LPL Investment's CEO Presents At Morgan Stanley Financials Conference (Transcript)

LPL Investment Holdings Inc. (LPLA)

Morgan Stanley Financials Conference Transcript

June 13, 2012 8:00 AM ET


Mark Casady – Chief Executive Officer


Thomas Allen – Morgan Stanley


Thomas Allen – Morgan Stanley

So I’m Thomas Allen. I’m the lead analyst on LPL Investment Holdings. It’s my pleasure to introduce a company. I’m sure you all know their story, but they are leading independent broker dealer. They service about 17,000 financial advisors that benefiting from the trend two independents from traditional firms.

They service both fee and commission based assets for the key differentiator. Today we are lucky to have Mark Casady, the CEO. He has been CEO since 2005. Mark has done a great job managing the company through a number of acquisitions. He sits on the Board of FINRA and we are very happy to have him. So thank you Mark.

Mark Casady

Good morning, everyone. Nice to see you here this morning. I want to go through a presentation and happy to take questions as we go through. Oops, I want to go through the Safe Harbor quickly, that’s usual disclosures related to forward-looking statements and such for the company.

Let start with an overview of LPL, basically we are on a mission to make sure that advisors are well-positioned to provide financial advise that unbiased and conflict free to basically middle income consumers. It’s a wide range of consumers they serve, well, majority as middle income, we do range from the mass market up to high-net-worth individuals.

We think the advisor as our customer and we are the largest independent broker dealer, that’s our legal structure for how we serve those advisors. The next competitor is 40% our size and the next one after that is 20% our size. So we are a dominate market leader within the independent broker dealer space with over $350 billion of client assets that we oversee.

We are the number one provider to banks and credit unions of white label brokerage services, meaning that we go into the bank and employees the bank use our brokerage capabilities and advisory capabilities to serve the banks clients, but they are employees of the bank and we have oversight for their activities. There is nearly 700 banks in credit unions that we serve today.

We are also leader in defined contribution space with something like 25,000 plans, roughly 2 million participants at about 60 billion of assets, that’s outside our 350 billion of consumer retail assets with some additional 60 billion of 401(k) that’s been a part of our story of serving those who consult to 401(k) plans.

I think it sometimes easier to understand LPL little bit by what we don’t do as much as by what we do. So we use this slide to just differentiate ourselves from other competitors in the marketplace, who are providing financial advise to consumers and you can see that from our perspective, we don’t create any products, we basically have no investment banking activities, no market making securities, whether its fixed income or equities, we don’t compete with our advisor by having direct-to-consumer businesses, we fully support those who are independent in this business, there is not an employee model within our business, fully open architecture, literally thousands and thousands of products that our consumer -- an advisor can use to provide advise to the consumers that they operate with.

And more recently since the end of 2008 we’ve provided the only integrated registered investment advisory and retial brokerage platform in the country. So basically for the same fee that you would pay to a custodian, we will essentially outsource the work for you to integrate that information for your clients to be successful.

So you can see that’s competitively distinctive against the others who are in the market, who have a range of conflicts from making proprietary products to an investment banking when it comes to retail financial advise.

We think the consumer understands this better and better since 2009 market break and we see more and more situations for consumers are saying to their advisors who had employee model firm, I’d like to make a change, they understand the conflicts quite well and want their advisors to make the change to independent where they can be better served.

We think LPL has a unique growth story. We are going to talk about each of these issues individually on the next few slides. But I want to pause here and talk about the very last bullet point which relates to our management team.

We did announced about two weeks ago, the appointment of Dan Arnold as our CFO, Robert Moore who was our CFO has become our President and COO, and essentially he is moving into more revenue producing opportunities as an executive for the company and continue to broaden his reach and his capabilities, and helping us grow the firm.

Dan Arnold was the Head of UVEST, which is the company that we acquired in 2007. He built that business from nothing to quite a sizable competitor in the marketplace and then basically joined us through the acquisition and let a series of acquisitions to create a very large business and now the market leader serving banks and credit unions. So Dan has incredible strategic sense, really wonderful business capabilities, certainly know account, but we have wonderful accountants who work for him that will be part of the finance team and do a great job. So we are very pleased with Dan’s appointment to CFO that we announced just a couple weeks ago.

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