LPL Financial (LPLA) Q1 2026 Earnings Transcript

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DATE

Thursday, April 30, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Managing Director, Business and Platform Solutions — Richard Steinmeier
• Chief Financial Officer — Matthew Jon Audette
• Operator

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TAKEAWAYS

• Total Client Assets -- $2.3 trillion, reflecting organic growth that was more than offset by lower equity markets.
• Organic Net New Assets -- $21 billion, representing a 4% annualized growth rate.
• Adjusted EPS -- Record $5.60, up 9% year over year.
• Adjusted Pretax Margin -- Approximately 38%, aided by expense discipline and organic growth.
• Gross Profit -- $1.593 billion, a $51 million sequential increase from Q4 2025.
• Commission and Advisory Fees Net of Payout -- $487 million, an increase of $33 million from Q4 2025.
• Payout Rate -- 87.2%, down 80 basis points from Q4 2025 due to the seasonal reset of the production bonus; guided to rise by approximately 50 basis points in Q2 2026.
• Client Cash Revenue -- $460 million, up $4 million sequentially, as increased average cash balances outweighed the negative impact of lower short-term rates.
• Client Cash Balances -- Ended at $59 billion, a $2 billion decline, mainly from record net buying activity.
• Insured Cash Account (ICA) Portfolio Fixed-Rate Mix -- Approximately 60%, within target range of 50%-75%.
• ICA Yield -- 336 basis points, down 5 basis points sequentially due to the full-quarter effect of Q4 2025 rate cuts; expected to be roughly flat in Q2 2026.
• Service and Fee Revenue -- $211 million, up $30 million from Q4 2025, driven by previous fee changes; projected to rise by about $5 million in Q2 2026 as direct mutual fund fees take effect.
• Transaction Revenue -- $81 million, an increase of $6 million versus Q4 2025, attributed to record trading volumes; guidance is for a roughly $5 million sequential decline next quarter due to normalization of trading activity.
• Other Revenue -- $4 million; expected to average $6 million per quarter going forward.
• Advisor Asset Retention Rate -- 98% for the quarter, 97% over the last 12 months.
• Total Recruited Assets -- $17 billion, with approximately $15 billion from traditional channels and roughly $2 billion from expanded affiliation models (Strategic Wealth, Independent Employee, enhanced RIA offering).
• Core G&A Expense -- $532 million, below the low end of guidance; adjusted full-year outlook now $2.155 billion-$2.19 billion, with Q2 projected at $540 million-$560 million.
• TA Loan Amortization -- $136 million, up $3 million from Q4 2025; expected to rise by about $10 million in Q2 2026 due to recruiting activity.
• Promotional Expense -- $76 million, flat sequentially; forecasted to grow $5 million in Q2 2026 based on planned conference activity.
• Share-Based Compensation Expense -- $22 million; expected to increase by a few million sequentially in Q2 2026.
• Tax Rate -- About 26.5%, expected to remain stable in Q2 2026.
• Leverage Ratio -- 1.86x, near the midpoint of the company's target range.
• Corporate Cash -- $567 million, a $98 million increase from Q4 2025.
• Share Repurchases -- Buybacks were resumed in early April; $125 million planned for Q2 2026.
• Commonwealth Integration Asset Retention -- Mid-80% range currently, tracking toward 90% target.
• Commonwealth Estimated Run-Rate EBITDA -- Revised to approximately $410 million due to market-driven asset declines; would increase to $425 million if asset values recover to earlier levels.
• Headcount -- Net decline of about 90 in Q1 due to effects tied to Commonwealth integration; underlying headcount otherwise stable or positive.

SUMMARY

Management highlighted renewed organic growth momentum with record recruiting pipelines and ongoing investments to support advisers, while operational efficiency improvements drove a reduction in full-year G&A expense guidance. The successful integration of recent acquisitions, resumption of share buybacks, and stable advisor and institutional retention rates all support continued capital deployment flexibility. Platform enhancements, including AI-driven efficiency gains, are expected to reinforce adviser experience and contribute to future scalability. The business model remains resilient against potential industry changes, with leaders emphasizing strategic flexibility to mitigate future pressure on cash-sweep economics. Core strategic clarity focused on sustaining mid- to high-single-digit organic growth rates, ongoing M&A discipline, and steadily increasing platform capabilities to capture adviser movement and institutional opportunities.

• Record gross profit and organic net new assets were achieved despite equity market declines impacting total asset balances.
• "We are creating capacity to reinvest in growth while driving stronger operating leverage," according to management, underlining near-term and longer-term margin priorities.
• April dynamics saw client cash fall by $4.5 billion, with seasonal factors (advisory fee collection and tax payments) responsible for about $5.5 billion of that decrease; outside these factors, cash balances rose by $1 billion and organic growth improved, indicating ongoing net inflows beyond one-off items.
• The payout rate is set to rise in Q2 driven by seasonal production bonuses, while long-term increases are tied to asset mix shifts associated with higher-AUM advisers joining via acquisition.
• AI and workflow automation are credited for meaningful improvements in process efficiency, lowering operational costs—management pointed to cycle time reductions up to 90% on specific manual processes—while also strengthening cyber defenses and compliance through automation.
• Advisers' average cash allocations per account remain historically low at $5,000, with minimal further risk from adviser-led cash sorting via AI, according to leadership commentary.
• The Commonwealth integration remains on track for fourth-quarter onboarding, with financial guidance solely impacted by quarter-end market asset levels; synergy assumptions are unchanged, focusing primarily on platform migration benefits.
• "We have flexibility in how we price, how we package, and how we deliver value across the platform," management asserted, as work continues on alternatives to cash-sweep dependence if needed.
• The institutional segment adds a secondary growth driver beyond adviser movement, supported by recent successful partnerships and a developing pipeline across banks, insurers, and product manufacturers.

INDUSTRY GLOSSARY

• ICA (Insured Cash Account): A cash sweep program that places client cash in FDIC-insured bank accounts, generating yield for both clients and the platform provider.
• TA Loan Amortization: The periodic expense recognized from upfront transition assistance loans provided to advisers when they join the firm, typically amortized over the loan term.
• Core G&A: General and administrative operating expenses, excluding variable items such as commissions or payout, used to assess controllable/non-compensation costs.
• Payout Rate: The percentage of revenues paid out to financial advisers, net of production bonuses and mix impacts from adviser assets and channels.
• NNA (Net New Assets): Net inflows or outflows of client assets apart from market movements, serving as an indicator of underlying business momentum.

Full Conference Call Transcript

Richard Steinmeier: Thanks, Operator, and thank you to everyone for joining our call. It is a pleasure to speak with you again. It has been a strong start to the year for LPL Financial Holdings Inc. We delivered solid organic asset growth and continued to progress our build and build our recruiting pipeline. We advanced the operational work in preparation to onboard Commonwealth Financial Network, and we made meaningful progress driving improved operating leverage. We accomplished all this against the backdrop of rising macroeconomic and geopolitical uncertainty, and an increasingly loud and often speculative narrative around the role of artificial intelligence in wealth management, whether enabler or disruptor.

It is periods like this that serve as a reminder of the value of professional advice, the importance of our responsibility to support our advisers and institutions, and the strength and resiliency of our business model. Now let us turn to our Q1 results. In the quarter, total assets decreased to $2.3 trillion as organic growth was more than offset by lower equity markets. We attracted organic net new assets of $21 billion, representing a 4% annualized growth rate. Our first quarter business results led to strong financial performance, with record adjusted EPS of $5.60, an increase of 9% from a year ago.

Next, let us turn to our strategic plan and how we are progressing against our organic and inorganic initiatives. Our vision is clear. We aspire to be the best firm in wealth management. To do that, we remain focused on three key priorities. One, maintaining the client centricity the firm was built upon. Two, empowering our employees to deliver exceptionally for our advisers and their clients. And three, delivering improved operating leverage. Effectively executing on these focus areas will help us sustain our industry-leading growth while advancing the efficiency and effectiveness of our model. With that as context, let us review a few highlights of our business growth.

In Q1, recruited assets improved to $17 billion, a solid outcome in what is typically our slowest quarter of the year. Throughout Q1, we advanced opportunities into the later stages of our recruiting pipeline while pushing the overall pipeline to record levels. We continue to expect the pull-through to improve over the course of the year, supporting improved organic growth. In our traditional markets, we added approximately $15 billion in assets as we improved on our already industry-leading capture rates of advisers in motion during Q1. With respect to our expanded affiliation models—Strategic Wealth, Independent Employee, and our enhanced RIA offering—we delivered another solid quarter, recruiting roughly $2 billion in assets.

Turning to overall asset retention, it was 98% for Q1 and 97% over the last 12 months. This is a testament to our continued efforts to enhance the adviser experience through the delivery of new capabilities and technology and the evolution of our service and operations functions. As for Commonwealth, the integration is progressing well. Advisors are completing their diligence, and as they do, we are pleased that many are deciding to stay with Commonwealth. In terms of asset retention, we are in the mid-80s today, and we continue to track towards our target of 90% retention.

At the same time, we are working closely with our Commonwealth partners to jointly map the path forward to ensure we are bringing together the best of Commonwealth and LPL. There are several foundational elements we are looking to embrace. For example, Commonwealth’s indispensable approach to adviser satisfaction and their commitment to responsiveness is woven into the fabric of their culture, and it is something that must be preserved. As a key step to enable this, we are developing a comprehensive case management solution to serve as a foundation for an evolved approach to how we route work and communicate progress to our advisers.

This modernized platform will connect advisers' offices to critical systems—from relationship management, to service, to operations, to product experience functions—helping ensure greater continuity, consistency, and follow-through across every step of the adviser experience. Beyond the work we are doing to prepare for the onboarding of Commonwealth advisers in Q4, we have continued to advance our capabilities to better meet the needs of high-net-worth individuals. We have expanded the inventory of alternative investment products available on the platform and are delivering more personalized investment solutions through enhanced direct indexing and tax-loss harvesting capability. In closing, the first quarter was a strong start to the year, and we feel great about our position as a critical partner to advisers and institutions.

As we continue to improve the efficiency of our operations, we are creating capacity to reinvest in growth while driving stronger operating leverage. We believe this positions us to deliver sustained value for both our advisers and our shareholders. With that, I will turn the call over to Matthew.

Matthew Jon Audette: Thanks, Rich. I am glad to speak with everyone on today’s call. As we move into 2026, we continue to advance our key priorities, which include driving solid organic growth, driving improved operating leverage by enhancing efficiencies and better monetizing the value we deliver, providing a market-leading adviser experience through ongoing investments in our platform, and advancing our M&A initiatives as we continue our preparation to onboard Commonwealth, announce the acquisition of Mariner Advisor Network, and continue to execute on our Liquidity & Succession strategy. These efforts resulted in strong first quarter business and financial performance and position us well for the year ahead. Now turning to a few highlights from our Q1 business results.

Total client assets were $2.3 trillion, down slightly from Q4 as continued organic growth was more than offset by lower equity markets. Total organic net new assets were $21 billion, an approximately 4% annualized growth rate. As for our Q1 financial results, the combination of organic growth and expense discipline led to adjusted pretax margin of approximately 38% and record adjusted EPS of $5.60. Gross profit was $1.593 billion, up $51 million sequentially. As for the key drivers, commission and advisory fees net of payout were $487 million, up $33 million from Q4. Our payout rate was 87.2%, down 80 basis points from Q4, largely due to the seasonal reset of the production bonus at the beginning of the year.

Looking ahead, we expect our payout rate will increase approximately 50 basis points in Q2, driven by the typical seasonal build. With respect to client cash revenue, it was $460 million, up $4 million, as the growth in average cash balances more than offset the full-quarter impact of short-term rates. Overall client cash balances ended the quarter at $59 billion, down $2 billion, primarily driven by record net buying in Q1. Within our ICA portfolio, the mix of fixed-rate balances ended the quarter at roughly 60%, within our target range of 50% to 75%.

Looking more closely at ICA yield, it was 336 basis points in Q1, down 5 basis points sequentially, driven by the full-quarter impact from the Q4 rate cuts. As we look ahead to Q2, based on where client cash balances and interest rates are today, we expect our ICA yield to be roughly flat. As for service and fee revenue, it was $211 million in Q1, up $30 million from Q4 as the benefits from our previously announced fee changes more than offset the seasonal decline in conference revenue. Looking ahead to Q2, we expect service and fee revenue to increase by approximately $5 million as the previously announced direct mutual fund fees go into effect.

Moving on to Q1 transaction revenue, it was $81 million, up $6 million from Q4, driven by record trading volumes. As we look ahead to Q2, we expect trading activity to normalize and transaction revenue to decline by roughly $5 million. With respect to other revenue, it was $4 million in Q1. Going forward, we expect this to be roughly $6 million per quarter. Now turning to our acquisition of Commonwealth. As Rich mentioned, the transaction continues to progress well, and we remain on track to onboard in the fourth quarter. As for the financials, accounting for the market-driven decline in Q1 assets, we now estimate run-rate EBITDA of approximately $410 million once fully integrated.

Next, let us move on to expenses, starting with core G&A. It was $532 million in Q1, below the low end of our outlook range, reflecting our continued progress in driving greater efficiency and reducing our cost to serve. For the full year, given our progress to date, we are lowering the upper end of our outlook range by $20 million. We now anticipate 2026 core G&A to be in a range of $2.155 billion to $2.19 billion. To give you a sense of the near-term timing of this spend, we expect Q2 core G&A to be in a range of $540 million to $560 million.

Turning to TA loan amortization, it was $136 million in Q1, up $3 million from Q4. Looking ahead to the second quarter, we expect TA loan amortization to increase by roughly $10 million, driven by the strengthening of our recruiting activity. As for promotional expense, it totaled $76 million in the first quarter, roughly flat with Q4. Looking ahead to Q2, we expect promotional expense to increase $5 million, driven by conference spend. Moving on to share-based compensation expense, it was $22 million in Q1, and we expect this to increase a few million sequentially as we head into Q2. Turning to our tax rate, it was approximately 26.5% in Q1, and we expect a similar tax rate in Q2.

As for our leverage ratio, it was 1.86 times at the end of Q1, just under the midpoint of our target range. We ended Q1 with corporate cash of $567 million, up $98 million from Q4. Moving on to capital deployment, our framework remains the same—focused on allocating capital aligned with the returns we generate: investing in organic growth first and foremost, pursuing M&A where appropriate, and returning excess capital to shareholders. In Q1, we continued to deploy capital in line with our priorities, investing primarily in organic growth and M&A, where we advanced the Commonwealth integration and continued to allocate capital to our Liquidity & Succession solution.

Regarding share repurchases, a reminder that we paused buybacks following the announcement of the Commonwealth acquisition with a plan to revisit following the onboard. Given our progress to date, with leverage slightly below the midpoint of our target range, the operational work to onboard Commonwealth on track, and the dislocation in the price of our stock, we opportunistically resumed buybacks earlier this month, with roughly $125 million planned for Q2. We will continue to remain flexible and dynamic with our capital deployment as we advance through the year. In closing, we delivered another quarter of strong business and financial results.

As we look forward, we remain excited about the opportunities we have to continue to drive growth, deliver operating leverage, and create long-term shareholder value. With that, Operator, please open the call for questions.

Operator: We will now open the call for questions. Our first question for today comes from the line of Steven Joseph Chubak from Wolfe Research. Your question, please.

Steven Joseph Chubak: Hi. Good afternoon, Rich and Matt, and thanks for taking my question. There has been much focus on the structural headwinds to cash growth with anticipated adoption of agentic AI tools. Given the value proposition you offer your advisers, both in terms of technology and enhanced service, can you speak to the flexibility on the pricing side if cash balances do remain in structural decline? And have you done any external research or engaged with advisers on a potential pivot to a more fee-based model that reduces your reliance on cash monetization?

Richard Steinmeier: Thanks, Steven. First off, we do not see an imminent risk to further adviser-led cash sorting from AI. While the AI and tokenization angle is new, we have heard variations of this question over time. We are well attuned to the recent developments in the sector and understand the focus on this subject. You should know we are doing the work to properly assess the opportunities and risks of reducing our reliance on cash sweep economics over time.

As with everything we do, we must ensure we are delivering a fair value exchange with our advisers and their end investors, and understand how any change may impact them or position us with prospective advisers, while being cognizant of how our shareholders value predictable recurring earnings. The levers are clear, but this is grounded in a lot of complex work. On the one hand, we are a monoline business, so, theoretically, it should be straightforward to effect change, especially since we do not have to contend with constraints of operating a bank and all that entails.

On the other hand, we only exist to serve the over 30 thousand advisers and over 1 thousand institutions that have trusted us with their business and the 8 million American families they serve. We must ensure that any potential changes would work for them and also how it might intersect with other services we are delivering in the broader value exchange. To summarize, we are doing the work, which we know is extremely important. However, it is going to take some time as we work closely with our clients to ensure any potential changes would work for them. We appreciate the question, deeply understand the setup, and know that this is top of mind for many of you.

Operator: Thank you. And our next question comes from the line of Alexander Blostein from Goldman Sachs. Your question, please.

Alexander Blostein: Hi. Good afternoon, everybody. I was hoping you could speak to your appetite for incremental M&A vis-à-vis the updated share repurchase outlook over the coming several quarters, as you are getting deeper into the Commonwealth integration. Obviously, very nice to get a deal announced here recently. So maybe speak to the pipeline, the engagement you see in the channel now for additional M&A, and how to think about that versus share repurchases.

Matthew Jon Audette: Yeah, Alex. I will speak to the near term, and then Rich can add on the longer term. Near term, our focus is on integrating Commonwealth—that is where we are spending our time and energy. From a capital allocation standpoint, what is right in front of us are the opportunities to drive organic growth, which we covered a bit in the prepared remarks with those pipelines building. And then there are really clear and compelling returns on buying back our stock. That is more of a near-term dynamic. For the longer term, I will turn it over to Rich.

Richard Steinmeier: Thanks, Matt. Longer term, our core strategy is to drive organic growth, and M&A is an important component of that holistic growth story. Historically and continually, we look at a couple of different categories for M&A. One would be growing our markets—so broker-dealers and RIAs of different size. You can look at Mariner Advisor Network as a good example of that. We have demonstrated the ability to integrate large and complex opportunities and deals better than anyone else. Second would be our Liquidity & Succession solution—helping existing and external advisers solve succession needs in ways other firms do not.

This is a very unique offering in the marketplace, and we feel very good about its continued progress in supporting our advisers and opportunistically looking externally. Third, where appropriate, we will look at capability transactions and evaluate whether we should allocate capital to build, buy, or partner. In general, our M&A criteria remain whether a transaction is a good fit strategically, financially, culturally, and operationally. We will remain disciplined around this framework as we go forward. Thank you.

Operator: And our next question comes from the line of Craig William Siegenthaler from Bank of America. Your question, please.

Craig William Siegenthaler: Good evening, everyone. AUM retention rebounded to 98.2% in the quarter, but the adviser count declined by 34. That is a rounding error, but I am curious what drove that dynamic. And how do you expect the financial adviser headcount trend into year-end?

Matthew Jon Audette: Yeah, Craig, I will take that. On the Q1 results, that is a near-term dynamic with respect to Commonwealth. As we track towards that 90% retention and we are in the mid-80s right now, as those folks actually leave, you will see those come out of headcount. They are still in our headcount until they actually leave. That was about a net 90 reduction in the quarter from that. So headcount was positive excluding that. On headcount going forward, it will be tied to our recruiting efforts as those ramp up.

And just keeping in mind as we get towards the end of the year—especially November and December—Q4 is when you often see smaller advisers exit the business or not renew their licenses. That can create some headcount noise with little to no AUM or NNA impact. That is typical pretty much every year toward the end of the year.

Operator: And our next question comes from the line of Devin Patrick Ryan from Citizens Bank. Your question, please.

Devin Patrick Ryan: Great. Rich, Matt, I want to come back to the topic of artificial intelligence and maybe just a broader question. How are you thinking about implications right now on LPL Financial Holdings Inc.'s model across areas like adviser productivity? How do you see it impacting demand for advisers over time, and potentially consolidation toward scale firms or adviser movement toward scale firms?

Richard Steinmeier: Hey, Devin. Thanks for the question. There are a lot of questions out there around AI. Historically, we have driven an enhanced value exchange by investing in tools, technology, and services to support advisers throughout the life cycle of their practice. We view transformative technology—specifically AI—as an incredibly powerful tool to help our advisers, not as a replacement. We put it into three broad buckets. First would be directly serving the adviser—helping them deliver their value to clients and accelerate their growth. Think note-taking tools, proposal generation tools, and enhancements to wealth planning and portfolio construction. We are bullish on building solutions and integrating them into our core workstation to enhance their value delivery.

Second would be processing of transactions and tasks to drive straight-through processing. This is the automation and efficiency of workflows and transaction types, which will lead to more efficient workflows, fewer errors, less manual intervention, while dramatically reducing our cost to serve and improving the adviser experience. Examples include reducing the time and cost of compliance, supervision, and marketing reviews—things that sometimes fall to the adviser and often to their staff. Third are foundational improvements in coding and development—the ability to materially advance the development and deployment of code inside our systems, modernize our code base, and deliver capabilities more quickly and robustly.

We are leaning on tools like GitHub Copilot, Cursor, and others, and we are seeing early, encouraging results. Taken together, we feel really good about integrating these experiences into our value delivery. That is why you have seen an increasing move of advisers choosing to join this firm—a scale firm in the independent segment supporting advisers and institutions with a differentiated, fully integrated set of capabilities. Integration is incredibly important in driving efficiency through the adviser’s practice.

You marry that with our responsibility to protect our cyber environment through the deployment of AI and enhancement of our controls and governance systems—strengthening our defenses, reducing the time required to identify and address emerging risks in an increasingly AI-driven threat environment—and this is an extension and continuation of our strategy, not a marked change. We are incredibly excited about how AI will help our advisers as well as our bottom line.

Operator: Thank you. And our next question comes from the line of Michael Cho from JPMorgan. Your question, please.

Michael Cho: Hi. Good evening. Thanks for taking my question. I want to touch on NNA and recruiting. You mentioned in your prepared remarks a record pipeline exiting Q1, and the expectation of improvement throughout 2026. How do you think the pace of improvement progresses from here for your recruiting pipeline? And any comments in terms of April since we are at the end of the month?

Richard Steinmeier: Hey, Michael. Thanks. We feel really good about the environment—adviser movement has returned to historical norms, and we feel good about more advisers beginning to move again. Specific to us, given our strong progress with Commonwealth, we are increasingly focusing our recruiting efforts on external opportunities. As we have freed up more resources to talk to advisers, we are seeing increasing responsiveness to the value proposition we are putting forward. It takes time to build and progress pipelines, but now sitting at record levels, we feel really good about the progression and the absolute level of engagement we are having with advisers in a marketplace where more advisers are moving.

Paired with the strength of our value proposition, we are confident in our ability to deliver mid- to high-single-digit growth over time. Over the longer term, that is supported by increasing our win rates in traditional markets, further penetration of the wirehouse and regional employee adviser space—we are now capturing 11% of the advisers in that segment in motion, up from 9% a couple of years ago—and Liquidity & Succession, which is a critically important, unique, and differentiated solution for advisers as they think about options to transition their business.

Pair that with low attrition and steady contribution from same-store sales, and it sets up well for sustained mid- to high-single-digit growth over the long term as well as the short term.

Matthew Jon Audette: Thanks, Rich. Michael, you slipped in two questions there, so I will cover April dynamics and client cash as well. April seasonality is typically one of the lowest months of the year for organic growth, if not the lowest, and on cash balances you typically see one of the larger declines because of two seasonal factors. In addition to advisory fees hitting in the first month of the quarter—which is around $2.5 billion now, given our size—you also have the impact of people paying their annual taxes. That reduced client cash by about $3 billion this year. Those two seasonal factors together are a decline of around $5.5 billion.

Outside of that, we continued to see the build that we saw in March carry into April, with client cash up by about $1 billion. The net of all that would be client cash down by around $4.5 billion. On the organic growth side, those seasonal factors hit as well and get annualized into that single month. Both tax payments and advisory fees reduced April organic growth by around 3 percentage points. We also had a bit of attrition earlier in the quarter from a large practice that left in April. Outside of those factors, organic growth has continued to improve as recruiting has continued to pick up.

Putting it all together, for April we will probably be in the zone of around 1.5%. As we move into May and June, as the seasonal factors abate and recruiting pipelines build and start to convert, we would expect to see organic growth pick up.

Operator: Thank you. And our next question comes from the line of Chris Allen from KBW. Your question, please.

Chris Allen: Good afternoon, and thanks for taking the question. I wanted to ask about the Commonwealth EBITDA run rate being lowered. You talked about mark-to-market dynamics. Just trying to reconcile that versus the current market levels and the improvement we have seen so far in April. I would imagine the EBITDA was as of the quarter end, so would we expect a positive inflection next quarter?

Matthew Jon Audette: Yeah, Chris, you have it right. The reduction from $425 million to $410 million was all market-driven—no changes to expected synergies or anything like that. If we were to snap the chalk with the market having come back and staying there until the end of the quarter, I would expect us to be back at $425 million.

Operator: Thank you. And our next question comes from the line of Benjamin Elliot Budish from Barclays. Your question, please.

Benjamin Elliot Budish: Hi, good evening. Following up on Chris’s question, the $410 million run rate is down sequentially based on the market moves, but that is still below the starting point that you disclosed in Q1 2025, when the asset level was higher than today. Is there anything else going on under the surface—mix-related or otherwise—that might be impacting the EBITDA run rate today?

Matthew Jon Audette: No, not at all. We have given updates each quarter on what has moved. The two things from a market standpoint are equity/overall market levels and the cash sweep, which has also moved around. No changes to expected synergies—simply market movements. And reiterating what I said to Chris: as we sit here today, those things have recovered. If we were giving an instant update—which we are not—we would be back at $425 million.

Operator: Thank you. And our next question comes from the line of Michael J. Cyprys from Morgan Stanley. Your question, please.

Michael J. Cyprys: Hi, good afternoon. Thanks for taking the question. Following up on AI and cash monetization, can you help unpack why you do not see more risk of adviser sorting from AI? What informs your viewpoint there? And you mentioned you are doing some work around reducing reliance on cash economics. Could you elaborate on what exactly this work entails, how you are going about your analysis, and what factors you are considering?

Richard Steinmeier: Let me take the first part. In many ways, the behavior you are alluding to has already happened. We have seen sustained yield-seeking over time, and cash allocations today are already at historical low levels—cash is around $5 thousand per account, which has been hovering there for nearly two years consistently, barring slight seasonal movements. The system has been adjusting, and what we tend to see is incremental evolution, not step-function change. Second, we have always provided advisers with an abundance of options for managing yield-sensitive cash on behalf of their clients. Most advisers have already adopted those options into their practice, so we do not see a significant behavioral change occurring simply because a new tool is available.

On the work to reduce reliance on cash economics, Matt can add color.

Matthew Jon Audette: Building on what Rich said, we have straightforward, fee-based levers we can use to manage and sustain our economics. We have flexibility in how we price, how we package, and how we deliver value across the platform. The core item, as Rich underscored, is that we exist to serve our 30 thousand advisers and over 1 thousand institutions, and the 8 million clients they have. The work we are describing is about ensuring any potential changes would work for them and how those changes would intersect with other services we deliver in the broader value exchange. We have the levers; it is about what works for our clients—that is the work in front of us.

Operator: Thank you. And our next question comes from the line of Jeffrey Paul Schmitt from William Blair. Your question, please.

Jeffrey Paul Schmitt: Hi, good afternoon. One more on the run-rate EBITDA for Commonwealth. What are you assuming for synergies in that estimate that would materialize mostly next year? And what are a few of the biggest drivers?

Matthew Jon Audette: There is no change there. The synergies are the ones we covered at the beginning—pretty common items. On the revenue side, when you get things onto our custody and clearing platform—cash sweep as well as sponsor-related revenues—and then typical expense synergies from being on our platform and our self-clearing infrastructure. Those are the synergies you would expect, and there is no change.

Operator: Thank you. And our next question comes from the line of Mike Brown from UBS. Your question, please.

Mike Brown: Good evening, Rich and Matt. How are you guys? I wanted to ask another one on AI disruption risk, but more from the risk to the adviser—not from the cash angle. Advisers have proven their value to customers, but the transformative potential of AI is tough to ignore. Could you speak to the risk of AI impacting the traditional adviser model with some AI-centric platforms and capabilities rolling out in real time? Could we see client behaviors shift to prefer models like this, especially if the economics are more favorable? How are you thinking about defending the turf of the traditional adviser model?

Richard Steinmeier: Thanks, Mike. Historically, the ties that bind in the adviser-client relationship are not because of the efficiency of delivery but because of trust and an extended relationship that, for many, spans years or decades. We see technology—and AI in particular—commoditizing some everyday, low-value tasks while making them more efficient, and enabling greater personalization of the adviser-client experience. That yields more time and better insights for advisers to serve clients. Advisers and their teams can move away from mundane task delivery into higher value-added work. We see a significant enhancement in the EQ elements of advice delivery, while certain IQ elements—portfolio construction, risk remediation—become more commoditized, yet more personalized. We are running headlong into AI enhancements that prop the adviser up.

There is a parallel in radiology: many believed AI would minimize radiologists, yet there are more radiologists today than ten years ago, delivering higher value services while more scans are performed. Similarly, advisers can serve more clients with deeper, personalized advice through tools that boost productivity. Those are the applications we are deploying in partnership with advisers. We see far more opportunity than risk to the traditional adviser model.

Operator: Thank you. Our next question comes from the line of Wilma Burdis from Raymond James. Your question, please.

Wilma Burdis: Just a quick one on the payout ratio. It was 87.2% in Q1, up about 40 bps year-over-year and versus 2024. Can you go through the drivers? Is it related to acquisitions like Commonwealth, or what else could be driving it?

Matthew Jon Audette: The primary driver was Commonwealth. Two items related to Commonwealth: on average, they have advisers with larger AUM, so the payout is higher. There is also a bit of noise unique to Q1 given the way our payout works with the production bonus that builds throughout the year; they do not have that, so the mix impact of their higher payout is most notable in Q1. Since we closed the acquisition, you see that noise in Q1. A secondary, relatively minor driver is that the payout was driven off advisory fees “snapped” at year-end when asset levels were higher. For larger advisers with tiered pricing and discounts at scale, you had a bit of that as well.

But the primary driver is Commonwealth, as you suspected.

Operator: Thank you. And our next question is a follow-up from the line of Michael Cho from JPMorgan. Your question, please.

Michael Cho: Hi. Thanks for getting me back in. A quick follow-up on G&A. You talked through G&A and efficiency and pulled down the top end of the guide. Could you unpack a bit more where the efficiency gains were in the quarter and how we should think about those as you progress through the year—areas for more potential versus areas of more organic investment?

Matthew Jon Audette: Broadly, we continue to invest at the highest level in adviser capabilities and technology to drive organic growth, combined with investments to drive efficiency. On efficiency, building on what Rich discussed on AI, that has been a big driver and a big component of our plans for the year across three areas: adviser capability, internal operations and efficiency, and developing technology faster. Focusing on internal operations—service and operations—this is exciting because it drives cost improvements and materially better adviser experience, ultimately supporting growth. Examples: in annuities, where we are the largest distributor in our space and the process is very manually intensive, we have deployed AI to streamline costs and increase the pace at which we can approve annuities.

In service, we are providing tools for advisers such as natural language search and AI-enabled chat so they can self-serve instead of calling us, and equipping our service teams with AI tools to answer questions more quickly and accurately. In operations, where agentic AI becomes very real, we can automate tasks like non-ACAT transfers, which are intensely manual—cutting cycle times by up to 90%. That lowers cost and improves the experience, especially for inbound transfers. We are still in the early innings. We have a robust roadmap for this year, and this is an ongoing opportunity into 2027 and beyond.

Operator: Thank you. And our next question is a follow-up from the line of Steven Joseph Chubak from Wolfe Research. Your question, please.

Steven Joseph Chubak: Thanks for accommodating the follow-up. On the long-term NNA outlook beyond the Commonwealth integration: you spoke about low adviser attrition, record pipelines, and steady contribution from same-store sales. How does that inform what you believe is an achievable organic growth rate? And separately, can you provide an update on the institutional opportunity and how that pipeline is tracking?

Richard Steinmeier: On the first part, taking it all together, we believe we should be able to sustain a mid- to high-single-digit organic growth rate over the long term. We have what we believe is the strongest value proposition in the marketplace. As we have reengaged more actively in recruiting, what I see in the pipeline and in direct adviser engagement is that our value proposition resonates significantly. Third-party recruiters are bullish on our ability to move back into the leadership position we have historically held—capturing adviser movement and extending that share over time. As we integrate AI into an already integrated platform—so it is not a swivel-chair environment—we expect our value proposition to strengthen further relative to competitors.

On the institutional segment, we are the leader in partnerships in that market and have demonstrated it over decades—first in financial institutions, where we have sustained leadership supporting banks and credit unions, and then extending into adjacent opportunities, most notably recently with insurance and product manufacturers. I would point to Prudential, which converted a little over a year ago and, by their measures, is thriving—financially and in recruiting. That speaks to them, and it also allows us to be more active in institutional conversations. Across banks, some opportunities will be opportunistic, and there is some overhang given M&A among financial institutions. But we are seeing increasing conversations with longer lead times.

We feel good about the institutional pipeline as a meaningful contributor that adds to consistent adviser-movement-driven growth. Having these two growth anchors—adviser movement to the strongest value proposition in the market and strong institutional partnerships—reinforces our belief in sustained mid- to high-single-digit growth over the long term.

Operator: Thank you. This does conclude the question-and-answer session of today’s program. I would like to hand the program back to Richard Steinmeier for any further remarks.

Richard Steinmeier: Thank you, Operator, and thank you all for joining us. We look forward to speaking with you again in July. Have a good night.

Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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