With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-466-LPL-Financial-Holdings-D7C9998-LPL-San-Diego-Exterior-Hero

LPL Financial Holdings, which joins the Fortune 500 for the first time this year, is considered the largest independent broker-dealer in the U.S., with more than 17,500 financial advisors operating under its umbrella.

This year's Fortune 500 marks the 66th running of the list.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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The largest independent broker-dealer in the United States, LPL Financial Holdings provides a range of services and products to independent financial advisors and institutions across the country, including retirement plan products, annuities, alternative investments, mutual funds, and insurance, as well as proprietary technology, compliance, and back-office support tools. For institutions like banks and credit unions, LPL Financial offers financial advisory services to their clients and helps improve efficiency through its technology offerings. The company was formed when two smaller brokerage companies, Linsco and Private Ledger, merged in 1989.

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Q4 2024

LPL Financial Holdings (LPLA): Company Profile, Stock Price, News, Rankings

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LPL Financial Holdings

lpl financial holdings

Good afternoon and thank you for joining the Q4 2024 Earnings Conference Call for LPL Financial Holdings Inc. Joining the call today are our Chief Executive Officer, Rich Steinmeier and President and Chief Financial Officer, Matt Audette. Rich and Matt will offer introductory remarks and then the call will be open for questions. The company would appreciate if analysts would limit themselves to only one question. To ask a follow-up, please reenter the queue.

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 that 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 Securities and Exchange Commission.

During the call, the company will also discuss certain non GAAP financial measures. For 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.com. With that, I will now turn the call over to Mr. Steinmeier.

Thanks so much, operator, and thank you to everyone for joining our call. It's a pleasure to speak with you again. Before touching on our Q4 results, I'd like to reflect on a few of our key accomplishments during 2024. Against an evolving market backdrop, we remain focused on serving our advisors and institutions, growing our business and delivering shareholder value. We delivered industry leading organic asset growth of 10% with contributions from both our traditional and new markets, including the onboarding of 1 of our largest institutional partners, Prudential Advisors.

We set recruiting records in both our independent advisor and institutional channels. As a complement to that strong organic growth, we closed on the acquisition of Atria and entered into an agreement to acquire the Investment Center. In addition, we continue to advance our pioneering liquidity and succession program, where we closed 22 deals, including 5 with external practices. Finally, we delivered impressive financial results with record adjusted earnings per share of $16.51 Okay. Now let's turn to our Q4 results.

In the quarter, total assets increased to a new high of $1,700,000,000,000 as we attracted record organic net new assets of $68,000,000,000 representing a 17% annualized growth rate. Our 4th quarter business results led to strong financial performance with the adjusted EPS of $4.25 Next, let's turn to our strategic plan and growth across our organic and inorganic initiatives. As a reminder, our long term vision is to become the leader across the advisor centered marketplace. To do that, our strategy is to invest back into the platform, provide unmatched flexibility in how advisors can affiliate with us and to deliver capabilities and services to help maximize advisor success throughout the lifecycle of their businesses. Doing this well gives us a path to sustainable industry leadership, not just in the independent and institutional markets, but across all of Wealth Management.

It's a bold aspiration, but one I'm confident that we can achieve. Over the near term, we are amplifying our focus on 3 key priorities. 1, to maintain the client centricity that this firm was built on 2, to empower our employees to deliver exceptionally for our advisors and their clients and 3, to deliver improved operating leverage. To help us achieve this, during the Q4, we shifted our organizational structure and leadership to better align our teams, sharpen our focus on key priorities and increase accountability. As part of these changes, we recognized outstanding individual contributions with the largest class of internal senior promotions in our history.

Together, these actions strengthen our ability to leverage our tremendous talent to execute on our long term vision. With that as context, let's review a few highlights of our business growth. In the Q4, recruited assets were $79,000,000,000 bringing our total for the year to $149,000,000,000 both of which represent records. In our traditional independent market, we added approximately $13,000,000,000 in assets during the quarter, which contributed to record full year recruited assets of $71,000,000,000 exceeding our prior high by more than 40%. This improves on our already industry leading capture rates of advisors in motion, while also expanding the breadth and depth of our pipeline.

With respect to our new affiliation models, strategic wealth, independent employee and our enhanced RIA offering, we delivered another solid quarter, recruiting roughly $2,000,000,000 in assets. And as we look ahead, we expect that the increasing awareness of these models in the marketplace and the ongoing enhancements to our capabilities will drive sustainable growth. We also continue to make progress within the large institutional marketplace, where during the Q4, we onboarded the retail wealth management business of Prudential. It's only been a couple of months that there are already signs that the integrated experience and enhanced capabilities we delivered are improving their attractiveness in the marketplace for advisors. Our momentum continues in Q1, where earlier this week we onboarded Wintrust Financial's wealth management business to our institutional services platform.

As a complement to our organic growth, we closed the acquisition of Atria Wealth Solutions welcoming their approximately 2,200 advisors, 160 institutions and home office staff to the LPL family. The transaction is progressing well and we remain on track to meet our 80% retention target. As for our broader business, asset retention remains industry leading at 98% over the last 12 months. This is a testament to our continued efforts to enhance the advisor experience through the delivery of new capabilities and technology and the evolution of our service and operations. In closing, the Q4 was a capstone on another outstanding year.

We are well positioned to serve as an indispensable partner to our advisors and institutions to continue delivering industry leading organic growth and to maximize long term value for shareholders. All of this is driven by the dedication and hard work of our fantastic team. So above all, I want to thank them for their efforts. And with that, I'll turn the call over to Matt.

All right. Thanks, Rich, and I'm glad to speak with everyone on today's call. As Rich mentioned, 2024 was a strong year for the firm as we delivered meaningful growth and progressed our capabilities, leaving us well positioned to continue to serve and support our nearly 29,000 advisors, grow our business, deliver shareholder value and advance our key strategic priorities. Turning to our 4th quarter business results. Total advisory and brokerage assets were 1,700,000,000,000 dollars up 9% from Q3 as continued organic growth was complemented by our acquisition of Atria, which added $88,000,000,000 of assets in Q4.

Total organic net new assets were 68,000,000,000 an approximately 17% annualized growth rate. Prior to the onboarding of Prudential Advisors, our annualized growth rate was approximately 7%, a strong result both on an absolute and relative basis. For the full year, total organic net new assets were $141,000,000,000 or an approximately 10% growth rate. On the recruiting front, Q4 recruited assets were a record $79,000,000,000 which included $63,000,000,000 from Prudential. Looking ahead, given our strong pipelines, we expect our recruiting momentum to continue into 2025.

However, I would note the natural seasonal headwinds to advisor movement in the back half December typically carry into January. So we expect recruiting to ramp throughout Q1. As for our Q4 financial results, the combination of organic growth and expense discipline led to adjusted EPS of $4.25 Gross profit was $1,228,000,000 up $100,000,000 sequentially. As for the components, commission advisory fees net of payout were $313,000,000 up $39,000,000 from Q3. Our payout rate was 87.8 percent, up 30 basis points from Q3 due to the seasonal build in the production bonus and the onboarding of Pranential.

With respect to client cash revenue, was $397,000,000 up $25,000,000 from Q3 as the sequential growth in balances more than offset the impact of lower short term interest rates. Overall client cash balances ended the quarter at $55,000,000,000 dollars up $9,000,000,000 sequential, which included approximately $4,000,000,000 from Atria and Prudential. The remaining $5,000,000,000 of cash balance growth was our largest sequential increase since the Q2 of 2022, a strong result even when considering the natural seasonal build in Q4. Within our ICA portfolio, the mix of fixed rate balances was roughly 55% within our target range of 50% to 75%. Looking more closely at our ICA yield, it was 3.35 basis points in Q4, up 3 basis points from Q3, driven by higher yields in our fixed rate contract renewals.

As we look ahead to Q1, we expect continued tailwinds from the yields in our new fixed rate contracts to be partially offset by the full quarter impact of the November December rate cuts. And as a result, we expect our ICA yield to increase by a few basis points. As for service and fee revenue, it was $139,000,000 in Q4, down $7,000,000 from Q3 due to lower conference revenue and IRAPs. Looking ahead to Q1, we expect service and fee revenue to be roughly flat as the full quarter contribution from Prudential is offset by lower conference revenue and OSJ termination. Moving on to Q4 transaction revenue with $62,000,000 up $3,000,000 from Q3.

As we look ahead to Q1, trading activity levels remain roughly in line with Q4. However, I would note there are 3 fewer trading days in Q1. So we expect transaction revenue to decline by a few 1,000,000 sequentially. Now let's move on to Atria and Prudential, starting with Atria. Overall, the transaction is progressing well and we remain on track to onboard our Atria advisors this year.

As for Prudential, we onboarded $40,000,000,000 of assets in Q4 and expect the remaining $23,000,000,000 to onboard in Q1. Now let's turn to expenses starting with Corogene. It was $422,000,000 in Q4, bringing our full year core G and A to $1,515,000,000 which was within our outlook range. For the full year, prior to the impact of Atrium Prudential, we grew 2024 core G and A by approximately 8%, roughly half the rate we grew in 2023. As we look ahead to 2025, we remain focused on delivering operating leverage in the business.

In recent years, we have ramped investments to scale our business and drive greater efficiency. So while we will continue to invest to drive and support growth, the benefits of our ongoing efficiency efforts are slowing core G and A growth in 2025. As a result, we plan to grow our core G and A in a range of 6% to 8%. In addition, we'll have the full year impact of expenses related to Atrium Prudential, which adds $170,000,000 to 180,000,000 dollars This brings our overall expectation for 2025 core G and A to be in a range of $1,730,000,000 to $1,780,000,000 To give you a sense of the near term timing of this spend, as we look ahead to Q1, we expect core G and A to be in a range of $420,000,000 to $430,000,000 Moving on to Q4 promotional expense. It was $173,000,000 down $3,000,000 from Q3, as lower conference expense was partially offset by seasonal increases in marketing spend as well as transition assistance related to our strong recruiting and the acquisition of Atrium.

Looking ahead to Q1, we expect promotional expense to decrease to approximately $160,000,000 driven by lower Prudential related OMS. Looking at share based compensation expense, it was $26,000,000 in Q4, which included a $12,000,000 impact related to the departure of our former CEO. As we look ahead to Q1, we expect this to return to a more normalized level for roughly $20,000,000 dollars Turning to depreciation and amortization, it was $92,000,000 in Q4, up $14,000,000 sequentially. In addition to technology development related to Prudential, as we noted last quarter, we recently went live with 2 new internal data sets, which was the main driver of the increase in Q4. Looking ahead to Q1, we expect depreciation and amortization to return to more typical levels of growth as we expect an increase of a few million.

As for interest expense, it was $82,000,000 in Q4, up $14,000,000 sequentially, driven by higher revolver balances following the close of the Atrient transaction. I would also note that during the quarter, we completed a leverage neutral refinancing of our existing $1,000,000,000 Term Loan B into a new Term Loan A. And as a result, expect roughly $5,000,000 of annual interest expense savings. Regarding capital management, we ended Q4 with corporate cash of $479,000,000 down $229,000,000 from Q3. As for our leverage ratio, at the end of Q4, it was 1.9 times, just below the midpoint of our target range.

Moving on to capital deployment. Our framework remains focused on allocating capital aligned with the returns we generate, investing in organic growth, 1st and foremost, pursuing M and A where appropriate and returning excess capital to shareholders. In Q4, we deployed capital across our entire frame. As we continue to invest to drive and support organic growth, allocated capital to M and A both within our liquidity and succession program as well as the acquisition of Atria. And lastly, return capital to our shareholders, restarting share repurchases, buying back $100,000,000 of our shares.

As we look ahead to Q1, we expect to repurchase another $100,000,000 of shares. In closing, we delivered another quarter of strong business and financial results. As we look forward, we remain excited about the opportunities we have to continue to drive growth, deliver operating leverage and create long term shareholder value. With that, operator, please open the call for questions.

Thank you. And our first question comes from Steven Chubak with Wolfe Research. You may proceed.

Rich, Matt, good afternoon and hope you're both well. Rich, I wanted to start off with a question on organic growth. In 2024, you achieved a 10% NNA in a backdrop where many of your peers actually saw a pretty market deceleration in organic flows. Just given the further widening of the NNA gap between you and your peers, as we look ahead to 2025, how do your backlogs compare today versus year ago levels? And is the 7% to 13% M and A target still achievable just given a much larger asset base today?

Thanks, Stephen. You're playing the role of Ricky Henderson for us here, the lead author. So appreciate it. Appreciate the question too. And thanks for the well wishes regarding Matt and I.

So regarding the question, so we're really proud of the results that we were able to deliver not only in the Q4, but throughout the entire year in recruiting. And as you kind of alluded to, the market itself, the advisor movement remains below historical norms. And we've even discussed this at points now internally to say, I think maybe this is where the norm is in that 5% kind of churn rate versus historical 6% to 6.5%. So in spite of that market environment where you see that movement being lower, we actually continue to win in that market because we're growing our win rates. We're growing our market share of advisors that are moving between firms and not just only independent advisors, but also W-two advisors at wires and regional firms as well.

And that's what you see inside of our Q4 results. And as those advisors move, I think they've prioritized capability delivery, technology and service experiences as the number one priority as they think through firms. And in that regard, what I think you're seeing is the payoff in the marketplace of our value exchange to advisors being unparalleled. You see an increasing amount of advisors recognizing that our capability sets our technology and the way we orient serving our clients is differentiated. And so the conversations are actually getting easier not harder for us as we enter into recruiting conversations.

2nd, those advisors are going to look at ongoing economics. And again here, as we take a look at how we compete in the marketplace, we feel really competitive as to how we can help advisors grow and achieve success, which isn't just financial payouts, but also the ability to grow and sustain their practices. And then last, the priority is usually going to be around TA rates, which have been stable in the marketplace and for which we're consistently competitive on those. But to say how I think how do we think about our ability to win ongoing and sustain that performance over a longer arc, I do think it represents a demonstration of the payoff of the investments we've made in our model and our capabilities, standing advisors choice and affiliating with our firm and building greater capabilities not only for advisors, but institutions to choose to join us. One of the things that's probably a little bit understated is actually the dedication and the performance of our world class business development team.

This is a team that is made up of individuals who come to work every day to reflect to advisors how they could join this firm to improve their performance of their practice. And I am just blown away, I had the privilege of leading that team for a number of years and feel that they are the best team by far in the marketplace and demonstrate that quarter in and quarter out. But you asked specifically about whether we can keep up that momentum. And I think the answer in short, Stephen, is yes. We continue to strengthen that value proposition.

We continue to out invest competitors in the ability to build new capabilities and service new markets. We continue to get demonstrated wins that actually validate us in new markets, not only in our private wealth markets, our large institutional markets, but a continuing progress in the momentum in serving wirehouse and regional advisors through our new models as well. In addition to that, we've plugged in a new capability over the last year and a half around liquidity and succession. And as you're aware, a third of advisors are going to retire over the next 10 year arc. Having a distinctive liquidity and succession solution that allows advisors to monetize their life work without having to have it homogenized and move that to the next generation of advisors is differentiated in the marketplace and quite honestly resonating.

And so as I take that all together in spite of the fact that obviously we're happy to have a stronger kind of denominator in that mathematical equation you asked about, I think we feel confident in our ability to sustain our performance in the range of organic growth that you've articulated and that we've articulated over the last couple of years.

And if I could add, Stephen, some Rishi and I play our roles well here. I think you hear the passion and excitement there. I'll just throw in some empirical data that I'm sure you know, but that 7% to 13% was the growth rates we had in 2020 2021, which I think were good looking years of a challenging year and a year kind of where things were right in the tailwind. And then if you look at 2022, we grew at 8% with our AUM at $1,100,000,000,000 If you look at 2023, we grew at 9% with AUM at 1,400,000,000,000 dollars and we grew at 10% this year with APUM ending at $1,700,000,000,000 So up to you if you extrapolate or not, but I think the trends, I think are pretty compelling. I'd yes, I'm not extrapolating just to make sure you know.

Rich has given me a thumbs up here. I don't know what that means. So jokes aside, hopefully that day was helpful.

No, it's extremely helpful. And that's it for me, unless no one asked on January cash levels, in which case I'll certainly get back in

All right. Well, I'll just blurt it out if no one does, Steven, so I have to get back in.

Thank you. Our next question comes from Alex Blostein with Goldman Sachs. You may proceed.

Thank you for the question as well. Another one for you around organic growth, but maybe more from organic revenue side of things. One of the sort of pillars of your growth algorithm has been to improve kind of revenues on assets over time. And part of that has been growth in the centrally managed accounts, centrally managed assets. If we look at the results this quarter, obviously, very meaningful step up.

It's likely due to Peru, but I was hoping you could unpack what the organic growth has been in that part of the business, where you're seeing the most uptake? And when you zoom out a little bit more, what are some of the most needle moving areas where you see improving return on client assets over the next couple of years?

Yes, I'll start with essentially managed, Rich, if you want to take the longer term point. I think, you're right, Alex. There's definitely a lot of crew in that number. Essentially managed NNA was $25,000,000,000 in the quarter, dollars 18,000,000 of that was from Prudential where other advisory assets were in there. So outside of that, you have call it $6,500,000,000 of think of that as growth during the quarter.

And that was a record by far, but our prior record was 4.4 and that was set this year, in last quarter. So I think what you see in centrally managed is really our focus on making sure we're building tools, capabilities, services that are supportive of our advisors. I think Centro Manage is a great example of that. We continue to invest in making sure it's priced right, capabilities are correct, and it can support advisors in their asset management, asset allocation part of their roles and jobs, so they can spend more time on where it's most valuable for them, which is with their clients. So I think that's just a key part of our value profit investment and I think that's why you're starting to see that those NDA numbers continue to improve.

Yes. So maybe, Alex, just to follow-up on one thing that because of import as we think about that centrally managed as well, I think it's critically important to recognize that we actually have our own advisory platforms. And so as advisors evolve and grow their business over time, as they look at that brokerage to advisory mix and when it's appropriate for their clients, it is deeply integrated and easy for them to actually move from one account type structure to another. And I think us owning and understanding and having that direct feedback from nearly 29,000 advisors on what's best to deliver capabilities in advisory is incredibly important because then we can go and build those capabilities directly. But if you think about you'd asked about some other areas where we may continue to see a positive mix shift, I would double down not just on centrally managed, but we still think there's a pretty sizable opportunity as advisors look at their books and the way they choose to serve their clients to move from brokerage to advisory.

And so I think you'll see continued movement from brokerage to advisory in time. As well, we look at the ability to expand our suite of offerings. And there for us that's a meaningful opportunity if we think about banking and lending for our advisors to continue their progression in serving their clients on both sides of the balance sheet with integrated capabilities that we would have on the banking and lending side around cash management as well as lending capabilities against their portfolios. Maybe last couple of things I would think about is, as we think about continued progression, I think you'd look at our scale and Matt impromptu came up with that growth in our AUM. But as we continue to grow scale, that means that our product and platform sponsorship partnerships are more important.

We become an incredibly important component of distribution. And so thinking about how we monetize the business in our partnerships on the asset management side is one area where we think there's good opportunity. And lastly, as we kind of draw our arms around this value exchange that I alluded to, at some point in time, you continue to think about potentially the ability to price our services aligned with the value that we deliver to advisors and their end investors. I think there's an opportunity there to continue progression in that velocity that you alluded to.

Thank you. Our next question comes from Devin Ryan with JMP Securities. You may proceed.

Thanks so much. Hi, Rich. Hi, Matt. I want to ask a question on Prudential. Clearly, early days of the integration, but it sounds like it's going really well.

And so with that said, just would be great to hear about more of the capabilities from that you kind of integrated there that are resonating the most. And then how you expect those advisors to grow their books of business relative to the average LTL advisor? And then just more broadly, how Peru is perhaps a catalyst for more conversations in either insurance or enterprise more broadly, assuming it has been? Thanks.

Yes. Thanks, Devin. I'll start out. Matt, do you have any impromptu things you want to scribble on that notepad and add to? Happy to create that space.

So let's talk about coming out. I think, look, in all honesty, we're incredibly proud. I am so proud of the team and what we delivered to be able to deliver on time, on point for Prudential, their advisors and their clients. It's a fantastic organization. They took a tremendous leap of faith with us that we could build those capabilities, and deliver them.

And I am just so proud that we were able to deliver for them. In regards to the capabilities, I think, Devin, this is one of those things that you think about. Those insurance based advisors who are both doing insurance business as well as wealth business In so many firms, that's a swivel chair type of arrangement that you're working through. You're working on one platform to think about your insurance assets, another platform and in many cases multiple platforms. So think about a brokerage platform and advisory platform, and you may even have additional add on tools as we have a page that we put together, we call it the Kirby Horan page, shout out to Kirby.

And on that page, it actually goes through when we talk to our institutional partners, we end up being the counterparty and the partner, whereas to replace up to 15 to 16 vendors that they're pulling together on the technology, compliance, supervision, CRM, etcetera. And so there's a simplified operating environment that is easier to understand. There is a singularity of the client experience where an advisor can actually see their clients, see their 360 view of that client all in one place, open accounts in one place, sell annuities in one place and it just makes it a lot easier for them to do their business instead of having to have the swivel chair where they are logging into multiple systems. That simplicity married with and I will tell you it's not just the integration of those capabilities, it is also that we have leading experiences in terms of our NIGO rate is best in class. Matt runs the operations group, but gotten the NIGO rate below 2%.

That's not in good order. And you'll see that a lot of different firms will have that number in 20% to 30% Nigro rates. So what happens is these advisors will come over, they'll get better capabilities, it's easier for them to do their business, as well not more of their business doesn't get bounced back. You have that, you get happier advisors. That leads to the ability to attract more advisors in the marketplace and that's where we feel pretty confident.

Prudential has a fantastic brand name in the marketplace. They actually have a tremendous offering to advisors And so we're hopeful that us coming together in that partnership will allow them to accelerate their growth. The second question or the second part of the question that you'd asked was how do you think about the growth of the Prudential advisors relative to other advisors on our platform? Now it's not been long enough and not a demonstrated long enough time for us to say, okay, we see absolutely that they will grow at a higher or lower rate than the rest of advisors on the platform. So I will use some intuition and maybe historical experience to share with you.

Prudential actually has lead generation outside of from Prudential into their advisors, into their wealth advisors. And so having a lead generation source, not unlike banks, gives the advisors an advantage in their ability to grow because they're growing likely more new client relationships than another advisor might grow. In addition, I think you see Prudential bringing new more new to the industry advisors in. And so as now they'll start with lower denominators, but on an average, you would see a new to industry advisor that is actually being presented the opportunities for leads. You would expect that they might grow faster in time than a more mature advisor in the ecosystem.

3rd part of your question in the one question format was in regards to Prudential, how do we think about that presenting an opportunity for other financial institutions, similar to Prudential to engage in conversations with us or to potentially win? I would tell you that our team was out in New York, technically in New Jersey, just 2 nights ago and went to dinner with some of the Prudential leadership team and they were incredibly bullish on our partnership on how we delivered, and have indicated that they are of course getting calls from their compatriots across the industry around what is that opportunity, how has it gone. And I don't think I'm embellishing when I say that I feel like this team collectively and Prudential had a lot to do with that delivery. There was a lot on their plates too. This team pulled off an exceptional delivery.

It doesn't surprise me because we've been building those capabilities to do it. And I would imagine that, Devon, in time that will result in more firms in the industry considering us as a potential partner for them as well.

That was fantastic. Thanks, Rich, and appreciate you answering my 3 questions in one. Thanks so much.

Thank you. Our next question comes from Bill Katz with TD Cowen. You may proceed.

Great. Thank you very much. Just thinking through the sort of modest shift of interest rate expectations, how are you thinking about if any kind of refinement to your sort of management of the fixed versus floating? You have very good disclosure in your supplements around your reinvestment rates and sort of the pickup from what you pick up variable versus fixed. But just given a potential for higher for longer backdrop, how do you think about maybe that range?

Does that shift a little bit? Does duration shift a little bit in your mind? Just trying to think about that a little bit longer term. And secondarily, thank you for the tighter opening remarks, not lost on me. Thank you.

All right. You're welcome, Bill. I think on the fixed target, I think the headline is our plans won't change, meaning we like being in that 50% to 75% range. We're at the low end of that range now and I think we will and that's more about the building cash balances in Q4. We'll move back up into the midpoint of that range.

But I think the environment itself, Phil, other than on the extremes, I don't think is going to have us move really beyond trying to be in that range in the midpoint. We like to target a rolling portfolio, not to try and be clairvoyant on where rates are going to go because tomorrow we can have a completely different view on where they're going to go. We just want to be steady and consistent in that. And that usually means 3 to 5 year rolling portfolio in the midpoint of that range and you'll likely see us move back up to that in Q1.

Thank you. Our next question comes from Brennan Hawken with UBS. You may proceed.

Hi, good afternoon. Thanks for taking my questions. I'm curious a little bit on D and A. There's been some really strong growth there. I know that you guys have been investing in the tech platform and I'm guessing that that has had something to do with some of that, but also some of the capabilities on enterprise side.

When we're thinking about a more normal potential growth rate though, it seems like we're back to that few million per quarter sequential that you referenced. And so is that the right way to think about as we progress through 2025? And is the X factor for the progression if you guys continue to have wins in enterprise and adding capabilities and that could put some upward pressure there? Is that the right way to think about it? Or would you adjust me?

I think you're in the right ballpark. I mean, I think the big increase, sounds like you paid very well attention in their prepared remarks, which is nice. The big increase this quarter was pretty unique to Prudential and rolling out a a couple of new data centers, which you're not going to do every quarter. So that's why going forward, getting back to that more normalized a few million. I do think on the institutions side and the technology necessary, that outside of Prudential, that hasn't been a huge driver.

I mean, I think as Rich articulated very well, Prudential was a very big technology build with a lot of capabilities and that was from an integration standpoint, dollars $525,000,000 of that was technology that drives and goes into that depreciation over time. That was a little bit unique. I think if you're thinking about just institution growth overall, it certainly could be a driver. I just it wouldn't be something at the level of a Prudential typically, because that was about building the capabilities, not only for that new platform, but also to get Prudential onto that platform with the tools and capabilities they need. So that one's a little bit of an outlier.

Thank you. Our next question comes from Michael Cho with JPMorgan. You may proceed.

Hi, good afternoon guys. Thanks for taking my question here. I just wanted to touch on expenses and the efficiencies. I mean, Matt, you talked about slowing core G and A growth, kind of given the efficiencies that gift you're experiencing. And I think you touched on a few areas in the prepared remarks.

I was hoping you can unpack kind of operationally where you've actually been able to extract a lot of these efficiencies and where might there be more ahead? And just more broadly, on this journey for outsides or more operating leverage in the years ahead, I mean, how would you characterize maybe the 2025 expense profile or margin profile on this journey to drive more leverage ahead? Thanks.

Yes. I'll give some perspective there. And I think maybe a broad point is not only about efficiencies on the expense side. There's opportunity on the revenue and the monetization side. So I'll start more on the expense side and maybe Rich, you can jump in on the revenue side.

I think and maybe the key thing is we're really continuing the things that we've been doing for the past few years and especially in 2024. And it's really about us dialing up the efforts and focus on that. And specific to your question, these are investments to really drive efficiencies and they don't sound like they're exciting things, but they're very effective in driving operating leverage, which is automating manual processes in large groups like operations, like service. We talked a fair bit about on this call that on being large institutions on board and just getting more efficient and effective at doing that not only in a cost effective way, but in more actually the lower the cost is actually the faster we get them on as well. So it's not only lower cost, it's a benefit to those clients as well.

So I think when we maybe getting specific to your point as we look ahead to 2025, and maybe with some context on 2024, right, where we delivered double digit organic growth 10%, with a core G and A growth rate in the 8% range or around 8%. And I think you're starting to see that operating leverage benefit continue into 2025 where if you look at our guidance in the 6% to 8% range prior to the full year impact of CRU and Atria. And I think shorthand that down the middle, which I think many of you will at 7%. That's the 2nd year in a row of expense growth coming down, while I think you've heard us have confidence that we're going to continue to invest and continue to drive organic growth. So there's some real power in that.

And I think our confidence on the opportunities for us to continue to make those investments, continue to drive those opportunities is high, especially when you couple it with, I think, a new focus and perspective on the revenue side as well. Maybe, Rich, if you want to jump in.

Yes. I will jump in on the revenue, but I actually wanted to embellish just one small thing there. I think it's important that you all as a community have gotten to know Matt Odette pretty well over the last couple of years, certainly as a CFO. But for the last couple of years, he's run our operations, our risk functions, our compliance function and now more recently our service and supervisory functions. And as you think about the discipline required, not only to kind of think through where you can have efficiency gains, it actually also requires the operating rigor to stay on top of it, set targets, act against those targets and then hold ourselves accountable to achieve those outcomes.

And so that rigor and discipline that you've maybe come to experience from the CFO side, we get to experience as well as an operator on the other side. And so it's not just the plans, it's actually the oversight and talent to execute against the plan. And we've made I alluded to some of the organizational changes that we made in the Q4. One of those notably to me is that we introduced an operating committee that is led by Matt as President and CFO to continue to make sure that we're actually progressing against that operating margin improvement. Now

Rich, I had stepped out for a minute. Do you mind repeating that?

I think Bill Katz would not appreciate me repeating remarks given that he gave us the compliment on the succinct nature of the opening remarks. Yet every one of my answers is incredibly long. So I apologize, Bill. I will say, I alluded to it a little bit earlier though, it's not just the expense side. It also is the monetization side.

So when you think about the monetization side, you do want to look at those assets. You want to look at your ability to monetize those assets differently. You want to look at your ability to expand your participation in other components of the wealth spectrum that we're not participating in. I mentioned banking. And there's a lot of things that we're looking there to continue to expand our monetization of the assets.

I mentioned as well partnerships on the asset management side and then pricing. And so we're looking at this in a balanced picture and recognize that there are opportunities on both sides of that equation for us to sustainably work towards growing operating leverage and margin.

Thank you. Our next question comes from Dan Fannon with Jefferies. You may proceed.

Thanks. Good evening. Wanted to follow-up on just the cash discussion and December obviously very nice build some of that seasonal. I'm curious if there's anything underneath that in terms of behavior outside of the onboarding of some of the transactions. And then maybe as we mentioned earlier, just update us on kind of the January trends, both I guess maybe on cash or anything on NNA that's worth highlighting?

Yes, you got it. And I'll start with organic growth first. And just a couple of seasonal items as a reminder, I know you know, but just to hit them, January is a lower NNA month by nature. Two things driving that, the lower recruiting that we talked about a little bit earlier in December, that kind of flows through into the 1st month of the quarter, usually the first half of January and then it ramps up in the second half. And then second is advisory fees, the biggest month of the quarter for advisory fees is the 1st month.

So those two things make January a lower NNA month. Now specific to this January for us, there's 2 items that will drive it the other way, which is we have $23,000,000,000 of Prudential assets that haven't onboarded yet. I think a decent amount of those will come on in January as well as, WindTrust onboarded in January with $15,000,000,000 of those $16,000,000,000 of assets coming on board. So, when you pull all that together and just looking prior to Prudential and WindTrust, we'd expect January to finish somewhere in the 3% to 4% range, which is similar to what we've seen in prior quarters and then building from there in February March usually in the mid to high single digits in those months. So that would typically bring the quarter to around 6%, which would be a good outcome for Q1.

And then when you layer on top of that, the assets coming from Prudential and WindTrust, I think we could be in a Q1 organic growth that's probably more in the mid teens. So I think a really compelling result and strong setup for Q1 on the growth side. On the client cash side, so January's, as you noticed, we got some seasonals as well. Two things to note there. First, same factor on fees, same item on fees, those come out primarily in the 1st month of the quarter.

That is about $1,600,000,000 of impact. And then second, that December cash build that we typically see due to things like tax loss harvesting, other repositioning, As I'm sure you saw this the build this year was larger than most and it was just at just under $5,000,000,000 And those balances start to go back into the market in January. We've already started to see that. So far just over $2,000,000,000 of that, $5,000,000,000 has been deployed back in the market. So you put all those factors together and January cash balances are sitting just under $51,500,000,000 And maybe just a little another perspective that I think could be helpful just to look at the overall flows of Q4 and January together, right, because that eliminates that noise of that December and January December buildup and then that January redeployment.

So if you just look at that and look at it prior to the $4,000,000,000 of cash that came on from Pru and Atria, if we just look at those 4 months, meaning Q4 in January, cash sweep is up around $1,500,000,000 over that 4 month period. So I think if you go back to the stability we started seeing earlier in the year and then you look at that 4 month trend, I think we're really starting to see some stability in cash.

Thank you. Our next question comes from Chris Allen with Citi. You may proceed.

Yes, evening everyone. Thanks for taking the question. I wanted to talk a little bit about the high net worth channel, increasing area of focus and the Alts platform. Maybe you could talk about where you are in terms of currently expanding your selling agreements on the Alts platform? And any color just around how you think about the revenue monetization opportunity longer term there?

Yes, Chris, it's Rich. Thank you so much for the question. So let's start maybe you started with Alts. So no, let's start with the high net worth channel. I think it's probably a better place to start.

So for us, I think you've seen us be pretty systematic over the course of the last several years in expanding our affiliation models. Part of that with intentionality was as we were able to build in capabilities to continue to serve more sophisticated advisors who are servicing larger and more complex end investors. We felt increasingly comfortable that we could then launch sequential models into the marketplace that not only allowed our existing advisors to affiliate in that way, but allowed us to be attractive externally in the marketplace. So when we think about the high net worth segment, that is a segment that we would as we size that as a $5,000,000,000,000 market opportunity. And I mentioned we've been building those capabilities and I'll talk about Alts, but it also has to do with you've heard us allude to banking in development capabilities and some complex financial planning in addition.

LPL Financial Holdings (LPLA) Q4 2024 Earnings Call Transcript

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