What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-20 · 102 added, 120 removed, 638 unchanged (26% of the section changed)

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Significant Events

Closed on the acquisition of Atria Wealth Solutions, Inc.

On February 13, 2024, the Company announced that it had entered into a definitive purchase agreement to acquire Atria, a wealth management solutions holding company that supports approximately 2,200 advisors and approximately 160 banks and credit unions which manage approximately $110 billion of brokerage and advisory assets.

The transaction closed on October 1, 2024, for an initial cash payment of approximately $859 million and includes potential contingent consideration of up to $330 million based on future conversion, retention, and other milestones.

Closed on the acquisition of Commonwealth Financial Network

On August 1, 2025, the Company closed on the acquisition of Commonwealth, a privately-held independent wealth management firm headquartered in Massachusetts, for a cash payment of approximately $2.7 billion.

As part of the transaction, Commonwealth will transition its advisory and brokerage assets to the Company’s platform.

The Company expects to complete the conversion in the fourth quarter of 2026.

Commonwealth's results were included in the Company's consolidated statements of income from August 1, 2025 through December 31, 2025 and consolidated statements of financial condition as of December 31, 2025.

See Note 4 - Acquisitions within the notes to the consolidated financial statements for additional information.

Completed transition of Prudential Advisors to the Company’s platform

On November 18, 2024, the Company announced the transition of Prudential Advisors, Prudential’s retail wealth management business, to LPL Enterprise, finalizing the launch of the strategic relationship that was first announced in 2023.

Completed debt refinancing and a $1.0 billion debt offering

On December 5, 2024, the Company entered into the ninth amendment to its amended and restated Credit Agreement to, among other changes, refinance its existing $1.0 billion senior secured Term Loan B (“Term Loan B”) facility with a new $1.0 billion Term Loan A (“Term Loan A”) facility due 2026, release the Company’s subsidiary guarantees under the Credit Agreement, release all of the security interests and liens granted by the Company to the collateral agent to secure the borrowing, and suspend certain restrictive covenants.

See Note 11 - Corporate Debt and Other Borrowings, Net , within the notes to the consolidated financial statements for further detail.

On May 20, 2024, the Company completed the issuance and sale of $500.0 million in aggregate principal amount of 5.700% senior unsecured notes due 2027 and $500.0 million in aggregate principal amount of 6.000% senior unsecured notes due 2034.

See Note 11 - Corporate Debt and Other Borrowings, Net , within the notes to the consolidated financial statements for further detail.

Executive appointments

On October 21, 2024, the Board confirmed Rich Steinmeier as Chief Executive Officer and elected him to the Board, and named Matthew Audette as President and Chief Financial Officer.

This followed the departure of Dan H.

Arnold, the Company’s former CEO.

Completed offerings of $2.75 billion of debt and $1.7 billion of equity

On February 26, 2025, the Company completed the issuance and sale of $750.0 million in aggregate principal amount of 5.200% senior unsecured notes due 2030 and $500.0 million in aggregate principal amount of 5.650% senior unsecured notes due 2035.

On April 3, 2025, the Company completed the issuance and sale of $500.0 million in aggregate principal amount of 4.900% senior unsecured notes due 2028, $500.0 million in aggregate principal amount of 5.150% senior unsecured notes due 2030 and $500.0 million in aggregate principal amount of 5.750% senior unsecured notes due 2035.

See Note 11 - Corporate Debt and Other Borrowings, Net within the notes to the consolidated financial statements for additional information.

On April 2, 2025, the Company completed a public offering of approximately 5.4 million shares of the Company’s common stock at an offering price of $320.00 per share.

See Note 15 - Stockholders’ Equity within the notes to the consolidated financial statements for additional information.

Executive Summary

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Total Organic Net New Assets $ 146.5 $ 140.7

As of and for the Years Ended December 31,

Organic advisory net new assets annualized growth (4)

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Total organic net new assets annualized growth (4)

As of and for the Years Ended December 31,

Client Cash Balances

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(1) Totals may not foot due to rounding.

(2) Consists of total advisory and brokerage assets under custody at the Company’s primary broker-dealer subsidiary, LPL Financial, as well as assets under custody of a third-party custodian related to Atria’s seven introducing broker-dealer subsidiaries.

(2) Consists of total advisory and brokerage assets under custody at the Company’s primary broker-dealer subsidiary, LPL Financial, as well as assets under custody of a third-party custodian related to CES and Atria’s introducing broker-dealer subsidiaries.

Please consult the “ Results of Operations” section for a tabular presentation of advisory and brokerage assets.

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(4) Calculated as annualized current period organic net new assets divided by preceding period assets in their respective categories of a dvisory assets or total advisory and brokerage assets.

(5) During the first quarter of 2024, the Company updated its definition of client cash account balances to exclude other client payables.

Prior period disclosures have been updated to reflect this change as applicable.

(5) Represents the amount of securities purchased less the amount of securities sold in client accounts custodied with LPL Financial.

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(7) The leverage ratio is a financial metric from our Credit Agreement and is calculated by dividing Credit Agreement net debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA.

Credit Agreement EBITDA, a non-GAAP financial measure, is

defined by the Credit Agreement as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions .

Credit Agreement EBITDA, a non-GAAP financial measure, is defined in the Credit Agreement as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions .

Please consult the “Debt and Related Covenants” section for more information.

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Interest expense on borrowings 403.4 274.2

Provision for income taxes 334.3 378.5

Depreciation and amortization 393.4 308.5

Provision for income taxes 286.5 334.3

Amortization of other intangibles 236.6 135.2

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EBITDA is defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles.

Adjusted EBITDA is defined as EBITDA plus acquisition costs, certain regulatory charges, losses on extinguishment of debt, and amounts related to the departure of the Company’s former CEO .

Adjusted EBITDA is defined as EBITDA plus acquisition costs excluding interest, certain regulatory charges, losses on extinguishment of debt, and amounts related to the departure of the Company’s former CEO .

The Company presents EBITDA and adjusted EBITDA because management believes that they can be useful financial metrics in understanding the Company’s earnings from operations.

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Regulatory charge (14)

Acquisition costs (17)

Acquisition costs excluding interest (16)

Departure of former CEO (17)

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employee share-based compensation;

and acquisition costs.

acquisition costs excluding interest and transition assistance loan amortization.

Management presents core G&A because it believes core G&A reflects the corporate expense categories over which management can generally exercise a measure of control, compared with expense items over which management either cannot exercise control, such as advisory and commission expense, or which management views as promotional expense necessary to support advisor growth and retention, including conferences and transition assistance.

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Employee deferred compensation

(4.8 ) (4.1 )

Loss on extinguishment of debt — (4.0)

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3,415.0 2,386.5

Acquisition costs excluding interest (16)

(732.0) (105.9)

Promotional (ongoing) (18)(19)

(317.2) (363.4)

Regulatory charges (15)

Transition assistance loan amortization (18)

(408.7) (265.5)

Employee share-based compensation (76.0) (89.0)

Acquisition costs (17)

Regulatory charges (14)

(29.0) (47.3)

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(12) See the “Liquidity and Capital Resources” section for additional information about Corporate Cash.

(14) Acquisition costs and other primarily include acquisition costs, costs incurred related to the integration of the strategic relationship with Prudential, a $26.4 million reduction related to the departure of the Company’s former Chief Executive Officer and related clawback of share-based compensation awards, an $18.0 million regulatory charge recognized during the three months ended September 30, 2024 reflecting the amount of a penalty proposed by the SEC as part of its civil investigation of the Company’s compliance with certain elements of the Company’s AML compliance program, and a $40.0 million regulatory charge recognized during the three months ended September 30, 2023 to reflect the amount of a penalty proposed by the SEC as part of its civil investigation of the Company's compliance with records preservation requirements for business-related electronic communications stored on personal devices that have not been approved by the Company.

(15) The Company recorded an $18.0 million regulatory charge for the year ended December 31, 2024 related to an investigation of the Company’s compliance with certain elements of the Company’s Anti-Money Laundering compliance program .

The Company recorded a $40.0 million regulatory charge for the year ended December 31, 2023 related to an investigation of the Company’s compliance with records preservation requirements for business-related electronic communications stored on personal devices or messaging platforms that have not been approved by the Company.

See Note 14 - Commitments and Contingencies , within the notes to the consolidated financial statements for additional information.

(13) Acquisition costs and other for the twelve months ending December 31, 2025 and 2024 primarily include costs related to acquisitions and the integration of the strategic relationship with Prudential.

Acquisition costs and other for the twelve months ending December 31, 2024 also includes a $26.4 million reduction related to the departure of the Company’s former Chief Executive Officer and an $18.0 million regulatory charge related to a penalty proposed by the SEC as part of its civil investigation of the Company’s compliance with certain elements of the Company’s anti-money laundering compliance program.

(14) The Company recorded an $18.0 million regulatory charge for the year ended December 31, 2024 related to a penalty proposed by the SEC as part of its civil investigation of the Company’s compliance with certain elements of the Company’s anti-money laundering compliance program.

(15) M&A accretion is an adjustment to reflect the annualized expected run rate EBITDA of an acquisition as permitted by the Credit Agreement for up to eight fiscal quarters following the close of such acquisition.

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Acquisition Costs

Fair value mark on contingent consideration

$ 41.7 $ 26.7

Professional services 20.9 10.0

Compensation and benefits (20)

$ 312.1 $ 35.0

Occupancy and equipment (20)

Promotional (19)

Professional services 41.7 20.9

Change in fair value of contingent consideration

Other 64.3 1.3

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(†) Totals may not foot due to rounding.

(18) The departure of the Company’s former CEO resulted in other income of $26.4 million during the three months and year ended December 31, 2024 related to the clawback of share-based compensation awards, which was offset by share-based compensation expense of $12.0 million related to the modification of certain stock options that were retained as part of the settlement agreement that the Company reached with the former CEO.

(17) The departure of the Company’s former CEO resulted in other income of $26.4 million during the year ended December 31, 2024 related to the clawback of share-based compensation awards, which was offset by share-based compensation expense of $12.0 million related to the modification of certain stock options that were retained as part of the settlement agreement that the Company reached with the former CEO.

See Note 16 - Share-Based Compensation, Employee Incentives and Benefit Plans within the notes to the consolidated financial statements for additional information.

(18) During the fourth quarter of 2025, the Company updated its definition of Promotional (ongoing) to exclude transition assistance loan amortization.

As a result, transition assistance loan amortization is now disclosed as a separate line in Core G&A.

Prior period disclosures have been updated to reflect these changes as applicable.

(19) Promotional (ongoing) for the years ended December 31, 2025 and December 31, 2024 includes $74.7 million and $46.6 million, respectively, of support costs related to full-time employees that are classified within compensation and benefits expense in the consolidated statements of income.

Promotional (ongoing) for the years ended December 31, 2025 and December 31, 2024 excludes $86.0 million and $7.0 million, respectively, of expenses incurred as a result of acquisitions, which are included in the Acquisition costs line item.

(20) The Company incurred $419.0 million of acquisition costs at the Commonwealth closing.

This primarily includes $228.4 million of costs related to transaction bonuses and the acceleration of unvested equity awards which were classified as Compensation and benefits and $190.1 million of costs related to certain contract termination fees which were classified as Occupancy and equipment.

Economic Overview and Impact of Financial Market Events

Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the financial markets in the United States.

According to the most recent estimate from the U.S.

Bureau of Economic Analysis, the U.S.

economy grew 2.8% in 2024, and at an annualized pace of 2.3% in the fourth quarter of 2024 after growing at an annualized pace of 3.1% in the third quarter of 2024.

economy added approximately 511,000 jobs in the fourth quarter of 2024, up from 477,000 in the third quarter.

The unemployment rate stabilized at approximately 4.2% in the latter half of 2024, up from 4.0% in the second quarter and 3.8% in the first quarter.

The equity markets rose modestly as risk appetite increased after the Federal Reserve (“Fed”) cut rates in mid-December by a quarter of a percentage point.

The S&P 500 total return index rose 25% for the year ended December 31, 2024, and the Bloomberg Barclays U.S.

Aggregate Bond Index fell 3.06% during the fourth quarter of 2024.

Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Fed policy.

During the fourth quarter of 2024, Fed policymakers reduced the target range for the federal funds rate to 4.25% to 4.50%.

The Federal Open Market Committee members may take into account the weakening job market, the inflation trajectory, and global financial conditions as it evaluates whether to pursue faster easing in monetary policy.

The equity markets rose during the year ended December 31, 2025, reaching new heights, with the S&P 500 and Russell 2000 small cap index rising 17.9% and 11.3%, respectively.

Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Federal Reserve (“Fed”) policy.

During the fourth quarter of 2025, Fed policymakers lowered the target federal funds rate to a range of 3.50% to 3.75%.

To the extent they pursue faster easing in monetary policy, the Federal Open Market Committee members will continue to take into account the evolving economic outlook and balance of risks.

Please consult the “Risks Related to Our Business and Industry” section within Part I, “Item 1A.

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Promotional 737,197 589,339 25 %

Depreciation and amortization 308,527 246,994 25 %

Occupancy and equipment 577,224 281,210 105 %

Interest expense on borrowings 403,406 274,181 47 %

Depreciation and amortization 393,434 308,527 28 %

Amortization of other intangibles 236,578 135,234 75 %

Brokerage, clearing and exchange 127,941 105,984 21 %

Professional services 218,738 93,729 133 %

Brokerage, clearing and exchange 178,133 127,941 39 %

Communications and data processing 85,846 75,838 13 %

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(2) Market impact is the difference between the beginning and ending asset balance less the net new asset amounts, representing the implied growth or decline in asset balances due to market changes over the same period of time.

Advisory revenue increased during the year ended December 31, 2024 as compared to the same period in 2023.

The increase during the year ended December 31, 2024 was primarily driven by continued organic growth, which increased advisory asset balances during the period, and an increase in the market impact as compared to the prior period.

Advisory revenue increased during the year ended December 31, 2025 as compared to the same period in 2024, primarily due to assets and related revenue from the acquisition of Commonwealth, an increase in advisory asset balances and related market impacts.

We generate two types of commission revenue:

(1) sales-based commissions that are recognized at the point of sale on the trade date and are based on a percentage of an investment product’s current market value at the time of purchase and (2) trailing commissions that are recognized over time as earned and are generally based on the market value of investment holdings in trail-eligible assets.

Sales-based commission revenue, which occurs when

clients trade securities or purchase various types of investment products, primarily represents gross commissions generated by our advisors and can vary from period to period based on the overall economic environment, number of trading days in the reporting period and investment activity of our advisors’ clients.

Sales-based commission revenue, which occurs when clients trade securities or purchase various types of investment products, primarily represents gross commissions

generated by our advisors and can vary from period to period based on the overall economic environment, number of trading days in the reporting period and investment activity of our advisors’ clients.

We earn trailing commission revenue primarily on mutual funds and variable annuities held by clients of our advisors.

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$ 4,505,072 $ 3,305,487 $ 1,199,585 36 %

The increase in trailing commission revenue in 2024 compared to 2023 was primarily driven by increased sales of mutual funds and annuities along with positive market conditions during the period.

The increase in sales-based commission revenue in 2024 compared to 2023 was primarily driven by an increase in sales of annuities and fixed income securities as a result of the higher interest rate environment for most of the year, as well as increases in sales of mutual funds and equities.

The increase in sales-based commission revenue in 2025 compared to 2024 was primarily driven by an increase in sales of annuities due to increased activity with Prudential.

The increase in trailing commission revenue in 2025 compared to 2024 was primarily due to continued growth in trail earning assets held by customers.

The following table summarizes activity impacting brokerage assets for the periods presented (in billions):

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Networking revenue on brokerage assets is correlated to the number of positions we administer and is paid to us by mutual fund product sponsors and annuity product manufacturers.

Asset-based revenue for the year ended December 31, 2024 increased by $120.0 million compared to 2023, primarily due to an increase in other asset-based revenue, partially offset by a decrease in client cash revenue.

Other asset-based revenue increased by $203.3 million compared to 2023 due to increases in asset balances in recordkeeping and sponsorship programs.

Client cash revenue for the year ended December 31, 2024 decreased $83.3 million compared to 2023 primarily due to lower average client cash balances.

For the year ended December 31, 2024, our average client cash balances decreased to $44.5 billion compared to $48.8 billion for the year ended December 31, 2023.

Asset-based revenue for the year ended December 31, 2025 increased by $498.2 million compared to 2024, primarily due to an increase in other asset-based revenue.

Other asset-based revenue increased by $267.0 million compared to 2024 primarily due to increases in recordkeeping and sponsorship program revenue.

Client cash revenue for the year ended December 31, 2025 increased $231.3 million compared to 2024 primarily due to higher average client cash balances.

For the year ended December 31, 2025, our average client cash balances increased to $50.9 billion compared to $44.5 billion for the year ended December 31, 2024.

Service and Fee

Service and fee revenue is generated from advisor and retail investor services, including technology, insurance, conferences, licensing, business services and planning and advice services, IRA custodian and other client account fees.

We charge separate fees to RIAs on our Independent RIA advisory platform for technology, clearing,

administrative, oversight and custody services, which may vary.

We charge separate fees to RIAs on our Independent RIA advisory platform for technology, clearing, administrative, oversight and custody services, which may vary.

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

Service and fee revenue for the year ended December 31, 2024 increased by $43.6 million compared to 2023, primarily due to increases in IRA custodian fees, trading, licensing, and resource fees, and error and omission insurance fees.

Service and fee revenue for the year ended December 31, 2025 increased by $100.4 million compared to 2024, primarily due to increases in custodian fees, trading, licensing, conference services and registration fees.

Transaction revenue includes transaction charges generated in both advisory and brokerage accounts from mutual funds, exchange-traded funds and fixed income products.

Transaction revenue for the year ended December 31, 2024 increased by $36.3 million compared to 2023, primarily due to increases in the volume of transactions for structured products, partially offset by a decrease in charges for managed assets.

Transaction revenue for the year ended December 31, 2025 increased by $34.5 million compared to 2024, primarily due to increases in the number of transactions and transaction charges for managed assets.

Interest Income, net

Interest income is primarily generated from bank deposits, client margin loans, client cash account (“CCA”) balances segregated under federal or other regulations and advisor repayable loans.

Interest income, net for the year ended December 31, 2024 increased compared to 2023, primarily due to increases in average daily balances of bank deposits, short-term U.S.

treasury bills and margin loans.

Interest income, net for the year ended December 31, 2025 increased by $44.0 million compared to 2024, primarily due to interest earned on overnight investment accounts driven by an increase in average daily balances.

Other revenue primarily includes unrealized gains and losses on assets held by us in our advisor non-qualified deferred compensation plan and model research portfolios and other miscellaneous revenue, which is not generated from contracts with customers.

Other revenue for the year ended December 31, 2024 increased by $25.1 million compared to 2023, primarily due to other income recognized as a result of the clawback of share-based compensation awards related to the departure of the Company’s former CEO.

This increase was partially offset by a net decrease in realized and unrealized gains on assets held in our advisor non-qualified deferred compensation plan, which are based on the market performance of the underlying investment allocations chosen by advisors in the plan, and a related increase in dividend income on assets held in our advisor non-qualified deferred compensation plan.

Other revenue for the year ended December 31, 2025 increased by $28.2 million compared to 2024, primarily due to increases in dividend income on assets held in our advisor non-qualified deferred compensation plan.

Advisory and Commission

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Payout rate 87.44 % 87.34 % 10 bps

Our payo ut r ate increased fo r the year ended December 31, 2024 compared to 2023, primar ily due to the effect of acquisitions during the year and changes in product mix.

Our payout rate increased for the year ended December 31, 2025 compared to 2024, primarily due to higher payouts resulting from our acquisition of Commonwealth and strategic relationship with Prudential.

Compensation and Benefits

Compensation and benefits expense includes salaries, wages, benefits, share-based compensation and related taxes for our employees, as well as compensation for temporary workers and contractors.

The following table sets forth our average number of employees for the periods presented :

Years Ended December 31,

The following table sets forth our number of employees for the periods presented :

2025 2024 % Change

Average number of employees 8,975 7,669 17%

Compensation and benefits expense for the year ended December 31, 2024 increased by $157.0 million compared to 2023, primarily due to an increase in headcount.

Number of employees

10,099 9,032 12%

Compensation and benefits expense for the year ended December 31, 2025 increased by $449.3 million, compared to 2024, primarily due to acquisition related expenses incurred in conjunction with the Commonwealth transaction as well as an increase in headcount.

See Note 4 - Acquisitions , within the notes to the consolidated financial statements for additional information.

Promotional expense includes business development costs related to advisor recruitment and retention, costs related to hosting certain advisory conferences that serve as training, sales and marketing events, and other costs that support advisor business growth.

Promotional expense for the year ended December 31, 2024 increased by $130.1 million compared to 2023, primarily due to increases in large bank integration labor and increases in recruited assets and advisors that led to higher costs to support transition assistance and retention.

Depreciation and Amortization

Depreciation and amortization expense relates to the use of property and equipment, which includes internally developed software, hardware, leasehold improvements and other equipment.

Depreciation and amortization expense for the year ended December 31, 2024 increased by $61.5 million compared to 2023, primarily due to our continued investment in technology to support the integrations, enhance our advisor platform and experience, and support onboarding of institutions.

Promotional expense for the year ended December 31, 2025 increased by

$147.9 million compared to 2024, primarily due to increases in recruited assets and advisors that led to higher costs to support transition assistance and retention, partially offset by decreases in large institutional onboarding costs.

Occupancy and Equipment

Occupancy and equipment expense includes the costs of leasing and maintaining our office spaces, software licensing and maintenance costs, and maintenance expense on computer hardware and other equipment.

Occupancy and equipment expense for the year ended December 31, 2024 increased by $32.6 million compared to 2023, primarily due to increased expense related to software licenses and our technology portfolio.

Occupancy and equipment expense for the year ended December 31, 2025 increased by $296.0 million compared to 2024, primarily due to acquisition-related expenses incurred in conjunction with the Commonwealth transaction.

See Note 4 - Acquisitions , within the notes to the consolidated financial statements for additional information.

Interest Expense on Borrowings

Interest expense on borrowings includes the interest associated with the Company’s Notes, Term Loan A, Term Loan B (together with our Term Loan A, the “Term Loans”) and revolving credit facilities;

Interest expense on borrowings includes the interest associated with the Company’s Notes, Term Loan A , and revolving credit facilities;

amortization of debt issuance costs;

and fees associated with the Company’s revolving lines of credit.

Interest expense on borrowings for the year ended December 31, 2024 increased by $87.4 million compared to 2023, primarily due to higher outstanding debt balances on our Term Loans, Notes, and revolving credit facilities.

Interest expense on borrowings for the year ended December 31, 2025 increased by $129.2 million compared to 2024, primarily due to the issuance of $1.0 billion senior unsecured notes in May 2024, $1.25 billion senior unsecured notes in February 2025 and $1.5 billion senior unsecured notes in April 2025.

See Note 11 - Corporate Debt and Other Borrowings, Net , within the notes to the consolidated financial statements for further detail.

Depreciation and Amortization

Depreciation and amortization expense relates to the use of property and equipment, which includes internally developed software, hardware, leasehold improvements and other equipment.

Depreciation and amortization expense for the year ended December 31, 2025 increased by $84.9 million compared to 2024, primarily due to our continued investment in technology to support integrations, enhance our advisor platform and experience, and support onboarding of institutions.

Amortization of Other Intangibles

Amortization of other intangibles represents the benefits received for the use of long-lived intangible assets established through our acquisitions.

Amortization of other intangibles for the year ended December 31, 2024 increased by $28.0 million compared to 2023, primarily due to increases in intangible assets resulting from acquisitions.

Amortization of other intangibles for the year ended December 31, 2025 increased by $101.3 million compared to 2024, primarily due to additional intangible assets acquired during the period.

See Note 4 - Acquisitions and Note 9 - Goodwill and Other Intangibles, Net, within the notes to the consolidated financial statements for further detail.

Professional Services

Professional services includes costs paid to outside firms for assistance with legal, accounting, technology, regulatory, marketing, and general corporate matters, as well as non-capitalized costs related to service and technology enhancements.

Professional services increased by $125.0 million compared to 2024, primarily due to technology enhancement projects and acquisition-related support.

Brokerage, Clearing and Exchange

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Brokerage, clearing and exchange expense for the year ended December 31, 2025 increased by $50.2 million compared to 2024, primarily due to an increase in the volume of trades and expenses for quote services.

Professional Services

Professional services increased by $21.1 million compared to 2023, primarily due to technology enhancement projects and acquisition related support .

Other Expense

Other expense includes the costs of the investigation, settlement and resolution of regulatory matters (including customer restitution and remediation), licensing fees, insurance, broker-dealer regulatory fees, travel-related expenses, fair value adjustments to contingent consideration liabilities, and other miscellaneous expenses.

Other expense depends in part on the size and timing of resolving regulatory matters and the availability of self-insurance coverage, which depends in part on the amount and timing of resolving historical claims.

Other expense for the year

ended December 31, 2024 increased by $9.1 million compared to 2023, primarily due to an increase in fair value adjustments to our contingent consideration liabilities, increases in insurance and licensing fees, and a loss on extinguishment of debt which were partially offset by decreases in regulatory charges.

See Note 4 - Acquisitions, Note 11 - Corporate Debt and Other Borrowings, Net , and Note 14 - Commitments and Contingencies , within the notes to the consolidated financial statements for further detail.

Provision for Income Taxes

Our effective income tax rate was 24.9% and 24.0% for the years ended December 31, 2025 and 2024, respectively.

The decrease in our effective tax rate for the year ended December 31, 2024 was primarily due to a reduction in non-deductible expenses, a release of uncertain tax positions and additional tax benefits for the vesting and exercise of share-based compensation.

See Note 14 - Commitments and Contingencies , within the notes to the consolidated financial statements for further detail.

The increase in our effective tax rate for the year ended December 31, 2025 was primarily due to a decrease in tax benefits for share-based compensation and an increase in reserves for uncertain tax positions.

See Note 13 - Income Taxes , within the notes to the consolidated financial statements for further detail.

Liquidity and Capital Resources

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Subject to regulatory approval or notification, capital generated by regulated subsidiaries can be distributed to the Parent to the extent the capital levels exceed regulatory requirements, Credit Agreement requirements, and internal capital thresholds.

During the years ended December 31, 2024 and 2023, LPL Financial paid dividends of $460.0 million and $710.0 million to the Parent, respectively.

During the years ended December 31, 2025 and 2024, LPL Financial paid dividends of $1.2 billion and $460.0 million to the Parent, respectively.

We believe Corporate Cash, a component of cash and equivalents, is a useful measure of the Parent’s liquidity as it represents the capital available for use in excess of the amount we are required to maintain pursuant to the Credit Agreement.

Corporate Cash is the sum of cash and equivalents from the following:

(1) cash and equivalents held at the Parent, (2) cash and equivalents held at regulated subsidiaries as defined by the Credit Agreement, which include LPL Financial, LPL Enterprise, PTC and Atria’s introducing broker-dealer subsidiaries, in excess of the capital requirements of the Credit Agreement and (3) cash and equivalents held at non-regulated subsidiaries.

(1) cash and equivalents held at the Parent, (2) cash and equivalents held at regulated subsidiaries as defined by the Credit Agreement, which include LPL Financial, LPL Enterprise, PTC, CES, and certain of Atria’s introducing broker-dealer subsidiaries, in excess of the capital requirements of the Credit Agreement and (3) cash and equivalents held at non-regulated subsidiaries.

The following table presents the components of Corporate Cash (in thousands):

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Corporate Cash $ 469,715 $ 479,438

Corporate Cash is monitored as part of our liquidity risk management strategy, and we target maintaining approximately $200 million in Corporate Cash to meet our near-term corporate debt obligations.

Corporate cash increased during the year ended December 31, 2024 primarily as a result of cash provided by operating activities and proceeds received from our $1.0 billion debt issuance in May 2024 offset by the repayment of balances outstanding on our senior unsecured revolving credit facility and the acquisition of Atria, which was funded by a combination of Corporate Cash on hand and borrowings under our senior unsecured revolving credit facility.

See Note 4 - Acquisitions and Note 11 - Corporate Debt and Other Borrowings, Net within the notes to the consolidated financial statements for additional information.

Corporate Cash is monitored as part of our liquidity risk management strategy, and we target maintaining approximately $200 million of Corporate Cash to meet our near-term corporate debt obligations.

During the year ended December 31, 2024, Corporate Cash also included cash held at certain of Atria’s introducing broker-dealer subsidiaries.

See Note 4 - Acquisitions , Note 11 - Corporate Debt and Other Borrowings, Net , and Note 15 - Stockholders’ Equity within the notes to the consolidated financial statements for additional information.

We actively monitor changes to our liquidity needs caused by general business volumes and price volatility, including higher margin requirements of clearing corporations and exchanges, and stress scenarios involving a sustained market downturn and the persistence of current interest rates.

We believe that based on current levels of operations and anticipated growth, our cash flow from operations, together with other available sources of funds, which include five uncommitted lines of credit, the revolving credit facility established through our Credit Agreement and the committed revolving credit facility of LPL Financial, will provide us with adequate liquidity to satisfy our short-term and long-term working capital needs, the payment of all of our obligations and the funding of anticipated capital expenditures.

short-term and long-term working capital needs, the payment of all of our obligations and the funding of anticipated capital expenditures.

We regularly evaluate our existing indebtedness, including potential issuances and refinancing opportunities, based on a number of factors, including our capital requirements, future prospects, contractual restrictions, the availability of refinancing on attractive terms and general market conditions.

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Our current capital deployment framework remains focused on investing in organic growth first, pursuing acquisitions where appropriate and returning excess capital to stockholders.

We paused share repurchases following the announcement of the Atria transaction in the first quarter of 2024 and resumed repurchases in the fourth quarter of 2024.

The Company repurchased 289,371 shares for a total of $100.0 million for the year ended December 31, 2025.

As of December 31, 2025, we had $630.0 million remaining under our existing repurchase program.

We paused share repurchases in anticipation of the Commonwealth acquisition.

Given the closing of the transaction, we expect to evaluate resuming share repurchases, consistent with our existing capital management strategy.

The timing and amount of share repurchases, if any, is determined at our discretion within the constraints of our Credit Agreement, applicable laws and consideration of our general liquidity needs.

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These sources include cash and equivalents on hand, the committed revolving credit facility of LPL Financial and proceeds from repledging or selling client securities in margin accounts.

When an advisor’s client purchases securities on margin or uses securities as collateral to borrow from us on margin, we are permitted, pursuant to the applicable securities industry regulations, to repledge, loan or sell securities, up to 140% of the client’s margin loan balance, that collateralize those margin accounts.

advisor’s client purchases securities on margin or uses securities as collateral to borrow from us on margin, we are permitted, pursuant to the applicable securities industry regulations, to repledge, loan or sell securities, up to 140% of the client’s margin loan balance, that collateralize those margin accounts.

Our other working capital needs are primarily related to loans we are making to advisors and timing associated with receivables and payables, which we have satisfied in the past from internally generated cash flows.

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Currently, the highest NFA requirement is the minimum net capital calculated and required pursuant to the SEC’s Uniform Net Capital Rule.

Our subsidiary PTC is also subject to various regulatory capital requirements.

Failure to meet the respective minimum capital requirements can result in certain mandatory and discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on PTC’s operations.

As of December 31, 2024, the Company’s regulated subsidiaries, including LPL Financial, LPL Enterprise, Atria’s seven introducing broker-dealer subsidiaries, and PTC, met all capital adequacy requirements to which they were subject.

Our other regulated subsidiaries, including LPL Enterprise, CES, and PTC, are also subject to various regulatory capital requirements.

As of December 31, 2025, the Company’s other regulated subsidiaries met all capital adequacy requirements to which they were subject.

Supplemental Guarantor Financial Information

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The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to:

• incur additional indebtedness or issue disqualified stock or preferred stock;

• declare dividends, or other distributions to stockholders;

• repurchase equity interests;

• redeem indebtedness that is subordinated in right of payment to certain debt instruments;

• make investments or acquisitions;

• create liens;

• sell assets;

• guarantee indebtedness;

• engage in certain transactions with affiliates;

• enter into agreements that restrict dividends or other payments from subsidiaries;

• consolidate, merge or transfer all or substantially all of our assets.

Our Credit Agreement allows us to pay dividends and distributions or repurchase our common stock only when certain conditions are met.

In addition, our revolving credit facility requires us to be in compliance with certain financial covenants as of the last day of each fiscal quarter.

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$ 248,827 $ 48,174 $ 96,767 $ 46,869 $ 57,017

Finance leases (1)

Financing obligations (1)

108,433 1,540 3,929 5,210 97,754

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____________________

(1) Represents future payments under operating or finance leases, respectively.

(1) Represents future payments under operating leases or financing obligations liabilities, respectively.

See Note 12 - Leases, within the notes to the consolidated financial statements for further detail.

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It defines the overall level and types of risk we are prepared to accept in order to achieve our strategic objectives and business plan.

This statement categorizes risks into strategic, technology, regulatory compliance, operational, liquidity, reputational, credit, interest rate risk, and market risks.

This statement categorizes risks into strategic, technology, regulatory compliance, operational, liquidity, reputational, credit, interest rate, and market risks.

Additionally, this framework aims to ensure policies and procedures are in place and appropriately designed to identify and manage risk at appropriate levels throughout the Company and within various departments.

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• First Line of Defense :

This consists of operational management, which owns and manages the risks within their business unit.

They are responsible for implementing controls and managing day-to-day risks.

This consists of business management, which owns and operates processes and manages day-to-day risks.

Responsibilities include identifying and assessing risks, implementing controls, monitoring compliance, and escalating issues or breaches.

• Second Line of Defense :

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and reviews Internal Audit reports on the assessment of the Company’s control environment.

The ARC reports to the Board on a regular basis and coordinates with the Board and other Board committees with respect to the oversight of risk management and risk assessment guidelines.

The ARC reports to the Board on a regular basis and coordinates with the

Board and other Board committees with respect to the oversight of risk management and risk assessment guidelines.

Compensation and Human Resources Committee of the Board

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The ROC, a management committee chaired by the chief risk officer, oversees our risk management activities, including those of our subsidiaries.

The ROC, which generally meets once every two months, with additional ad hoc meetings as necessary.

The members of the ROC include certain Managing Directors of LPL Financial, as well as other members of LPL Financial’s senior management team who serve as ex-officio/non-voting members and represent key control areas of the Company.

The ROC generally meets once every two months, with additional ad hoc meetings as necessary.

The members of the ROC include certain Group Managing Directors of LPL Financial, as well as other members of LPL Financial’s senior management team who serve as ex-officio/non-voting members and represent key control areas of the Company.

Participation in the ROC by senior officers is intended to ensure that the ROC covers the key risk areas of the Company, including its subsidiaries.

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It also examines certain new and complex products and business arrangements, transactions with significant risk elements and identified emerging risks.

The chief risk officer provides updates on pertinent ROC discussions to the Audit and Risk Committee on a regular basis and, if necessary or requested, to the Board.

The chief risk officer provides updates on pertinent ROC discussions to the ARC on a regular basis and, if necessary or requested, to the Board.

Subcommittees of the Risk Oversight Committee

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risks introduced by third-party vendors and/or counterparties;

issues stemming from the use of artificial intelligence;

risks introduced by third-party financial institutions that we do not control, such as clearing agents, securities exchanges, clearing houses and other financial intermediaries, including any interruption in their operations;

issues stemming from the use of AI, including misuse by advisors or third-party vendors or the use of AI by malicious third parties;

and inadequate data governance, which could result in data breaches, loss, lack of compliance, or unauthorized access.

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This contingent consideration is remeasured at its fair value at each subsequent reporting date until the contingency is resolved.

Any changes in fair value are recognized in other expense in the consolidated statements of operations.

Any changes in fair value are recognized in other expense in the consolidated statements of income.

The Company does not recognize a liability for contingent payments in acquisitions that are accounted for as asset acquisitions as the amounts to be paid will be uncertain until a future measurement date.

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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 7. Management’s Discussion and Analysis