What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-22 compared with 2021-02-23 · 149 added, 129 removed, 189 unchanged (60% of the section changed)

General Corporate Overview

We are a leader in the retail financial advice market and the nation’s largest independent broker-dealer.

We serve independent financial advisors and financial institutions, providing them with the technology, research, clearing and compliance services and practice management programs they need to create and grow their practices.

We enable them to provide objective financial guidance to millions of American families seeking wealth management, retirement planning, financial planning and asset management solutions.

We believe that objective financial guidance is a fundamental need for everyone.

We enable our advisors to focus on what they do best—create the personal, long-term relationships that are the foundation for turning life’s aspirations into financial realities.

We do that through a singular focus on providing our advisors with the front-, middle- and back-office support they need to serve the large and growing market for independent investment advice.

We believe that we are the only company that offers advisors the unique combination of an integrated technology platform, comprehensive self-clearing services and open architecture access to a wide range of non-proprietary products, all delivered in an environment unencumbered by conflicts from product manufacturing, underwriting and market-making.

LPL serves the advisor-mediated advice marketplace as the nation’s largest independent broker-dealer, a leading investment advisory firm, and a top custodian.

We support nearly 20,000 financial advisors, including advisors at approximately 800 institution-based investment programs and at approximately 500 registered investment adviser (“RIA”) firms nationwide, providing the front-, middle- and back-office support our clients need to serve the large and growing market for comprehensive financial advice from an advisor.

We offer a customizable platform of integrated technology, brokerage and advisory platforms, digital capabilities, clearing and compliance services, business solutions, and strategic growth resources to help our clients run their perfect practices.

We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to personalized guidance from a financial advisor.

We believe advisors should have the freedom to manage their client relationships because they know their clients best.

We believe investors achieve better outcomes when working with a financial advisor.

We strive to make it easy for advisors to do what is best for their clients, while protecting advisors and investors and promoting independence and choice through access to a wide range of diligently evaluated non-proprietary products.

We strive to make it easy for advisors to do what is best for their clients by promoting freedom and choice through access to a wide range of diligently evaluated non-proprietary products while protecting advisors and clients.

We believe that we are the only company that offers the unique combination of an integrated technology platform, comprehensive self-clearing services, and curated access to a wide range of non-proprietary products all delivered in an environment unencumbered by conflicts from product manufacturing, underwriting, and market-making.

LPL Financial Holdings Inc., which is the parent company of our business, was incorporated in Delaware in 2005.

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• Fortigent Holdings Company, Inc.

and its subsidiaries (“Fortigent”) provide solutions and consulting services to registered investment advisers (“RIAs”), banks and trust companies serving high-net-worth clients.

and its subsidiaries (“Fortigent”) provide solutions and consulting services to RIAs, banks and trust companies serving high-net-worth clients.

• LPL Insurance Associates, Inc.

(“LPLIA”) operates as a brokerage general agency that offers life and disability insurance products and services.

• AdvisoryWorld provides technology products, including proposal generation, investment analytics and portfolio modeling.

• AW Subsidiary, Inc.

is a holding company for AdvisoryWorld and Blaze Portfolio Systems LLC (“Blaze”).

AdvisoryWorld offers technology products, including proposal generation, investment analytics and portfolio modeling, to both the Company’s advisors and external clients in the wealth management industry.

Blaze provides an advisor-facing trading and portfolio rebalancing platform.

• The Private Trust Company, N.A.

(“PTC”) provides trust administration, investment management oversight and Individual Retirement Account (“IRA”) custodial services.

• LPL Employee Services, LLC is a holding company for Allen & Company of Florida, LLC (“Allen & Company”), an RIA that we acquired in 2019.

• Blaze Portfolio Systems LLC (“Blaze”), which we acquired in 2020, provides an advisor-facing trading and portfolio rebalancing platform.

Our Advisor Relationships

• LPL Employee Services, LLC is a holding company for Allen & Company of Florida, LLC (“Allen & Company”), an RIA.

At LPL, our mission is to take care of our advisors, so they can take care of their clients.

Our vision is to become the leader across the advisor-centered marketplace by empowering advisors to deliver great advice to their clients and be great operators of their businesses.

In order to achieve this vision, our strategy is to meet advisors and institutions where they are in the evolution of their businesses, provide capabilities to help advisors differentiate and drive efficiency in their practices, create an industry-leading service experience that delights advisors and their clients, and help advisors run the most successful businesses in the market.

Advisor Relationships

Our business is dedicated exclusively to our advisors;

we are not a market-maker nor do we offer investment banking or underwriting services.

We offer no proprietary products of our own.

Because we do not offer proprietary products, we enable the independent financial advisors, banks and credit unions that we support to offer their clients lower-conflict advice.

We offer no proprietary products of our own, and, as a result, we enable the independent financial advisors and financial institutions that we support to offer their clients lower-conflict advice.

We work alongside advisors to navigate complex market and regulatory environments and strive to empower them to create the best outcomes for investors.

In addition, we make meaningful investments in technology and services to support the growth, productivity and efficiency of advisors across a broad spectrum of business models as their practices evolve.

Our advisors are a community of diverse, entrepreneurial financial services professionals.

Our advisors are a community of diverse, entrepreneurial financial services professionals who support approximately 7.2 million client accounts.

They build long-term relationships with their clients in communities across the United States by guiding them through the complexities of investment decisions, retirement solutions, financial planning, and wealth management.

Our advisors support approximately 6.0 million client accounts.

Our services are designed to support the evolution of our advisors’ businesses over time and to adapt as our advisors’ needs change.

We believe we offer a compelling economic value proposition to independent advisors, which is a key factor in our ability to attract and retain advisors and their practices.

The independent channels pay advisors a greater share of advisory fees and brokerage commissions than the captive channels — generally 80-90% compared to 30-50%.

The independent channels pay advisors a greater share of advisory fees and brokerage commissions than the captive channels — generally 80-100% compared to 30-50% for captive channels.

Our independent financial advisors are business owners who, unlike their captive counterparts, also have the opportunity to build equity in their own businesses.

Furthermore, we believe that our technology and service platforms enable our advisors to operate their practices with a greater focus on serving investors at a lower cost than other independent advisors.

Finally, as business owners, our independent financial advisors, unlike captive advisors, also have the opportunity to build equity in their own businesses.

Our approximately 17,300 advisors average about 20 years in the industry, which generally allows us to focus on supporting and enhancing our advisors’ businesses without needing to provide basic training or subsidizing advisors who are new to the industry.

We serve nearly 20,000 advisors that average over 20 years in the industry, which generally allows us to focus on supporting and enhancing our advisors’ businesses without needing to provide basic training or subsidizing advisors who are new to the industry.

Our flexible business platform allows our advisors to choose the most appropriate business model to support their clients whether they conduct brokerage business, offer brokerage and fee-based services on our corporate RIA platform, or provide fee-based services through their own RIA practices.

The majority of our advisors are independent contractors who are primarily located in rural and suburban areas and, as such, are viewed as local providers of independent advice.

Many of our advisors operate under their own business name, and we may assist these advisors with their own branding, marketing and promotion and regulatory review.

We also support advisors who are our employees through our independent employee advisor affiliation model, which we introduced in 2020.

Advisors licensed with LPL Financial as registered representatives and as investment advisory representatives are able to conduct both commission-based business on our brokerage platform and fee-based business on our corporate RIA platform.

The majority of our advisors are independent practitioners who are primarily located in rural and suburban areas and, as such, are viewed as local providers of independent advice.

Many of our advisors operate under their own business name, and we may assist these advisors with their branding, marketing and promotion and regulatory review.

We also support advisors who are our employees through our independent employee advisor affiliation model.

Advisors licensed with LPL Financial as registered representatives and/or as investment advisory representatives are able to conduct both commission-based business on our brokerage platform and fee-based business on our corporate RIA platform, respectively.

In order to be licensed with LPL Financial, advisors must be approved through our assessment process, which includes a review of each advisor’s education, experience and compliance history, among other factors.

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These advisors also agree not to engage in any outside business activity without prior approval from us and not to act in competition with us.

LPL Financial also supports over 450 independent RIA firms that conduct their business through separate entities (“Hybrid RIAs”) with over 5,000 advisors who conduct their advisory business through these separate entities, rather than through LPL Financial.

LPL Financial also supports nearly 500 independent RIA firms that conduct their business through separate registered investment advisor firms (“Hybrid RIAs”) with over 5,400 advisors who conduct their advisory business through these separate entities, rather than through LPL Financial.

Hybrid RIAs operate pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”), or their respective states’ investment advisory licensing rules.

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Advisors associated with Hybrid RIAs retain 100% of their advisory fees, and in return, we charge separate fees for custody, trading, administrative and support services.

In addition, most financial advisors associated with Hybrid RIAs carry their brokerage license with LPL Financial and access our fully-integrated brokerage platform under standard terms.

We believe we are the market leader in providing support to over 2,500 financial advisors at approximately 800 banks and credit unions nationwide.

In addition, some financial advisors associated with Hybrid RIAs carry their brokerage license with LPL Financial and access our fully-integrated brokerage platform under standard terms.

We believe we are the market leader in providing support to over 2,800 financial advisors at approximately 800 financial institutions nationwide.

The core capabilities of these institutions may not include investment and financial planning services, or they may find the technology, infrastructure and regulatory requirements of supporting such services to be cost-prohibitive.

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We also provide support to approximately 3,700 additional financial advisors who are affiliated and licensed with insurance companies.

These arrangements allow us to provide outsourced customized clearing, advisory platforms and technology solutions that enable the financial advisors at these insurance companies to offer a breadth of services to their client base in an efficient manner.

These arrangements allow us to provide outsourced customized clearing, advisory platforms

and technology solutions that enable the financial advisors at these insurance companies to offer a breadth of services to their client base in an efficient manner.

Our Value Proposition

We are dedicated to making it easy for advisors to do what is best for their clients.

Our scale and self-clearing platform enable us to provide advisors with the capabilities they need, and the service they expect, at a compelling

Our scale and self-clearing platform enable us to provide advisors with the capabilities they need, and the service they expect, at a compelling price.

We are dedicated to continuously improving the processes, systems and resources we leverage to meet these needs.

We support our advisors by providing front-, middle- and back-office solutions through our distinct value proposition:

integrated technology solutions, comprehensive clearing and compliance services, consultative practice management programs and training and independent research.

integrated technology solutions, comprehensive clearing and compliance services, consultative practice management programs and training, business solutions and planning and advice services, and in-house research.

The comprehensive and increasingly automated nature of our offering enables our advisors to focus on their clients while successfully and efficiently managing the complexities of running their own practice.

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Comprehensive Clearing and Compliance Services

We provide custody and clearing services for the majority of our advisors’ transactions, and seek to offer a simplified and streamlined advisor experience and expedited processing capabilities.

We provide custody and clearing services for the majority of our advisors’ transactions, and seek to offer a simplified and streamlined advisor experience with expedited processing capabilities.

Our self-clearing platform enables us to control client data, more efficiently process and report trades, facilitate platform development, reduce costs and ultimately enhance the service experience for our advisors and their clients.

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We continue to make substantial investments in our compliance function to provide our advisors with a strong framework through which to understand and operate within regulatory guidelines, as well as guidelines that we establish.

Protecting the best interests of investors and our advisors is of utmost importance to us.

Protecting the best interests of investors and our advisors is imperative to us.

As the financial industry and regulatory environment evolve and become more complex, we have made a long-term commitment to enhancing our risk management and compliance structure, as well as our technology-based compliance and risk management tools, in order to further enhance the overall effectiveness and scalability of our control environment.

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• personalized business consulting that helps eligible advisors and program leadership enhance the value and operational efficiency of their businesses;

• advisory and brokerage consulting and financial planning to support advisors in growing their businesses through our broad range of products and fee-based offerings, as well as wealth management services, to assist advisors serving high-net-worth clients with comprehensive estate, tax, philanthropic and financial planning processes;

• advisory and brokerage consulting and financial planning to support advisors in growing their businesses through our broad range of products and fee-based offerings and wealth management services;

• marketing strategies, including campaign templates, to enable advisors to build awareness of their services and capitalize on opportunities in their local markets;

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• in-person and virtual training and educational programs on topics including technology, use of advisory platforms and business development.

Independent Research

Business Solutions and Planning and Advice Services

LPL Business Solutions provides business support to advisors in areas critical to the operation of their practices, such as marketing, accounting and transaction support.

The LPL Business Solutions portfolio includes professional services and business optimizer offerings.

Professional services offerings, including CFO Solutions, Marketing Solutions, and Admin Solutions, are digital and employee-powered solutions that provide practice management expertise to increase practice-level growth and operational efficiency.

Business optimizer offerings, including M&A Solutions, Remote Office Solutions, Resilience Plans and Assurance Plans, are digital solutions that provide risk mitigation and business continuity services to support practice operations and succession planning.

Planning and Advice Services were launched in January of 2022 to enhance and expand our differentiated services portfolio in support of our vision to become the leader across the advisor-centered marketplace.

The focus of Planning and Advice Services is helping advisors deliver comprehensive advice and creating advice capacity.

We are expanding our portfolio of services to address new advisor needs while also enhancing our existing solutions to deliver an industry-leading customer experience.

In-House Research

We provide our advisors with integrated access to comprehensive research on a broad range of investments and market analysis on macro-economic events, capital markets assumptions and strategic and tactical asset allocation.

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This includes third-party asset manager search, selection and monitoring services for both traditional and alternative strategies across all investment access points (exchange-traded funds, mutual funds, separately managed accounts, unified managed accounts and other products and services).

We believe not providing proprietary products or investment banking services better enables us to provide research that is unbiased and objective.

We believe not providing proprietary products or investment banking services better enables us to provide research that is unbiased.

Our Product and Solution Access

We do not manufacture any financial products.

Instead, we provide our advisors with open architecture access to a broad range of commission, fee-based, cash and money market products and services.

The sales and administration of these products are facilitated through our technology solutions that allow our advisors to access client accounts, product information, asset allocation models, investment recommendations and economic insight as well as to perform trade execution.

Instead, we provide our advisors with curated access to a broad range of commission, fee-based, cash and money market products and services.

The sales and administration of these products are facilitated through our technology solutions, which allow our advisors to access client accounts, product information, asset allocation models, investment recommendations, and economic insight, as well as to perform trade execution.

Commission-Based Products

Commission-based products are those for which we and our advisors receive an upfront commission and, for certain products, a trailing commission, or a mark-up or mark-down.

Commission-based products include those for which we and our advisors receive an upfront commission and, for certain products, a trailing commission.

Our brokerage offerings include variable and fixed annuities, mutual funds, equities, fixed income, alternative investments, retirement and 529 education savings plans and insurance.

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As of December 31, 2021, the total brokerage assets in commission-based products were $563.2 billion .

Fee-Based Advisory Platforms and Support

LPL Financial has various fee-based advisory platforms that provide centrally managed or customized solutions from which advisors can choose to meet the investment needs of their clients, including wrap-fee programs, mutual fund asset allocation programs, an advisor-enhanced digital advice program, advisory programs offered by third-party investment advisor firms, financial planning services and retirement plan consulting services.

Fee-Based Platforms and Support

LPL Financial has various fee-based platforms that provide centrally managed or customized solutions from which advisors can choose to meet the investment needs of their clients, including wrap-fee programs, mutual fund asset allocation programs, an advisor-enhanced digital advice program, advisory programs offered by third-party investment advisor firms, financial planning services and retirement plan consulting services.

The fee structure of our platforms enables our advisors to provide their clients with higher levels of service, while establishing a recurring revenue stream for the advisor and for us.

Our fee-based platforms provide access to mutual funds, exchange-traded funds, stocks, bonds, certain option strategies, unit investment trusts and institutional money managers and no-load multi-manager variable annuities.

As of December 31, 2020, the total advisory assets under custody in these platforms, through both our corporate RIA platform and Hybrid RIAs, were $461.2 billion.

Our fee-based platforms provide access to mutual funds, exchange-traded funds, stocks, bonds, certain option strategies, unit investment trusts and institutional money managers and

no-load multi-manager variable annuities.

As of December 31, 2021, the total advisory assets under custody in these platforms, through both our corporate RIA platform and Hybrid platform, were $643.2 billion .

Client Cash Programs

We assist our advisors in managing their clients’ cash balances through money market programs and insured bank sweep vehicles.

As of December 31, 2020, the total assets in our client cash programs, which are held within advisory and brokerage accounts, were approximately $48.9 billion.

We offer insured bank sweep vehicles and money market programs, which enable our advisors to manage their clients’ cash balances.

As of December 31, 2021, the total assets in our client cash programs, which are held within advisory and brokerage accounts, were $57.3 billion .

Other Services

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We also offer retirement solutions for commission- and fee-based services that allow advisors to provide brokerage services, consultation and advice to retirement plan sponsors using LPL Financial.

We offer proposal generation, investment analytics and portfolio modeling capabilities to both our advisors and external clients in the wealth management industry through our subsidiary AdvisoryWorld.

Finally, through our subsidiary Blaze, we offer an advisor-facing trading and portfolio rebalancing platform.

We offer proposal generation, investment analytics and portfolio modeling capabilities to both our advisors and external clients in the wealth management industry and provide an advisor-facing trading and portfolio rebalancing platform.

Our Financial Model

Our overall financial performance is a function of the following dynamics of our business:

• Our revenues stem from diverse sources, including advisor-generated advisory and commission fees, as well as other asset-based fees from product sponsors, recordkeeping, networking services, client cash balances and transaction and other fees for other ancillary services that we provide.

Revenues are not concentrated by advisor, product or geography.

For the year ended December 31, 2020, no single relationship with our independent advisor practices, banks, credit unions or insurance companies accounted for more than 7% of our net revenues, and no single advisor accounted for more than 2% of our net revenues.

• The largest variable component of our cost base, advisor payout percentages, is directly linked to revenues generated by our advisors.

• A portion of our revenues, such as software licensing and account and client fees, are not correlated with the equity financial markets.

Our overall financial performance is a function of the following:

• Our revenue stems from diverse sources, including advisor-generated advisory and commission fees, as well as other asset-based fees from product sponsors, recordkeeping, networking services, client cash balances, service and fee revenue, transaction revenue and revenue for other ancillary services that we provide.

Revenue is not concentrated by advisor, product or geography.

For the year ended December 31, 2021, no single relationship with our independent advisor practices, banks, credit unions or insurance companies accounted for more than 2% of our advisory and commission revenue, and no single advisor accounted for more than 1% of our advisory and commission revenue.

• The largest variable component of our cost base, advisor payout percentages, is directly linked to revenue generated by our advisors.

• A portion of our revenue is not asset-based or correlated with the equity financial markets.

Service and fee revenue includes service solutions, IRA custodian fees, contract and licensing fees, and other client account fees.

Service and fee revenue from Business Solutions is based on recurring subscription fees.

We charge separate fees to RIAs for technology, clearing, administrative, oversight and custody services, which may vary.

In addition, we host certain advisor conferences that serve as training, education, sales and marketing events for which we charge sponsors a fee.

• Our operating model is scalable and is capable of delivering expanding profit margins over time.

• We have managed our capital requirements and expenditures such that we have been able to invest in our business as well as return capital to shareholders.

• We have managed our capital requirements and expenditures such that we have been able to both invest in our business and return capital to shareholders.

Our Competitive Strengths

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We are the established leader in the independent advisor market, which is our core business focus.

We use our scale and position as an industry leader to champion the independent business model and the rights of our advisors.

We use our scale and position as an industry leader to champion the independent business model and the rights of our advisors and their clients.

Our scale enables us to benefit from the following dynamics:

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• Economies of Scale — As one of the largest distributors of financial products in the United States, we have been able to obtain attractive economics from product sponsors.

• Payout Ratios to Advisors — Among the largest U.S.

broker-dealers by number of advisors, we believe that we offer the highest average payout ratios to our advisors.

The combination of our ability to reinvest in our business and maintain highly competitive payout ratios has enabled us to attract and retain advisors.

• Payout Rates to Advisors — As one of the largest U.S.

broker-dealers by number of advisors, we believe that we offer our advisors the highest average payout rates in our industry.

The combination of our ability to reinvest in our business and maintain highly competitive payout rates has enabled us to attract and retain advisors.

This, in turn, has driven our growth and led to a continuous cycle of reinvestment that reinforces our established scale advantage.

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For example, because we do not have any proprietary manufactured financial products, we do not view firms that manufacture asset management products and other financial products as direct competitors.

We provide comprehensive solutions to financial institutions, such as regional banks, credit unions and insurers that seek to provide a broad array of services for their clients.

We provide comprehensive solutions to financial institutions, such as regional banks, credit unions, and insurance companies that seek to provide a broad array of services for their clients.

We believe many institutions find the technology, infrastructure, and regulatory requirements associated with delivering financial advice to be cost-prohibitive.

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Our business model allows our advisors the freedom to choose how they conduct their business, subject to certain regulatory parameters, which has helped us attract and retain advisors from multiple channels, including wirehouses, regional broker-dealers and other independent broker-dealers.

Our platform can accommodate a variety of independent advisor business models, including independent financial advisors and Hybrid RIAs, as well as employee advisors.

Our business model provides advisors with a multitude of customizable service and technology offerings that allow them to increase their efficiency, focus on their clients and grow their practice.

Our platform can accommodate a variety of independent advisor business models, including independent financial advisors and RIAs, as well as employee advisors.

The flexibility of our business model enables our advisors to select their preferred affiliation model and product mix as their business evolves and preferences change within the market or their client base all within an environment that allows that evolution with minimal interruption for their business and their clients.

In addition, our business model provides advisors with a multitude of customizable service and technology offerings that allow them to increase their efficiency, focus on their clients and grow their practice.

For example, LPL Business Solutions provides business support to advisors in areas critical to the operation of their practices, such as marketing, accounting and transaction support.

Our Sources of Growth

We believe we can increase our revenues and profitability by benefiting from favorable industry trends and by executing strategies to accelerate our growth beyond that of the broader markets in which we operate.

Favorable Industry Trends

Growth in Investable Assets

From 2016 to 2019, the U.S.

retail investment market averaged 10% annual growth.

The chart below shows the historical growth of assets in the U.S.

retail investment market (in trillions):

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The Cerulli Report:

Advisor Metrics 2020.

Increasing Demand for Independent Financial Advice

Retail investors, particularly in the mass-affluent market, are increasingly seeking financial advice from independent sources.

We are highly focused on helping independent advisors meet the needs of the mass-affluent market, which constitutes a significant and underserved portion of investable assets.

Advisor Migration to Independent Channels

Independent channels continue to gain market share from captive channels.

We believe that we are not just a beneficiary of this secular shift, but an active catalyst in the movement to independence.

There is an increased shift towards advisors seeking complete independence by forming an RIA firm and registering directly with the SEC or state securities regulators.

This shift has led to significant growth in the number of advisors associated with Hybrid RIAs and independent RIA firms.

Executing Our Growth Strategies

Increasing Productivity of Existing Advisor Base

We believe the productivity of our advisors has the potential to increase over time as we continue to develop solutions designed to enable them to add new clients, manage more of their clients’ investable assets, and expand their existing practices with additional advisors.

We expect to facilitate these productivity improvements by helping

our advisors better manage their practices in an increasingly complex external environment, which we believe has the potential to result in the assets per advisor growing over time.

We expect to facilitate these productivity improvements by helping our advisors better manage their practices in an increasingly complex external environment, which we believe has the potential to result in the assets per advisor growing over time.

Business Solutions and Planning and Advice Services are a source of organic growth as a larger share of advisors adopts these service solutions.

Attracting New Assets to Our Platform

We intend to grow the assets served by our platform.

There is an estimated $22.7 trillion in advisor-mediated assets in the United States, of which we have a 4.0% market share, and we believe we are positioned to attract assets from any channel.

Channel (dollars in billions) Advisor-mediated Assets % of Market

Independent Channels $8,469 37.3%

Wirehouses 7,850 34.5%

Other Employee Channels 6,412 28.2%

$22,731 100.0%

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The Cerulli Report:

Advisor Metrics 2020.

We intend to grow the assets served by our platform across traditional markets and through new affiliation models.

Ongoing investment in and enhancement to our platform and support teams is leading to increased win rates and an expanded pipeline.

We are also experiencing strong momentum from our new advisor affiliation models, which are attracting prospects.

Finally, we have opened up a new market with our newest large financial institution affiliation model.

The relationships with M&T Bank Corporation (“M&T Bank”) and BMO Harris Financial Advisors (“BMO Harris”) that we began during 2021, the expected onboarding of CUNA Brokerage Services, Inc.

(“CBSI”), and the related investments in the institutional platform are generating interest from new institutional clients.

We compete with a variety of financial firms to attract and retain experienced and productive advisors.

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• Independent RIA firms, which are registered with the SEC or through their respective states’ investment advisory regulator and not through a broker-dealer, may choose from a number of third-party firms to provide custodial services.

Competitors within these various channels and markets generally do not offer a complete clearing solution for advisors and are frequently supported by third-party clearing and custody-oriented firms.

These clearing firms and their affiliates and other providers also offer an array of service, technology and reporting tools, while retaining a portion of the economics for the offerings utilized by their clients.

Our advisors compete for clients with financial advisors of brokerage firms, banks, insurance companies, asset management, and investment advisory firms.

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Our success depends on our ability to attract, hire, retain and develop highly-skilled professionals in a variety of specialties, including finance, technology, compliance, business development, cybersecurity and management.

As of December 31, 2020, we had 4,756 full-time employees.

As of December 31, 2021, we had approximately 5,900 full-time employees.

Talent Management and Culture

Due to the complexity of our business, we compete for talent with other companies, both inside and outside of our industry, and in multiple geographical areas in the United States.

In 2020, our human capital efforts focused on establishing a culture of service that emphasizes taking care of our advisors, so they can take care of their clients.

In 2021, our human capital efforts focused on further developing our culture of service that emphasizes taking care of our advisors, so they can take care of their clients.

To that end, we seek employees who are approachable, proactive, collaborative, agile and innovative, and who share our commitment to excellence, integrity and service.

Compensation and Benefits

To maintain a high-caliber, values-driven workforce that is committed to our culture, we strive to offer total rewards, including compensation, benefits and recognition programs that position our company as an employer of choice.

We design our compensation to be competitive in the markets in which we compete, and closely monitor industry trends and practices to ensure we are able to attract and retain the personnel who are critical to our success.

We also monitor internal pay equity to make sure that our compensation practices are fair and equitable across our organization.

Our company’s senior leaders have an opportunity to receive a portion of their compensation in company equity, and, subject to a cap, we match the contributions of all of our employees to our retirement savings plan that supports their long-term financial goals.

We also offer an employee stock purchase plan that enables eligible employees to acquire an ownership interest in our company at a discount to prevailing market

To support our employees’ health and well-being, we offer competitive medical, dental and vision plan benefits, as well as access to free resources such as fitness classes and an online wellness portal.

Our compensation is designed to be performance based and competitive in the markets in which we compete.

We closely monitor industry trends and practices to ensure we are able to attract and retain the personnel who are critical to our success.

We also monitor internal pay equity to help ensure that our compensation practices are fair and equitable across our organization.

Our company’s senior leaders have an opportunity to receive a portion of their compensation in Company equity, and, subject to a cap, we match the contributions of all of our employees to our retirement savings plan to help support their long-term financial goals.

We also offer an employee stock purchase plan that enables eligible employees to acquire an ownership interest in our company at a discount to prevailing market prices.

To help our employees feel supported, we offer an array of benefits intended to meet the diverse needs of our employees and their eligible dependents.

From healthcare to holidays, our aim is to help our employees enjoy happy and healthy lifestyles, while maintaining good work-life balance.

Our benefits, which are overseen by our Total Rewards team in partnership with our Corporate Communications, Finance, Payroll, and Human Capital teams, are available to all full-time employees and part-time employees working at least 30 hours per week.

Our benefits packages are comprehensive and available to over 99% of our workforce.

Our health and welfare benefits include, among other things:

medical coverage;

dental and vision coverage;

healthcare and dependent-care flexible spending accounts, Health Savings Accounts, the LPL Live Well employee wellbeing program, an Employee Assistance Program, including counseling and work/life services for employees and their families;

accident and critical illness coverage;

life and accidental death and dismemberment insurance, as well as short-term and long-term disability insurance;

and an on-site cafeteria.

Training and Development

We believe in our employees’ potential and provide training and development opportunities intended to maximize their performance and professional growth.

To ensure that new employees integrate into our culture and their daily work, we provide a robust new-hire experience, as well as extensive ongoing training for our employees to acquaint them with our business.

To ensure that new employees integrate into our culture and their daily work, we provide a robust new-hire experience, as well as extensive ongoing training for our employees to acquaint

them with our business.

We require all of our employees to complete courses in key regulatory areas, such as insider trading and anti-money laundering compliance, and we offer opportunities for professional development through training sessions and cross-departmental workshops.

In addition, we have a mentorship program that pairs younger employees with more experienced professionals, giving mentees access to experience, expertise and guidance as they chart their career paths.

In addition, we have a mentorship program that pairs newer employees with more experienced professionals, giving mentees access to experience, expertise and guidance as they chart their career paths.

Employee Safety

We aim to provide a safe, inclusive environment for our employees where they feel engaged in our business, supported in who they are and empowered to succeed.

We are committed to providing a workplace that is free from violence, harassment and other unsafe or disruptive conditions and require our personnel to attend regular training sessions and workshops on those topics.

To promote safety during the COVID-19 pandemic, starting in March 2020, we implemented a work-from-home policy that enables our employees to work remotely.

For our essential workers, we introduced additional hospital-grade disinfectants and modified workspaces in our office locations to ensure social distancing.

To promote safety during the COVID-19 pandemic, starting in March 2020, we expanded our work-from-home policy that enables our employees to work remotely.

For our essential workers, we introduced additional hospital-grade disinfectants and maximized outdoor air intake and air filtration.

We adopted a Temporary COVID-19 Sick Time Policy that provides all workers with up to 14 days of full pay if they are sick and/or have COVID, so they do not suffer wage loss due to an absence, and so they remain off-site when ill.

We also extended our Leaves of Absence protocol, which now offers personal leaves of absence to support employees with mental health concerns, daycare challenges, and/or distance learning for their children and dependents.

In addition, the LPL Financial Foundation established the LPL Care Fund, an employee-to-employee relief fund created to help employees facing unexpected and unavoidable financial hardships as a result of a natural disaster or epidemic by providing tax-free grants.

Diversity, Equity and Inclusion

We believe that well-being is more than just physical safety and that our employees should feel welcome and supported as who they are.

We seek to foster diversity and a culture of inclusivity through our employee resource groups, which are employee-run resource teams that focus on the needs, concerns and experiences of various diverse groups.

In addition, our recruitment efforts have focused on improving the diversity of our employee population, including through targeted outreach to and collaborations with organizations that serve diverse populations.

Continuous improvement is a pillar of our culture, and we regularly solicit our employees’ feedback on the effectiveness and quality of our support programs and their engagement with our business.

We use this feedback to improve our programming and inform decisions about our business.

In addition, we closely monitor employee turnover, both in the aggregate and in key subcategories such as executive leadership and diversity, to evaluate our effectiveness in retaining critical personnel.

We seek to foster diversity and a culture of inclusivity.

Our employee-led resource groups focus on the needs, concerns and experiences of various diverse groups and help leaders drive business outcomes.

In addition, our professional development and recruitment efforts have focused on improving the diversity of our employee population, including through targeted outreach to and collaborations with organizations that serve diverse populations.

Continuous improvement is a pillar of our culture, and we regularly solicit employee feedback on the effectiveness and quality of our support programs and their level of engagement with our business.

We use this feedback to improve our programs and processes and inform decisions about our business.

In addition, we closely monitor employee turnover, both in the aggregate and in key subcategories such as diversity and levels in the Company, to evaluate our effectiveness in retaining critical personnel.

We are committed to an inclusive work environment to encourage and cultivate diversity of thought and ideas within the Company.

We sponsor Employee Resource Groups to leverage the individual talents, perspectives and experiences of our employees to position us for continued growth and success.

The financial services industry is subject to extensive regulation by U.S.

federal, state, and international government agencies as well as various self-regulatory organizations.

We take an active leadership role in the development of the rules and regulations that govern our industry.

We seek to participate in the development of significant rules and regulations that govern our industry.

We have been investing in our compliance functions to monitor our adherence to the numerous legal and regulatory requirements applicable to our business.

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Broker-Dealer Regulation

LPL Financial is a broker-dealer registered with the SEC, a member of the Financial Industry Regulatory Authority (“FINRA”) and various other self-regulatory organizations and a participant in various clearing organizations including the Depository Trust Company, the National Securities Clearing Corporation and the Options Clearing Corporation.

LPL Financial is a broker-dealer registered with the SEC, a member of the Financial Industry Regulatory Authority (“FINRA”) and other self-regulatory organizations, and a participant in various clearing organizations including the Depository Trust Company, the National Securities Clearing Corporation, and the Options Clearing Corporation.

LPL Financial is registered as a broker-dealer in each of the 50 states, the District of Columbia, Puerto Rico, and the U.S.

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In many cases, our margin policies are more stringent than these rules.

In June 2019, the SEC adopted a new standard of conduct applicable to retail brokerage accounts (“Regulation BI”), with a compliance date of June 30, 2020.

Regulation BI requires that broker-dealers act in the best interest of retail customers without placing their own financial or other interests ahead of the customer’s and imposes new obligations related to disclosure, duty of care, conflicts of interest and compliance.

On June 30, 2020, the SEC’s new standard of conduct applicable to retail brokerage accounts (“Reg BI”) became applicable.

Reg BI requires that broker-dealers act in the best interest of retail customers without placing their own financial or other interests ahead of the customer’s and imposes new obligations related to disclosure, duty of care, conflicts of interest and compliance.

Certain state securities and insurance regulators have also adopted, proposed or are considering adopting similar laws and regulations.

Compliance with these provisions could require us to review our product and service offerings for potential changes and would likely result in increased compliance costs.

On December 18, 2020, the DOL finalized a new Prohibited Transaction Exemption 2020-02 (“PTE 2020-02”) that expands instances where an investment advice fiduciary can receive additional compensation on transactions as a result of fiduciary recommendation to a plan covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), IRA or other account covered by Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”).

Compliance with these provisions has increased our compliance costs.

Moreover, to the extent new rules or regulations affect the operations, financial condition, liquidity and capital requirements of financial institutions with which we do business, those institutions may seek to pass on increased costs, reduce their capacity to transact, or otherwise present inefficiencies in their interactions with us.

The ultimate impact that new rules or regulations will have on us, the financial industry and the economy cannot be known until such rules and regulations have been finalized, implemented and enforced.

In addition, it is unclear how and whether other regulators, including banking regulators and state securities and insurance regulators, may respond to or attempt to enforce similar issues addressed by Regulation BI.

As of June 30, 2020, we implemented new procedures in accordance with Regulation BI.

As industry compliance practices and regulatory approaches to guidance, examinations and enforcement continue to develop, the ultimate impact that these new rules or regulations will have on us, the financial industry and the economy cannot be known at this time.

It is unclear how and whether other regulators, including banking regulators, and state securities and insurance regulators, may respond to or attempt to enforce similar issues addressed by Reg BI and PTE 2020-02.

Investment Advisor Regulation

As investment advisors registered with the SEC, our subsidiaries LPL Financial and Fortigent, LLC are subject to the requirements of the Advisers Act, and the regulations promulgated thereunder, including examination by the SEC’s staff.

As investment advisors registered with the SEC, our subsidiaries LPL Financial, Allen & Company and Fortigent, LLC are subject to the requirements of the Advisers Act, and the regulations promulgated thereunder, including examination by the SEC’s staff.

Such requirements relate to, among other things, fiduciary duties to clients, performance fees, maintaining an effective compliance program, solicitation arrangements, conflicts of interest, advertising, limitations on agency cross and principal transactions between the advisor and advisory clients, recordkeeping and reporting requirements, disclosure requirements, and general anti-fraud provisions.

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Retirement Plan Services Regulation

Certain subsidiaries, including LPL Financial, PTC and LPLIA, are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), and to regulations promulgated under ERISA or the Code, insofar as the subsidiaries provide services with respect to plan clients, or otherwise deal with plan clients that are subject to ERISA or the Code.

Certain subsidiaries, including LPL Financial, LPL Employee Services, LLC, PTC, Fiduciary Trust Company of New Hampshire and LPLIA, are subject to ERISA, and Section 4975 of Code, and to regulations promulgated under ERISA or the Code, insofar as the subsidiaries provide services with respect to plan clients, or otherwise deal with plan clients, plan participants and retirement, health and educational accounts that are subject to ERISA or Section 4975 of the Code.

ERISA imposes certain duties on persons who are “fiduciaries” (as defined in Section 3(21) of ERISA) and prohibits certain transactions involving plans subject to ERISA and fiduciaries or other service providers to such plans.

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Section 4975 imposes excise taxes for violations of these prohibitions.

In December 2020, the DOL issued a new rule that expanded the definition of “fiduciary” under ERISA and Section 4975 of the Code, which we expect to result in legal, compliance, information technology and other costs and could lead to a greater risk of client lawsuits and enforcement activity by the DOL.

The effect of any future DOL regulation on our retirement plan business cannot be anticipated or planned for, but may have further impacts on our products and services and results of operations.

On June 29, 2020, the DOL officially reinstated its “five-part test” defining fiduciary “investment advice” under ERISA and the Code (the “Five-Part Test”).

Under this test, providing non-discretionary investment advice or recommendations with respect to a covered account can cause a person to be a fiduciary under ERISA and/or the Code if the advice is provided for a fee, on a regular basis, and subject to a mutual understanding that the advice will be personalized to the needs of the advice recipient and used as a primary basis for an investment decision.

This action formally implemented the Fifth Circuit’s decision in 2019 to vacate the DOL’s 2016 “fiduciary rule,” which had significantly expanded the scope of activities that could otherwise result in fiduciary status under ERISA and Section 4975 of the Code.

On December 18, 2020, the DOL finalized PTE 2020-02, providing broad exemptive relief for receiving variable or transaction-based compensation, and certain other “prohibited transactions,” in connection with fiduciary investment advice to investors using covered accounts.

The preamble to this exemption also included the DOL’s new and expanded interpretation of when providing a rollover recommendation (or potentially other recommendations) could result in fiduciary status under the historic Five-Part Test.

This new interpretation, as well as other guidance issued by the DOL in connection with this interpretation, is the subject of multiple litigations in federal district courts challenging the DOL’s authority to issue it.

We operate our business in compliance with a number of DOL prohibited transaction exemptions, including PTE 2020-02, where applicable.

However, as industry compliance practices and regulatory approaches to guidance, examinations and enforcement continue to develop, and the outcomes of litigation remain pending, the ultimate impact that these new rules or regulations will have on us, the financial industry and the economy cannot be known at this time.

In addition, it is unclear how and whether the DOL and other regulators, including the SEC, FINRA, banking regulators, and the state securities and insurance regulators may respond to, or enforce elements of the Five Part Test and PTE 2020-02 rules or interpretations.

The DOL issued a new exemption for “fiduciary” investment advice under ERISA and Section 4975 of the Code with a compliance date of February 1, 2022.

The DOL also signaled its intent to further amend the definition of “fiduciary” under ERISA and the Code and certain of its existing prohibited transaction exemptions, which we expect, if completed, to result in increased legal, compliance, information technology and other costs and could lead to a greater risk of client lawsuits and enforcement activity by the DOL and other regulators.

The effect of any future DOL regulations and changes on our retirement plan business cannot be anticipated or planned for but may have further impacts on our products and services and results of operations.

Commodities and Futures Regulation

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LPL Financial is also subject to the NFA ’ s financial requirements and is required to maintain net capital that is in excess of or equal to the greatest of the NFA’s minimum financial requirements.

Under these requirements, LPL Financial is currently required to maintain minimum net capital that is in excess of or equal to the minimum net capital calculated and required pursuant to the SEC ’ s Net Capital Rule.

The SEC, FINRA, the CFTC, and the NFA impose rules that require notification when net capital falls below certain predefined criteria.

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Anti-Money Laundering and Sanctions Compliance

The USA PATRIOT Act of 2001, which amended the Bank Secrecy Act, contains anti-money laundering and financial transparency laws and mandates the implementation of various regulations applicable to broker-dealers,

futures commission merchants and other financial services companies.

Financial institutions subject to these requirements generally must have an anti-money laundering program in place, which includes monitoring for and reporting suspicious activity, implementing specialized employee training programs, designating an anti-money laundering compliance officer, and annually conducting an independent test of the effectiveness of its program.

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Regulatory activity in the areas of privacy and data protection continues to grow worldwide and is generally being driven by the growth of technology and related concerns about the rapid and widespread dissemination and use of information and general concerns about the security of that information.

To the extent they are applicable to us, we must comply with federal and state information-related laws and regulations in the United States, including the Gramm-Leach-Bliley Act of 1999, SEC Regulation S-P, the Fair Credit Reporting Act of 1970, as amended, and Regulation S-ID, as well as the California Consumer Protection Act and further potential federal and state requirements.

Financial Information about Geographic Areas

Our revenues for the periods presented were derived from our operations in the United States.

To the extent they are applicable to us, we must comply with federal and state information-related laws and regulations in the United States, including the Gramm-Leach-Bliley Act of 1999, SEC Regulation S-P, the Fair Credit Reporting Act of 1970, as amended, and Regulation S-ID as well as the California Consumer Privacy Act and further potential federal and state requirements.

Access Overlay ® , BlazePortfolio ® , BranchNet ® , CLIENTWORKS ® , Fortigent ® , LPL ® , LPL Career Match ® , LPL Financial (& Design) ® , Manager Access Network ® , Manager Access Select ® , OMP ® and SPONSORWORKS ® are our registered trademarks, and ADVISORYWORLD, CLIENTWORKS CONNECTED, ALLEN & COMPANY OF FLORIDA, LLC, and THE PRIVATE TRUST COMPANY, N.A.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business