Good afternoon, and thank you for joining the Third Quarter 2025 Earnings Conference Call for LPL Financial Holdings Inc. Joining the call today are 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. [Operator Instructions] 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. 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, operator, and thank you to everyone for joining our call. It's a pleasure to speak with you again. It is hard to believe, but it's been a little over a year since I became the CEO of LPL Financial. In that time, we've advanced the firm, extending our privileged competitive position in the adviser-mediated marketplace while driving efficiency in the business. So I'd like to spend some time today sharing an update on the progress against the key initiatives I outlined on my first earnings call. But first, let's hit our Q3 results. In the quarter, total assets increased to a record $2.3 trillion, driven by our acquisition of Commonwealth and complemented by solid organic growth and higher equity markets. We attracted organic net new assets of $33 billion, representing a 7% annualized growth rate. Our third quarter business results led to strong financial performance with record adjusted EPS of $5.20, an increase of 25% from a year ago. With that as context, let's review a few highlights of our business growth. In the third quarter, recruited assets were $33 billion, bringing our total for the trailing 12 months to a record $168 billion. In our traditional independent market, we added approximately $12 billion in assets during Q3, where despite depressed industry-wide adviser movement, we maintained our industry-leading capture rates of advisers in motion while also expanding the breadth and depth of our pipeline. With respect to our expanded affiliation models, strategic wealth, independent employee and our enhanced RIA offering, we delivered another solid quarter, recruiting roughly $3 billion in assets. Our third quarter adviser recruiting underscores the evolution of our business and the appeal of our flexible affiliation models. During the quarter, we attracted 4 separate $1 billion-plus practices, which joined us from a range of firms, including…

It's not on the script, Rich, you're very funny. I do like me a good protein shake. That's not my favorite candy like I do have a favorite candy. And I didn't want to tell you, I figured it would be too triggering given your high school football nickname, butter fingers. I loved it. Now, I can eat them. All right. Well, thank you for that intro. And I'm glad to speak with everyone on today's call. It was another productive quarter as we advanced several strategic priorities, including another quarter of industry-leading organic growth, the onboarding of the wealth management business of First Horizon, closing of our acquisition of Commonwealth and the continued advancement of our cost efficiency work, which is driving sustainable improvement in our margin. Now turning to a few highlights from our Q3 business results. Total advisory and brokerage assets were $2.3 trillion, up 21% from Q2 as continued organic growth and higher equity markets were complemented by our acquisition of Commonwealth, which added $275 billion of assets in Q3. Total organic net new assets were $33 billion, an approximately 7% annualized growth rate, a strong result both on an absolute and relative basis. On the recruiting front, Q3 recruited assets were $33 billion, contributing to a record $168 billion over the trailing 12 months. With respect to large institutions, we successfully onboarded First Horizon with $18 billion of AUM, of which $17 billion transitioned onto our platform in Q3. Looking at Q3 financial results. The combination of organic growth and expense discipline led to an adjusted pretax margin of approximately 38% and record adjusted EPS of $5.20. Gross profit was $1.479 billion, up $175 million sequentially. As for the key drivers, commission and advisory fees net of payout were $426 million, up $77 million from…

[Operator Instructions] Our first question coming from the line of Alex Blostein with Goldman Sachs.

Thank you for all the detail, including the snack preferences. Just maybe starting with Commonwealth. Obviously, it's a big topic, helpful update with the 80%. Maybe help us frame how that's tracking at this point of integration relative to your original plan? And given that 80% is already quite sizable number, at what point do you find that your recruiting teams could start to focus more externally again to reaccelerate the pace of net organic growth?

Good question, Alex. I appreciate you asking. So let me start out. So it's been around 6 months since we signed the deal and 3 months since we closed. And as we mentioned, the transaction continues to progress as planned. It's really been an ongoing engagement with Commonwealth Advisers and home office staff, and it is incredibly productive as we jointly chart this course ahead together. And as we've said previously, the Commonwealth advisers are really thoughtful, and they are a very diligent community, which really doesn't surprise us given that they include many of the best advisers in the industry. And so it stands for reason that they have been extremely thorough in their diligence. And we have been dedicated to making sure that we can give them all the information they need to make their very best decision. And that includes thousands of interactions since the announcement to ensure the advisers understand the benefits of the combination. Most recently, last week, there were over 1,000 CFN advisers at their national conference in Washington, D.C. We had sessions from main stage breakouts as well as a number of individual sessions across both the Commonwealth leadership as well as the LPL leadership. And as well, we know that we have scheduled many more in-person home office visits and virtual meetings for the next coming months. And so as we said earlier, we're at that kind of nearly percent -- nearly 80% of assets having signed their agreements to stay with Commonwealth on track for the 90% and putting all of that retention aside, we feel over the moon with this transaction. The cultural alignment and complementary capabilities are creating a combined firm that is far stronger than the sum of the parts. We feel great about the value that this will deliver to Commonwealth advisers, existing LPL advisers and shareholders. And the work that we're doing here significantly advances our progress on creating the best firm in wealth management. One last thing you did mention, as we begin to continue to progress towards higher and higher percentages of the advisers who have decisioned to stay with Commonwealth, that does present us the opportunity to bring back some of the recruiting and retention specialists that we had ring-fenced and allocated into educating Commonwealth advisers. And that's beginning throughout the second half of this year and will continue. But Matt, is there more you'd like to add?

Sure. I mean I think maybe just to underscore what you said, I mean, I think we feel great about the transaction. We feel great about Commonwealth as a firm, high-quality advisers they have, high-quality leadership team, home office team, culture. So just all around from an acquisition standpoint before we even get to the economics, which I'll give a little more color on, we feel really great about. I think since there's been, let's just say, a little bit of focus on the retention targets and how those have been progressing, I think, Alex, to your question, it's always hard to predict exactly how things will trend. But I think as a general point, we are on track to where we thought we would be. But if you just look at where we are right now at nearly 80% retention and the economics that come with that where we are right now, I mean, you're just under a 9x multiple, right? So I think for a property of the quality that Commonwealth is, I think we'd be very happy with that. And to Rich's point, as we progress to 90% retention, just to give a little bit of the sensitivities. Every incremental percentage of retention that we have is about a reduction of 1/10 of a turn on the multiple or an increase of $5 million in run rate EBITDA. Just so you have kind of the sensitivities on how that would work. But I think as you pull back up, I mean, we're incredibly excited to have the opportunity to engage with them, sign the transaction, to close the transaction. And now that we're much, much closer and involved with the teams, as Rich said, we're over the moon. We're really, really happy.

Our next question coming from the line of Steven Chubak with Wolfe Research.

Rich and Matt, so maybe to start, I was hoping to dive a bit deeper into the pricing changes you mentioned in the prepared remarks. It's certainly encouraging to hear the net impact will be 100 bps benefit to the margin. But I wanted to clarify whether the 100 bps net benefit contemplates both efficiency in addition to pricing changes and how these pricing adjustments could enhance the value prop, maybe drive some better organic growth outcomes going forward?

Sure, Steven. So I think the 100 bps improvement was solely from the pricing changes. So any additional improvements on the cost side would be in addition to that. I think to your second part of your question, I think when you look at the areas where the pricing changes are being made in the core area where our advisers are bringing in assets on the advisory side. And I think our pricing there has been competitive, and we're lowering the pricing there as to make it even more competitive. So if you think about where advice is being delivered and where the flows are, I think that helps enhance our opportunity to grow. And on the other side, on the brokerage side, as we looked at the market, we were priced below the market. So I think what you see us doing on the brokerage side is bringing fees up into line where the market is currently. So broadly, brokerage in line, and I think we positioned advisory to be a place that can grow even further.

Our next question coming from the line of Craig Siegenthaler with Bank of America.

So I have another follow-up on Commonwealth, and congrats on getting to the 80% retention. That fell faster than expected. But on the 90% target, is the time line there the 4Q '26 onboarding target? Or could that actually be sooner?

Well, I'd say, Craig, I mean maybe it's -- the answer could be yes to both. I think when you look at when we will finalize where -- what the retention is, is when they're onboarded. So that's when you snap the chalk. But whether we get from 80% to 90% before that certainly can occur. But ultimately, it's when they are onboarded is when we'll measure that. And our estimate is that, that's the estimate of $425 million when we'll start to begin to recognize synergies and building up to that $425 million is when onboarding happens as well. So all a little bit over a year from now.

Our next question coming from the line of Brennan Hawken with BMO Capital Markets.

Rich and Matt, so I know Commonwealth brings new capabilities to you. You've also been steadily investing in building out the service offering, particularly for high net worth investors, really with the goal of pursuing larger teams and targeting some more wirehouse advisers. Could you speak to how that's progressing and what your updated expectations are on that front?

Yes. Thanks, Brennan. And I would thank you for painting within the lines on that question. So I appreciate your sticking to the knitting there. So let me try to hit it. So first off, you're right. I mean we have been pursuing a multiyear journey to become increasingly more relevant to wirehouse advisers. I think Commonwealth adds a tremendous amount, not only of capabilities, of brand credibility, capabilities and a service orientation that is second to none in the independent channel that is very attractive to wirehouse breakaways as well. But when you take a couple of steps back and think about the way we've built towards methodically serving this market more expansively, it started with expanding our affiliation models several years ago, specifically as you think about our independent adviser channel around our W-2 channel we call Linsco, as well as our strategic wealth supported independent channel and progress with our introduction of a private wealth channel. The 3 of those offerings plus a continued investment in capabilities around degrading the difference between ourselves and the wires, certainly now on alternative investments, high net worth capabilities, specifically advanced tax planning, long-term planning, investment solutions as well and our ability to upgrade our service experience with the introduction of our field management organization oriented towards the success of those larger advisers. Taken together with our pool of existing high net worth oriented advisers, you have a community that is building in capabilities. And kind of the capstone to those investments for us over the last year has been the introduction of an enhancement of the LPL brand in the marketplace. All of those things taken together have expanded consideration for us in that wirehouse W-2 market. And I believe now have begun to expand our consideration for those high net worth wirehouse advisers that represent an additional $5 trillion market opportunity. So we continue to run into that space. We continue to build capabilities. We continue to build credible capabilities, and we've enhanced consideration. Taken together, I would expect that, that would continue to advance our capture of flow and movement out of the wires and the regionals across our affiliation models in a way that we have methodically seen, I would expect it to continue at pace.

Our next question coming from the line of Devin Ryan with Citizens Bank.

I want to ask a question just on expenses. Obviously, good to see the improvement on the 2025 G&A guide. So just trying to think about bigger picture, there's been a lot of moving parts on expenses just with a couple of big acquisitions coming into the system here in recent quarters. At the same time, you guys are taking actions to become more efficient. So I love to just think about, I guess, first off, some of the drivers that improved the guidance for the year. How much of that is structural carries into 2026? And then just more broadly, how you're feeling about the expense trajectory of the firm as you're probably finding more efficiencies with these transactions at the same time, still plenty of growth investment to do and some business inflation. So just trying to think about the guidance, but then also the trajectory.

Yes, Devin. So I think when you look at the things that we're doing that are driving the savings, I mean, they are -- to the point of your question, there are things that are ongoing, right? There are things where we're making investments to automate things in our service areas and our operations groups. There are process improvements, capability deployments. We're starting to use AI in a way that is practical and delivering. And you think about where and how that shows up as you're able to improve those things, you start to have lower NIGO rates, which are things that have to be reworked back and forth between us and our clients, which is a frustration from a client standpoint and it also incurs costs on our side. Our advisers and their staff have to call us less, right, because there's less to call about. And we have less folks that spend time answering those calls. We have increased use of our digital tools, right? It just -- it goes on and on. And I think those are the things that really led to the improvements this year. And those are the things that I think we're going to continue to focus on from here going forward. Now I think we do get into some things, even if you just look at next year, we'll give some -- we'll give our guidance for next year on the next call like we normally do. But to your point on some of the other deals coming on board, I just -- maybe there are 2 things I would highlight that are in addition to the efficiencies that we are driving. One is maybe obvious, but just keeping in mind, you're going to have a full year impact of Commonwealth's expenses…

Our next question coming from the line of Jeff Schmitt with William Blair.

You had talked about how adviser movements are still depressed for the industry, I believe. And I was curious, how is your share of those movements trending? And do you still expect that to be kind of a temporary phenomenon and ultimately lead to higher organic growth in future quarters?

Yes. Thanks for the question. We have seen that, that movement continues to stay a little bit artificially low. The truth is that when you look at movement in the industry, you see overall movement, but then you often see times where there are events in the marketplace that drive adviser churn. And those two events that we're seeing right now in the marketplace that would drive churn are: one, the adviser compensation changes at the wirehouse. They just continue to get further and further away from market competitive. And so you see more and more advisers in increasing numbers picking up their heads to consider their alternatives. And so I think that actually is a good trend for the independent segment where you could see continued movement and may move us back towards historical norms. The other side of that is actually our Commonwealth acquisition as well, which drove activity in the marketplace, certainly from competitors and drove more, I would say, even elevated TA rates that have extended more broadly, not only just at Commonwealth opportunities, but I think more broadly across the industry. How do we think about that extending in time, I think we would be hopeful that we would return to historical norms as well as for how our capture has been trending, our capture has stayed consistent. We are the #1 capturer of advisers in movement and in motion in the marketplace. That has persisted at historical levels. And in time, over the last 5 years, we have seen that we have continued to grow share capture of advisers in motion, and we would hope to believe that, that would continue in time as well. So as we head back towards more stable times, I think we would expect to see ourselves continue to participate in the way that we have in the marketplace. We feel as convicted, if not more convicted that our relative value proposition is absolutely the strongest in the marketplace in support of advisers. And so I think we feel good at the forward-looking outlook.

Our next question coming from the line of Michael Cyprys with Morgan Stanley.

I wanted to ask about alternatives. I was hoping you could update us on the progress in building out your alternative investment capabilities, how that stands today, steps you're looking to take over the next 12, 24 months? And if you could also touch upon digital assets, speaking of alts generally, what sort of access do your customers have today? How is that evolving? What sort of demand are you seeing? And how might both of these enhance your appeal to advisers in the marketplace as you build this out? And how might it also support revenue ROCA monetization?

Yes. I'll hit the developments of the -- that's like a quadruple embedded question, which is pretty awesome. Thanks, Michael. So on alternative investments, we have -- and we've shared a couple of times on earnings, we've been on a multiyear journey to delivering a very compelling alternative investment offering. And I would tell you, by the end of this calendar year, I think we're on par with any player in the marketplace around the breadth and quality of our offerings. And so that journey was for us, one, building a core technology platform, which we have largely implemented. Two was expanding the offering. And so those selling agreements across a broad set of alts that we've done diligence on, and we're making really good progress there and expect to be -- our alternatives improved for sale have more than doubled to 80 by the end of -- that was from the end of 2024, and we're moving towards 120 alts available for sale by the end of this year, which I think puts us toe to toe with anybody in the industry. And then the third thing for us is beginning to educate advisers and assisting them in how alternatives can help the needs of their clients. And so we've done a couple of things there, not only introduced an alts Connect last year, which is our e-signature and digital sign and simplifying the subscription process, but we also launched the Learning Hub in Q1, which is a one-stop shopping for educational resources designed to empower advisers with the knowledge and tools necessary to incorporate alts into their investment -- into their practices. And so I think on alts, I think I can reflect and say we have made tremendous progress over the last 18 months. I'm incredibly proud…

Our next question coming from the line of Ben Budish with Barclays.

Matt, a few questions ago, you were talking about how the slowdown in advisers in Motion has resulted in some elevated TA rates, not just that are impacting Commonwealth but across the industry more broadly. I'm curious, you guys have talked in the past about these sort of slowdowns being temporary. Given where rates are, I think you've explained in the past that TA rates rose as this is somewhat reflecting a reinvestment of higher rates on cash balances. What would your expectation be? Or how do you think about the progression of TA rates from here as rates come down? Would it be natural to expect that if advisers in motion or the turnover picks up that rates come back down? Or what would your expectation be there? How should we be thinking about that over, say, the next 12 months?

Yes. I mean I think if history is a guide, right, the overall returns are going to guide where TA rates go, right? So as interest rates have gone up, you saw TA rates go up. And as it comes down, you would expect them to come down. I think the other dynamic you have or a couple of dynamics to your point of less advisers moving, so there's more demand for that. And when you have transactions in the marketplace like we are currently engaging with Commonwealth, folks will bring more money to the table from a TA standpoint. And I think that's what we're seeing right now. I think for us, which you've heard us talk about before, I mean, we always underwrite to returns with a consistent framework and return hurdle, which for us is usually deploying capital in the 3 to 4x EBITDA range. And I think when you have an environment like this, we'll just hedge towards the upper end of that, right? So being closer to 4x than 3x, but still going back to what really, really matters, which is really the environment that an adviser is going to land on, meaning the capabilities, technology, service and their ongoing economics. So that's really what's going to carry the day. TA, of course, is important. I think where it trends over time it's hard to predict, but it's going to be driven by the factors that you highlighted, the number of advisers moving, what's happening in the marketplace and where rates are going. But I think from our standpoint, we've operated in all those environments. And ultimately, what matters is the value that we're bringing to the table is going to carry the day. And I think that's why to what Rich was just talking about, when advisers do decide to change firms, we're the #1 place they come.

And we have a follow-up question from Steven Chubak from Wolfe Research.

Given the NNA trajectory has been impacted by the repurposing of resources to support better or higher Commonwealth retention, has anything changed about your long-term NNA expectations? And I was also hoping you can give an update, Matt, on October cash and NNA trends as well.

Sure. I'll start with October, and then I think Richard can jump in on the NNA. So I think October has been a good month, similar to September. So if you look at client cash balances, reminders that you know well, Steven, but I'll hit in many ways, advisory fees primarily hit in the first month of the quarter. And now just given our size, right, including with Commonwealth at $2.3 trillion of AUM, those fees get bigger and bigger. So for October, they were at $2.4 billion. Outside of that, though, client cash balances continue to grow. And they're up so far $700 million in the month. So you kind of net that out, down at $1.7 billion or just over $54 billion of cash. So I think a good month on the cash. On the organic growth side, those advisory fees hit there as well. So the first month of the quarter is typically lower. And then factoring in that adviser movement still remains low. When you factor in those two factors, I think October has looked good. We're -- where we sit today, we're around 4% organic growth for the month. Keeping in mind that's prior to the around $1 billion of AUM left to go on those large OSAs that are offboarding that we would expect to come out sometime in the fourth quarter. So overall, I think it's a good start to the quarter.

Steven, it's Rich. So on that NNA trajectory, I think what we've seen would say that you should not think that our NNA trajectory is changing because of this. This is a temporary really ring-fencing of many of our most sophisticated recruiting and/or retention resources to move them over to help educate Commonwealth advisers, some of which they've already been in discussions with. And as such, our feeling has been quite good. It's the progression in the pipeline that was going to be most impacted as that team only has so many hours in the day. So as they begin to move back in to having -- enhancing the share of their time that's spent on external advisers to this firm, I think you would expect to see that we would continue to have the successes we've had in the past.

Our next question coming from the line of Bill Katz with TD Cowen.

Congrats on the 1 year, Rich, can't believe how quick it's been. Maybe a 2-part question, just embedded, a little bit disparate in nature, so I apologize for that. Can you give us a sense of where you might stand on the enterprise side now that you're getting -- working your way through CFN and how you might be able to sort of multitask maybe some larger platforms to the extent that, that pipeline is building? And then on the net new money that's coming in the door, can you tell us what kind of cash allocation that is relative to roughly 2.5% that's the legacy book right now?

Do you want to take institutional first?

Well, I was going to say thank you to Bill first because he said something really nice to me. Why don't you hit the last part and then I'll come back on institutional.

Yes, sure. So Bill, make sure I just jump in. When you say the cash sweep that's coming in, when you say allocation, are you talking about the percent per account on the incremental versus the overall? I want to make sure about the question.

Yes. I apologize for coughing on the call. Yes, like the cash allocation as a percentage of net new assets compared to roughly a 2.5% that's the average for the quarter or at the end of the quarter.

Yes, I think the cash that's coming in, it's around -- it's not a material difference than where things are overall, if that's where you're getting. So pretty similar.

Okay. So then on that institutional side, Bill, maybe I should acknowledge for us, getting Commonwealth right is the singular #1 job right now. And so we're focusing a lot of our resources on delivering a seamless experience for the new advisers joining the platform while ensuring to continue -- we deliver a great experience for our existing advisers. So we framed this a couple of times, but I'd just reiterate, I wouldn't expect too much by the way of other large announcements for the time being. But that being said, maybe in some broader context, we have been targeting historically large banks. And I think especially as you think about this market environment for large banks, we see the ability for the banks that we work with to be winners and net consolidators in the consolidation of that retail banking industry. And so feel really good about our ability to be a counterparty to large banks as they acquire in that market. And historically, we've had some fantastic partners like M&T, BMO and where we've seen them be net acquirers and us help them with their wealth management business on some of those transactions. As well, we continue to be in conversations around insurance broker-dealers and product manufacturers and as an aside, those markets are similar size, bank outsourced model opportunity sits around $1.5 trillion in the market. And in that insurance broker-dealers and product manufacturers, there's another $1.5 trillion in market opportunity. And post that onboarding of Prudential that we feel really good about, and we've seen great successes with -- in partnership with them. I think that is a very validating event in the marketplace. But as we've said before, those are some long lead time conversations. And just to reiterate, at this moment in time, we are focusing all of our resources on ensuring that we get Commonwealth right and landed and still progressing conversations, but I would expect less in the way of announcements to come in that large institutional segment.

I'm showing there are no further questions in the queue at this time. I will now turn the call back over to Mr. Steinmeier for any closing remarks.

Well, thank you, operator, and thank you to everyone for joining us tonight. We look forward to speaking -- we look forward to speaking with you all again in January. Have a great evening. Thanks.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.