From the Chairman

Our 2014 results highlight the continuing appeal of the independent model and reinforce the importance of the LPL Financial mission: to enable our clients to focus on creating the personal, long-term relationships that are the foundation for turning life's aspirations into financial realities. This sense of purpose and focus is the primary reason today we are the nation's premier independent broker-dealer.


2014 Financial Results

For the fifth consecutive year, LPL increased revenue, generating a record $4.4 billion, driven by healthy asset flows and stable investor engagement. Advisory and brokerage assets grew 8% to $475 billion, while assets under management per advisor reached a record $34 million. Of note, assets on our platform that support independent RIAs grew 44% to $91 billion for the year.

Adjusted earnings per share (EPS) remained flat year-over-year, as our success in growing the core business was offset by the cost of resolving regulatory matters and the impact of low interest rates. Our ability to continue to grow the business as we work through these near-term challenges will create long-term value for our shareholders, as demonstrated by our strong business development and retention results: We ended the year with over 14,000 advisors while retaining 97 percent of advisor production for the year.

Improving Our Operations and the Client Experience

Our focus on the client experience has never been greater, and our Commitment Creed-which describes how we feel about our clients and helps us understand their importance to our company-is a constant reminder.We have made tremendous progress over the last several years to ensure that our clients have the best experience possible and can fully harness the power of their affiliation with LPL. We began by investing in leadership and talent and leveraged that foundational work to build a fully integrated technology function that is delivering value-added capabilities and solutions. Next, we enhanced our service quality and speed of processing, while lowering costs and refocusing our employees on more value-added functions.

In 2014, we continued executing on our strategy by further enhancing the client experience and developing new technology to help drive efficiency into our advisors' businesses. We created a new, dedicated Client Experience and Training team solely focused on ensuring that our clients have the best experience possible. We also launched and enhanced several technology solutions with a focus on simplicity and productivity as we introduced a new Resource Center and made improvements to tools such as Account View, Portfolio Manager, and the Streamlined Office

Strengthening Our Risk Management and Compliance Capabilities

We also continued to strengthen our risk management and compliance capabilities in 2014 as we initiated a multi-year redesign of our surveillance and supervision systems and made significant progress assessing the remaining needs of our legacy compliance and risk management capabilities.

While investments in our compliance and controls have strengthened our risk management capabilities, in 2014, we continued to navigate a challenging regulatory environment, which involved the resolution of several regulatory matters. We incurred a total of $36 million in charges related to the resolution of these matters. The regulatory charges for 2014 were approximately four times the level of charges the Company incurred in each of the prior two years.

Importantly, we believe we are taking the necessary steps to improve. We are strengthening our business and our advisors' businesses by taking responsibility as a company for issues discovered by regulators or by us. We believe the heightened regulatory environment will continue in 2015, but in all cases, we are focused on doing the right thing and holding ourselves accountable by continuing to proactively review our systems and processes to identify issues and fix them when we or others find them.

Focus on Creating Long-term Value for All Stakeholders

The results we have achieved are driven by the operating principles that guide our efforts to position LPL to be the leading destination for advisors in the industry and to maintain a business model that maximizes long-term shareholder value. We are dedicated to allocating your capital in order to achieve the highest long-term shareholder value creation, reinvesting back into the business where there's opportunity to earn attractive long-term returns, and returning surplus capital to shareholders. Most importantly, we are committed to making decisions that create long-term value for all stakeholders in our community, including employees, advisors and institutions, shareholders, and business partners.

Looking Ahead

In 2015, we will remain focused on increasing our market share by being the leading destination for advisors in the industry. And, we will continue to enhance and strengthen our compliance and risk management capabilities, which we believe will contribute to an improved control environment and improved interactions with regulators in 2016 and beyond. To achieve these goals, we will continue to invest to simplify and grow our four industry leadership positions: independent advisors, hybrid RIAs, financial institutions, and retirement plan specialists.

We will continue to unlock value for independent advisors and institutions by offering a versatile and fully integrated platform for the delivery of personal, objective financial advice. We are optimistic about the opportunities we have created to deliver positive results and win in the marketplace. We know that if we execute consistently on our strategy and adhere to our operating principles, we will create long-term value for our shareholders and clients and continue to attract and retain the best people in the industry.

Thank you for your investment in LPL Financial.


Mark Casady
Chairman and CEO
LPL Financial