LPL does not engage in the business practices of investment banks or provide other alternative financial services.
Throughout our history and across various economic cycles, LPL Financial has produced consistent earnings results.
Our financial stability can be attributed to our independent business model and to the hard work and dedication of our financial advisors to their clients.
Because our model is rather unique, I would like to provide you with some additional insight into how LPL enables our advisors to focus on creating the personal, long-term client relationships that are the foundation for turning life’s aspirations into financial realities.
Our business model
One of the distinguishing characteristics of our business model is our ability to consistently generate significant free cash flow. LPL does not engage in the business practices of investment banks or provide other alternative financial services.
We do not engage in market-making activities nor do we engage in proprietary trading for our own account. Our trading activities are focused solely on facilitating trades for our advisors’ clients, and not on speculative trading for the firm’s own account.
In addition, we have no exposure to mortgage-related investments or securities, nor do we provide loans to hedge funds or other speculators.
What LPL does provide is technology, brokerage, and investment advisory services through business relationships with independent financial advisors, registered investment advisors (RIAs), and financial institutions and their financial representatives, all of whom we refer to collectively as our “clients.”
We offer these clients access to a broad array of financial products and services to support them in providing financial advice and brokerage services to retail investors. Our financial advisors and institutions are our only clients.
Financial performance and liquidity position
As a Financial Industry Regulatory Authority (FINRA) member firm subject to the federal securities laws and the rules of industry self-regulatory organizations, LPL has always carried out our obligations to protect client assets in our custody with the utmost care and scrupulous adherence to financial protection rules, including those governing the segregation of advisor assets.
Moreover, LPL maintains net capital well in excess of requirements set out by our regulators; as of December 31, 2016, we exceeded our net capital requirement by $110 million.
Because the vast majority of LPL advisors are independent contractors rather than employees, LPL does not have a high degree of fixed costs.
Our revenue is derived through our business relationships with financial advisors, banks, credit unions, investment companies, insurance carriers, and other financial institutions.
Counter-party risk assessment
Our Governance, Risk, and Compliance department routinely reviews our counter-party risk as well as those LPL does business with to limit our exposure to risk.
The team monitors all outstanding debits and credits and the firms that clear those trades to ensure they are healthy and do not pose a risk to LPL or our advisors’ clients.
This process includes extensive research, due diligence, financial analysis, and forward-looking measures of financial strength and sustainability.
Client account protection
LPL is a member of the Securities Investor Protection Corporation (SIPC). Membership provides protection for client accounts up to $500,000, of which $250,000 may be claims for cash, in the unlikely event that LPL were to fail financially. (For an explanatory brochure, visit www.sipc.org.)
Moreover, LPL accounts have additional securities protection to cover the net equity of client accounts up to an overall aggregate firm limit of $575,000,000, subject to conditions and limitations.
This coverage is underwritten by London Insurers through the Lloyds of London syndicates. Account protection applies when a SIPC member firm fails financially and is unable to meet its obligations to securities clients, but it does not protect against losses from the rise and fall in the market value of investments.
This extensive coverage reflects a strong commitment to serving your investment needs. As always, our focus remains on our advisors and financial institutions and their clients and on helping you meet your financial needs and goals.
Thank you for the opportunity to partner with your financial advisor to serve your financial needs.
Chief Financial Officer
|Not FDIC/NCUA Insured||Not Bank/Credit Union Guaranteed||May Lose Value|
|Not Guaranteed by any Government Agency||Not a Bank/Credit Union Deposit|