arnold: What might change that at the industry level? I hear you on some of the services, portfolios, innovations that can help move it in your favor for you guys, but just at the macro backdrop for the broader industry. Just curious what might lead that turn to pick up here versus slow down even further? And then how do you see this sort of backdrop evolving if interest rates are cut? Yeah, good questions.

Speaker Change: Promotional expense going forward, excluding the large one timers.

Speaker Change: Well I think that the probably the best way to think about it as just hone in on the key drivers of the growth I'd put it in three categories, which could have different trends I think the first is organic growth overall, that's typically the biggest driver.

Dan Hogan Arnold: Um, look, I do think you've got a number of different things that might create a slight headwind on movement that then, at the aggregate, you know, had brought it down from, I don't know, a historically 7% kind of range or movement, which we would expect to return, normalize over a period of time. These little headwinds that I referenced; some of it is still a bit of a hangover from COVID, and just some of the change and complexity that was created as people work through that, I think is one. I think a second one is that you have had a volatile market with a lot of geopolitical uncertainty that surrounds it. Advisors sometimes avoid making big strategic moves or pivots or adjustments.

Speaker Change: And the ta associated with bringing bringing recruiting onboard as the driver of that so the amount of recruiting that we do.

Speaker Change: Is really the driver there ta rates really have not had been fairly stable haven't changed recently so.

Speaker Change: I think we're recruiting goes is where that would go.

Speaker Change: The second is conference spend and conference spend more kind of trends with the overall number of advisors that we have at LPL right. They are really important part of how we engage with them how they engage with each other so as the as the firm scales.

Speaker Change: Expect that spend to scale.

Speaker Change: And then lastly, as you highlighted it's really the onboarding expenses associated with those large enterprises, so that really can be a little bit hard to predict because it depends on the firms that come onboard Prudential is a great example of we've got we've got good insight into spending in 'twenty four and good insight into spending overall to bring that on board.

Dan Hogan Arnold: In the midst of uncertainty, and I think that's been something that we've seen over the last couple of years that has created some uncertainty. And I also think you see advisors pivoting in a new world of how do they operate post-pandemic? What did they learn from that?

Speaker Change: It just depends on what happens on the other side of it so I'd really put it into those three categories. They kind of trend differently. Each so it just depends on how those three those three things play out.

Dan Hogan Arnold: What pressures does it put on their practice? The growing complexity of regulations may drive up costs, the whole digitalization of their businesses and their offices and what does that mean and how do they think about what is the best partner for them going forward? What are the types of services that are new to them that could transform their practice? I think just trying to assess what those options and alternatives are in a world that's flipped on its side, and now you throw AI on top of that, in the short run creates lots of noise and exuberance. Unfortunately, it's also a shiny penny that sometimes doesn't always lead to good productive outcomes. And so I think as we get further down the road of assimilating some order to the house being flipped on its side in some cases and helping them really see where they can use technology really wisely to drive productivity, where they can either leverage tools or outsource risk management to lower their costs associated with, a world that's getting tougher and tougher from a regulatory standpoint where they really do think about, hey, how do I drive growth and what do I need in my value proposition to do that? that.

Speaker Change: Alright, thank you.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Michael Cho with J P. Morgan Your line is open.

Michael Cho: Hey, good afternoon, Dan and Matt Thanks for squeezing me in here.

Michael Cho: Just wanted to touch on enterprise quickly again.

Michael Cho: Just a quick two parter here.

Michael Cho: You talked about a healthy pipeline and sort of an uptick in conversations.

Michael Cho: Since the potential announcement, but so in terms of kind of looking ahead.

Potential onboarding limit your bandwidth at all to do more.

Michael Cho: <unk> type deals.

Michael Cho: And then second just longer term looking beyond Prudential I mean, how should we think about framing the potential benefits to lpl's operating scale and leverage as we continue to gain critical mass within the enterprise opportunity set.

Michael Cho: Okay.

Michael Cho: Okay.

Michael Cho: So.

Speaker Change: Look on the on the first one I think.

Dan Hogan Arnold: I think those are some of the interesting questions that as they're able to solve those, it enables them to move forward in a little more informed way and thus, at a fast rate. So those are some of the little, I think, skirmishes, if you will, that we're trying, and we're overcoming as we go forward in time that will help return maybe movement back to a more normal. Great, thanks

Speaker Change: We see an interesting pipeline on both sides of that and its channel as I've said before banks and.

Speaker Change: On the insurance slash other manufacturing related.

Speaker Change: Market space and.

Speaker Change: And with that portfolio comes.

Speaker Change: With continued opportunity right to continue to explore and learn.

Speaker Change: <unk>.

Speaker Change: Were doing with existing programs and how that drives innovation.

Dan Hogan Arnold: And just as a follow-up question for Matt on promotional expense, if I adjust the large enterprise one-timer over the past couple of years, it looks like the underlying promo expense has been in the mid to high teens. Does that sound about right to you? And arguably, that's in the context of high singles organic growth. So another question there is, if we expect that sort of organic growth to persist in the high singles, should we expect a similar mid to high teens pace of underlying promotional expense going forward, excluding the large one-timer? Well, I think probably the best way to think about it is just to hone in on the key drivers of the growth, and I'd put it in three categories, which could have different trends. I think the first is organic growth overall.

Speaker Change: We ate more appealing.

Second is every time you bring one on how do you create a more automated.

Speaker Change: Playbook to be more efficient at doing that so you can do that better and faster.

Speaker Change: And more economically or at a lower cost and so I would tell you we are much better than we were three.

Speaker Change: Three years ago, when we brought our first larger enterprises are and we continue to automate more and more of that kind.

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Speaker Change: And as you rightfully said to the access that you were able to do that now.

Speaker Change: More interesting economic outcomes by lowering the amount of investment upfront in these opportunities you also can bring demand at a at a at a fast pace and so I think we're working our way into being able to be very thoughtful about how we bring these on in an orderly fashion assuring that's first and foremost we get experience.

Matthew J. Audette: That's typically the biggest driver, and the TA associated with bringing recruiting on board is the driver of that, so the amount of recruiting that we do is really the driver there. TA rates really have been fairly stable and haven't changed recently, so I think where recruiting goes is where that would go. The second is conference spend, and conference spend kind of trends with the overall number of advisors that we have at LPL. They're a really important part of how we engage with them, how they engage with each other, so as the firm scales, you could expect that spend to scale. And then lastly, as you highlighted, it's really the onboarding expenses associated with those large enterprises, so that really can be a little bit hard to predict because it depends on the firms that come on board. Prudential is a great example of how we've got good insight into spending in 24 hours and good insight into spending overall to bring that on board. It just depends on what happens on the other side of it, so I'd really put it into those three categories.

Speaker Change: Right.

Speaker Change: Yet you continue to operate the existing platform at the level that you want to.

Speaker Change: And then if you.

Speaker Change: As you get better and better at that I think you can line those up and bringing those home faster and faster pace and that's what we're challenging ourselves to do without being overly precise on exactly how that would look or what that looks like.

Speaker Change: Again to challenge ourselves programmatic opportunities to think.

Speaker Change: How do you shorten that Onboarding changed management.

Speaker Change: That's the problem solving.

Speaker Change: Yeah, Yeah, I think the answer is a resounding yes on are there benefits to scale I think when you look at just starting high level of the overall value proposition of this channel and the things that we're building youre, bringing on clients where they are at once they are on their platform a big part of the attraction is.

Speaker Change: Getting access to our capabilities and allowing them to grow that channel faster on our platform. So you get a place where youre increasing your levels of organic growth.

Speaker Change: I think maybe to the core of your question on the cost side.

Speaker Change: In each of these instances.

Speaker Change: You're typically building out capabilities, our technology, that's really important to that particular enterprise, but they're usually applicable to others as well right. So you are not only making sure that you have the ability to serve and support this particular client that youre, bringing on but you're you're usually enhancing those capabilities for things that the rest of <unk> with the rest.

Matthew J. Audette: They kind of trend differently, so it just depends on how those three things play out. All right, thank you. One moment for our next question. And our next question comes from Michael Cho with JP Morgan. Your line is open.

Operator: Hey, good afternoon, Dan and Matt. Thanks for squeezing me in here. I just want to touch on Enterprise quickly again, and I have just a quick two-parter here. You talked about a healthy pipeline and sort of an uptick in conversations since the prudential announcement. But in terms of kind of looking ahead, I mean, does the prudential onboarding limit your bandwidth at all to do more prudential-type deals? And then, second, just longer term, looking beyond prudential, I mean, how should we think about framing the potential benefits to LPL's operating scale and leverage as you continue to gain critical mass within the enterprise opportunity set? I'll take the first one.

Speaker Change: This channel would like and I think Peru is a very good example of that where we're not only bringing on capabilities specific to Prudential. We're building out a platform that can actually open up a much larger channel for us.

Speaker Change: And to recruit more on so a headline point is they're certainly scale benefits and hopefully those examples are helpful.

Speaker Change: Perfect. Thanks, guys Thats it from me.

Speaker Change: And this concludes today's question and answer session I would now like to turn the conference back to Mr. Dan Arnold for closing remarks.

Dan Hogan Arnold: Hey, I just wanted to thank everyone for taking the time to join US. This afternoon, and we look forward to speaking with you again next quarter. Thank you.

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

Dan Hogan Arnold: So, um, look at the first one, I think. We see an interesting pipeline on both sides of the enterprise channel, as I said before, banks and insurance slash other manufacturer-related market space, and And with that portfolio comes the continued opportunity to continue to explore and learn both how we're doing with existing programs and how that drives innovation, um, create more appeal, and Second, every time you bring one on, how do you create a more automated process? A better playbook to be more efficient at doing that so you can do that better and faster and more economically for a lower cost. And so I would tell you we're much better than we were three years ago when we brought our first larger enterprises on board, and we continue to automate more and more of that.

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Dan Hogan Arnold: Change Management, Onboarding, Effort, and Process. And as you rightfully said, to the extent that you're able to do that, not only are you going to create more interesting economic outcomes by lowering the amount of investment up front in these opportunities, but you can bring them on at a faster rate. So, I think we're working our way into being able to be very thoughtful about how we bring these on in an orderly fashion, assuring that, first and foremost, we get the experience right, that you continue to operate your existing platform, www.lplfinancial.com, and you again get better and better at that. I think you can wind those up.

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Dan Hogan Arnold: And that's what we're challenging ourselves to do without being overly precise in exactly how that would look or what that looks like. I think we are beginning to challenge ourselves with pragmatic opportunities to think, you know, how do you shorten that onboarding process and change that. That's the problem, out.

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Dan Hogan Arnold: Yeah, I think the answer is a resounding yes on whether there are benefits to scale. I think when you look at just starting high-level with the overall value proposition of this channel and the things that we're building, you're bringing on clients where once they're on their platform, a big part of the attraction is getting access to our capabilities and allowing them to grow that channel faster on our platforms. You get a place where you're increasing your levels of organic growth.

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Matthew J. Audette: I think maybe to the core of your question on the cost side, in each of these instances, you're typically building out capabilities or technology that's really important to that particular enterprise, but they're usually applicable to others as well. You're not only making sure that you have the ability to serve and support this particular client that you're bringing on, but you're usually enhancing those capabilities for things that the rest of LPL or the rest of this channel would like. I think Prue is a very good example of that, where we're not only bringing on capabilities specific to Prudential, but we're building on a platform that can actually open up a much larger channel for us to recruit more on. So, a headline point is that there are certainly scale benefits, and hopefully, those examples are helpful. Perfect. Thanks, guys. That's it for me.

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Operator: And this concludes today's question and answer session. I would now like to turn the conference back to Mr. Dan Arnold for closing remarks. Yeah, and Hey, I just want to thank everyone for taking the time to join us this afternoon, and we look forward to speaking with you again. And this concludes today's conference call. Thank you for participating. You may now disconnect. Copyright 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. Thank you for watching!

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Operator: Good afternoon, and thank you for joining the fourth quarter 2023 earnings conference call for LPL Financial Holdings Inc. Joining the call today are 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 to questions. The company would appreciate it if analysts would limit themselves to one question and one follow-up each. The company has posted its earnings press release and supplementary information in the investor relations section of the company's website, investor.lpl.com.

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Operator: Today's call will include forward-looking statements, including statements about LPL Financial's 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 and 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. 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 Security and Exchange Commission. During the call, the company will also discuss certain non-GAAP financial measures. For reconciliation of such non-GAAP financial measures to comparable GAAP figures, please refer to the company's earnings release, which can be found at investor.lpl.com.

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Dan Hogan Arnold: With that, I will now turn the call over to Mr. Arnold. Thank you, Amy, and thanks to everyone for joining our call today. Over the past quarter and throughout 2023, our advisors continue to provide their clients with personalized financial guidance on the journey to help them achieve their life goals. As we enter the new year, we thank our advisors for their continued commitment and dedication. While we remain focused on our mission... taking care of them so they can take care of their clients. During the fourth quarter, we continued to see the appeal of our model grow due to the combination of our robust and feature-rich 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 Up better than anyone else and, thereby, serve as the most appealing player in the industry.

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Dan Hogan Arnold: With respect to our performance... We delivered another quarter of solid results, while also continuing to make progress on the execution of our mission. I'll review both of these areas, starting with our fourth-quarter business. In the quarter, total assets increased to $1.4 trillion as continued solid organic growth was complemented by higher equity markets. Supporting organic growth

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Dan Hogan Arnold: Fourth Quarter Organic Net Due Assets for $25.00, representing 8% annualized. This contributed to organic net new assets for the year of approximately nine. In the fourth quarter, recruited assets for $17 billion, bringing our total for the full year to $80 billion. Part of large enterprises recruited assets for the full year were $67 billion, an increase of nearly 50% year-over-year and a new annual record.

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Speaker Change: Good afternoon, and thank you for joining the fourth quarter 2023 earnings conference call for LPL Financial Holdings, Inc.

Dan Hogan Arnold: This outcome was driven by the ongoing enhancements to our model, as well as our expanded addressable model. 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 within, Combination. The droves are solid. Thanks for the sales. At the same time, we continue to enhance the advisor experience through the delivery of new capabilities and technology and the evolution of our service and operations. As a result, asset retention for the full year was approximately 99%.

Speaker Change: Joining the call today are president and Chief Executive Officer, Dan Arnold and Chief Financial Officer, and head of business operations, Matt Audette.

Speaker Change: Dan and Matt will offer introductory remarks, and then the call will be opened for questions. The company would appreciate and 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 Dotcom.

Speaker Change: Today's call will include forward looking statements, including statements about LPL financial's future financial and operating results outlook business strategies and plans as well as other opportunities and potential risks that management foresees such.

Dan Hogan Arnold: Our fourth quarter business results led to solid financial outcomes with adjusted EPS of $3.51, which brought our full year total to $15.75, an increase of 36 percent year-over-year. Let's now turn to the progress we've made on our strategic plan. As a reminder, our long-term vision is to become the leader across the advisor-centered market. To do that, our strategy is to invest back into the platform. unprecedented flexibility and how advisors can affiliate, and deliver capabilities and services to help maximize advisors' success throughout the life cycle of their business.

Speaker Change: Such forward looking statements reflect management's current estimates or beliefs and 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.

Speaker Change: 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.

Dan Hogan Arnold: Doing this well gives us a sustainable path to industry leadership across the advisor experience, organic growth, and market. Now, to execute on our strategy, we organize our work into two strategic categories, horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate with us, such that we compete for all 300,000 advisors in the marketplace, and Vertical Innovation, where we focus on delivering capabilities, technology, and services that help our advisors differentiate when in the marketplace against the great operators of the business. Now, with that as context, let's start with our efforts around horizontal expansion. Over the fourth quarter, we saw strong recruiting in our traditional independent insurance companies, adding approximately $14 billion in assets.

Speaker Change: During the call. The company will also discuss certain non-GAAP financial measures a reconciliation 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 LPL Dot com with that I will now turn the call over to Mr. Arnold.

Arnold: Thank you Amy and thanks to everyone for joining our call today.

Arnold: Over the past quarter and throughout 2023, alright advisers continue to provide their clients with personalized financial guidance on the journey to help them achieve their life goals and dreams as.

Dan Hogan Arnold: As a result of the ongoing appeal of our model and the evolution of our go-to-market approach, we maintained our industry-leading win rates, also expanding the breadth and depth of our pipeline. With respect to our new affiliation models, strategic wealth, employee benefits, and our enhanced RAA offering, we delivered our strongest year to date, recruiting roughly $15 billion in assets, nearly double the total of the prior year. As we look ahead, we expect that the increasing awareness of these models in the marketplace and our ongoing enhancements to their capabilities will help drive sustained increases in their growth. Next, the traditional bank and credit union space continues to be a consistent contributor to organic growth as we added approximately $1 billion of recruited assets. In addition, large enterprises remained a meaningful source of recruiting in 2023 with the addition of Bank of the West and Commerce.

Arnold: As we enter the new year, we think our advisers for their continued commitment dedication while we remain focused on our mission of taking care of them. So they can take care of their clients.

Arnold: During the fourth quarter, we continued to see the appeal of our model growth due to the combination of a robust and feature rich platform, the stability and scale of our industry leading model.

Arnold: 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 industry.

Arnold: 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.

Arnold: I'll review both of these areas starting with our fourth quarter business results.

Dan Hogan Arnold: In 2024, we continue to prepare to onboard the retail wealth management business of potential financial partners. Now, as a part of that process, our team has been on the road meeting with Prudential to provide them with a preliminary orientation to our platform, and the early feedback has been positive. Looking ahead, we are confident that the appeal of our value proposition for enterprises, matched with our track record of successful execution, positions us to help solve the needs of a broad spectrum of institutions. Now, within our vertical integration... We are focused on investing back into the model in order to deliver a comprehensive platform of capabilities, services, and technology that helps our advisors differentiate and win in the marketplace and Run a Thriving Business. As part of this effort, over the past quarter, we continued to make progress on our aspiration of delivering an industry-leading service. This work includes continuing to make our service model more flexible and efficient through a multi-channel approach. The purpose of which is to offer a broad spectrum of service options, including human-centric support, digital capabilities, and artificial intelligence, such that we can provide advisors with the information they need in the channel that works best for them.

Arnold: In the quarter total assets increased to $1 four trillion as continued solid organic growth was complemented by higher equity market.

Arnold: Regarding organic growth.

Arnold: Fourth quarter organic net new assets were <unk> 25.

Arnold: Representing 8% annualized growth.

Arnold: This contributed to organic net new assets for the year of 100 million representing approximately a 9%.

Arnold: In the fourth quarter recruited assets were 17 billion, bringing our total for the full year to $80 billion.

Arnold: Sorry to large enterprises recruited assets for the full year were 67 billion, an increase of nearly 50% year over year and a new annual record.

Arnold: This outcome was driven by the ongoing enhancements to our model as well as our expanded addressable market.

Arnold: Looking at same store sales.

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

Arnold: Risers are both winning new clients and expanding wallet share with existing.

Arnold: Combination drove solid same store sales in Q4.

Arnold: At the same time, we continue to enhance the advisor experience through the delivery of new capabilities and technology and the evolution of our service and operations functions as a result asset retention for the full year was approximately 99%.

Dan Hogan Arnold: In that spirit, over the last year, we have continued to expand our digital capability, including our digital hubs, which provide advisors with always-on support in an intuitive form. Our investments in this area enabled us to expand from two digital hubs to 11 over the last year, with the newest being our tax hub, which helps advisors process tax business in a streamlined and highly efficient way. But we're still in the early innings of the adoption of this capability.

Arnold: Our fourth quarter business results led to solid financial outcomes with adjusted EPS of $3 51.

Arnold: Which brought our full year total to $15 72, an increase of 36% year over year.

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

Speaker Change: As a reminder, our long term vision is to become the leader across the advisor centered market.

Speaker Change: Do that our strategy is to invest back into the flat.

Dan Hogan Arnold: The percentage of advisors' interactions that went through digital channels has roughly doubled over the last year from 10% to 20%. And as we continue to refine these capabilities, we believe that digital... Now, as an additional part of our vertical integration... We continue to expand and enhance our services and are encouraged by the evolving appeal of our value proposition and the maturation of our capabilities. And as a result of solid demand, the number of advisors utilizing our portfolio of 14 available services continues to increase, and we ended the year with nearly 3,900 active users. 27, the year.

Speaker Change: Budd unprecedented flexibility in how advisors can affiliate with us and to deliver capabilities and services to help maximize adviser success throughout the lifecycle of their businesses.

Speaker Change: Doing this well gives us a sustainable path to industry leadership across the advisor experience organic growth and market share.

Speaker Change: Now to execute on our strategy, we organize our work into two strategic.

Speaker Change: Horizontal expansion, where we look to expand the ways that advisors and enterprises can affiliate us such that we compete.

300000 advisors and the Mark.

Speaker Change: Vertical integration, where we focus on delivering capabilities technology and services that help our advisers differentiate and win in the marketplace. The great operators of the business.

Speaker Change: Now with that as context, let's start with our efforts around horizontal expansion.

Dan Hogan Arnold: Looking ahead, we remain focused on addressing the needs of a broader set of advisors and are innovating on new services that will directionally double the size of our services portfolio over the next two years. And one of the latest innovations in our service, the Services Portfolio, was inspired by our broader efforts to tackle the advisor transition, which has historically been an industry-wide pain point given the friction and complexity of changing firms. That said, rather than seeing the transition process as a headwind, we view it as an important strategic opportunity. The easier we can make it for advisors to change firms, the more it will drive up advisor movement in the industry, where we are well positioned to benefit as a market leader in recruiting. And to help solve for that opportunity, we have developed several new transition capabilities and solutions, including a live testing environment for advisors to familiarize themselves with our platform for transition. Fully Automated Stages of the Onboarding Process, and a suite of transition services that include short-term admin, branding, and bookkeeping, which helps simplify the transition and onboarding, ultimately accelerating advisors' readiness.

Speaker Change: Over the fourth quarter, we saw strong recruiting in our traditional independent.

Speaker Change: Adding approximately 14 billion in assets.

Speaker Change: As a result of the ongoing appeal of our model and the evolution of our go to market approach, we maintained our industry leading win rates, while also expanding the breadth and depth of our pipeline.

Speaker Change: With respect to our new affiliation models strategic will employ and our enhanced store offering we delivered our strongest year to date recruiting roughly $15 billion in assets nearly double the total of the prior year.

Speaker Change: As we look ahead, we expect the increasing awareness of these models in the marketplace and our ongoing enhancements to their capabilities will help drive sustained increase in their growth.

Speaker Change: Next the traditional banking credit Union space continues to be a consistent contributor to organic growth as we added approximately $1 billion recruited assets in Q4.

Speaker Change: In addition, large enterprises remain a meaningful source of recruiting in 2023 with the addition of bank of the West end.

Speaker Change: Commerce.

Speaker Change: For 2024, we continue to prepare to onboard the retail wealth management business potential financial.

Speaker Change: Now as a part of that process. Our team has been on the road meeting with Prudential advisors provide them a preliminary orientation to our platform.

Dan Hogan Arnold: Early feedback on these transition services has been positive, and they are proving to be a catalyst for additional subscriptions. 40% of advisors who use these end up subscribing to one or more of our other ongoing services. And as we move forward, we will continue to challenge ourselves to solve for advisors' needs at every stage of their practice in order to help them build the perfect business for themselves and ultimately maximize their success. In summary, in the fourth quarter and throughout the year, we continue to invest in our value proposition for advisors and their clients while driving growth and increasing our market. As we look ahead, we remain focused on executing on our strategy to help our advisors further differentiate in the marketplace, and as a result, but long-term, sure, with that, all over the map. All right. Thank you, Dan.

Speaker Change: And the early feedback has been positive.

Speaker Change: Looking ahead, we are confident that the appeal of our value proposition for enterprises matched with our track record of successful execution positions us well to help solve the needs of a broad spectrum of institutions.

Speaker Change: Now within our vertical integration efforts, we are focused on investing back into the model in order to deliver a comprehensive platform capabilities services and technology.

Speaker Change: Help our advisers differentiate and win in the marketplace.

Speaker Change: Ron driving business.

Speaker Change: As part of this effort over the past quarter, we continued to make progress on our aspiration of delivering an industry leading services.

Speaker Change: This work includes continuing to make our service model more flexible and efficient through a multichannel approach.

Speaker Change: For purposes of which is to offer a broad spectrum of service options, including human centric support digital capabilities and artificial intelligence. So that we can provide advisors the information they need in the channel that works best for them.

Matthew J. Audette: And I'm glad to speak with everyone on today's call. Before I review our fourth-quarter results, I would like to highlight our progress during 2020. Against an evolving market backdrop, we maintained our focus on supporting our advisors and their clients while executing on our strategic priorities. We continue to grow assets organically in both our traditional and new markets, successfully onboard new enterprise clients, and continue to make progress with our liquidity and succession solution. So as we enter 2024, we remain excited about the opportunities we have to serve and support our more than 22,000 advisors while continuing to invest in our industry-leading value proposition and drive organic growth. Now, let's turn to our fourth quarter business. Total advisory and brokerage assets were $1.4 trillion, up 9% from Q3. This continued organic growth was complemented by higher activity.

Speaker Change: In that spirit over the last year, we've continued to expand our digital capabilities, including our digital hubs, which provides advisors always on support centralized intuitive form.

Speaker Change: Our investments in this area enabled us to expand to digital hubs to 11 over the last year with the newest being our tax up which helps advisors process tax business in a streamlined and highly efficient way.

Speaker Change: While we're still in the early innings of the adoption of this capability set the percentage of advisers interactions through digital channels has roughly doubled over the last year from 10% to 20%.

Speaker Change: And as we continue to refine these capabilities, we believe digital solutions can ultimately serve as much as 50% of our service interactions.

Speaker Change: Now as an additional part of our vertical integration strategy, we continued to expand and enhance our service portfolio.

Speaker Change: We are encouraged by the evolving appeal of our value proposition and the seasoning of our capability.

Speaker Change: And as a result of solid demand the number of advisors utilizing our portfolio of 14 available services continues to increase and we ended the year with nearly 3900 active users up 27% a year ago.

Matthew J. Audette: Total organic net new assets were $25 billion, or approximately an 8% annualized growth rate. Our Q4 recruited assets were $17 billion, which brought our total for the year to $80 billion. Looking ahead to Q1, our momentum continues, and we are on pace to deliver another strong quarter of recruiting. As for our Q4 financial results, the combination of organic growth and expense discipline led to adjusted EPS of $3.51. Gross profit was $1.7 billion, down $3 million sequentially.

Speaker Change: Looking ahead, we remain focused on addressing the needs of a broader set of advisors and are innovating on new services that will directionally double the size of our services portfolio over the next two years.

Speaker Change: One of the latest innovations in our service.

Speaker Change: Services portfolio was inspired by our broader efforts tackle the advisor transition process, which has historically been an industry wide pain point, given the friction and complexity changing firm.

Speaker Change: That said rather than seeing the transition process is a headwind we view it as an important strategic opportunity is the easier we can make it for advisers to change firms the more it will drive up advisor movement in the industry.

Speaker Change: We are well positioned to benefit as the market leader in recruiting.

Matthew J. Audette: Our payout rate was 87.6%, up 30 basis points from Q3 due to the seasonal build in production. Looking ahead to Q1, we anticipate our payout rate will decline to approximately 86.5% as the production bonus resets at the beginning of each year. With respect to client cash revenue, it was $374 million, down $4 million from Q3, as average client cash balances declined slightly during the quarter.

Speaker Change: And to help solve for that opportunity, we have developed several new transition capabilities and solutions, including live testing environment for advisors familiarize themselves with our platform for transmission.

Speaker Change: <unk> fully automated stages of the Onboarding process and a suite of transition services that includes short term admin branding and bookkeeping support which helps simplify the transition in Onboarding journey ultimately accelerate advisors readiness.

Speaker Change: Early feedback on these transition services has been passed.

Matthew J. Audette: Client cash balances ended the quarter at $48 billion, up $1 billion sequentially, marking the first quarterly increase since the second quarter of 2022. Within our ICA portfolio, the mix of fixed rate balances ended the quarter at roughly 60%. Within our target range of 50% to 75%. As a reminder, during Q4, there were roughly $2.5 billion of fixed-rate contracts that matured. We placed $2 billion of these maturing balances into new, five-year contracts, yielding approximately 415 basis points, which is roughly 85 basis points higher than their prior yield. Looking more closely at our ICA yield, it was 317 basis points in Q4, down one basis point from Q3.

Speaker Change: And they are proving to be a catalyst for additional subscriptions is 40% of advisors, who use these solutions end up subscribing to one or more of our other ongoing services.

Speaker Change: And as we move forward, we will continue to challenge ourselves to solve for advisors needs at every stage of their practice in order to help them build the perfect business for themselves and ultimately maximize.

Speaker Change: In summary in the fourth quarter and throughout the year, we continued to invest in value proposition for advisers and their.

Speaker Change: While driving growth and increasing our market.

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

Speaker Change: Drive long term shareholder value with that I will turn the call over to Matt Alright, Thank you, Dan and I'm glad to speak with everyone on today's call.

Matthew J. Audette: Before I review, our fourth quarter results I would like to highlight our progress during 2023.

Matthew J. Audette: Against an evolving market backdrop, we maintained our focus on supporting our advisers and their clients, while executing on our strategic priorities.

Matthew J. Audette: We continue to grow assets organically in both our traditional and new markets.

Matthew J. Audette: As for Q1, based on where client cash balances and interest rates are today, as well as the yields on our new fixed-rate contracts, we expect our ICA yield to increase by approximately five basis points. As for service and fee revenue... It was $131 million in Q4, down $5 million from Q4. This decline was primarily driven by lower-following our largest advisor conference of the year in Q3, as well as seasonally lower IRE. Looking ahead to Q1, we expect service and fee revenue to decrease by approximately $5 million sequentially on lower conferences.

Matthew J. Audette: Successfully on boarded new enterprise clients and continued to make progress with our liquidity and succession solution.

Matthew J. Audette: So as we enter 2024, we remain excited about the opportunities we have to serve and support our more than 22000 advisors, while continuing to invest in our industry, leading value proposition and drive organic growth.

Matthew J. Audette: Now, let's turn to our fourth quarter business results total advisory and brokerage assets were one four trillion up 9% from Q3 <unk>.

Matthew J. Audette: This continued organic growth was complemented by higher equity.

Matthew J. Audette: Total organic net new assets were two 5 billion or approximately an 8% annualized growth rate.

Matthew J. Audette: Moving on to Q4 Transaction Revenue, it was $54 million, up $4 million sequentially due to increased trading. As we look ahead to Q1, based on what we've seen to date, we would expect transaction revenue to increase by a couple million sequentially. Now let's turn to expenses, starting with Core G&A. It was $364 million in Q4, bringing our full year for GNA to $1,369,000,000.

Matthew J. Audette: Our Q4 recruited assets were $17 billion, which brought our total for the year to $80 billion.

Matthew J. Audette: Looking ahead to Q1, our momentum continues and we are on pace to deliver another strong quarter of recruiting.

Matthew J. Audette: As for our Q4 financial results the combination of organic growth and expense discipline led to adjusted EPS of $3 51.

Matthew J. Audette: Gross profit was $1 7 million down $3 million sequentially.

Matthew J. Audette: This was within our outlook range and for the full year represents approximately 15% growth. As a reminder, this included an opportunistic 5% of incremental spend focused on accelerating our capabilities as we took advantage of the favorable macro environment. Now, as we look ahead to 2020,

Matthew J. Audette: Our payout rate was 87, 6% up 30 basis points from Q3 due to the seasonal build in the production moves.

Matthew J. Audette: Looking ahead to Q1.

We anticipate our payout rate will decline to approximately 86, 5% as the production bonus reset at the beginning of each year.

Matthew J. Audette: With respect to client cash revenue it.

Matthew J. Audette: It was $374 million down $4 million from Q3 as average client cash balances declined slightly during the quarter.

Matthew J. Audette: We plan to return to more normalized levels of..., concentrating on investments that enable organic growth and drive operating leverage in our business. In addition, our ongoing investments to scale our business are driving greater efficiency. Pulling this together, we expect our 2024 core G&A growth rate to be roughly half the rate we saw in 2020. More specifically, we intend to grow our 2024 core DNA in a range of six and a quarter to eight and three quarters percent. As for Q1, we expect core G&A to be in a range of 360 to 370 million. Note that this core G&A spend is prior to expenses associated with credit.

Matthew J. Audette: Client cash balances ended the quarter at 48 billion up $1 billion sequentially, marking the first quarterly increase since the second quarter of 2022.

Matthew J. Audette: Within our ICA portfolio the mix of fixed rate balances ended the quarter at roughly 60% within our target range of 50% to 75%.

Matthew J. Audette: As a reminder, during Q4, there were roughly $2 5 billion of fixed rate contracts that mature.

Matthew J. Audette: We placed $2 billion of these maturing balances into new five year contracts, yielding approximately 415 basis points, which is roughly 85 basis points higher than their prior yield.

Matthew J. Audette: As we move closer to onboarding them towards the end of this year, we'll provide an update on 2024 core GNS. I would just emphasize that we expect only a small amount of spend in 2024, as the majority of these costs will be incurred in 2025. Moving on to Q4 promotion, it was $138 million, down $2 million sequentially. Its lower conference spend was partially offset by higher credential-related onboarding and integration costs.

Matthew J. Audette: Looking more closely at our ICA yield it was 317 basis points in Q4 down one basis point from Q3.

Matthew J. Audette: As for Q1 based on where our client cash balances and interest rates are today as.

Matthew J. Audette: As well as the yields on our new fixed rate contracts, we expect our ICA yield to increase by approximately five basis.

Matthew J. Audette: As for servicing fee revenue.

Matthew J. Audette: It was $131 million in Q4 down 5 million from Q3.

Matthew J. Audette: This decline was primarily driven by lower conference room.

Matthew J. Audette: Following our largest advisor conference of the year in Q3.

As well as seasonally lower IRA.

Matthew J. Audette: Looking ahead to Q1, we expect promotional expense to be roughly flat, as we have one of our largest advisor conferences during the quarter, which will be offset by seasonal declines and market conditions. As for regulatory expense, it was $9 million in Q4. Looking forward, given the increased size and scale of our business, we would expect regulatory expense to be roughly $10 million per person. Looking at share-based compensation, it was $16 million in Q4, flat compared to Q3. As we look ahead, we anticipate this expense will increase by approximately $6 million sequentially, as Q1 tends to be our highest quarter of the year, given the timing of our annual stock. Regarding capital management, our balance sheet remains strong in Q4, with corporate cash at $184 million.

Matthew J. Audette: Looking ahead to Q1, we expect service and fee revenue to decrease by approximately $5 million sequentially on lower conference right.

Matthew J. Audette: Moving onto Q4 transaction revenue it was $54 million up $4 million sequentially due to increased trading volume.

As we look ahead to Q1 based on what we've seen to date, we would expect transaction revenue to increase by a couple million dollars sequentially.

Matthew J. Audette: Now, let's turn to expenses, starting with core G&A. It was $364 million in Q4, bringing our full year or G&A to $1 billion $369 million.

Matthew J. Audette: This was within our outlook range and for the full year represents approximately 15% growth.

Matthew J. Audette: As a reminder, this included an opportunistic 5% of incremental spend focused on accelerating our capabilities as we took advantage of the favorable macro environment.

Matthew J. Audette: Now as we look ahead to 2024, we plan to return to more normalized levels of spend concentrating on investments that enable organic growth and drive operating leverage in our business.

Matthew J. Audette: I would note that during the quarter, we completed our first investment-grade debt offer, issuing $750 million of senior debt. With that, our leverage ratio increased to 1.6 times and is within our target leverage range of 1.5 to 2.5 times. Turning to how we deploy that capital, 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 Q4, we deployed capital across our entire framework as we continued to invest to drive and support organic growth. We allocated capital to M&A within our Liquidity in Succession Solution and returned capital to our shareholders for purchasing $225 million of shares. As we look ahead to Q1, we plan to repurchase $200 million of our shares, keeping us on track to execute our $2 billion authorization over two years. Turning now to interest expense, it was $54 million in Q4, up $6 million sequentially. Looking ahead to Q1, given current debt balances and interest rates, we expect interest expense to increase by approximately $7 million from Q4.

Matthew J. Audette: In addition, our ongoing investments to scale, our business are driving greater efficiencies.

Matthew J. Audette: Pulling this together, we expect our 2024 core G&A growth rate to be roughly half the rate we saw through 2023.

Matthew J. Audette: More specifically, we intend to grow 2024 core G&A in a range of six and a quarter to 83 quarters of percent.

Matthew J. Audette: As for Q1, we expect core G&A to be in a range of $360 million to $370 million.

Matthew J. Audette: Note that this quarter G&A spend is prior to expenses associated with credential.

Matthew J. Audette: As we move closer to Onboarding them towards the end of this year, we will provide an update on 2024 core G&A.

Matthew J. Audette: I would just emphasize that we expect only a small amount of spend in 2024 as the majority of these costs will be incurred in 2025.

Matthew J. Audette: Moving onto Q4 promotional expense.

Matthew J. Audette: $138 million down $2 million sequentially as lower conference spend was partially offset by higher prudential related onboarding and integration costs.

Matthew J. Audette: Looking ahead to Q1, we expect promotional expense to be roughly flat as we have one of our largest advisor conferences during the quarter, which will be offset by seasonal declines in marketing spend.

Matthew J. Audette: As for regulatory expense it was $9 million in Q4.

Matthew J. Audette: Looking forward given the increased size and scale of our business, we would expect regulatory expense to be roughly $10 million per quarter.

Matthew J. 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. With that, operator, please open the call for questions. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Matthew J. Audette: Looking at share based compensation expense it was $16 million in Q4 flat compared to Q3 as.

Matthew J. Audette: As we look ahead, we anticipate this expense will increase by approximately $6 million sequentially as Q1 tends to be our highest quarter of the year given the timing of our annual stockholders.

Matthew J. Audette: Regarding capital management, our balance sheet remained strong in Q4 with corporate cash of $184 million.

Matthew J. Audette: I would note that during the quarter, we completed our first investment grade debt offering.

Operator: Please stand by while we compile the Q&A roster. And our first question comes from Steven Chubak with Wolf Research. Your line is open. Good afternoon, Dan and Matt.

Matthew J. Audette: Issuing $750 million of senior notes.

Matthew J. Audette: With that our leverage ratio increased to one six times and is within our target leverage range of one five to two five times.

Steven Chubak: Thanks for taking the questions. Maybe just to start off with a question on core G&A and organic growth. The double-digit organic growth you've achieved these past three years has really been bolstered, at least in part, by significant investments in the platform, and core G&A has also grown at a double-digit clip as well. So the updated core G&A guide for 24 certainly surprised positively. It does imply significant moderation, as you noted, Matt, in expense growth, but should we expect the slower G&A growth to drive a commensurate slowdown in organic growth, or do you feel the N&A momentum can be sustained even with that moderation in G&A spend? Yeah, Steven. I'll give you some color here.

Matthew J. Audette: Turning to how we deploy that capital our framework remains focused on allocating capital aligned with the returns we generate.

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

Matthew J. Audette: In Q4, we deployed capital across our entire frame as we continue to invest to drive and support organic growth.

Matthew J. Audette: Allocated capital to M&A within our liquidity and succession solution and returned capital to our shareholders repurchasing $225 million of shares.

Matthew J. Audette: As we look ahead to Q1, we plan to repurchase $200 million of our shares keeping us on track to execute our $2 billion authorization over two years.

Turning now to interest expense it was $54 million in Q4 up $6 million sequentially.

Dan Hogan Arnold: But the answer is going to be the latter. I think the investments are moderated, and our confidence and conviction around continuing to drive organic growth is just, Now, the details below that, just building a little bit on what I shared in the preparator marks, the cost strategy or investment strategy remains, you know, driving investments, prioritizing driving organic growth, as well as driving productivity and efficiency. I think what's probably most relevant in this conversation is also adapting as the environment evolves. So, if you look at, to your point on 2023 and growing 15%, you kind of break that 15% into three equal categories of about 5% each. The first was really about serving and supporting core business growth.

Matthew J. Audette: Looking ahead to Q1, given current debt balances and interest rates, we expect interest expense to increase by approximately $7 million from Q4.

Matthew J. 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 advisers grow our business and create long term shareholder value with that operator. Please open the call for questions.

Matthew J. Audette: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compile the Q&A roster.

Matthew J. Audette: And our first question comes from Steven <unk> with Wolfe Research. Your line is open.

Steven: Good afternoon, Dan and Matt Thanks for taking the questions.

Matthew J. Audette: The second was about continuing to make investments to really improve our value proposition, improve and establish ourselves in new models and addressable markets to scale our services, things of that nature. And that third category, that third 5%, was really just being opportunistic about the market and really accelerating investment. And I think when you look at the guidance for 2024, our plans for 2024, it's really pulling back in that third category. So we're continuing to make the investments to support organic growth; we're continuing to make the investments to improve our value proposition and capabilities. And just those two things, and this may get really to the core of your question, that would typically lead to 4G and 8G growth in the 8-10% range.

Steven: Maybe just to start off with a question on core G&A in organic growth the double digit organic growth you've achieved these past three years, it's really been bolstered in part by significant investments in the platform and core G&A has also grown at a double digit clip as well so the updated core G&A guide for 'twenty four.

Steven: Certainly surprised positively it does imply a significant moderation as you noted Matt in expense growth, but should we expect the slower G&A growth to drive a commensurate slowdown in organic or do you feel the M&A momentum can be sustained even with that moderation in G&A spend.

Matthew J. Audette: Yes, Stephen I'll give you some color here, but the answer is going to be the latter I think the investments.

Stephen: Are moderated in our confidence and conviction around continuing to drive organic growth is just the same.

Stephen: Now the details below that just building a little bit on what I shared in the prepared remarks that the cost strategy, our investment strategy remains driving investments prioritizing to drive organic.

Matthew J. Audette: But then you add on top of that the investments we're making for productivity and efficiency, which do create capacity to invest each and every year, are getting even better. And it's that final point that brings us down to the 6.25 to 8.75. So hopefully, the color helps there, but I think the headline point is our conviction on continuing to deliver organic growth in this high single digits remains. That's great to hear.

Stephen: Organic growth as well as driving productivity and efficiency and I think what's probably most relevant in this conversation is also adapting as the environment evolves. So if you look at to your point on 2023 and growing 15%.

Stephen: Can you kind of break that into that 15% into three equal categories of about 5%. Each the first is really about serving and supporting the core business growth.

Stephen: The second was about continuing to make investments to really improve our value prop through and establish ourselves in the in the new models and addressable markets to scale, our services things of that nature.

Matthew J. Audette: And for my follow-up, Matt, I was hoping you could just provide an update on January trends. I know it's a seasonally weaker month, typically for both NNA and cash. But and just with cash trends also stabilizing over the last six months, just speak to your confidence level that some of these sorting headwinds, which have gotten a lot of airplay, are largely in the rear view. Yeah, I think I'll start with cash.

Stephen: That third category that 35% was really just being opportunistic about the market really accelerating investments.

Stephen: I think when you look at the guidance for 2020 for our plans for 2024, it's really pulling back in that third category. So we're continuing to make the investments to support organic growth, we're continuing to make the investments to improve our value proposition and capabilities and just those two things and this may get really to the core of your question that would typically lead to for G&A.

Matthew J. Audette: I mean, the headline is we really saw cash start to stabilize back in July. So really, if you look at the second half of the year, even by the month, we ended the year at a pretty similar level to where we ended July. So I think what we're seeing in January is really a continuation of that stability. So just a reminder, the seasonal factor that does hit in January is advisory fees, which typically hit primarily in the first month of the quarter. So those do reduce cash balances.

Stephen: Growth of 8%, 10% range.

Stephen: But then you put on top of that the investments, we're making for productivity and efficiency, which do create capacity to invest each and every year are getting even better and its that final point that brings us down to the six and a quarter to 83 quarters. So hopefully that color helps there, but I think the headline point is our conviction on continuing to deliver organic growth.

Matthew J. Audette: It's around $1.2 billion. Outside of that, though, we continue to see stability. So the amount of cash balance movement from customer activity was actually a slight increase in January. So you put that together, and cash balances overall for the month are down $1.2 billion.

Stephen: This high single digits remains.

Stephen: That's great to hear and for my follow up Matt I was hoping you could just provide an update on January trends I know, it's a seasonally weaker months typically for both M&A and cash.

Matthew J. Audette: But it's primarily driven by those fees, and the activity is actually a slight increase. So I think the headline is continuing to see stability on the cash sweep side. On the organic growth side, and maybe I'll give you a little bit of context and perspective on the overall quarter, as well as the month of January. To your point on your first question, when you look at the last three, four years of really driving and delivering that high single-digit organic growth, given the nature of Q1, the first quarter is usually a little bit lower. So in those years, it was typically in the 6% to 7% zone.

Matthew J. Audette: Just with cash trend also stabilizing over the last six months just speak to your confidence level that some of the sorting headwinds, which have gotten a lot of air play are largely in the rearview.

Matthew J. Audette: Yes, I think I'll start on cash I mean, the headline is we really saw a cash start to stabilize.

Matthew J. Audette: Back in July so really if you look at the second half of the year, even by the months. We ended the year at a pretty similar level of where we ended ended July. So I think what we're seeing in January is really a continuation of that stability.

Matthew J. Audette: Just a reminder, the seasonal factor that does hit in January as advisory fees typically hit primarily in the first month of the quarter.

Matthew J. Audette: So, if we look at what we're seeing for Q1-24, it's really delivering something in a similar place, that 6 to 7 percent. The only thing I would highlight, and the reason for this color, is that we would expect January to actually be a little bit lower than normal in the 1 to 2 percent zone, and then February and March actually to be higher than typical, really at those high single digits, really coming together at 6 to 7 percent for the quarter. And really, the reason for that is the seasonal factors that we just talked about on the cash sweep side, meaning advisory fees hitting in the first month of the quarter, as well as on the N&A front, that normal slowdown in the first half of January because of FINRA closing in the second half of December, as well as advisors taking time off. You have those normal factors that come through in January.

Matthew J. Audette: So those do reduce cash balances this around $1 2 billion.

Matthew J. Audette: Outside of that though we've continued to see stability.

Matthew J. Audette: The amount of cash balance movement from customer activity was actually a slight increase in January.

Matthew J. Audette: Put that together and cash balances overall for the months are down $1 2 billion, but that's primarily driven by those fees and the activity is actually a slight increase.

Matthew J. Audette: So I think the headline is continuing to see stability on the cash sweep side.

Matthew J. Audette: On the organic growth side, and maybe just I'll give a little bit of context perspective on the overall quarter as well as the muscle January to your point on your first question. When you look at the last three or four years of really driving and delivering that high single digit organic growth given the nature of Q1. The first quarter is usually a little bit lower so in those years.

Matthew J. Audette: Or is it was typically in the 6% to 7% zone. So.

Matthew J. Audette: So if we look at what we're seeing for Q1 'twenty four is really delivering something in a similar place that 6% to 7%.

Matthew J. Audette: Two things I would highlight this January, though. First, recruiting. Recruiting continues to be strong. You may recall that in Q1 of last year, we set a new record for recruiting prior to large enterprises at around $13 billion. We're on track to exceed that in the first quarter of this year. So, continued strength there. Just the timing's a little shifted more towards February and March. So, you get a little bit of weakness in January. And then on the attrition side, a little bit of the opposite, and that attrition is going to be a little bit heavier in January versus February and March, as we had two practices that were acquired part during the month. And that's normal. It happens from time to time.

Matthew J. Audette: The only thing I would highlight and the reason for this color is we would expect January would actually be a little bit lower than normal in the 1% to 2% Zone and then February and March actually to be higher than typical really at those high single digits really coming together at a 6% to 7% for the quarter.

Matthew J. Audette: And really the reason for that is the seasonal factors that we just talked about.

Matthew J. Audette: On the cash sweep side, meaning advisory fees hitting in the first month of the quarter as well as you have on the M&A front that normal slowdown in the first half of January because of the FINRA closing in the second half of December as well as advisers, taking time off you have those normal factors that come through in January.

Matthew J. Audette: Two things I would highlight though for this January 1st is recruiting.

Our recruiting continues to be strong you may recall Q1 of last year, we set a new record in recruiting prior to large enterprises at around $13 billion. We're on track to exceed that in the first quarter of this year. So continued strength. There just the timings are little shifted more towards February and March so you've got a little bit of weakness in January.

Matthew J. Audette: We just happen to have two in a single month of January. Outside of that, our retention remains consistently high at the levels we've seen. So lots of color there, but I would headline it. We're looking at Q1 and continuing in that 6% to 7% zone, and you're just going to have a little bit of a different shape to the quarter with January in that 1% to 7% zone. Lots to unpack here, but thanks so much for the detail, Alex. You bet. One moment for our next question, and our next question comes from Alexander Blostein with Golden Saks. Your line is open. Hey, good afternoon, everyone.

Matthew J. Audette: And then on the attrition side, a little bit of the opposite and that attrition is going to be a little bit heavier in January versus February and March as we had two practices that were acquired depart during the month.

Matthew J. Audette: And Thats normal it happens from time to time, we just happened to have two in a single month of January outside of that our retention.

Matthew J. Audette: Remains consistently high with the levels, we've seen so lots of color there, but I'll, let headlined it in we're looking at Q1 and continuing in that 6% to 7% zone and Youre just going to have a little bit of a different shape to the quarter with January and that 1% to 2%.

Speaker Change: Lots to unpack there, but thanks, so much for the detail that.

Speaker Change: You bet.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Alexandra <unk> with Goldman Sachs. Your line is open.

Steven Chubak: Thanks for the question as well. Dan, I was hoping we could talk a little bit about the large enterprise channel for you guys. It's been an area of significant success over the last couple of years. So maybe talk a little bit about deal activity expectations for 2024. And, in particular, I'm curious about the level of engagement you guys are seeing from insurance company clients on the back of the Peru deal. Thanks.

Alexandra: Hey, good afternoon, everyone. Thanks for the question as well.

Alexandra: I was hoping we could talk a little bit about the large enterprise channel for you guys. It's been an area of significant success over the last couple of years.

Alexandra: So maybe talk a little bit about deal activity expectations for 2024 and in particular curious about the level of engagement you guys are seeing from insurance company clients on the back of the Peru deal. Thanks.

Alexander Blostein: Yeah, thanks, Alex. So, with respect to our large enterprise channel, you know, we opened this market up back in 2020 with a novel outsourcing solution. And initially, we targeted larger banks.

Speaker Change: Yeah, Thanks, Alex so.

Speaker Change: So look with respect to.

Speaker Change: Our large enterprise channel.

Speaker Change: We opened this market up back in 2020.

Speaker Change: Novel outsourcing solution and initially we targeted larger banks.

Dan Hogan Arnold: We've had success up to this point, capturing about $85 billion of assets on our platform. If you look at the total market for banks and outsourcing of wealth management, for wealth management, it's roughly in and around $1 trillion. We believe, you know, our experience, reputation, and capability set creates a compelling solution that helps continue to strengthen that pipeline and offers up an interesting, durable growth opportunity as we move forward. That said, at the same time, we took our solution that was targeted at banks, and we made some additional investments and capabilities and personalized options that enabled us to extend the appeal of that model to, as you said, the insurance companies or product manufacturers that operate wealth management solutions. And now that market represents an additional $1.5 trillion of opportunity. And with the prudential announcement, it was a catalyst for additional inquiries exploring the question, so why aren't they health resources?

Speaker Change: And then I have seen some success up to this point, capturing about $85 billion of assets to our platform.

Speaker Change: If you look at the total market for banks and outsourcing of wealth management or wealth management, it's roughly in and around one trillion and we believe our experience reputation and capability set.

Speaker Change: <unk> solution that helps.

Speaker Change: Continue to strengthen that pipeline and offer up an interesting durable growth opportunity as we move forward.

That said at the same time.

Speaker Change: We took our solution that was targeted to banks and.

Speaker Change: We made some additional investments in capabilities and personalized options, which enabled us to extend the appeal of that model too as you said the insurance companies.

Speaker Change: Or product manufacturers that operate wealth management solutions now that market represents an additional $1 five trillion of opportunity.

Speaker Change: And with the Prudential announcement, it was a catalyst for additional inquiries exploring the question so why aren't they outsourcing.

Dan Hogan Arnold: And we continue to progress in these discussions and explore others. They're still in the early stages, but we do believe this part of the pipeline will continue to evolve as well. So, you know, if I summarize it, as we move forward, we believe our market leadership capability set and some deep IP for this enterprise channel creates a really unique growth opportunity for us.

Speaker Change: And we continue to progress in these discussions and explore others. They are still in the early stages, but we do believe this part of the pipeline will continue to evolve as well.

Speaker Change: So.

Speaker Change: If I summarize it as we move forward, we believe our market leadership capability set and we will deep IP for this enterprise channel creates a really unique opportunity for us.

Speaker Change: We're excited about.

Speaker Change: Alright and quick.

Matthew J. Audette: And a quick, quick follow-up for you, Matt. So, nice to see you guys moving forward with the reinvestments of the six ICA maturities of $2 billion that you mentioned. How is demand holding up in the ICA channel for additional fixed maturities as we kind of think about the six and a half billion dollar tranche that's coming up this year? And is there a way to sort of accelerate some of that reinvestment?

Speaker Change: Quick follow up for you, Matt So nice to see you guys moving forward with Reinvestments of the fixed maturities with $2 billion that you mentioned how is demand holding up in the ICU channel for additional fixed maturities as we kind of think about the $6 5 billion tranche, that's coming out this year and is there a way to sell.

Speaker Change: We have accelerated some of that reinvestment I know you provided a schedule kind of how that shakes out over the course of the year, but any opportunity to move a little faster in case rates to start moving lower to walk in wider spreads.

Matthew J. Audette: I know you provided a schedule kind of how that shakes out over the course of the year, but any opportunity to move a little faster in case rates just start moving lower to lock in a wider spread. Yeah, Alex, I think on the demand side, the demand's strong. Like, if you look at the $2 billion that we did place into new contracts towards the end of the quarter, we were able to place them on five-year contracts, so kind of the longest duration that the market typically offers, which is where we prefer to be right now. And we were able to place them at a 30-basis point spread above where the curve is. And I think, you know, we've talked about, for a long time in this marketplace, there really were no spreads on the curve, and sometimes there were even discounts.

Matthew J. Audette: Yes, Alex I think on the on the demand the demand strong like if you look at the $2 billion that we did place.

Alex: Into new contracts towards that towards the end of the quarter.

Alex: We were able to place them in five year contracts, so that kind of the longest duration that the market typically offers which is where we prefer to be right now.

Alex: And we were able to place them at a 30 basis point spread above where the curve is and I think we've talked about.

Long time in this marketplace, there really were no spreads to the curve and sometimes they're even discount so I think thats probably the most.

Alexander Blostein: So I think that's probably the most, you know, empirical data that the demand is out there is strong, and you see similar demand on the floating rate side as well. On the second part of your question, the opportunities to accelerate really aren't there. It's kind of the nature of a fixed-rate contract, right, for the same reason on both sides of the equation from a bank liquidity standpoint, where they get it on their side.

Alex: Empirical data that the demand is out there is strong and you see similar demand on the floating rate side as well.

Alex: The second part of your question the opportunity to accelerate really arent there, it's kind of the nature of our fixed rate contract rate for the same reason.

Alex: On both sides of the equation from a bank liquidity standpoint, where they get it on their side, it's not it's not a very common thing. So I wouldn't expect any opportunities to accelerate it but as you noted we have when you just look at the year, we've got $6 5 billion coming up.

Kyle Voigt: It's not a very common thing, so I wouldn't expect any opportunities to accelerate it. But as you noted, we have, you know, when you just look at the year, we've got $6.5 billion coming up. And if you look at the marketplace right now, we'd be able to place them at even higher rates. And if that five-year point is available, we'll be excited to do it there as well. So the market's good, but acceleration opportunities probably aren't. Got it.

And if you look at the marketplace right now we'd be able to place them in an even higher rates and if that five year point is available we'll be excited to do it there as well so market is good but acceleration opportunity is probably not there.

Matthew J. Audette: All right. Sounds like a plan. Thanks.

Speaker Change: Got it alright sounds like a plan.

Matthew J. Audette: One moment for our next question. And our next question comes from Kyle Voigt with KBW. Your line is open. Hi, good evening.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Kyle Voigt with <unk>. Your line is open.

Kyle Voigt: Hi, Good evening, maybe just a question on the Prudential expenses.

Kyle Voigt: Maybe just a question on prudential expenses. First, I just wanted to confirm that the $125 million of integration and onboarding expenses in the promotional line are one-time and still expected to entirely roll off by the start of 2025. And then can you just help frame the size of the incremental G&A growth we should think about in 2025, either on a percentage basis year-on-year or relative to the size of the PRU expenses in promo that will be rolling off in 2024? Yeah, sure, Kyle.

Kyle Voigt: Just wanted to confirm that the $125 million of the integration and Onboarding expenses in the promotional line are one time and still expected to entirely roll off by the start of 2025, and then can you just help frame the size of the incremental G&A growth and we should think about in 25, either on a percentage basis year on.

Kyle Voigt: Year or framing relative to the size of the <unk> expenses and promo that will be rolling off in 'twenty four.

Speaker Change: Yes, sure Kyle I mean, I think on the 125, yes. They are definitely one time and specific to <unk> Prudential onboard.

Dan Hogan Arnold: I mean, I think on the 125, yes, they are definitely one-time and specific to bringing Prudential on board. I think the majority of them will be in 2024, so if you look at what we've spent so far in 2023, it's in the $25-26 million range. Of that remaining $100, that will primarily be in 2024, but just depending on the timing of when they come on board, some of that could flow over into 2025. Now, the total amount wouldn't change. It's just that it would still be $125.

Speaker Change: The majority of them will be in 2024. So if you look at what we spent so far in 'twenty three it's in the $25 $26 million range.

Speaker Change: Remaining 100 that will primarily be in 'twenty, four but just depending on the timing of when they come onboard.

Kyle Voigt: That could could flow over into 2025 now the total amount wouldn't change it's just a matter it would still be a 125.

Dan Hogan Arnold: Some of it could just go into 2025, but the majority would be in 2024. On the core G&A front, I think that the headline I would give you and kind of emphasize in my prepared remarks is that the amount we expect in 2024 is relatively small, and it's all about the timing of when they come on board. I think to your question of how to dimension it, I think I'd just go back to the estimated EBITDA when it's fully ramped up, which is around $60 million, and maybe just look at overall margins in our business, which is around 50%. That should give you a sense of the overall expenses that would go along with it. So I think if you did something like that, you'd be directionally correct.

Kyle Voigt: It could some of it could just go into into 2025, but the majority of it would be in 2024.

Kyle Voigt: On the core G&A front I think the headline I would give you in kind of emphasize in the prepared remarks that the amount. We expect in 2024 is relatively small and it's all about the timing of when they come on board I think to your question of how to dimension. It I think I'd just go back to the estimated EBITDA when it's fully ramped which is around 60.

Kyle Voigt: And maybe just look at overall margins in our business around 50% that should give you a sense of the overall expenses.

Kyle Voigt: That would go along with it. So I think if you did something like that you'd be directionally correct. I just emphasize that it's from a from a cost standpoint, it's likely to be primarily in 2025, just given the timing of when theyre going to come on board is towards the end of 'twenty.

Daniel Thomas Fannon: I just emphasize that from a cost standpoint, it's likely to be primarily in 2025, just given the timing of when they're going to come on board. Understandable. Thank you for that. And then just on a follow up.

Kyle Voigt: Okay.

Speaker Change: Understood. Thank you for that.

Speaker Change: And then just on a follow up I can just ask on the M&A environment.

Matthew J. Audette: You just asked about the M&A environment; you know, we're seeing a macro backdrop now that I expect to be a bit more favorable for M&A in the sector. Markets are at all-time highs, we're starting to see some clarity on interest rates, at least relative to the past year or two. So just wondering if you could speak to the opportunities you're seeing in the market, whether bid-ask spreads between sellers and buyers may be narrowing, and the number of or types of deals that you're seeing come across your desk now versus maybe this time last year. You can take a stab at that one, Stan.

Speaker Change: We're seeing a macro backdrop now that I expect to be more favorable for M&A in the sector markets are at all time highs, we're starting to see some clarity on interest rates at least relative to the past year or two so I'm. Just wondering if you could speak to the opportunities youre seeing in the market whether bid ask spreads between sellers and buyers maybe.

Speaker Change: <unk> and the number of types of deals that youre seeing come across your desk now versus maybe this time last year.

Speaker Change: Let me take a stab at that one can stand in.

Matthew J. Audette: I hope that I'll get all of your questions inside of there. So, as you know, M&A remains a core part of our strategy as a complement to organic growth opportunities. To your question, we focus on three primary categories of opportunities. One is, www.lplfinancial.com, our Binning Scattered Good acquisition, Juan L. and Reed acquisition, and then Crown Capital, which we closed earlier this year.

Hopefully I'll get all your questions inside of there so.

Speaker Change: I think as you know M&A remains a core part of our strategy as a complement to our organic growth opportunities.

Speaker Change: To your question, we focus on three primary categories of opportunities.

Speaker Change: One is first to grow in our market. So.

Speaker Change: <unk> acquisitions might include both broker dealers in Ria's examples of that are.

Speaker Change: Our bidding scatter good acquisition model in Rede acquisition, and then around capital closing earlier. This year. So those are good examples of how we might look across the marketplace for those opportunities.

Dan Hogan Arnold: So those are good examples of how we might look across the market, www.lplfinancial.com and so on. The second type of transaction that we'll look at is to add capabilities, and these are... capabilities that we would ultimately evaluate and allocate. And should we allocate capital to build, buy, or partner and to the extent this accelerates our desire to, The Thank you trading platform that we're turning into what we think will be a really industry-leading trading and rebalancing platform that we're making available to our entire client base early in the spring.

Speaker Change: And look as the industry continues to consolidate we would expected to be up.

Speaker Change: Consolidations.

Speaker Change: The second type of transactions that we will look at is to add capabilities.

Speaker Change: Sure.

Speaker Change: <unk>, where we would <unk>.

Speaker Change: Italy evaluate and allocate.

Speaker Change: And should we allocate capital to build buy or partner and to the extent this accelerates.

Speaker Change: Desired.

Speaker Change: That vertically integrated feature rich platform and this is where we would look for an opportunity like that.

<unk> capability transactions would include advisory world and delays and to remind you Blaze is trading platform that we're turning into what we think would be a really industry, leading trading and rebalancing tools.

Dan Hogan Arnold: I'm excited about that type of transaction and what we can do with it. The third type of category or example of a transaction would be deploying capital against this newest capability of liquidity and succession. It certainly gives us a path to put our capital to work in a way that both meets our discipline return thresholds and then helps both internal and external advisors solve a really important question around, you know, this. Succession needs and requirements that we've talked a lot about over the next 10 years. And again, I think in doing that, it could potentially create that solution for those that aren't part of our enterprise. So if you just summarize all of that, we consider M&A opportunities or part of our strategy, but we will remain disciplined to make sure that the framework within which we assess them is that they've got to fit strategically, financially, culturally, and operationally, and we'll do it with good discipline around that. Okay. Thank you.

Speaker Change: We're making available.

Speaker Change: Client base.

Speaker Change: Early in the spring.

Speaker Change: <unk> about that type of transaction.

Speaker Change: The third type of care.

Speaker Change: Category, or example of a transaction would be deploying capital against.

Speaker Change: This newest capability of liquidity and success.

Certainly gives us a path to put our capital work in a way that both meets our disciplined return thresholds.

And then helps both internal and external adviser solve a really important question around.

Speaker Change: This succession needs and requirements that we've talked a lot about over the next 10 years.

Speaker Change: And again I think in doing that.

Speaker Change: <unk> us well to not only do the internal advisors, but also.

Speaker Change: Essentially create that solution for those that are part of our enterprise today. So if you just summarize all of that we consider M&A up.

Speaker Change: <unk> opportunities.

Speaker Change: Hum.

Speaker Change: A core part of our strategy.

Speaker Change: We will remain disciplined to make sure that the framework with which we assess them as they've got a.

Speaker Change: Fit strategically financially culturally and operationally.

Speaker Change: And we will do it.

Speaker Change: The discipline around each of those.

Speaker Change: I hope that helps.

Speaker Change: Okay.

Daniel Thomas Fannon: One moment for our next question. And our next question comes from Devin Ryan with J&P Securities. Your line is open. Okay, great. Thanks so much.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Speaker Change: And our next question comes from Devin Ryan with JMP Securities. Your line is open.

Devin Ryan: Okay, great. Thanks, so much.

Devin Ryan: Question for Dan: I was interested in the comments you made about some of the new service innovations and really encouraging advisors to move and, I guess, move to LPL. And I guess I took that more as, you know, LPL looking to win more advisors in motion, but if I look at industry churn, it's been pretty anchored at, you know, 5 to 6% recent history. So, I'm just curious based on what you just talked about, whether it's some of the innovations in the services portfolio or just that you're seeing more broadly occurring in the industry that could really change that 5 to 6% rate, and it would seem like it would be a pretty big deal if you could. So, I would love to get a sense of kind of what those innovations actually mean, and then whether that rate can move for either LPL Thanks.

Devin Ryan: For Dan was interested by the comments you made about some of the new service innovations and really to encourage advisors to move in I guess move to LPL.

Devin Ryan: I guess I took that more as.

Devin Ryan: LPL looking to win more advisors in motion, but if I look at industry churn, it's been pretty anchored at 5% to 6% in recent history. So I'm just curious based on what you just talked about whether it's some of the innovations in the services portfolio, where just that youre seeing more broadly occurring in the industry that could really change at 5% 6%.

Devin Ryan: Right and it would seem like it would be a pretty big deal.

Devin Ryan: Love to get a sense of kind of what those innovations actually mean, and then Ken can that rate move for either LPL reasons or industry reasons. Thanks.

Dan Hogan Arnold: Yeah, question. So I think if we just sort of start with the first question around, you know, churn or that movement in the market, and we continue to see advisor move, or remain flat.

Speaker Change: Yes, good question.

Speaker Change: <unk>.

Speaker Change: So I think if we just sort of start with the first question around.

Ken: Churn or that movement in the marketplace.

Ken: And we.

Ken: We continue to see advisor movement.

Dan Hogan Arnold: Think about that in the range of five, five and a half percent that are part of the last couple of years, which is, you know, is below the historical norm. Now, there has been some mix shift in that turnover and where it's coming from. In fact, in the last year, you've seen movement in the traditional independent market move up where there's been a slowdown, as an example, from the wire. That said, notwithstanding all of that, I think we first and foremost look at our overall performance across all of our association models as a way to continue to understand their absolute appeal as well as their hopefully growing appeal as we invest more into the platform or the model. And as we said earlier, Despite this lower movement in advisors, if you look at the relative market share we're picking up in our win rates, you've seen that increase. We look at the global medical market, the projections of global markets, the training of medical professionals, the studies and databases; are there any pros and cons?

Ken: Flat.

Ken: About that in the in the range of five to five 5% over the other part of the last couple of years, which as you know was below historic norms.

Ken: Now there has been some mix shift and that turnover and where it's coming from.

Ken: In fact in the last year, you've seen movement in the <unk>.

Ken: Additional independent market move up where theres been a slowdown as an example from the wires.

Ken: That said notwithstanding all of that I think we first and foremost looked at our overall win rates what is moving across all of our affiliate.

Ken: Patient models.

Ken: As a way to continue to understand their absolute appeal.

Ken: They are hopefully growing appeal as we invest more into the platform for the model.

And as we as we said earlier.

Ken: Despite this lower movement and advisors. If you look at the relative market share, we're picking up and our win win rates you've seen those.

The past three years with that investment back into the model.

Ken: And I think look for the newer models not only do we have higher opportunities to enhance the capability set there is there.

Dan Hogan Arnold: I think there are some cons, one of them is that nobody thinks about them on a, you know, Fresher journey, if you will, in terms of our investment capabilities there. Also, their seasoning, their growing awareness, and credibility they have in the marketplace can also be a catalyst for higher win rates there. So it's not just even the investment; it's that growing seasoning around our right to win, if you will, with those new models. And then finally, your point: I think one of the things that we look at is that we can't completely control the movement of advisors in the marketplace. What could we do to contribute to this notion or concept of making it easier to help an advisor move from one practice to another?

Ken: On a pressure.

Ken: Pressured journey, if you will in terms of our investment capabilities. They're also they're seasoning the growing awareness and credibility they have in the marketplace.

Ken: It can also be a catalyst for higher win rates. There. So it's not just even the investment.

Ken: That pit.

Ken: <unk> seasoning around our right to win if you will with those new models and then finally your point.

Speaker Change: I think one of the things that we look at is.

Speaker Change: And we can't.

Speaker Change: Whole movement of advisors in the marketplace, what could we do to contribute to this notion of concept, making easier helping advisors move from one practice to another.

Dan Hogan Arnold: Given that being one of the big hurdles for advisors moving, boy, if you could solve for that or begin to break it down and imagine it in different ways and thus create a much different rubric, if you will, for the change management that's sort of associated with moving from A to B, that could be a real catalyst to increase that movement in the industry. And so that's the question I think we're trying to explore and that I alluded to in my remark. We're using our services portfolio and some of the ways in which we've learned how to add value to advisors and help them operate, fund their practices, and realized that we tweaked them a bit and offered them someone else's version, that actually could be a catalyst to make it easier to go through that change, and thus, it's successful at doing that, www.lplfinancial.com the knock-on effect, So that's how we pulled that all together. I hope that color Yeah, thanks, Dan. That's a great color.

Speaker Change: Given that being what we believe is one of the big hurdles for advisors moving voice.

Speaker Change: Boy, if you could solve that or begin to break that down and imagine that in different ways.

Speaker Change: Thus creates.

Speaker Change: A much different rubric, if you will or the change management efforts.

Speaker Change: Associated movie that need to be.

Speaker Change: That could be a real catalyst rights.

Speaker Change: That.

Speaker Change: The industry and so that's the question I think we're trying to explore that I alluded to in my remarks, and we are using our services portfolio and some of the ways in which we.

Speaker Change: Learn how to add value to advisors and helping them operate their practices and realized if we tweak them a bit and offered them while somewhat.

Speaker Change: Version that actually could be a catalyst to making.

Speaker Change: Easier to go through that change management.

Speaker Change: Thus.

Speaker Change: It's successful at doing that.

Speaker Change: Structurally well then you could see.

Speaker Change: The knock on effect, if you will potentially accelerating the movement.

Speaker Change: With our ability to recruit and our positioning of our models in the marketplace certainly that's a strategic opportunity for us. So that's how we pull that together I hope that color Ed.

Speaker Change: Yes.

Speaker Change: Yes, Thanks, Dan Thats, great color and I guess my follow up.

Ed: It's just it's interrelated to that so.

Dan Hogan Arnold: And I guess my follow-up is just interrelated to that. So your terrific momentum in recruited assets in 2023. And really, you know, the new affiliation bottles are clearly responding in the market. And I believe you said 15 billion from those new channels in 2023. So that would seem to imply that the legacy channels would be around 50 billion to get to the 67 total, if I'm correct there.

Speaker Change: Terrific momentum and recruited assets in 2023, and really the new affiliation models.

Speaker Change: Are clearly resonating in the market and I believe you said.

Speaker Change: $15 billion from those new channels in 2023, so that would seem to imply that the legacy channels would be around 50 billion to get to the 67 total Tom correct. There so.

Dan Hogan Arnold: So, you know, on the new affiliation channels, you know, the contribution continues to scale, and those mature, should that look like something similar to call it the $50 billion from the legacy channels, or I'm just trying to size, because they're growing so quickly, kind of what they look like, it may be maturity or something that's more mature, like that, or maybe maybe well above 50. But I just want to get some thoughts on kind of where we're coming from and where we're going, just because there has been such tremendous growth there, especially when you split it out separately. Thanks.

Speaker Change: On the new affiliation channels.

Speaker Change: Is the contribution continues to scale and those mature should that look like something similar to call. It the $50 billion from the legacy channels or I'm, just trying to size that because were growing so quickly kind of what they look like they may be maturity or something thats more mature like or maybe well above.

Speaker Change: But just wanted to get some thoughts on kind of where we're coming from to where we're going just because there has been such tremendous growth there, especially when you split it out separately. Thanks, yes. It is.

Devin Ryan: Yeah, it's a great question. And I think, you know, as we think about those longer terms, and what is that possibility? I think we start with the size of each of those markets, you know, that we've broken down into the FOIA-based market is the largest one of all in that $11-12 trillion range. Um, and then, and then, and then, the sort of Swiss model that we have is a subset, if you will.

Speaker Change: Great question, and I think as we think about those longer term what is that possibility I think we start with the size of each of those mark.

Okay.

Speaker Change: We've broken down into the employee base market is the largest one of all and that 11 12 trillion.

Speaker Change: Trillion range.

Speaker Change: When the second.

Speaker Change: And then.

Speaker Change: And then.

Speaker Change: Sort of Swiss model that we have as a subset.

Dan Hogan Arnold: Wang created the first employee-based models; if you think about the opening opportunities associated with them, you would start that aftermarket, and then Be difficile began to clinic with a broader exchange, being drilled down on what's our right to win, what's our ability to win, and what are the capabilities necessary to continue to grow our win rates inside those markets. And then if you do that, it's reason to believe, given the size of those markets relative to the traditional independent, that even if we achieve half of the win rate or the success rate we do on our traditional independent channel. Those begin to make sizable contributions that, as you were estimating, look more like a contribution on the independent side. What I'm not suggesting is that we'll get there.

Speaker Change: We thought it was coming out of an employee based model. So if you think about the opportunity set associated with those I think you would start with that broader market and then you begin to.

Speaker Change: And drill down on.

Speaker Change: What's our right to win what's our ability to room, what are the capabilities necessary to.

Continue to grow our win rates inside those markets and then if you do that is reason to believe given the size of those markets relative to the traditional independent that even if we if we achieve out of the win rate for the success rate, we do in our traditional independent channel.

Speaker Change: Channel.

Speaker Change: Those begin to make sizable contributions.

Speaker Change: As you were estimating.

Speaker Change: Look more like a contribution.

Speaker Change #100: Thats, what im not suggesting that you will get there what I am suggesting that that's an opportunity that is for the continuing through.

Dan Hogan Arnold: What I am suggesting is that it's an opportunity that is worthy of continuing to work on, work into investments, and challenge ourselves to achieve the type of win rates we have on the independent side in these large, I hope that helped. Yep, that's great. Thank you.

Speaker Change #100: Work into invest into and challenge ourselves to achieve.

Speaker Change #100: Achieve the type of win rates, we have on the independent side in these large markets.

Speaker Change #101: I hope that helps.

Speaker Change #102: Yeah, that's great. Thank you.

Daniel Thomas Fannon: One moment for our next question, and our next question comes from Dan Fannon with Jeffries. Your line is open.

Speaker Change #103: One moment for our next question.

And our next question comes from Dan Fannon with Jefferies. Your line is open.

Daniel Thomas Fannon: Thanks. This quarter saw the biggest kind of quarter-over-quarter increase in sales-based commissions, and it looks to be somewhat driven by annuities. So, curious about your outlook for that and, in the context of what the DOL has proposed, how you think that might change behavior or not going forward. Yeah, let me let me let me take that one.

Speaker Change #103: Thanks.

Daniel Thomas Fannon: Quarter saw the biggest kind of quarter over quarter increase in sales based commissions looks to be somewhat driven by annuities. So curious about your outlook for that and in the context of what the Dol has proposed how you think that might change behavior or not going forward.

Speaker Change #104: Yeah, Let me let me let me take that one thanks for the question we have seen some momentum frankly since rates have gone up.

Matthew J. Audette: Thanks for the question. We have seen some momentum, frankly, since rates have gone up. But you've seen interesting growth in the utilization and probably predictable growth in the utilization of, and so I think it's been a nice tailwind for annuities for the better part of the year, last year plus, and you're exactly right. The fourth quarter just reinforced that.

Speaker Change #105: You've seen the interesting growth in the utilization and public predictable growth in the utilization of fixed annuities.

Speaker Change #106: And then when the equity markets move and have volatility in.

Speaker Change #106: Variable annuities can also be interesting opportunities to deploy capital.

Speaker Change #106: And so I think it's been a it's been a nice tailwind for annuities for the better part of the year last year, plus and you're exactly right fourth quarter just reinforce that.

Matthew J. Audette: I think as we go forward. A question around the DOL, a good one relative to brokerage and advisory. And I think as we think about that, we go back to our playbook we used in the 15 and 16 timeframe where, um, you know, um, As from a principled standpoint, we believe maintaining choice for advisors and clients is in their best interest. Our interest in making sure that we do the things necessary to preserve the choice for advisors between brokerage and advisory and our ability to ensure that we can help them adequately do that as the rules change relative to Reg B.I., and then again, if the D.O.L. rule ultimately goes through and changes that slightly, making sure that we're prepared to help them pivot where they can successfully continue to do that business where it's in their best interests. Um, and I think it's hard to argue with making sure that you provide people with choice and, then ultimately..., enable those advisors to serve them in an optimal way and meet their needs. That said, I do believe that in many cases.

Speaker Change #106: I think as we go forward.

Speaker Change #106: The question around the Dol.

Speaker Change #106: As is.

Speaker Change #106: A good one relative to brokerage and advisory and I think as we think about that we go back to our playbook, we used in 15 and 16 timeframe where.

Speaker Change #106: No.

Speaker Change #106: From a principal standpoint, we believe that maintaining choice for advisors clients is in their best interest.

Speaker Change #106: Our interest in making sure that we.

Speaker Change #106: We do the things necessary to preserve choice for advisers between brokerage and advisory and our ability to ensure that we can help them.

Speaker Change #106: Adequately do that as well.

Speaker Change #106: Rules change relative to the eye and then again, if the Dol rule ultimately goes through and changes that slightly.

Speaker Change #106: Making sure that we're prepared to help them pivot where they can successfully continued to do that business.

Speaker Change #106: Where it's in the best interest of the coupon.

Speaker Change #106: And I think.

Speaker Change #106: Hard to argue with making sure that you provide choice and then ultimately.

Speaker Change #106: Enable those deposits to serve them will weigh in.

Speaker Change #106: That said.

Speaker Change #106: I do believe that in many cases annuities will continue to be used where they're needed.

Matthew J. Audette: The annuities will continue to be used where they're needed, where they make sense as a rollover option or where they make sense, and helping someone, as we talked about earlier, with downside protection, still anticipating the upsides of the equity market. Good places to use them. I think that's all. What we will see, though, is in other areas... probably see a bigger increase for the Utilization of Advisory Services, just tougher to do. There may be some places, small accounts.

Speaker Change #106: Where they make sense as a rollover option or where they make sense.

Hoping someone as we talked about earlier with downside protection.

Speaker Change #106: Phasing in.

Speaker Change #106: <unk>.

Speaker Change #106: Upsides of the equity markets. There is good places to use them.

Speaker Change #107: Thank you.

Speaker Change #107: But we will see though is in other areas.

Speaker Change #107: <unk> see a bigger shift to the utilization of advisory.

Speaker Change #107: No.

Speaker Change #107: Uh huh.

Tougher to do brokerage business there may be some places small accounts there may be other scenarios, where given the two options. The adviser ultimately utilizes advisory solutions I'm still in the best interest of the client, but also just in the spirit of.

Matthew J. Audette: There may be other scenarios where, given the two options, the appraiser ultimately utilizes the latter, still in the best interest of the client, but also in the spirit of. So we do believe that's a trend. The investments in our advisory platforms and vertical integration we have around our advisors' offering, again, lines up well, and puts a capstone on it. We will and make sure that we're positioned to enable brokerage to be used. I do think that the DOL rule would create some headwinds on the...

Speaker Change #107: Making sure the business can be done.

Speaker Change #107: So we do believe that's the trend.

Speaker Change #107: The investments in our advisory platforms vertical integration, we have around our advisory offering.

Speaker Change #107: Again lines up well structured.

Speaker Change #107: So put a capstone on it we will make sure that we're positioned to enable brokers to be used I do think that.

The Dol rule will create some headwind on the.

Speaker Change #107: Percentage of brokerage business that we see but it but it won't be a complete change you'll still see utilized with some inventory.

Matthew J. Audette: And then just as a follow-up, I think Dan, you mentioned 99% retention in 2023. And then Matt, you called out January for a couple of departures.

Speaker Change #108: That helps.

Speaker Change #109: Understood and then just as a follow up I think Dan you mentioned, 99% retention in 2023, and then Matt you called out January a couple of departures. So just curious if you can give some context around maybe what happens in January and and if you think retention might be slightly different given the environment.

Dan Hogan Arnold: So just curious, we get some context around maybe what happens in January, and, and if you think retention might be slightly different given the environment. And, you know, as we think about 2024, more broadly. Yeah, no, our sense of it is, look, we got to make sure we execute on our strategy.

Speaker Change #109: As we think about 2024 more broadly.

Matthew J. Audette: Yeah, no our sense of it is is look we got to make sure we execute on our strategy. We got into this mess in our capabilities and we've got to deliver.

Dan Hogan Arnold: We have got to invest in our capabilities, and we have got to deliver. We have solid trends there, strengthening NPS scores, and evolving capability. We expect that retention rate in that 98.5% range to 99% range to be a good way to think about or a good centering point, if you will, on retention for this year outside of the example of what Matt used for someone else's practice to potentially solve for a succession solution.

Matthew J. Audette: Attempt to deliver an extraordinary experience on a daily basis, we had solid trends there strengthening NPS scores evolving capability.

Matthew J. Audette: We expect that retention rate in that 98, 5% range to 99% range to be a good way to think about our goods centering point it will on retention for this year outside of.

Matthew J. Audette: The example of what Matt use where someone celsis practice.

Matthew J. Audette: Potentially solve for a succession solution and look that was the.

Dan Hogan Arnold: And look, that was the exact trigger that we launched our liquidity and succession program a year ago. It gave us... a great opportunity to go solve that really important question that many advisors had. Those two examples, maybe we didn't launch ours in time enough to get a swing at those.

Matthew J. Audette: That trigger that we launched our liquidity and succession program a year ago gave us up.

Matthew J. Audette: A great opportunity to go solve that.

Matthew J. Audette: What is the question that many advisers had those two examples maybe we didn't launch hours in time enough to get a swing at those.

Dan Hogan Arnold: And though we won't win them all, we do believe we've got a really appealing differentiated solution that will position us well, not only to help serve our clients who are already on our platform, but actually use it as a way to attract new assets to the platform because not only do we have a rich value proposition that we serve and support daily, but we can also help them with their success. That's how we're. One moment for our next question. And our next question comes from the line of Ben Buttish with Barclays. Your line is open.

Matthew J. Audette: And though we won't win them all we do believe we've got a really appealing differentiated solution.

Matthew J. Audette: Positioning us well not only that.

Matthew J. Audette: To help serve our clients and we're already on our platform but.

Matthew J. Audette: Actually use it as a way to attract new assets platform because not only do we have a rich value proposition serving support the daily needs. We also can help them with their succession. So that's how we're.

Speaker Change #110: Thank you.

Speaker Change #111: One moment for our next question.

Speaker Change #111: And our next question comes from the line of Ben <unk> with Barclays. Your line is open.

Ben Buttisch: Hi, good evening, and thanks for taking the questions. I think most of mine have already kind of been covered, but maybe just one for Matt on the core G&A growth: can you just talk a little bit about what gets you to the higher low end of the range? It sounds like the prudential ramp is going to be not too impactful for this year, so what are the sort of factors that could drive that up or down, and at what point in the year do you start to get a better sense of where that shakes out? Thank you.

Ben: Hi, good evening and thanks for taking the question.

Ben: Most of mine have already been covered but maybe just one for Matt on the core G&A growth can you just talk a little bit about what gets you to the higher low end of the range. It sounds like the Prudential ramp is going to be not too impactful for this year. So what are the sort of factors that could drive that up or down and at what point in the year do you start to get a better sense of.

Matthew J. Audette: Yeah, I think what typically drives us within that range is the cost associated with supporting the growth that happens during the year. I think you look at Q4 of 23 this quarter is a good example where we came in within our range, but at the high end of the range, and that was really about the variable costs associated with growing, whether it's variable compensation associated with that growth or the direct cost to ramp up. So that's typically the driver within that range, those things. Then we'll follow up then, or no? Sorry, that was all I had to do. Thank you very much.

Ben: Where that shakes out thank you.

Yes, I think what.

Matthew J. Audette: Typically drives us within the ranges of the costs associated with with supporting the growth that happens during the year. Thank.

Matthew J. Audette: If you look at Q4 of 23 of this quarter is a good example of where we came in within our range, but at the high end of the range and that was really about the variable costs associated with the growing whether it's variable compensation associated with that growth of the direct cost to ramp up.

Matthew J. Audette: So that's typically the driver.

Matthew J. Audette: Within that range those things.

Speaker Change #112: A follow up I don't know.

Speaker Change #113: Alright that was all I had thank you very much okay.

Ben Buttisch: Okay. All right. No one else gets your follow-up question though, we just lost... One moment for our next question. And our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Nobody else gets your follow up Doug you just lost it.

Speaker Change #114: One moment for our next question.

Speaker Change #114: And our next question comes from Michael Cyprus with Morgan Stanley. Your line is open.

Michael J. Cyprys: Great, thanks for taking the question. I just wanted to come back to Dan on some of your comments earlier about the slower movement of advisors across the industry that you alluded to. Curious what's driving that?

Michael J. Cyprys: Great. Thanks for taking the question I just wanted to come back to that some of your comments earlier just around the slower movement of advisors across the industry that you alluded to I'm curious, what's driving that what might change that at the industry level I hear you on some of the services portfolio of innovations that can help moving in your favor for you guys, but just at the macro backdrop for the <unk>.

Dan Hogan Arnold: What might change that at the industry level? I hear you on some of the services, portfolios, innovations that can help move it in your favor for you guys, but just from the macro backdrop for the broader industry. Just curious what might lead that turn to pick up here versus slow down even further? And then how do you see this sort of backdrop evolving if interest rates are cut? Yeah, good questions. Um, look, I do think you've got a number of different things that might create a slight headwind on movement that then, at the aggregate, you know, had brought it down from, I don't know, a historically 7% kind of range or movement and we would expect to return. Normalize Over a Period of Time

Speaker Change #115: Water industry, just curious what might lead that turned to pick up here versus slow down even further and then how do you see this sort of backdrop evolving if interest rates are cut.

Speaker Change #116: Yes, good questions.

Speaker Change #117: Do think you.

Speaker Change #118: <unk> got a number of different things that might create.

Speaker Change #118: Slight headwind on movement than at the aggregate.

Speaker Change #118: It brought it down from I don't know, what historically, 7% kind of range.

Our movement and we would expect.

Speaker Change #118: Thanks to return and normalize over a period of time.

Dan Hogan Arnold: These little headwinds that I referenced, some of it is still a bit of a hangover from COVID and just some of the change and complexity that was created as people work through that. I think a second one is, you know, you've got a volatile market with a lot of geopolitical uncertainty that surrounds it. Advisors avoid sometimes making big strategic moves or pivots or adjustments.

Speaker Change #118: These little headwinds that I referenced some of it is still a bit of a hangover from COVID-19 and just some of the change in complexity that was created as people work through that.

Speaker Change #118: I think this is one.

Speaker Change #118: <unk>.

Speaker Change #118: I think a second one as you know.

Speaker Change #118: You just got it you've had a volatile market with a lot of geopolitical uncertainty that surrounds it in advisors avoid sometimes making big strategic moves or pivot sort of adjustments in periods of time with them.

Matthew J. Audette: It's a period of time when they've really got to be focused on the clients, and they don't want to create more change. In the midst of uncertainty, and I think that's been something that we've seen over the last couple of years that has created some uncertainty. And I also think you see advisors pivoting in a new world of how do they operate post-pandemic? What did they learn from that? What pressures does it put on their practice? The growing complexity of regulations may drive up costs.

Speaker Change #118: Got to be focused on our clients and they don't want to create more change.

Speaker Change #118: In the midst of uncertainty and I think that's been something that we've seen.

Speaker Change #118: Over the last couple of years that have created some uncertainty and I also think you see advisors also pivoting in a new world of how do they operate.

Speaker Change #118: Postpaid than what they learn from that what pressures does it put on their practices.

Speaker Change #118: <unk>.

Speaker Change #118: The growing complexity of regulations may drive up costs.

Matthew J. Audette: The whole digitalization of their businesses and their offices, and what does that mean, and how do they think about what is the best partner for them going forward? What are the types of services that are new to them that could transform their practice? I think just trying to assess what those options and alternatives are in a world that's flipped on its side, and now you throw AI on top of that, in the short run, creates lots of noise and exuberance. Unfortunately, it's also a shiny penny that sometimes doesn't always lead to good productive outcomes.

Speaker Change #118: The whole digitalization of their businesses in their offices and what does that mean and how do they think about what is the best partner for them going forward.

Speaker Change #118: What are the types of services or new to them to transform their practice I think just trying to assess what those options and alternatives are in a world. That's the flip side and now you throw AI on top of that which in.

Speaker Change #118: In the short run creates lots of noise and exuberance. Unfortunately, it's also a shiny penny that sometimes.

Speaker Change #118: Doesn't always lead to good productive outcomes.

Matthew J. Audette: And so I think as we get further down the road of assimilating some order to the house being flipped on its side in some cases and helping them really see where they can use technology really wisely to drive productivity, where they can either leverage tools or outsource risk management to lower their costs associated with, a world that's getting tougher and tougher from a regulatory standpoint where they really do think about, hey, how do I drive growth and what do I need in my value proposition to do that? How do I leverage that? that.

Speaker Change #118: And so I think.

Speaker Change #118: As we get further down the road of assimilating some order to the house being flipped on its side in some cases and helping them really see where they can use technology really wisely to drive productivity with again, either leverage tools or outsource risk management to lower their costs associated with <unk>.

Speaker Change #118: A world that is getting tougher and tougher from a regulatory standpoint, where they really do think about a <unk>.

Speaker Change #118: Do I drive growth and what do I need my value proposition to do that how do I leverage.

Dan Hogan Arnold: I think those are some of the interesting questions that as they're able to solve those, it enables them to move forward in a little more informed way and thus, at a fast rate. So those are some of the little, I think, skirmishes, if you will, that we're trying, and we're overcoming as we go forward in time that will help return maybe movement back to a more normal. Great, thanks for that. And just as a follow-up question for Matt on promotional expense, if I adjust the large enterprise one-timer over the past couple of years, it looks like the underlying promo expense has been in the mid to high teens. Does that sound about right to you?

Speaker Change #118: Yeah.

Speaker Change #118: I think those are those are some of the interesting.

Speaker Change #118: <unk> that is we're able to solve those and enables them to move forward in a little more informed way and thus.

Speaker Change #118: At a faster pace. So those are some of the little I think skirmishes if you will that we're.

Speaker Change #118: We're overcoming as we go forward in time that will help return.

Speaker Change #118: Maybe movement back to a more normal settlements.

Speaker Change #119: Okay. Thanks for that and just as a follow up question for Matt on promotional expense.

Matthew J. Audette: Just for the large enterprise one timers over the past couple of years. It looks like the underlying promo expense has been in the mid to high teens does that sound about right to you and arguably that's in the context of high singles organic growth. So another question. There if we expect that sort of organic growth to persist in the high singles should we expect a similar mid to high teens pace of underlying.

Matthew J. Audette: And arguably, that's in the context of high singles organic growth. So another question there is, if we expect that sort of organic growth to persist in the high singles, should we expect a similar mid to high teens pace of underlying promotional expense going forward, excluding the large one-timer? Well, I think probably the best way to think about it is just to hone in on the key drivers of the growth, and I'd put it in three categories, which could have different trends. I think the first is organic growth overall.

Matthew J. Audette: Promotional expense going forward, excluding the large one timers.

Speaker Change #120: Well I think that the probably the best way to think about it as just hone in on the key drivers of the growth I'd put it in three categories, which could have different trends I think the first is organic growth overall, that's typically the biggest driver.

Matthew J. Audette: That's typically the biggest driver, and the TA associated with bringing recruiting on board is the driver of that, so the amount of recruiting that we do is really the driver there. TA rates really have been fairly stable and haven't changed recently, so I think where recruiting goes is where that would go. The second is conference spend, and conference spend kind of trends with the overall number of advisors that we have at LPL. They're a really important part of how we engage with them, how they engage with each other, so as the firm scales, you could expect that spend to scale. And then lastly, as you highlighted, it's really the onboarding expenses associated with those large enterprises, so that really can be a little bit hard to predict because it depends on the firms that come on board. Prudential is a great example of how we've got good insight into spending in 24 hours and good insight into spending overall to bring that on board. It just depends on what happens on the other side of it, so I'd really put it into those three categories.

Speaker Change #120: And the Ta associated with bringing bringing recruiting on board as the driver of that so the amount of recruiting that we do.

Speaker Change #120: Is really the driving their ta rates really have not had been fairly stable haven't changed recently so.

Speaker Change #120: I think we're recruiting goes is where that would go the.

Speaker Change #120: The second is conference spend and conference spend more kind of trends with the overall number of advisors that we have at LPL right, they're really important part of how we engage with them how they engage with each other so as the as the firm scales.

Speaker Change #120: You could expect that spend to scale.

Speaker Change #120: And then lastly, as you highlighted it's really the on boarding expenses associated with those large enterprises, so that really can be a little bit hard to predict because it depends on the firms that come onboard Prudential is a great example of we've got we've got good insight into spending in 'twenty four and good insight into spending overall to bring that on board. It just depends.

Speaker Change #120: On what happens on the other side of it so I'd really put it into those three categories that kind of trend differently. Each so it just depends on how those three those three things play out.

Michael J. Cyprys: They kind of trend differently, so it just depends on how those three things play out. All right, thank you. One moment for our next question. And our next question comes from Michael Cho with JP Morgan. Your line is open.

Speaker Change #121: Alright, thank you.

Speaker Change #122: One moment for our next question.

Speaker Change #122: And our next question comes from Michael Cho with J P. Morgan Your line is open.

Michael Cho: Hey, good afternoon, Dan and Matt. Thanks for squeezing me in here. I just want to touch on Enterprise quickly again, and I have just a quick two-parter here. You talked about a healthy pipeline and sort of an uptick in conversations since the Prudential announcement. But in terms of kind of looking ahead, I mean, does the Prudential onboarding limit your bandwidth at all to do more Prudential-type deals? And then, second, just longer term, looking beyond Prudential, I mean, how should we think about framing the potential benefits to LPL's operating scale and leverage as you continue to gain critical mass within the enterprise opportunity set? I'll take the first one, guys.

Michael Cho: Hey, good afternoon, Dan and Matt Thanks for squeezing me in here.

Michael Cho: Just wanted to touch on enterprise quickly again.

Michael Cho: Just a quick two parter here.

Michael Cho: You talked about a healthy pipeline and sort of an uptick in conversations.

Michael Cho: The potential announcement, but so in terms of kind of looking ahead, I mean does that potential onboarding limit your bandwidth at all to do more.

Michael Cho: <unk> type deals.

Michael Cho: And then second just longer term looking beyond Prudential.

Michael Cho: How should we think about framing the potential benefits to lpl's operating scale and leverage as we continue to gain critical mass within the enterprise opportunity set.

Speaker Change #123: I'll take the first one.

Dan Hogan Arnold: So, um, look at the first one, I think. We see an interesting pipeline on both sides of the enterprise channel, as I said before, banks and insurance slash other manufacturer-related market space, and And with that portfolio comes the continued opportunity, right, to continue to explore and learn both how we're doing with existing programs and how that drives innovation, um, create more appeal, and Second, every time you bring one on, how do you create a more automated process? A better playbook to be more efficient at doing that, so you can do that better and faster and more economically for a lower cost. And so I would tell you we're much better than we were three years ago when we brought our first larger enterprises on board, and we continue to automate more and more of that.

Speaker Change #123: <unk>.

Speaker Change #123: So.

Speaker Change #124: Look on the on the first one I think.

Speaker Change #125: We see an interesting pipeline on both sides of that enterprise channel as I've said before banks and.

Speaker Change #125: On the insurance slash other manufacturing related.

Speaker Change #125: Market space and.

Speaker Change #125: And with that portfolio.

Speaker Change #125: With continued opportunity right too.

To explore and learn.

Speaker Change #125: How were doing with existing programs and how that drives innovation.

Speaker Change #125: More appeal and second is every time you bring one on how do you create a more automated.

Speaker Change #125: Better playbook to be more efficient at doing that so you can do that better and faster.

Speaker Change #125: And more economically or the law.

Speaker Change #125: Our cost.

Speaker Change #125: And so I would tell you we are much better than we were.

Speaker Change #125: Three years ago, when we brought our first larger enterprises are and we continue to automate more and more of that and.

Dan Hogan Arnold: Change Management, Onboarding, Effort, and Process. And as you rightfully said, to the extent that you're able to do that, not only are you going to create more interesting economic outcomes by lowering the amount of investment up front in these opportunities, but you can bring them on at a faster rate. So I think we're working our way into being able to be very thoughtful about how we bring these things on in an orderly fashion, assuring that, first and foremost, we get the experience right, that you continue to operate your existing platform at the level that you want to. And then if you're..., you again get better and better at that, I think you can line those up. And that's what we're challenging ourselves to do without being overly precise in exactly how that would look or what that looks like. I think we are beginning to challenge ourselves with pragmatic opportunities to think, you know, how do you shorten that onboarding process and change that. That's the problem now.

Speaker Change #125: And it changed management Onboarding.

Speaker Change #125: Process.

Speaker Change #125: And as you rightfully said to the access that you were able to do that now.

Speaker Change #125: The more interesting economic outcomes by lowering the amount of investment upfront in these opportunities you also can bring them on at a at a at a fast pace and so I think we're working our way into being able to be very thoughtful about how we bring these on in an orderly fashion assuring that's first and foremost we get experience.

Speaker Change #125: Right.

That you continue to operate in the existing platform at the level that you want to.

Speaker Change #125: And then if you are.

Speaker Change #125: As you get better and better at that I think you can line those up and bringing those home faster and faster pace and that's what we're challenging ourselves to do without being overly precise and exactly how that would look or what that looks like I think we again to challenge ourselves with programmatic opportunities to think.

Speaker Change #125: How do you shorten that Onboarding changed management.

Speaker Change #125: That's the problem solving.

Matthew J. Audette: Yeah, I think the answer is a resounding yes on whether there are benefits to scale. I think when you look at just starting high-level with the overall value proposition of this channel and the things that we're building, you're bringing on clients where once they're on their platform, a big part of the attraction is getting access to our capabilities and allowing them to grow that channel faster on our platforms. You get a place where you're increasing your levels of organic growth.

Speaker Change #125: Yeah, Yeah, I think the answer is a resounding, yes are there benefits to scale I think when you look at just starting high level of the overall value proposition of this channel and the things that we're building youre, bringing on clients where there once they are on their platform a big part of the attraction is.

Speaker Change #125: Access to our capabilities and allowing them to grow that channel faster on our platform. So you get a place where youre increasing your levels of organic growth.

Matthew J. Audette: I think maybe to the core of your question on the cost side, in each of these instances, you're typically building out capabilities or technology that's really important to that particular enterprise, but they're usually applicable to others as well. So you're not only making sure that you have the ability to serve and support this particular client that you're bringing on, but you're usually enhancing those capabilities for things that the rest of LPL or the rest of this channel would like. I think Prue is a very good example of that, where we're not only bringing on capabilities specific to Prudential, but we're building on a platform that can actually open up a much larger channel for us to recruit more on. So a headline point is that there are certainly scale benefits, and hopefully those examples are helpful.

Speaker Change #125: I think maybe to the core of your question on the cost side.

Speaker Change #125: In each of these instances.

Speaker Change #125: You are typically building out capabilities, our technology Thats really important to that particular enterprise, but theyre, usually applicable to others as well right. So you are not only making sure that you have the ability to serve and support this particular client that youre, bringing on but you're usually enhancing those capabilities for things that the rest of LTI the rest.

Speaker Change #125: This channel would like and I think Peru is a very good example of that where we're not only bringing on capabilities specific to Prudential. We're building out a platform that can actually open up a much larger channel for us.

Speaker Change #125: And to recruit more on so a headline point is they're certainly scale benefits and hopefully those examples are helpful.

Michael Cho: Perfect. Thanks, guys. That's it for me.

Speaker Change #126: Perfect. Thanks, guys. That's it for me.

Operator: And this concludes today's question and answer session. I would now like to turn the conference back to Mr. Dan Arnold for closing remarks. Yeah, and hey, I just wanna thank everyone for taking the time to join us this afternoon, and we look forward to speaking with you again. And this concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #126: And this concludes today's question and answer session I would now like to turn the conference back to Mr. Dan Arnold for closing remarks.

Dan Hogan Arnold: Hey, I just want to thank everyone for taking the time to join US. This afternoon, and we look forward to speaking with you again next quarter. Thank you.

Speaker Change #127: And this concludes today's conference call. Thank you for participating you may now disconnect.