The events of the past few days have many people asking questions about the health of the
financial services companies they entrust with their money and investments. And to the extent
that you may have similar questions, we want to provide some important information regarding the
resilience of LPL Financial’s business model, our financial stability and liquidity position, the steps
we take to help protect client accounts, how we are regulated, and our approach to enterprise risk
management.
Business Model
LPL Financial provides technology, brokerage, and investment advisory services through business
relationships with independent financial advisors, registered investment advisors (RIAs), and
financial institutions and their financial representatives. We offer access to a broad array of financial
products and services to support them in providing financial advice and brokerage services to
individual investors.
It’s important to note that LPL is not a bank and does not have direct exposure to Silicon Valley
Bank or Signature Bank of New York.
Financial Performance and Liquidity Position
LPL’s financial stability and our commitment to financial advisors, institutions, and their clients
remains strong, and we are well-positioned to execute on our growth strategy. LPL is a Fortune
500 company, serving more than 21,000 financial professionals with over $1 trillion in brokerage
and advisory client assets. Our balance sheet is strong, with over $200 million of excess cash and
modest leverage below our conservative management targets. This financial strength positions us
with ample capacity to allocate capital across our flexible framework, which prioritizes investments
to improve our value proposition for advisors and their clients.
The Financial Industry Regulatory Authority (FINRA), our industry’s regulatory body, mandates
that all broker/dealers must maintain net capital equal to or in excess of the minimum regulatory
requirement to provide a level of comfort in our ability to meet our financial obligations and support
our business. At quarter end, we had excess net capital of nearly four times our requirement.
The amount of debt LPL carries is low relative to our income and our peer group -- running with
leverage of 1.4x as of Q4. We remain in compliance with all of our lender debt covenants. In addition,
as an indication of the growth of our firm and our financial strength, in November of 2022, Moody’s
upgraded our credit rating to Baa3, establishing LPL as an investment-grade credit.
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Client Account Protection
Recent events in the banking sector have heightened concerns over liquidity and safety of client cash
balances. To help safeguard client cash balances, LPL’s cash management strategy seeks to mitigate
risk with a focus on safety, security, and liquidity. Client cash swept through the LPL Insured Cash
Account (ICA) and LPL Deposit Cash Account (DCA) is federally insured. ICA and DCA accounts are
insurable by the FDIC up to $2,500,000 per client for an individual and $5,000,000 for joint accounts.
LPL Financial is a member firm of the Securities Investor Protection Corporation (SIPC).
Membership provides account protection up to a maximum of $500,000 per client, of which
$250,000 may be claims for cash. For an explanatory brochure, please visit www.sipc.org.
Additionally, through London Insurers, LPL Financial accounts have additional securities protection
to cover the net equity of client accounts up to an overall aggregate firm limit of $750,000,000 in the
event a firm cannot meet its obligations to securities clients, subject to conditions and limitations.
Regulation
The financial services industry is regulated by U.S. federal and state regulatory agencies and
securities exchanges, as well as by non-government agencies, regulatory bodies, and securities
exchanges. Throughout our history, we have invested heavily, with the benefit of our scale, in
compliance capabilities to monitor our compliance with the extensive legal and regulatory
requirements applicable to our business. We also remain subject to regular auditing and
examination by our various regulators to ensure we are continuing to meet these requirements.
Counter-party risk assessment
LPL Financial utilizes our enterprise risk management framework to routinely examine the health
of business partners with which we have relationships in order to assess risk to both ourselves and
our advisors. This process includes research, financial analysis, and forward-looking measures of
financial strength and sustainability. When necessary, business partners have been removed from
our “approved” list until such time as they can effectively demonstrate a return to good standing.
LPL’s record-setting business performance, conservative balance sheet and strong capital position
provide a solid foundation for weathering economic headwinds. We remain steadfast in our mission
to take care of our advisors, so they can take care of their clients. And we will continue to be a source
of strength and advocacy for financial professionals and institutions, with a focus on being a safe and
stable custodian for their clients’ wealth
Matt Audette
Chief Financial Officer & Head of Business Operations
LPL Financial
Tracking: 1-05364376