LPL Financial Holdings Inc.

Good afternoon and thank you for joining the second quarter 2021 earnings conference call for LPL Financial Holdings Incorporated. Joining the call today are our President and Chief Executive Officer Dan Arnold and Chief Financial Officer Matt Audit. Dan and Matt will offer introductory remarks and then the call will be open for questions. The company would appreciate if analysts would limit themselves to one question and one follow-up each. 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 risk and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward-looking statements. The company refers listeners to the disclosure set forth under the caption forward-looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission. More information about such risks and uncertainties. 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. Arnold.

Thank you, RJ, and thanks to everyone for joining our call today. Over the past quarter, our advisors continue to provide their clients with personalized financial guidance on their clients' journey to achieve life's goals and dreams. And at the same time, we remain focused on our mission of taking care of our advisors so they can take care of their clients. This combination positioned us to deliver another quarter of solid results. while also continuing to make progress on our strategic plan. I'd like to review both of these areas, starting with our second quarter business results. In the quarter, total assets reached a new high of $1.1 trillion, up more than 45% from a year ago. This increase was primarily driven by continued organic growth, our Waddell & Reed acquisition, and equity market appreciation. Now, with respect to organic growth, Second quarter net new assets were 37 billion. This result translated to a 16% annualized growth rate driven by continued strength across new store sales, same store sales, and retention, and brought our organic growth rate to over 12% for the past year. In the second quarter, recruited assets were 35 billion, which brought our total over the past year to 80 billion. Our continued growth in recruited assets including new quarterly and full-year highs, reflects our ongoing progress on enhancing the appeal of our model and expanding our addressable markets. During the quarter, our recruiting results increased in each of our markets, with over 10 billion in our traditional independent model, over 22 billion in our institution services model, and approximately 2.5 billion in our new affiliation models. These broader and more diversified results helped position us to drive higher levels of recruiting going forward. Now looking at the same-store sales, with the backdrop of continued strong retail engagement, our advisors remain proactive and focused on serving their clients and enhancing their offering. As a result, advisors are both winning new clients and capturing more assets from existing clients, which drove same-store sales to new highs in the second quarter. At the same time, we further enhanced the advisor experience, through the continued delivery of new capabilities and technology, as well as the ongoing modernization of our service and operations functions. As a result, asset retention was over 98% in the second quarter and 98% over the past year. Now, our second quarter business results led to solid financial outcomes, with $1.85 of EPS prior to intangibles and acquisition costs, which is an increase of 30% from a year ago. Let's now turn to the progress we made on our strategic plan. Now, as a reminder, our long-term vision is to redefine the independent model over time, and by doing so, become the leader across the entire advisor-centered marketplace. Our approach is to provide a platform that is simple and straightforward for advisors to design and run their perfect practice through a breadth of affiliation models and the ability to personally configure the components of our offerings to align with each advisor's unique needs and goals. Doing this well gives us a sustainable path to continued solid organic growth, increased market leadership, and long-term shareholder value creation. Now, to execute on our strategy, we have organized our work into four strategic plays, which I'd like to review with you in turn. Our first strategic play involves meeting advisors where they are in the evolution of their practice by winning in our traditional markets, where our leading market share is now over 15%, while also leveraging new affiliation models to expand our adjustable markets. In our traditional markets, despite advisor movement in the overall industry remaining lower in the second quarter, we continue to increase our recruiting results and gain market share. The combination of our recruiting momentum and the appeal of our model continues to expand the depth and breadth of our pipelines. Looking at our financial institutions channel, within the past two quarters, we onboarded two new clients, BMO Harris and M&T. Then in June, we announced that CUNA Brokerage Services made the decision to partner with us and plans to join early next year. These results reflect the market opportunity that exists to leverage our capabilities to serve large institutions. As we look ahead, we continue to progress prospects through the pipeline and see large financial institutions as a sustainable multiyear contributor to organic growth. With respect to the expansion of our addressable markets, we continue to see momentum building across all three of our new affiliation models. Over the past quarter, we added five new practices across our strategic wealth services and employee models, and after relaunching the RIA-only offering in April, We have been encouraged by the positive market reaction, including a new RIA that joined in May. Looking ahead, we see a growing pipeline across all of our new affiliation models. Now, another key component of this strategic play is using M&A as a complement to organic growth. After closing our Waddell and Reed acquisition in April, last week we transitioned to our platform over 900 advisors who serve approximately 98% of client assets. Our second strategic play is focused on providing capabilities that help our existing advisors differentiate in the marketplace and drive efficiency in their practices. One of the key components of this play is helping our advisors enrich how they serve their clients through the use of advisory platforms. In that spirit, we continue to innovate on our platform, most recently with the introduction of a number of product pricing and capability enhancements. One new capability to highlight increases the personalization available within our centrally managed advisory solutions. Now, two years ago, we introduced AdvisorSleep, which allows advisors to personalize centrally managed portfolios with their own asset allocation models. while outsourcing the day-to-day work of portfolio allocation and trading to us. To build on this capability, last quarter we launched Firm Sleeve. This innovation enables larger firms, RAs, and institutions to develop models that all advisors across their firms can use, and thus providing additional ways to leverage our centrally managed platforms to help meet client needs, differentiate the marketplace, and drive efficiency in advisor practices. At a date, over 9 billion of client assets is invested across Advisor Sleeve and Firm Sleeve, and we will continue innovating to increase the value of these personalized investment offerings. Let's next move to our third strategic play, which involves creating an industry-leading service experience to delight advisors and their clients, and in turn, help drive advisor recruiting and retention. A key component of this strategic play is transforming our service model into an omnichannel client care model. In the second quarter, we launched a digital help center, a machine learning-based solution that gives advisors easy access to information that addresses their most common service-related needs. This resource puts information that's personalized, timely, and relevant at their fingertips, thus positioning advisors to serve their clients in a simpler, and more efficient way. Together with our voice and chat channels, the Digital Help Center enables advisors to access industry-leading service at a time and in a manner that works best for them. We also continue to automate and streamline key elements of our service operations through the enhancement of our digital operating model, including investing in new bots across our care organization. Now, this helps us to increase both our service levels and our capacity to grow as we continue to scale our business. We believe these investments in our client care model and the automation and streamlining of our service operations are making positive contributions to the service experience while also increasing the scalability of our platform. Our fourth strategic play is focused on helping advisors run the most successful businesses in the independent marketplace. One of the key components of this play is our portfolio of business solutions, which helps advisors more effectively operate their businesses so they can focus on serving their clients and growing their practices. As we discussed last quarter, we see multiple pathways for continued growth in business solutions, including delivering existing solutions to additional advisors, and introducing new solutions to expand our product portfolio. In the second quarter, our subscription base continued to scale to approximately 2,100 monthly subscribers, more than double a year ago. This includes about 80 subscriptions with advisors who joined from Waddell & Reed. Now, the more we work on business solutions, the more opportunities we find. to help our advisors solve additional challenges through the expansion of our product portfolio. We now have seven solutions available in our product portfolio, three additional solutions in pilot, and a handful of other offerings in the incubation phase. As we continue to add new solutions, we expect to expand the adjustable market while at the same time accelerating our pace of innovation. Before closing, I want to highlight our ongoing efforts to actively shape and refine our advisor-centric culture, which is instrumental to executing our strategy. In the second quarter, we rolled out our Advisor Promise, which is a modern evolution of the Advisor Commitment Creed our founders wrote more than 30 years ago. We will use this promise to drive further accountability for providing industry-leading advisor experience, and to continue to increase the competitive advantage our advisor-centric culture provides in the marketplace. In summary, in the second quarter, we continued to invest in the value proposition for advisors and their clients, while driving growth and increasing our market leadership. As we look ahead, we remain focused on executing our strategy to help our advisors further differentiate and win in the marketplace, and as a result, drive long-term shareholder value.

With that, I'll turn the call over to Matt.