LPL Financial Annual Report 2021

FY2021 Annual Report · LPL Financial

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2021
ANNUAL
REPORT

LPL Financial Holdings Inc.

LPL 2021 Annual Report

AT LPL FINANCIAL, WE EXIST
TO SERVE FINANCIAL ADVISORS*—
THEIR GREATNESS IS OUR GOAL.

Founded on the principle that the ﬁrm should work for the advisor,
and not the other way around, we continue to believe that advisors
are driving the future of ﬁnancial advice. And we’re committed to
advancing the industry by keeping those advisors at the forefront.
At LPL, independence means that advisors have the freedom they
deserve to choose the business model, services, and technology
resources that allow them to run their perfect practice. And they
have the freedom to manage their client relationships, because they
know their clients best.

With access to LPL’s expertise and support, advisors across the
nation are empowered to run successful businesses and deliver
personalized ﬁnancial advice to investors. Simply put, we take care
of our advisors, so they can take care of their clients.

* Throughout this Annual Report, the terms “ﬁnancial advisors” and “advisors” are used to refer to registered

representatives and/or investment advisor representatives affiliated with LPL Financial LLC. Securities
and advisory services offered through LPL Financial LLC, an SEC-registered broker-dealer and investment
advisor. Member FINRA/SIPC. LPL Financial LLC and its affiliated companies provide ﬁnancial services only
from the United States. We routinely disclose information that may be important to shareholders in the
“Investor Relations” or “Press Releases” section of our website.

LPL 2021 Annual Report

A Message from the

PRESIDENT & CEO

Dear Fellow Shareholder,

In 2021, we delivered another year of solid business and ﬁnancial
outcomes at LPL. These results were driven by a combination
of thoughtful strategy, strong execution, and our mission-driven
culture. Looking ahead, we believe that this focus continues to
position us well to serve our clients and drive proﬁtable growth for
our shareholders.

Before I turn to our performance and progress in 2021, I
ﬁrst want to recognize our advisors and institutions for the
extraordinary work they have continued to do for their clients.
Their commitment, care, and advice has helped millions of
Americans make well-informed decisions during a complex and
uncertain time—they are an inspiration.

I also want to thank our employees for their hard work and
dedication. By executing with excellence, they help us continue
to make progress on our strategic plan, as well as live into our
mission: taking care of our advisors, so they can take care of
their clients.

TOTAL ADVISORY &
BROKERAGE ASSETS*
($ billions)

$903

$1,206

$764

$615

$628

2017

2018

2019

2020

2021

2021 Performance

Looking at our business results, total assets reached a new high
of $1.2 trillion, which was up 34% from a year ago. This increase
was primarily driven by continued organic growth and our
acquisition of Waddell & Reed’s wealth management business,
complemented by equity market appreciation.

Total organic net new assets were $119 billion, translating
to a 13% growth rate, up from 7% in 2020. This increase was
driven by continued strength across all three channels of
growth: new store sales, same store sales, and retention.

Regarding our ﬁnancial results, we continued to drive solid
outcomes through a combination of expense discipline and a
record level of organic net new assets. As a result, earnings
per share prior to amortization of intangible assets and
acquisition costs was $7.02, up 9% year-over-year2.

$2,455

$2,172

$2,103

GROSS PROFIT*
($ millions)

$1,948

$1,555

2017

2018

2019

2020

2021

Strategic Context

As a reminder, our long-term vision is to become the leader
across the entire advisor-centered marketplace. For us,
this means being the best at empowering advisors to deliver
advice to their clients and be great operators of their business.
Doing this well gives us a sustainable path to industry
leadership across advisor experience, organic growth, and
market share.

To execute on our strategy, we have organized our
work into four strategic plays, which not only serve as an
execution framework, but also provide color on where and
how we’re investing.

A Message from the President & CEO, continued

LPL 2021 Annual Report

STRATEGIC PLAY 1

Meeting advisors where they are
in the evolution of their business

In 2021, we remained focused on winning in our traditional
independent and institutional markets, while also leveraging
new affiliation models to expand our addressable markets to
~$26 trillion*. In addition, ongoing enhancements to our
platform and the efficacy of our Business Development team
continued to increase our win rates and expand the depth and
breadth of our pipeline.

With respect to our new affiliation models—Strategic Wealth,
Employee, and an enhanced RIA custody offering—we recruited
approximately $89 billion of assets in 2021. In each of these models,
we continue to see growing demand and expanding pipelines,
which position them for increased contributions to organic growth.
Additionally, large ﬁnancial institutions served as a new source of
recruiting, and demand and pipeline in this market has continued
to build.

NUMBER OF ADVISORS**

19,876

16,109

16,464

17,287

15,210

2017

2018

2019

2020

2021

STRATEGIC PLAY 2

Providing capabilities that help
advisors differentiate and win

their clients. With that in mind, over the past two years we have
transformed our service model into an omni-channel client care
model, including voice, chat, and digital support. As we move
forward, we are continuing to ﬁne-tune our omni-channel model
to drive additional efficiency and an enhanced experience for
our advisors.

STRATEGIC PLAY 4

Helping advisors run successful businesses

The ﬁnal area we are investing is focused on helping advisors run
the most successful businesses in the independent marketplace.
One of the key components of this play is our portfolio of Business
Solutions, which helps advisors more effectively operate their
businesses, so they can focus on serving their clients and grow
their practices—for example, CFO, CMO, and Admin Solutions. Over
2021, Business Solutions continued to demonstrate a strong value
proposition, more than doubling our subscription base year-over-
year to approximately 3,000 subscriptions.

EPS Prior to intangible Assets
and Acquisition Costs2
$7.02

$6.46

$7.17

$560

$473

$460

NET INCOME*
($ millions)

$5.33

$2.84

$439

$239

2017

2018

2019

2020

2021

We’re also focused on providing capabilities and solutions that help
advisors differentiate in the marketplace and drive efficiency in
their practices. This work is organized across three key areas:

(cid:131) Enriching the end-client experience with expanded digital
solutions that increase personalization and self-service

(cid:131) Enhancing our wealth management platforms to help
advisors provide their clients with differentiated advice,
products, and pricing

(cid:131) Advancing ClientWorks, our core operating platform, with
additional digitized workﬂows to help advisors operate more
efficiently and increase their scalability to serve more clients

Lastly, while working with advisors on our evolving suite of Business
Solutions, we also identiﬁed a new category of opportunity that
will help advisors deliver comprehensive ﬁnancial advice and
planning solutions more effectively. In that spirit, we’ve launched
a paraplanning solution, and we’re incubating several additional
solutions, including tax planning and high-net-worth services. We
look forward to sharing more information with you about these
capabilities over 2022.

As we look ahead, we remain focused on executing our strategy

to help our advisors and institutions differentiate and win in the
marketplace. We believe that this will help us continue to increase
our market leadership and drive long-term shareholder value.

STRATEGIC PLAY 3

Creating an industry-leading service
experience, at scale

Thank you for investing in LPL.
Sincerely,
Sincerely

Regarding the advisor service experience, our aspiration is deliver
an industry-leading service model that delights advisors and

Dan Arnold, President & CEO

*Amounts shown in all charts are as of or for the indicated year ended.
**Source: LPL estimates as of YE 2021, based on Cerulli Lodestar data.

2021 FINANCIAL HIGHLIGHTS

CONSOLIDATED STATEMENTS OF INCOME DATA

Total revenue (in thousands) 1

Total expense (in thousands) 1

Income before provision for income taxes (in thousands) 1

Net income (in thousands) 1

PER SHARE DATA

Earnings per diluted share 1

EPS prior to amortization of intangible assets and acquisition costs 1, 2

Weighted average diluted shares outstanding (in thousands) 1

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DATA

Cash and cash equivalents (in thousands) 3
Total assets (in thousands) 3

Total debt, net (in thousands) 3, 4

OTHER FINANCIAL AND OPERATING DATA

Gross proﬁt (in thousands) 1, 5
EBITDA (in thousands) 1, 6

Number of advisors 3

Total advisory and brokerage assets (in billions) 3

Advisory assets (in billions) 3

Average number of full-time employees 1

2021

2020

2019

2018

2017

$ 7,720,830

$ 5,871,640

$ 5,624,856

$ 5,188,400

$ 4,281,481

$ 7,119,501

$ 601,329

$ 459,866

$ 5.63

$ 7.02

81,742

$ 5,245,567

$ 4,883,021

$ 4,595,763

$ 3,916,911

$ 626,073

$ 741,835

$ 592,637

$ 364,570

$ 472,640

$ 559,880

$ 439,459

$ 238,863

$ 5.86

$ 6.46

80,702

$ 6.62

$ 7.17

84,624

$ 4.85

$ 5.33

90,619

$ 2.59

$ 2.84

92,115

$ 495,246

$ 7,991,600

$ 2,814,044

$ 808,612

$ 590,209

$ 511,096

$ 811,136

$ 6,596,162

$ 5,880,238

$ 5,477,468

$ 5,358,751

$ 2,345,414

$ 2,398,818

$ 2,371,808

$ 2,385,022

$ 2,454,717

$ 2,103,308

$ 2,172,225

$ 1,947,670

$ 1,554,835

$ 936,431

19,876

$ 1,206.4

$ 643.2

5,283

$ 908,929

$ 1,032,949

$ 865,568

$ 593,959

17,287

$ 903.1

$ 461.2

4,560

16,464

$ 764.4

$ 365.8

4,327

16,109

$ 628.1

$ 282.0

4,007

15,210

$ 615.1

$ 273.0

3,469

1 Amounts shown are for the indicated year ended.

2 EPS prior to amortization of intangible assets and acquisition costs, a non-GAAP ﬁnancial measure,

is deﬁned as adjusted net income, which is deﬁned as net income plus the after-tax impact of
amortization of other intangibles and acquisition costs, divided by the weighted average number of
diluted shares outstanding for the applicable period. We present adjusted net income and EPS prior to
amortization of intangible assets and acquisition costs because we believe these metrics can provide
investors with useful insight into our core operating performance by excluding non-cash items and
acquisition costs that we do not believe impact our ongoing operations. Adjusted net income and
EPS prior to amortization of intangible assets and acquisition costs are not measures of our ﬁnancial
performance under GAAP and should not be considered as alternatives to net income, EPS or any
other performance measure derived in accordance with GAAP.

The following is a reconciliation of net income and EPS to adjusted net income and EPS prior to
amortization of intangible assets and acquisition costs for the periods presented above:

3 Amounts shown are as of the indicated year ended. Total assets for periods prior to 2020 have

not been updated to reﬂect investments in fractional shares held in customer brokerage accounts
resulting from the dividend reinvestment program that the Company offers.

4 Corporate debt and other borrowings, net consists of our senior secured term loan, senior unsecured
subordinated notes, and borrowings outstanding under our revolving credit facility and unsecured,
uncommitted lines of credit, net of debt issuance costs and unamortized premiums.

5 Gross proﬁt, a non-GAAP ﬁnancial measure, is calculated as total revenue less advisory and

commission expense and brokerage, clearing, and exchange expense. All other expense categories,
including depreciation and amortization of property and equipment and amortization of other
intangibles, are considered general and administrative in nature. Because our gross proﬁt
amounts do not include any depreciation and amortization expense, we consider our gross proﬁt
amounts to be non-GAAP ﬁnancial measures that may not be comparable to those of others in
our industry. Below is a calculation of annual gross proﬁt for the periods presented above:

2021

2020

2019

2018

2017

Amount

Per
Share Amount

Per
Share

$460 $5.63

$473 $5.86

$560 $6.62

$439 $4.85

$239 $2.59

IN MILLIONS

Total Revenue

Advisory and commission expense

Brokerage, clearing and exchange expense

Gross proﬁt

2021

2020

2019

2018

2017

$7,721

$5,872

$5,625

$5,188

$4,281

5,180

3,697

3,388

3,178

2,670

$2,455

$2,103

$2,172

$1,948

$1,555

0.97

0.83

0.76

0.66

0.41

6 EBIDTA, a non-GAAP ﬁnancial measure, is deﬁned as net income plus interest expense on

0.93

0.00

(41)

(0.51)

(19)

(0.23)

(18)

(0.21)

(17)

(0.19)

(15)

(0.16)

borrowings, provision for income taxes, depreciation and amortization, and amortization of other
intangibles. We present EBITDA because we believe that it can be a useful ﬁnancial metric in
understanding our earnings from operations. EBITDA is not a measure of our ﬁnancial performance
under GAAP and should not be considered as an alternative to net income or any other
performance measure derived in accordance with GAAP.

$574 $7.02

$521 $6.46

$607

$7.17

$482 $5.33

$262 $2.84

The following is a reconciliation of net income to EBITDA for the periods presented above:

$ In millions,
except per
share data

Net income /
earnings per
diluted share

Amortization
of other
intangibles

Acquisition
costs

Tax beneﬁt

Adjusted net
income*

Diluted share
count

*Adjusted net income / EPS prior to amortization of intangible assets and acquisition costs

Numbers may be rounded to the nearest thousand, million, or billion.

IN MILLIONS

Net Income

Interest expense on borrowings

Provision for income taxes

Depreciation and amortization

Amortization of other intangibles

2021

$460

104

142

151

2020

$473

106

153

110

2019

$560

130

182

2018

$439

125

153

2017

$239

107

126

EBITDA

$936

$909

$1,033

$866

$594

Numbers may be rounded to the nearest thousand, million, or billion.

FORM
10-K

LPL Financial Holdings Inc.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

☒

☐

Commission File Number 001-34963
LPL Financial Holdings Inc.
(Exact name of registrant as specified in its charter)

(State or othett

r jurisdiction of incoii

rporation or organiza

n
tion)

Delaware

20-3717839

((
(

I.R.S.

Employer Identification No.)

4707 Executive Drive, San Diego, California

dd
(Address

of Prinrr cipal Executive Offices)

92121
(Zip Code)

(800) 877-7210

(Registrant

’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

( )
Trading Symbol(s)
g y

g
Name of Each Exchange on Which Registered

Common Stock — $0.001 par value per share

LPLA

The Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or forff
such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YesYY x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or forff
to submit such files). Yes x No o

such shorter period that the registrant was required

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

Non-accelerated filer

Accelerated filer

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effeff ctiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No
As of June 30, 2021, the aggregate market value of the voting stock held by non-affiliates of the registrant was $10.8 billion. For purposes of this
information, the outstanding shares of Common Stock owned by directors and executive offiff cers of the registrant were deemed to be shares of
the voting stock held by affiliate

The number of shares of Common Stock, par value $0.001 per share, outstanding as of February 16, 2022 was 79,969,381.

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders are incorporated
by reference into Part III.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1

Item 1A Risk Factors
Item 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3
Item 4 Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information about our Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II

Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Item 6

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7 Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our Sources of Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Key Performance Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions, Integrations and Divestitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Economic Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt and Related Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Policies and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . .
Item 14 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 15 Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16 Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Page

12
29
29
29
29
30

34
35
35

38
38
38
38
39
40
44
44
45
50
53
54
54
56

103
103
105

105
105

105

105
108
109

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly, and current reports, proxy statements and other informff
Exchange Act of 1934, as amended (“Exchange Act”), with the Securities and Exchange Commission (“SEC”). Our
SEC filings are available to the public on the SEC’s website at SEC.govg .

ation required by the Securities

We post the following filings to LPL.com as soon as reasonably practicable after they are electronically filed with or
furnished to the SEC: our annual reports on Form 10-K, our proxy statements, our quarterly reports on Form 10-Q,
our current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act. Copies of all such filings are available free of charge by request via email
(investor.relations@lpl.com
Street, 22nd Floor, Boston, MA 02109). The informat
this Annual Report on Form 10-K.

), telephone ((617) 897-4574) or mail (LPL Financial Investor Relations at 75 State

ion contained or incorporated on our website is not a part of

@ p

We may use our website as a means of disclosing material informat
ion and for complying with our disclosure
obligations under Regulation Fair Disclosure promulgated by the SEC. These disclosures are included on our
website in the “Investor Relations” or “Press Releases” sections. Accordingly, investors should monitor these
portions of our website, in addition to following the Company’s press releases, SEC filings, public conference calls
and webcasts.

When we use the terms “LPLFH”, “LPL”, “we”, “us”, “our” and “the Company”, we mean LPL Financial
a Delaware corporation,

and its consolidated subsidiaries, taken as a whole, unless the context otherwise

Holdings Inc.,
indicates.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in Part 2, Item 7 - “Management’s Discussion and Analysis of Financial Conditiontt
Operations” and other sections of this Annual Report on Form 10-K regarding:

and Resultstt of

•

•
•
•

the Company’s future financial and operating results, outlook, growth, plans, business strategies, liquidity
and future share repurchases, including statements regarding future resolution of regulatory matters, legal
proceedings and related costs;
the Company’s future revenue and expense;
future affiliat
the expected onboarding of advisors, institutions, and assets in connection with our acquisition and
recruitment activity;

ion models and capabilities;

• market and macroeconomic trends;
•

projected savings and anticipated improvements to the Company’s operating model, services and
technologies as a result of its investments, initiatives, programs and/or acquisitions;
expected impacts of the coronavirus disease 2019 (“COVID-19”) pandemic on the Company’s business;
and
any other statements that are not related to present facts or current conditions or that are not purely
historical, constitute forward-looking statements.

•

and its plans, estimates and
These forward-looking statements are based on the Company’s historical performance
expectations as of February 22, 2022. The words “anticipates,” “believes,” “expects,” “may,” “plans,” “predicts,” “will”
and similar expressions are intended to identifyff
statements contain these identifying words. Forward-looking statements are not guarantees that the future results,
plans, intentions or expectations expressed or implied by the Company will be achieved. Matters subject to forward-
looking statements involve known and unknown risks and uncertainties, including economic, legislative, regulatory,
competitive and other factors, which may cause actual financial or operating results, levels of activity or the timing of
events to be materially differe
that could cause or contribute to such diffeff

forward-looking statements, although not all forward-looking

nt from those expressed or implied by forward-looking

statements. Important factors

rences include:

•
•

changes in general economic and financial market conditions, including retail investor sentiment;
changes in interest rates and fees payable by banks participating in the Company’s client cash programs,
including the Company’s success in negotiating agreements with current or additional counterparties;
the Company’s strategy and success in managing client cash program fees;
fluctuations in the levels of advisory and brokerage assets, including net new assets, and the related impact
on revenue;
effects of competition in the financial services industry;
the success of the Company in attracting and retaining financial advisors and institutions, and their ability to
market effect

ively financial products and services;

•

•
•

•

•
•

ngs;

ory organizations;

of current, pending and future legislation, regulation and regulatory actions, including disciplinary

whether retail investors served by newly-recruited advisors choose to move their respective assets to new
accounts at the Company;
changes in growth and profitability of the Company’s fee-based offeri
ff
the effect
actions imposed by federal and state regulators and self-regulat
the cost of settling and remediating issues related to regulatory matters or legal proceedings, including
actual costs of reimbursing customers for losses in excess of our reserves;
changes made to the Company’s services and pricing, including in response to competitive developments
and current, pending and future legislation, regulation and regulatory actions, and the effect
changes may have on the Company’s gross profit streams and costs;
execution of the Company’s capital management plans, including its compliance with the terms of the
Company’s amended and restated credit agreement (“Credit Agreement”) and the indentures governing the
Company’s senior unsecured notes (the “Indentures”);
the price, the availability and trading volumes of shares of the Company’s common stock, which will affect
the timing and size of future share repurchases by the Company, if any;
execution of the Company’s plans and its success in realizing the synergies, expense savings, service
improvements or efficiencies
plans and technology initiatives;
the performance
ff
the Company’s ability to control operating risks, information technology systems risks, cybersecurity risks
and sourcing risks;
the effect
ff
the other factors set forth in Part I, “Item 1A. Risk Factors.”

of third-party service providers to which business processes have been transitioned;

expected to result from its investments, initiatives and acquisitions, expense

s of the COVID-19 pandemic, including efforts

to contain it; and

that such

Except as required by law, the Company specifically disclaims any obligation to update any forward-looking
statements as a result of developments occurring after the date of this Annual Report on Form 10-K, even if its
estimates change, and you should not rely on statements contained herein as representing the Company’s views as
of any date subsequent to the date of this Annual Report on Form 10-K.

iii

Item 1. Business

Overvirr ew

PART I

LPL serves the advisor-mediated advice marketplace as the nation’s largest independent broker-dealer, a leading
investment advisory firm, and a top custodian. We support nearly 20,000 financial advisors, including advisors at
approximately 800 institution-based investment programs and at approximately 500 registered investment adviser
(“RIA”) firms nationwide, providing the front-, middle- and back-officeff
growing market for comprehensive financial advice from an advisor. We offer
technology, brokerage and advisory platforms, digital capabilities, clearing and compliance services, business
solutions, and strategic growth resources to help our clients run their perfect practices.

a customizable platform of integrated

support our clients need to serve the large and

We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to
personalized guidance from a financial advisor. We believe advisors should have the freedom to manage their client
relationships because they know their clients best. We believe investors achieve better outcomes when working
with a financial advisor. We strive to make it easy for advisors to do what is best for their clients by promoting
freedom and choice through access to a wide range of diligently evaluated non-proprietary products while protecting
advisors and clients.

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

the unique combination of an integrated technology platform,

underwriting, and market-making.

LPL Financial Holdings Inc., which is the parent company of our business, was incorporated in Delaware in 2005.
The Company’s most significant wholly owned subsidiaries are described below:

•

LPL Holdings, Inc. is a direct subsidiary of LPL Financial Holdings Inc. and is an intermediate holding
company of our business.

LPL Financial LLC (“LPL Financial”) is a clearing broker-dealer and an investment adviser that clears and
settles customer transactions.

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

LPL Insurance Associates, Inc. (“LPLIA”) operates as a brokerage general agency that offers
disability insurance products and services.

life and

AWAA Subsidiary, Inc. is a holding company for AdvisoryWorld and Blaze Portfolioff
AdvisoryWorld offers
modeling, to both the Company’s advisors and external clients in the wealth management industry. Blaze
provides an advisor-facing trading and portfolio rebalancing platform.

technology products, including proposal generation, investment analytics and portfolio

Systems LLC (“Blaze”).

The Private Trust Company, N.A. (“PTC”) provides trust administration, investment management oversight
and Individual Retirement Account (“IRA”) custodial services.
LPL Employee Services, LLC is a holding company for Allen & Company of Florida, LLC (“Allen &
Company”), an RIA.

Our Strategy

At LPL, our mission is to take care of our advisors, so they can take care of their clients. Our vision is to become the
leader across the advisor-centered marketplace by empowering advisors to deliver great advice to their clients and
be great operators of their businesses. In order to achieve this vision, our strategy is to meet advisors and
institutions where they are in the evolution of their businesses, provide capabilities to help advisors different
drive efficiency
ff
clients, and help advisors run the most successful businesses in the market.

in their practices, create an industry-leading service experience that delights advisors and their

iate and

Our Business

Advisor Relationships

Our business is dedicated exclusively to our advisors; we are not a market-maker nor do we offer
banking or underwriting services. We offeff
independent financial advisors and financial institutions that we support to offeff

investment
r no proprietary products of our own, and, as a result, we enable the

r their clients lower-conflict advice.

We work alongside advisors to navigate complex market and regulatory environments and strive to empower them
to create the best outcomes for investors. In addition, we make meaningful investments in technology and services
to support the growth, productivity and effiff ciency of advisors across a broad spectrum of business models as their
practices evolve. Our advisors are a community of diverse, entrepreneurial financial services professionals who
support approximately 7.2 million client accounts. They build long-term relationships with their clients in
communities across the United States by guiding them through the complexities of investment decisions, retirement
solutions, financial planning, and wealth management. Our services are designed to support the evolution of our
advisors’ businesses over time and to adapt as our advisors’ needs change.

We believe we offeff
r a compelling economic value proposition to independent advisors, which is a key factor in our
ability to attract and retain advisors and their practices. The independent channels pay advisors a greater share of
advisory fees and brokerage commissions than the captive channels — generally 80-100% compared to 30-50% for
captive channels. Our independent financial advisors are business owners who, unlike their captive counterparts,
also have the opportunity to build equity in their own businesses. Furthermore, we believe that our technology and
service platforms enable our advisors to operate their practices with a greater focus on serving investors at a lower
cost than other independent advisors.

We serve nearly 20,000 advisors that average over 20 years in the industry, which generally allows us to focus on
supporting and enhancing our advisors’ businesses without needing to provide basic training or subsidizing advisors
who are new to the industry. Our flexible business platform allows our advisors to choose the most appropriate
business model to support their clients whether they conduct brokerage business, offer
services on our corporate RIA platform, or provide fee-based services through their own RIA practices.

brokerage and fee-based

The majority of our advisors are independent practitioners who are primarily located in rural and suburban areas
and, as such, are viewed as local providers of independent advice. Many of our advisors operate under their own
business name, and we may assist these advisors with their branding, marketing and promotion and regulatory
review. We also support advisors who are our employees through our independent employee advisor affiff liation
model.

Advisors licensed with LPL Financial as registered representatives and/or as investment advisory representatives
are able to conduct both commission-based business on our brokerage platform and fee-based business on our
corporate RIA platform, respectively. In order to be licensed with LPL Financial, advisors must be approved through
our assessment process, which includes a review of each advisor’s education, experience and compliance history,
among other factors. Approved advisors become registered with LPL Financial and enter into a representative
agreement that establishes the duties and responsibilities of each party. Pursuant to the representative agreement,
each advisor makes a series of representations, including that the advisor will disclose to all clients and prospective
clients that the advisor is acting as LPL Financial’s registered representative or investment advisory representative,
that all orders for securities will be placed through LPL Financial, that the advisor will sell only products that LPL
Financial has approved, and that the advisor will comply with LPL Financial policies and procedures as well as
securities rules and regulations. These advisors also agree not to engage in any outside business activity without
prior approval from us and not to act in competition with us.

LPL Financial also supports nearly 500 independent RIA firms that conduct their business through separate
registered investment advisor firms (“Hybrid RIAs”) with over 5,400 advisors who conduct their advisory business
through these separate entities, rather than through LPL Financial. Hybrid RIAs operate pursuant to the Investment
Advisers Act of 1940, as amended (the “Advisers Act”), or their respective states’ investment advisory licensing
rules. These Hybrid RIAs engage us for technology, clearing and custody services, as well as access to our
investment platforms. Advisors associated with Hybrid RIAs retain 100% of their advisory fees, and in return, we
charge separate fees for custody, trading, administrative and support services. In addition, some financial advisors
associated with Hybrid RIAs carry their brokerage license with LPL Financial and access our fully-integrated
brokerage platform under standard terms.

We believe we are the market leader in providing support to over 2,800 financial advisors at approximately 800
financial institutions nationwide. The core capabilities of these institutions may not include investment and financial
planning services, or they may find the technology, infrastructure and regulatory requirements of supporting such
services to be cost-prohibitive. For these institutions, we provide their financial advisors with the infrastructure and
services they need to be successful, allowing the institutions to focus more attention and capital on their core
businesses.

We also provide support to approximately 3,700 additional financial advisors who are affiliat
insurance companies. These arrangements allow us to provide outsourced customized clearing, advisory platforms

ed and licensed with

and technology solutions that enable the financial advisors at these insurance companies to offeff
services to their client base in an effiff cient manner.

r a breadth of

Our Value Proprr osition

We are dedicated to making it easy for advisors to do what is best forff
platform enable us to provide advisors with the capabilities they need, and the service they expect, at a compelling
price. We are dedicated to continuously improving the processes, systems and resources we leverage to meet
these needs.

their clients. Our scale and self-clearing

We support our advisors by providing front-, middle- and back-offiff ce solutions through our distinct value proposition:
integrated technology solutions, comprehensive clearing and compliance services, consultative practice
management programs and training, business solutions and planning and advice services, and in-house research.
The comprehensive and increasingly automated nature of our offering
enables our advisors to focus on their clients
while successfully and efficient

ly managing the complexities of running their own practice.

Integrated Technology Solutions

We provide our technology and service to advisors through an integrated technology platform that is cloud-based
and web-accessible. Our technology offerings
are designed to permit our advisors to effeff ctively manage all critical
aspects of their businesses in an efficient
automate time-consuming processes, such as account opening and management, document imaging, transaction
execution, and account rebalancing, in an effort

manner while remaining responsive to their clients’ needs. We continue to

to improve our advisors’ efficiency

and accuracy.

Comprehensive Clearing and Complill anii

ce Services

r a simplified
We provide custody and clearing services for the majority of our advisors’ transactions, and seek to offeff
and streamlined advisor experience with expedited processing capabilities. Our self-clearing platform enables us to
control client data, more efficient
ultimately enhance the service experience for our advisors and their clients. Our self-clearing platform also enables
us to serve a wide range of advisors, including those associated with Hybrid RIAs.

ly process and report trades, facilitate platform development, reduce costs and

We continue to make substantial investments in our compliance function to provide our advisors with a strong
framework through which to understand and operate within regulatory guidelines, as well as guidelines that we
establish. Protecting the best interests of investors and our advisors is imperative to us. As the financial industry and
regulatory environment evolve and become more complex, we have made a long-term commitment to enhancing
our risk management and compliance structure, as well as our technology-based compliance and risk management
tools, in order to further enhance the overall effect

iveness and scalability of our control environment.

Our team of risk and compliance employees assists our advisors through:

•

training and advising advisors on new products, new regulatory guidelines, compliance and risk
management tools, security policies and procedures and best practices;

advising on sales practice activities and facilitating the supervision of activities by branch managers;
conducting technology-enabled surveillance of trading activities and sales practices;

•
•
• monitoring of registered investment advisory activities for advisors on our corporate RIA platform; and
•

s and advising on how to strengthen compliance procedures.

inspecting branch officeff

Practice Management Programs

and Training

Our practice management programs are designed to help financial advisors in independent practices and financial
institutions, as well as all levels of financial institution leadership, enhance and grow their businesses. Our
experience gives us the ability to benchmark the best practices of successful advisors and develop customized
recommendations to meet the specific needs of an advisor’s business and market, and our scale allows us to
ff
dedicate a team of experienced professionals to this effort.

Our practice management and training services include:

•

personalized business consulting that helps eligible advisors and program leadership enhance the value
and operational efficiency

of their businesses;

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

and wealth management services;

• marketing strategies, including campaign templates, to enable advisors to build awareness of their services

and capitalize on opportunities in their local markets;

•

succession planning and an advisor loan program for advisors looking to either sell their own or buy another
practice;

transition services to help advisors establish independent practices and migrate client accounts to us; and

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

Business Solutions

and Planning and Advice Services

LPL Business Solutions provides business support to advisors in areas critical to the operation of their practices,
such as marketing, accounting and transaction support. The LPL Business Solutions portfolio includes professional
services and business optimizer offeri
ngs, including CFO Solutions, Marketing
Solutions, and Admin Solutions, are digital and employee-powered solutions that provide practice management
expertise to increase practice-level growth and operational effici
Solutions, Remote Officff e Solutions, Resilience Plans and Assurance Plans, are digital solutions that provide risk
mitigation and business continuity services to support practice operations and succession planning.

ngs. Professional services offeri

ency. Business optimizer offeri

ngs, including M&A

Planning and Advice Services were launched in January of 2022 to enhance and expand our different
portfolio in support of our vision to become the leader across the advisor-centered marketplace. The focus of
Planning and Advice Services is helping advisors deliver comprehensive advice and creating advice capacity. We
are expanding our portfolio of services to address new advisor needs while also enhancing our existing solutions to
deliver an industry-leading customer experience.

iated services

In-House Research

We provide our advisors with integrated access to comprehensive research on a broad range of investments and
market analysis on macro-economic events, capital markets assumptions and strategic and tactical asset allocation.
Our research team provides advice that is designed to empower our advisors to provide their clients with thoughtful
advice in a timely manner, including the creation of discretionary portfolios for which we serve as a portfolio
manager, available through our turnkey advisory asset management platforms.
with our product risk management group to review the financial products offered
includes third-party asset manager search, selection and monitoring services for both traditional and alternative
strategies across all investment access points (exchange-traded funds, mutual funds, separately managed
accounts, unified managed accounts and other products and services). We believe not providing proprietary
products or investment banking services better enables us to provide research that is unbiased.

Our research team actively works
through our platforms. This

Our Prorr duct and Solutiontt

Access

We do not manufacture any financial products. Instead, we provide our advisors with curated access to a broad
range of commission, fee-based, cash and money market products and services. The sales and administration of
these products are facilitated through our technology solutions, which allow our advisors to access client accounts,
product information, asset allocation models, investment recommendations, and economic insight, as well as to
performff

trade execution.

Commission-Based Productstt

Commission-based products include those for which we and our advisors receive an upfront commission and, for
certain products, a trailing commission. Our brokerage offerings
ff
equities, fixed income, alternative investments, retirement and 529 education savings plans and insurance. We
regularly review the structure and fees of our commission-based products in the context of retail investor
preferences and the changing regulatory environment, as well as the competitive landscape. As of December 31,
2021, the total brokerage assets in commission-based products were $$563.2 bil

include variable and fixed annuities, mutual funds,

lion

Fee-Based Platforms

u
and Support

LPL Financial has various fee-based platforms that provide centrally managed or customized solutions from which
advisors can choose to meet the investment needs of their clients, including wrap-fee programs, mutual fund asset
allocation programs, an advisor-enhanced digital advice program, advisory programs offered
investment advisor firms, financial planning services and retirement plan consulting services. The fee structure of
our platforms enables our advisors to provide their clients with higher levels of service, while establishing a recurring
revenue stream for the advisor and for us. Our fee-based platforms provide access to mutual funds, exchange-
traded funds, stocks, bonds, certain option strategies, unit investment trusts and institutional money managers and

by third-party

no-load multi-manager variable annuities. As of December 31, 2021, the total advisory assets under custody in
these platforff ms, through both our corporate RIA platform and Hybrid platform, were $$643.2 bil

lion

Client Cash Programs

insured bank sweep vehicles and money market programs, which enable our advisors to manage their

We offer
clients’ cash balances. As of December 31, 2021, the total assets in our client cash programs, which are held within
advisory and brokerage accounts, were $$57.3 bil

lion

tt
Other

Services

We provide a number of tools and services that enable advisors to maintain and grow their practices. Through our
subsidiary PTC, we provide custodial services to trusts for estates and families. Under our model, an advisor may
provide a trust with investment management services, while administrative services for the trust are provided by
PTC. We also offeff
brokerage services, consultation and advice to retirement plan sponsors using LPL Financial. We offeff
generation, investment analytics and portfolio modeling capabilities to both our advisors and external clients in the
wealth management industry and provide an advisor-facing trading and portfolio rebalancing platform.

r retirement solutions for commission- and fee-based services that allow advisors to provide

r proposal

Our Financial Model

Our overall financial performance

is a function of the following:

• Our revenue stems from diverse sources, including advisor-generated advisory and commission fees, as
well as other asset-based fees from product sponsors, recordkeeping, networking services, client cash
balances, service and fee revenue, transaction revenue and revenue for other ancillary services that we
provide. Revenue is not concentrated by advisor, product or geography. For the year ended December 31,
2021, no single relationship with our independent advisor practices, banks, credit unions or insurance
companies accounted for more than 2% of our advisory and commission revenue, and no single advisor
accounted for more than 1% of our advisory and commission revenue.

•

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

A portion of our revenue is not asset-based or correlated with the equity financial markets. Service and fee
revenue includes service solutions, IRA custodian fees, contract and licensing fees, and other client account
fees. Service and fee revenue from Business Solutions is based on recurring subscription fees. We charge
separate fees to RIAs for technology, clearing, administrative, oversight and custody services, which may
vary. In addition, we host certain advisor conferences that serve as training, education, sales and marketing
events for which we charge sponsors a fee.

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

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

our business and return capital to shareholders.

Our Competitive Strengths

Market Leadersh

ip Position and Significff ant Scale

We are the established leader in the independent advisor market, which is our core business focus. We use our
scale and position as an industry leader to champion the independent business model and the rights of our advisors
and their clients. Our scale enables us to benefit from the following dynamics:

•

Continual
tt
management support, which further improves the productivity of our advisors.

— We actively reinvest in our comprehensive technology platform and practice

Reinvestment

Economies of Scale — As one of the largest distributors of financial products in the United States, we have
been able to obtain attractive economics from product sponsors.
Payout Rates to Advisors — As one of the largest U.S. broker-dealers by number of advisors, we believe
that we offer

our advisors the highest average payout rates in our industry.

The combination of our ability to reinvest in our business and maintain highly competitive payout rates has enabled
us to attract and retain advisors. This, in turn, has driven our growth and led to a continuous cycle of reinvestment
that reinforces

our established scale advantage.

Comprehensive Solutions

We differentiate through the combination of our capabilities across research, technology, risk management, and
practice management. LPL makes meaningful investments to support the growth, productivity and effici
advisors across a broad spectrum of models as their practices evolve. Our focus is working alongside advisors to
navigate complex environments in order to create the best outcomes for their clients.

ency of

r a compelling value proposition to independent financial advisors and financial institutions. This

We believe we offeff
value proposition is built upon the delivery of our services through our scale, independence, and integrated
technology, the sum of which we believe is not replicated in the industry. As a result, we believe that we do not have
any direct competitors that offer
our business model at the scale at which we offer
not have any proprietary manufactu
ff
management products and other financial products as direct competitors.

red financial products, we do not view firms that manufacture

it. For example, because we do

asset

We provide comprehensive solutions to financial institutions, such as regional banks, credit unions, and insurance
companies that seek to provide a broad array of services for their clients. We believe many institutions find the
technology, infrastructure, and regulatory requirements associated with delivering financial advice to be cost-
prohibitive. The solutions we provide enable financial advisors at these institutions to deliver their services on a
cost-effective basis.

Flexibi

liii ty of Our Busines

s Model

Our business model allows our advisors the freedom to choose how they conduct their business, subject to certain
regulatory parameters, which has helped us attract and retain advisors from multiple channels, including
wirehouses, regional broker-dealers and other independent broker-dealers. Our platform can accommodate a
variety of independent advisor business models, including independent financial advisors and RIAs, as well as
employee advisors. The flexibility of our business model enables our advisors to select their preferred affiliat
ion
model and product mix as their business evolves and preferences change within the market or their client base all
within an environment that allows that evolution with minimal interruption for their business and their clients.

In addition, our business model provides advisors with a multitude of customizable service and technology offerings
that allow them to increase their efficiency
, focus on their clients and grow their practice. For example, LPL Business
Solutions provides business support to advisors in areas critical to the operation of their practices, such as
marketing, accounting and transaction support.

Our Sources of Growth

Increasingii

Produ

ctivityvv

xx
of Existi

ngii

ii
Advisor

Base

We believe the productivity of our advisors has the potential to increase over time as we continue to develop
solutions designed to enable them to add new clients, manage more of their clients’ investable assets, and expand
their existing practices with additional advisors. We expect to facilitate these productivity improvements by helping
our advisors better manage their practices in an increasingly complex external environment, which we believe has
the potential to result in the assets per advisor growing over time. Business Solutions and Planning and Advice
Services are a source of organic growth as a larger share of advisors adopts these service solutions.

Attractingii

New Assets to Our Platfo

We intend to grow the assets served by our platforff m across traditional markets and through new affiff liation models.
Ongoing investment in and enhancement to our platform and support teams is leading to increased win rates and
an expanded pipeline. We are also experiencing strong momentum from our new advisor affiliat
ion models, which
are attracting prospects. Finally, we have opened up a new market with our newest large financial institution
affilff
iation model. The relationships with M&T Bank Corporation (“M&T Bank”) and BMO Harris Financial Advisors
(“BMO Harris”) that we began during 2021, the expected onboarding of CUNA Brokerage Services, Inc. (“CBSI”),
and the related investments in the institutional platform are generating interest from new institutional clients.

Competition

We compete with a variety of financial firms to attract and retain experienced and productive advisors. These
financial firms operate in various channels and markets:

• Within the independent broker-dealer channel, the industry is highly fragmented and comprised primarily of
regional firms that rely on third-party custodians and technology providers to support their operations.

• Wirehouses tend to consist of large nationwide firms with multiple lines of business that have a focus on the

highly competitive high-net-worth investor market.

•

Competition for advisors also includes regional firms that primarily focus on specific client niches or
geographic areas.

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

Our advisors compete for clients with financial advisors of brokerage firms, banks, insurance companies, asset
management, and investment advisory firms. In addition, they also compete with a number of firms offering
to-investor online financial services and discount brokerage services.

direct-

Human Capital

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

Workforcerr

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

Talent Management and Culture

Due to the complexity of our business, we compete for talent with other companies, both inside and outside of our
industry, and in multiple geographical areas in the United States. In 2021, our human capital efforts
further developing our culture of service that emphasizes taking care of our advisors, so they can take care of their
clients. To that end, we seek employees who are approachable, proactive, collaborative, agile and innovative, and
who share our commitment to excellence, integrity and service.

focused on

Compensationtt

and Benefitsff

that is committed to our culture, we strive to offer

To maintain a high-caliber, values-driven workforce
including compensation, benefits and recognition programs that position our company as an employer of choice.
Our compensation is designed to be performance based and competitive in the markets in which we compete. We
closely monitor industry trends and practices to ensure we are able to attract and retain the personnel who are
critical to our success. We also monitor internal pay equity to help ensure that our compensation practices are fair
and equitable across our organization. Our company’s senior leaders have an opportunity to receive a portion of
their compensation in Company equity, and, subject to a cap, we match the contributions of all of our employees to
our retirement savings plan to help support their long-term financial goals. We also offeff
purchase plan that enables eligible employees to acquire an ownership interest in our company at a discount to
prevailing market prices.

r an employee stock

total rewards,

To help our employees feel supported, we offer
an array of benefits intended to meet the diverse needs of our
employees and their eligible dependents. From healthcare to holidays, our aim is to help our employees enjoy
happy and healthy lifestyles, while maintaining good work-life balance. Our benefits, which are overseen by our
Total Rewards team in partnership with our Corporate Communications, Finance, Payroll, and Human Capital
teams, are available to all full-time employees and part-time employees working at least 30 hours per week. Our
benefits packages are comprehensive and available to over 99% of our workforce.
Our health and welfare benefits
include, among other things: medical coverage; dental and vision coverage; healthcare and dependent-care flexible
spending accounts, Health Savings Accounts, the LPL Live Well employee wellbeing program, an Employee
Assistance Program, including counseling and work/life services for employees and their families; accident and
critical illness coverage; lifef and accidental death and dismemberment insurance, as well as short-term and long-
term disability insurance; and an on-site cafeteria.

Training and Development

We believe in our employees’ potential and provide training and development opportunities intended to maximize
ff
their performance
work, we provide a robust new-hire experience, as well as extensive ongoing training for our employees to acquaint

and professional growth. To ensure that new employees integrate into our culture and their daily

them with our business. We require all of our employees to complete courses in key regulatory areas, such as
insider trading and anti-money laundering compliance, and we offer
opportunities for professional development
through training sessions and cross-departmental workshops. In addition, we have a mentorship program that pairs
newer employees with more experienced professionals, giving mentees access to experience, expertise and
guidance as they chart their career paths.

Employee Safetyt

We aim to provide a safe, inclusive environment for our employees where they feel engaged in our business,
supported in who they are and empowered to succeed. We are committed to providing a workplace that is free from
violence, harassment and other unsafe or disruptive conditions and require our personnel to attend regular training
sessions and workshops on those topics.

To promote safety during the COVID-19 pandemic, starting in March 2020, we expanded our work-from-home policy
that enables our employees to work remotely. For our essential workers, we introduced additional hospital-grade
disinfectants and maximized outdoor air intake and air filtration. We adopted a Te
Po ylicy that provides all workers with up to 14
fsufffer
fff
protocol, which now fofffers
g
challenges,
employee-t
established the LPL CCare Fund, an
and unavoidable ffinancial hardships as a result

mporary COCOVID-19 SSick Time
yhey are sick an /d/or have COCOVID, so th yey do not
te when ill. We also extended our Leaves fof Absence
ydaycare

o-employee rel
fof a natural disaster or epidemic yby pro

learning ffor their children and dependents. In addition, the LPL Financial Foundation

personal leaves fof absence to support emp yloyees with mental health concerns,

gwage loss due to an absence, and so th yey remain fofff-si

facing unexpected
f

ief ffund created to help

employees facing

and/or distance

tax-free ggrants.

y
viding
g

ydays fof ffull

ypay fif t

fff

Diversity,t Equityt and Inclusion

We believe that well-being is more than just physical safety and that our employees should feel welcome and
supported as who they are. We seek to foster diversity and a culture of inclusivity. Our employee-led resource
groups focus on the needs, concerns and experiences of various diverse groups and help leaders drive business
outcomes. In addition, our professional
s have focused on improving the diversity
development and recruitment effort
of our employee population, including through targeted outreach to and collaborations with organizations that serve
diverse populations.

Continuous improvement is a pillar of our culture, and we regularly solicit employee feedback on the effecti
and quality of our support programs and their level of engagement with our business. We use this feedback to
improve our programs and processes and informff
decisions about our business. In addition, we closely monitor
employee turnover, both in the aggregate and in key subcategories such as diversity and levels in the Company, to
evaluate our effeff ctiveness in retaining critical personnel.

veness

We are committed to an inclusive work environment to encourage and cultivate diversity of thought and ideas within
the Company. We sponsor Employee Resource Groups to leverage the individual talents, perspectives and
experiences of our employees to position us for continued growth and success.

Regulation

to extensive regulation by U.S. federal, state, and international government

The financial services industry is subject
agencies as well as various self-regulat
ory organizations. We seek to participate in the development of significant
rules and regulations that govern our industry. We have been investing in our compliance functions to monitor our
adherence to the numerous legal and regulatory requirements applicable to our business. Compliance with all
applicable laws and regulations, only some of which are described below, involves a significant investment in time
and resources. Any new laws or regulations applicable to our business, any changes to existing laws or regulations,
or any changes to the interpretations or enforff cement of those laws or regulations may affeff ct our operations and/or
financial condition.

Broker-Dealer Regulatioll

LPL Financial is a broker-dealer registered with the SEC, a member of the Financial Industry Regulatory Authority
(“FINRA”) and other self-regulatory organizations, and a participant in various clearing organizations including the
Depository Trust Company, the National Securities Clearing Corporation, and the Options Clearing Corporation. LPL
Financial is registered as a broker-dealer in each of the 50 states, the District of Columbia, Puerto Rico, and the
U.S. Virgin Islands. The rules of the Municipal Securities Rulemaking Board, which are enforced
by the SEC and
FINRA, apply to the municipal securities activities of LPL Financial.

ngs, publication of research reports, use and safekeeping of clients’ funds and

Broker-dealers are subject to rules and regulations covering all aspects of the securities business, including sales
and trading practices, public offeri
securities, capital adequacy, recordkeeping and reporting, the conduct of directors, offiff cers and employees,
qualification and licensing of supervisory and sales personnel, marketing practices, supervisory and organizational
procedures intended to ensure compliance with securities laws, and to prevent improper trading on material
nonpublic informat
ion, limitations on extensions of credit in securities transactions, clearance and settlement
procedures, and rules designed to promote high standards of commercial honor and just and equitable principles of
trade. Broker-dealers are also subject to state securities laws and regulated by state securities administrators in
those jurisdictions where they do business. Applicable laws, rules, and regulations may be subject to varying
interpretations and change from time to time.

Regulators make periodic examinations and inquiries of us and review annual, monthly, and other reports on our
operations and financial condition. Regulatory actions brought against us alleging violations of applicable laws,
rules, and regulations could result in censures, penalties and fines, settlements, disgorgement of profits, restitution
to customers, remediation or the issuance of cease-and-desist orders. Such actions could also result in the
restriction, suspension or expulsion from the securities industry of us or our financial advisors, officers
employees. We also may incur substantial expenses, damage to our reputation, or similar adverse consequences in
connection with any such actions by the SEC, FINRA, the U.S. Department of Labor (“DOL”) or state securities
regulators, regardless of the outcome.

LPL Financial’s margin lending is regulated by the Federal Reserve Board’s restrictions on lending in connection
with client purchases and short sales of securities, and FINRA rules also require LPL Financial to impose
maintenance requirements based on the value of securities contained in margin accounts. In many cases, our
margin policies are more stringent than these rules.

On June 30, 2020, the SEC’s new standard of conduct applicable to retail brokerage accounts (“Reg BI”) became
applicable. Reg BI requires that broker-dealers act in the best interest of retail customers without placing their own
financial or other interests ahead of the customer’s and imposes new obligations related to disclosure, duty of care,
conflicts of interest and compliance. Certain state securities and insurance regulators have also adopted, proposed
or are considering adopting similar laws and regulations. On December 18, 2020, the DOL finalized a new
Prohibited Transaction Exemption 2020-02 (“PTE 2020-02”) that expands instances where an investment advice
fiduciary can receive additional compensation on transactions as a result of fiduciary recommendation to a plan
covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), IRA or other account
covered by Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”). Compliance with these
provisions has increased our compliance costs. Moreover, to the extent new rules or regulations affect
operations, financial condition, liquidity and capital requirements of financial institutions with which we do business,
those institutions may seek to pass on increased costs, reduce their capacity to transact, or otherwise present
inefficiencies
examinations and enforcement
on us, the financial industry and the economy cannot be known at this time. It is unclear how and whether other
regulators, including banking regulators, and state securities and insurance regulators, may respond to or attempt to
ff
enforce

in their interactions with us. As industry compliance practices and regulatory approaches to guidance,

continue to develop, the ultimate impact that these new rules or regulations will have

similar issues addressed by Reg BI and PTE 2020-02.

the

Investment Advisovv

ll
r Regulation

As investment advisors registered with the SEC, our subsidiaries LPL Financial, Allen & Company and Fortigent,
LLC are subject to the requirements of the Advisers Act, and the regulations promulgated thereunder, including
examination by the SEC’s staff.ff Such requirements relate to, among other things, fiduciary duties to clients,
performance
advertising, limitations on agency cross and principal transactions between the advisor and advisory clients,
recordkeeping and reporting requirements, disclosure requirements, and general anti-fraud provisions.

ive compliance program, solicitation arrangements, conflicts of interest,

fees, maintaining an effect

The SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act and
associated regulations. Investment advisors also are subject to certain state securities laws and regulations. Failure
to comply with the Advisers Act or other federal and state securities laws and regulations could result in
investigations, censures, penalties and fines, settlements, disgorgement of profits, restitution to customers,
remediation, the issuance of cease-and-desist orders or the termination of an investment advisor’s registration. We
also may incur substantial expenses, damage to our reputation or similar adverse consequences in connection with
such actions, regardless of the outcome.

Retiremen

t Planll

Services Regulatioll

Certain subsidiaries, including LPL Financial, LPL Employee Services, LLC, PTC, Fiduciary Trust Company of New
Hampshire and LPLIA, are subject to ERISA, and Section 4975 of Code, and to regulations promulgated under
ERISA or the Code, insofarff
as the subsidiaries provide services with respect to plan clients, or otherwise deal with
plan clients, plan participants and retirement, health and educational accounts that are subject to ERISA or Section
4975 of the Code. ERISA imposes certain duties on persons who are “fiduciaries” (as defined in Section 3(21) of
ERISA) and prohibits certain transactions involving plans subject to ERISA and fiduciaries or other service providers
to such plans. Non-compliance with or breaches of these provisions may expose an ERISA fiduciary or other
service provider to liability under ERISA, which may include monetary and criminal penalties as well as equitable
remedies for the affecte
in Section 4975(e)(1), which include, for example, IRAs and certain Keogh plans) and service providers, including
fiduciaries (as defined in Section 4975(e)(3)), to such plans. Section 4975 imposes excise taxes for violations of
these prohibitions.

d plan. Section 4975 of the Code prohibits certain transactions involving “plans” (as defined

reinstated its “five-part test” defining fiduciary “investment advice” under ERISA

On June 29, 2020, the DOL officially
and the Code (the “Five-Part Test”). Under this test, providing non-discretionary investment advice or
recommendations with respect to a covered account can cause a person to be a fiduciary under ERISA and/or the
Code if the advice is provided for a fee, on a regular basis, and subject to a mutual understanding that the advice
will be personalized to the needs of the advice recipient and used as a primary basis for an investment decision.
This action formally implemented the Fifth Circuit’s decision in 2019 to vacate the DOL’s 2016 “fiduciary rule,” which
had significantly expanded the scope of activities that could otherwise result in fiduciary status under ERISA and
Section 4975 of the Code.

On December 18, 2020, the DOL finalized PTE 2020-02, providing broad exemptive relief for receiving variable or
transaction-based compensation, and certain other “prohibited transactions,” in connection with fiduciary investment
advice to investors using covered accounts. The preamble to this exemption also included the DOL’s new and
expanded interpretation of when providing a rollover recommendation (or potentially other recommendations) could
result in fiduciary status under the historic Five-Part Test. This new interpretation, as well as other guidance issued
by the DOL in connection with this interpretation, is the subject
b
challenging the DOL’s authority to issue it. We operate our business in compliance with a number of DOL prohibited
transaction exemptions, including PTE 2020-02, where applicable. However, as industry compliance practices and
regulatory approaches to guidance, examinations and enforcement
continue to develop, and the outcomes of
ff
litigation remain pending, the ultimate impact that these new rules or regulations will have on us, the financial
industry and the economy cannot be known at this time. In addition, it is unclear how and whether the DOL and
other regulators, including the SEC, FINRA, banking regulators, and the state securities and insurance regulators
may respond to, or enforce

elements of the Five Part Test and PTE 2020-02 rules or interpretations.

of multiple litigations in federal district courts

The DOL issued a new exemption for “fiduciary” investment advice under ERISA and Section 4975 of the Code with
a compliance date of February 1, 2022. The DOL also signaled its intent to further amend the definition of “fiduciary”
under ERISA and the Code and certain of its existing prohibited transaction exemptions, which we expect, if
completed, to result in increased legal, compliance, information technology and other costs and could lead to a
greater risk of client lawsuits and enforcement
of any future DOL
regulations and changes on our retirement plan business cannot be anticipated or planned for but may have further
impacts on our products and services and results of operations.

activity by the DOL and other regulators. The effect

Commodities and Futures Regulation

LPL Financial is registered as an introducing broker with the Commodity Futures Trading Commission (“CFTC”) and
is a member of the National Futures Association (“NFA”).
products to ADM Investor Services, Inc. (“ADM”), and all commodities accounts and related client positions are held
by ADM. LPL Financial is regulated by the CFTC and the NFA.FF Violations of the rules of the CFTC and the NFAFF
could result in remedial actions including fines, registration terminations or revocations of exchange memberships.

LPL Financial introduces commodities and futures

Trust Regulation

trust, investment management oversight and custodial services for estates

Through our subsidiary, PTC, we offer
and families. PTC is chartered as a non-depository national banking association. As a limited purpose national
bank, PTC is regulated and regularly examined by the Officeff
of the Comptroller of the Currency (“OCC”). PTC files
reports with the OCC within 30 days after the conclusion of each calendar quarter. Because the powers of PTC are
limited to providing fiduciary services and investment advice, it does not have the power or authority to accept
deposits or make loans. For this reason, trust assets under PTC’s management are not insured by the FDIC.

Because of its limited purpose, PTC is not a “bank” as defined under the Bank Holding Company Act of 1956.
Consequently, neither its immediate parent, PTC Holdings, Inc., nor its ultimate parent, LPLFH, is regulated by the
Board of Governors of the Federal Reserve System as a bank holding company. However, PTC is subject to
regulation by the OCC and to various laws and regulations enforced
of control restrictions and regulations governing fiduciary duties, conflicts of interest, self-dealing
laundering. For example, the Change in Bank Control Act of 1978, as implemented by OCC supervisory policy,
imposes restrictions on parties who wish to acquire a controlling interest in a limited purpose national bank such as
PTC or the holding company of a limited purpose national bank such as LPLFH. In general, an acquisition of 10% or
more of our common stock, or another acquisition of “control” as defined in OCC regulations, may require OCC
approval. These laws and regulations are designed to serve specific bank regulatory and supervisory purposes and
are not meant for the protection of PTC, PTC Holdings, Inc., LPLFH, or their stockholders.

by the OCC, such as capital adequacy, change

, and anti-money

ll
Regulatory

Capital Requirements

The SEC, FINRA, the CFTC, and the NFAFF have stringent rules and regulations with respect to the maintenance of
specific levels of net capital by regulated entities. The net capital rule under the Exchange Act requires a broker-
dealer to maintain a minimum net capital and applies certain discounts to the value of its assets based on the
liquidity of such assets. LPL Financial is also subject to the NFAFF ’s financial requirements and is required to maintain
net capital that is in excess of or equal to the greatest of the NFA’FF s minimum financial requirements. Under these
requirements, LPL Financial is currently required to maintain minimum net capital that is in excess of or equal to the
minimum net capital calculated and required pursuant to the Exchange Act’s net capital rule.

The SEC, FINRA, the CFTC, and the NFAFF impose rules that require notification when net capital falls below certain
predefined criteria. These broker-dealer capital rules also dictate the ratio of debt to equity in regulatory capital
composition and constrain the ability of a broker-dealer to expand its business under certain circumstances. If a
broker-dealer fails to maintain the required net capital, then certain notice requirements to the regulators are
required, and the broker-dealer may be subject
to suspension or revocation of registration by the applicable
regulatory agency, and suspension or expulsion by these regulators ultimately could lead to the broker-dealer’s
liquidation. Additionally, the net capital rule and certain FINRA rules impose requirements that may have the effect
of
ff
prohibiting a broker-dealer from distributing or withdrawing capital and require prior notice to the SEC and FINRA for
certain capital withdrawals. LPL Financial, which is subject to net capital rules, has been and currently is in
compliance with those rules and has net capital in excess of the minimum requirements.

Anti-Money Launderinrr g and Sanctions Complianll

The USA PATRAA IOT Act of 2001, which amended the Bank Secrecy Act, contains anti-money laundering and
financial transparency laws and mandates the implementation of various regulations applicable to broker-dealers,
futures commission merchants, and other financial services companies. Financial institutions subject to these
requirements generally must have an anti-money laundering program in place, which includes monitoring for and
reporting suspicious activity, implementing specialized employee training programs, designating an anti-money
laundering compliance officer
addition, sanctions administered by the United States Offiff ce of Foreign Asset Control prohibit U.S. persons from
doing business with blocked persons and entities or certain sanctioned countries. We have established policies,
procedures and systems designed to comply with these regulations and work continuously to improve and
strengthen our regulatory compliance mechanisms.

, and annually conducting an independent test of the effecti

veness of its program. In

Securityt and Privacyc

Regulatory activity in the areas of privacy and data protection continues to grow worldwide and is generally being
driven by the growth of technology and related concerns about the rapid and widespread dissemination and use of
ion. To the extent they are applicable to us, we
informat
must comply with federal and state informf
ation-related laws and regulations in the United States, including the
Gramm-Leach-Bliley Act of 1999, SEC Regulation S-P,P the Fair Credit Reporting Act of 1970, as amended, and
Regulation S-ID as well as the California

Consumer Privacy Act and further potential federal and state requirements.

ion and general concerns about the security of that informat

Trademarks

Access Overlay®, BlazePortfolio®, BranchNet®, CLIENTWORKS®, Fortigent®, LPL®, LPL Career Match®, LPL
Financial (& Design)®, Manager Access Network®, Manager Access Select®, OMP® and SPONSORWORKS® are
our registered trademarks, and ADVISORYWO
FLORIDA, LLC, and THE PRIVATVV E TRUST COMPANYPP

RLD, CLIENTWORKS CONNECTED, ALLEN & COMPANYPP

,YY N.A. (& Design) are among our service marks.

Item 1A. Risk Factors

Risk Factor Summary

Our business, operations and financial results are subject
providing the following summary of risk factors to enhance readability of our risk factor disclosure. Material risks that
may adversely affect

our business, operations and financial results include, but are not limited to, the following:

to varying degrees of risk and uncertainty. We are

Risks Related to Our Business and Industryy

• We depend on our ability to attract and retain experienced and productive advisors, and we are subject to

competition in all aspects of our business.

• Our financial condition and results of operations may be adversely affect

ed by market fluctuations and other

economic factors.

•

Significant interest rate changes could affect

our profitability and financial condition.

Any damage to our reputation could harm our business and lead to a loss of revenue and net income.

• Our business is subject to risks related to litigation, arbitration claims and regulatory actions.

•

There are risks inherent in the independent broker-dealer business model.

• We rely on third-party service providers, including off-shore

providers, to performff

technology, processing

and support functions, and our operations are dependent on financial intermediaries that we do not control.

•

Lack of liquidity or access to capital could impair our business and financial condition.

• Our business could be materially adversely affecte

d as a result of the risks associated with acquisitions and

investments.

• Our risk management policies and procedures may not be fully effecti

ve in mitigating our risk exposure in all

market environments or against all types of risks.

• We face competition in attracting and retaining key talent.

•

The securities settlement process exposes us to risks related to adverse movements in price.

• Our indebtedness could adversely affect

our financial condition and may limit our ability to use debt to fund

future capital needs.

•

Restrictions under our Credit Agreement and the Indentures governing our senior unsecured notes (the
“Notes”) may prevent us from taking actions that we believe would be in the best interest of our business.

Provisions of our Credit Agreement and the Indentures could discourage an acquisition of us by a third-
party.

• Our insurance coverage may be inadequate or expensive.

•

Poor service or performance
such services or products may cause clients of our advisors to withdraw their assets on short notice.

of the financial products that we offeff

r or competitive pressures on pricing of

rers of financial products could harm our relationship

A loss of our marketing relationships with manufactu
with our advisors and, in turn, their clients.
Changes in U.S. federal income tax law could make some of the products distributed by our advisors less
attractive to clients.
fff
The fefffect
gglobal ffinancial markets, and
material adverse fefffect

economy and
ymay disrupt our operations and our advisors' operations, which could have a

on our business, ffinancial condition and results fof operations.

s fof the outbreak fof COCOVID-19 have

economy, SU.S.

ed the gglobal

ively fafffect

gnegat

fff

Risks Related to Our Regulatory Environment

•

Any failure to comply with applicable federal or state laws or regulations exposes us to litigation and
regulatory actions, which could increase our costs or negatively affect
Regulatory developments could adversely affect
business less profitable.

our business by increasing our costs or making our

our reputation.

• We are subject to various regulatory requirements, which, if not complied with, could result in the restriction

of the conduct or growth of our business.

•

Failure to comply with ERISA regulations and certain tax-qualified plan laws and regulations could result in
penalties against us.

Risks Related to Our Technologygy

• We rely on technology in our business, and technology and execution failures could subject us to losses,

litigation and regulatory actions.

• Our informat

ion technology systems may be vulnerable to security risks.

•

A cyber-attack or other security breach of our technology systems or those of our advisors or third-party
vendors could subject us to significant liability and harm our reputation.

Failure to comply with the complex privacy and data protection laws and regulations to which we are subject
could result in adverse action from regulators.

Failure to maintain technological capabilities, flaws in existing technology, difficult
ies in upgrading our
technology platforff m or the introduction of a competitive platforff m could have a material adverse effect
business.

on our

Inadequacy or disruption of our business continuity and disaster recovery plans and procedures in the event
of a catastrophe could adversely affect

our business.

Risks Related to Ownership of Our Common Stock

•

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial
losses for our investors.

• We are a holding company and rely on dividends, distributions and other payments, advances and transfers

of funds from our subsidiaries to meet our debt service and other obligations.

• Our future ability to pay regular dividends to holders of our common stock or repurchase shares are subject
earnings and

to the discretion of our board of directors and will be limited by our ability to generate sufficient
cash flows.

Risks Related to Our Business and Industry

e
We depend
competition in allll aspects of our busines

on our abilityll

to attract and retain exper

ienrr

ced and prodrr uctivevv advisors, and we are subject to

We derive a large portion of our revenue from commissions and fees generated by our advisors. Our ability to
attract and retain experienced and productive advisors has contributed significantly to our growth and success, and
our strategic plan is premised upon continued growth in the number of our advisors and the assets they serve. If we
fail to attract new advisors or to retain and motivate our current advisors, replace our advisors who retire, or assist
our retiring advisors with transitioning their practices to existing advisors, or if advisor migration away from
wirehouses to independent channels slows, our business may suffer.

The market for experienced and productive advisors is highly competitive, and we devote significant resources to
attracting and retaining well-qualified advisors. In attracting and retaining advisors, we compete directly with a
variety of financial institutions such as wirehouses, regional broker-dealers, banks, insurance companies and other
independent broker-dealers. If we are not successful in retaining highly qualified advisors, we may not be able to
recover the expense involved in attracting and training these individuals. There can be no assurance that we will be
successful in our effort

s to attract and retain the advisors needed to achieve our growth objectives.

More broadly, we are subject to competition in all aspects of our business from:

•

brokerage and investment advisory firms, including national and regional firms, as well as independent RIA
firms;

asset management firms;

commercial banks and thrift institutions;

insurance companies;

other clearing/custodial technology companies; and

investment firms offeff

ring so-called “robo” advice solutions.

Many of our competitors have substantially greater resources than we do and may offeff
and financial products across more markets. Some of our competitors operate in a diffeff
than we do, which may give them certain competitive advantages in the services they offer
our competitors only provide clearing services and consequently would not have any supervision or oversight
liability relating to actions of their financial advisors. We believe that competition within our industry will intensifyff as a

r a broader range of services
rent regulatory environment
. For example, certain of
ff

result of consolidation and acquisition activity and because new competitors face few barriers to entry, which could
adversely affect

our ability to recruit new advisors and retain existing advisors.

If we fail to continue to attract highly qualified advisors, or if advisors licensed with us leave us to pursue other
opportunities, we could face a significant decline in market share, commission and fee revenue or net income. We
could face similar consequences if current or potential clients of ours, including current clients that use our
outsourced customized clearing, advisory platforms or technology solutions, decide to use one of our competitors
rather than us. If we are required to increase our payout of commissions and fees to our advisors in order to remain
competitive, our net income could be significantly reduced.

Our finanii
other economic factors.

cial condition and results of operatiorr

ns may be adversel

yl affeff cted by market fluctuations and

Significant downturns and volatility in equity and other financial markets have had and could continue to have an
adverse effect

on our financial condition and results of operations.

General economic and market factors can affect
market levels or market volatility can:

our commission and fee revenue. For example, a decrease in

•

reduce new investments by advisors’ new and existing clients in financial products that are linked to the
equity markets, such as variable life insurance, variable annuities, mutual funds and managed accounts;

reduce trading activity, thereby affect

ing our brokerage commission revenue and our transaction revenue;

reduce the value of advisory and brokerage assets, thereby reducing advisory fee revenue, trailing
commission revenue and asset-based fee revenue; and

• motivate clients to withdraw funds from their accounts, thereby reducing advisory and brokerage assets,

advisory fee revenue and asset-based fee revenue.

Other more specific trends may also affect
changes in the mix of products preferred
associated with such products depending on whether investors gravitate towards or away from such products. The
timing of such trends, if any, and their potential impact on our financial condition and results of operations are
beyond our control.

our financial condition and results of operations, including, for example,

by investors may result in increases or decreases in our fee revenue

In addition, because certain of our expenses are fixed, our ability to reduce them in response to market factors over
short periods of time is limited, which could negatively impact our profitability.

Significff ant interesrr

t rate changes could affeff ct our profrr

itff abtt

ilityt and financialii condition.

Our revenue is exposed to interest rate risk primarily from changes in fees payable to us from banks participating in
our client cash programs, which are generally based on prevailing interest rates. Our revenue from our client cash
programs has declined in the past as a result of a low interest rate environment, and our revenue may decline in the
future due to decreases in interest rates, decreases in client cash balances or mix shiftsff among the current or future
bank sweep vehicles and money market programs that we offer
. The Federal Reserve’s federal funds rate was near
zero throughout 2021, and there is no assurance that it will not maintain a low-interest rate environment for a
significant period of time. Our revenue from our client cash programs also depends on our success in placing
deposits and negotiating favorable terms in agreements with third-party banks and money market fund providers
participating in our programs, as well as our success in offeff
ring competitive products, program fees and interest
rates payable to clients. The expiration of contracts with favorable pricing terms, less favorable terms in future
contracts, the inability to place deposits with third-party sweep banks, or changes in money market programs that
we offer
could result in declines in our revenue. A sustained low interest rate environment may also have a negative
ff
impact upon our ability to negotiate contracts with new banks or renegotiate existing contracts on comparable terms
with banks participating in our client cash programs. If interest rates do not rise, or if balances or yields in our client
cash programs decrease, future revenue from our client cash programs may be lower than expected.

Any damage to our reputation could harm our busines

s and lead to a loss of revenue and net income.

We have spent many years developing our reputation for integrity and client service, which is built upon our support
for our advisors through: enabling technology, comprehensive clearing and compliance services, practice
management programs and training and in-house research. Our ability to attract and retain advisors and employees
is highly dependent upon external perceptions of our level of service, business practices and financial condition.
Damage to our reputation could cause significant harm to our business and prospects and may arise from
numerous sources, including:

•

litigation or regulatory actions;

failing to deliver acceptable standards of service and quality, including technology or cybersecurity failures;

compliance failures; and

unethical behavior and the misconduct of employees, advisors or counterparties.

Negative perceptions or publicity regarding these matters could damage our reputation among existing and potential
advisors and employees, and could lead advisors to terminate their agreements with us, which they generally have
the right to do unilaterally upon short notice. Adverse developments with respect to our industry may also, by
association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against
us. These occurrences could lead to loss of revenue and lower net income.

Our business is subject to risks related

i
to litigatio

n, arbirr

tration claims and regulatory

actions.

From time to time, we have been subjected to and are currently subject to legal and regulatory proceedings arising
out of our business operations, including lawsuits, arbitration claims, governmental subpoenas and regulatory,
governmental and self-regulat
well as other actions and claims. Many of our legal claims are initiated by clients of our advisors and involve the
purchase or sale of investment securities, but other claims and proceedings may be, and have been, initiated by
state-level and federal regulatory authorities and SROs, including the SEC, FINRA and state securities regulators.

ory organization (“SRO”) inquiries, investigations and enforcement

proceedings, as

The outcomes of any such legal or regulatory proceedings, including inquiries, investigations and enforcement
proceedings by the SEC, FINRA, DOL and state securities regulators, are difficult
such a matter could result in substantial legal liability, censures, penalties and fines, disgorgement of profits,
restitution to customers, remediation, the issuance of cease-and-desist orders, or injunctive or other equitable relief
against us. Further, such negative outcomes individually or in the aggregate may cause us significant reputational
harm and could have a material adverse effect
on our ability to recruit or retain financial advisors, or our results of
operations, cash flows or financial condition.

to predict. A negative outcome in

We may face liabilities for deficiencies or failures in our compliance systems and programs, as well as actual or
alleged breaches of legal duties to our advisors’ clients, including in respect of issues related to the financial
products we make available in our curated product platformff
our advisors provide to their clients, which are subject to various standards of care, including in some cases
fiduciary obligations.

or the investment advice or securities recommendations

In addition, the administration of client accounts involves functions such as recordkeeping and accounting, security
pricing, corporate actions, and account reconciliations that are complex and rely on tools and resources to support
these operational processes. Failure to properly performff
these tools, could subject us to regulatory sanctions, penalties or litigation and result in reputational damage, and
liability to clients. Moreover, new and developing state and federal regulatory requirements with respect to
standards of care and other obligations, as discussed under “Risks Related to Our Regulatory Environment” below,
may introduce new grounds for legal claims or enforcement
actions against us in the future, including, in particular
with respect to our brokerage services. We may also become subject to claims, allegations and legal proceedings
related to employment matters, including wage and hour, discrimination or harassment claims, or matters involving
others’ intellectual property or other proprietary rights, including infringement or misappropriation claims.

operational tasks or errors in the design or function of

There are risks inherent

in the indepee ndentdd

broker-dealdd

er business model.

Compared to wirehouses and other employee model broker-dealers, we generally offer
operating their businesses with regard to product offeri
supervisory models. Our approach may make it more challenging for us to comply with our supervisory and
regulatory compliance obligations, particularly in light of our limited on-site supervision and the complexity of certain
advisor business models.

advisors wider choice in
technology and

ngs, outside business activities, officeff

Misconduct and errors by our employees and our advisors could be diffiff cult for us to detect and could result in
violations of law by us, regulatory sanctions, or serious reputational or financial harm. Although we have designed
policies and procedures to comply with applicable laws, rules, regulations and interpretations, we cannot always
prevent or detect misconduct and errors by our employees and our advisors, and the precautions we take to prevent
and detect these activities may not be effect
typically not our direct employees and some of whom tend to be located in small, decentralized offices,
additional challenges, particularly in the case of complex products or supervision of outside business activities. In
technology, we
addition, although we provide our advisors with requirements and recommendations for their officeff
cannot fully control or monitor the extent of their implementation of our requirements and recommendations.

ive in all cases. Prevention and detection among our advisors, who are

present

Accordingly, we cannot assure that our advisors’ technology meets our standards, including with regard to
informat
advisors will not lead to a material adverse effect
sufficient

ion security and cybersecurity. We also cannot assure that misconduct or errors by our employees or

ff
to cover such misconduct or errors.

on our business, or that our errors and omissions insurance will be

We rely on third-pa
off-sh
rty service providvv ers,
and support functions, and our operations are dependentdd

includingii

dd
ore provid
rr

ers,

to perform technology, processingii

on financialii

intermediaridd

.ll
es that we do not controlrr

We rely on outsourced service providers to performff
example, we have an agreement with Refinitiv US LLC, under which it provides us key operational support,
including data processing services for securities transactions and back officeff
use of third-party service providers may decrease our ability to control operating risks and informat
systems risks.

processing support (“BETAHost
ff

certain technology, processing and support functions. For

ion technology

”). Our

Any significant failures by BETAHost or our other service providers could cause us to sustain serious operational
disruptions and incur losses and could harm our reputation. These third-party service providers are also susceptible
to operational and technology vulnerabilities, including cyber-attacks, security breaches, ransomware, fraud,
phishing attacks and computer viruses, which could result in unauthorized access, misuse, loss or destruction of
data, an interruption in service or other similar events that may impact our business.

, cost-effect

ive manner, if at all, or that they will be able to adequately expand their services to meet our

We cannot assure that our third-party service providers will be able to continue to provide their services in an
efficient
needs and those of our advisors. An interruption in or the cessation of service by a third-party service provider and
our inability to make alternative arrangements in a timely manner could cause a disruption to our business and
could have a material impact on our ability to serve our advisors and their clients. In addition, we cannot predict the
costs or time that would be required to find an alternative service provider.

We have transitioned certain business and technology processes to off-shore
ff
related risks described above. For example, we rely on several off-sho
locations, for functions related to cash management, account transfers, information technology infrastructure and
support and document indexing, among others. To the extent third-party service providers are located in foreign
jurisdictions, we are exposed to risks inherent in such providers conducting business outside of the United States,
including international economic and political conditions, and the additional costs associated with complying with
foreign laws and fluctuations in currency values.

providers, which has increased the
re service providers, operating in multiple

We expect that our regulators would hold us responsible for any deficiencies in our oversight and control of our
third-party relationships and for the performance
of such third parties. If there were deficiencies in the oversight and
control of our third-party relationships, and if our regulators held us responsible for those deficiencies, our business,
ff
reputation and results of operations could be adversely affecte

In addition, certain aspects of our operations are dependent on third-party financial institutions that we do not
control, such as clearing agents, securities exchanges, clearing houses and other financial intermediaries. Any
failure of these intermediaries, or any interruption in their operations, either on a widespread or individual basis,
could adversely affect
event of such failure or interruption, there is no guarantee that we would be able to find adequate and cost-effecti
replacements on a timely basis, if at all.

our ability to execute transactions, service our clients and manage our exposure to risk. In the
ve

Like us, these intermediaries are exposed to risks related to fluctuations and volatility in the financial markets and
broader economy, as well as specific operational risks related to their business, such as those related to technology,
security and the prevailing regulatory environment. Because we rely on these intermediaries, we share indirect
exposure to these risks. If these risks were to materialize, or if there was a widespread perception that they could
materialize, our business, reputation and results of operations could be adversely affecte

Lack of liquiditdd yt or access to capital could impair our business

and financialii conditidd on.

Liquidity, or ready access to funds, is essential to our business. We expend significant resources investing in our
business, particularly with respect to our technology and service platforms. In addition, we must maintain certain
levels of required capital. As a result, reduced levels of liquidity could have a significant negative effect
potential conditions that could negatively affect

our liquidity include:

on us. Some

•
•

illiquid or volatile markets;
diminished access to debt or capital markets;

•

unforeseen cash or capital requirements;

regulatory penalties or fines, settlements, customer restitution or other remediation costs; or

adverse legal settlements or judgments.

The capital and credit markets continue to experience varying degrees of volatility and disruption. In some cases,
the markets have exerted downward pressure on availability of liquidity and credit capacity for businesses similar to
ours. Without sufficient
.
business would suffer

liquidity, we could be required to limit or curtail our operations or growth plans, and our

We may sometimes be required to fund timing differences arising from the delayed receipt of client funds associated
with the settlement of client transactions in securities markets. These timing differences
are funded either with
internally generated cash flow or, if needed, with funds drawn under our revolving credit facility, the committed
revolving credit facility at our broker-dealer subsidiary, LPL Financial, or uncommitted lines of credit. We may also
need access to capital in connection with the growth of our business, through acquisitions or otherwise.

In the event current resources are insuffici
as bank debt. The availability of additional financing will depend on a variety of factors such as:

ent to satisfyff our needs, we may need to rely on financing sources such

• market conditions;

•

the general availability of credit;

the volume of trading activities;

the overall availability of credit to the financial services industry;

our credit ratings and credit capacity; and

the possibility that our lenders could develop a negative perception of our long- or short-term financial
prospects as a result of industry- or company-specific considerations. Similarly, our access to funds may be
impaired if regulatory authorities or rating organizations take negative actions against us.

Disruptions, uncertainty or volatility in the capital and credit markets may also limit our access to capital required to
operate our business. Such market conditions may limit our ability to satisfy statutory capital requirements, generate
commission, fee and other market-related revenue to meet liquidity needs and access the capital necessary to grow
our business. As such, we may be forced to delay raising capital, issue different
types of capital than we would
otherwise, less effeff ctively deploy such capital, or bear an unattractive cost of capital, which could decrease our
profitability and significantly reduce our financial flexibility.

Our business could be materiallyll adversely affected
and invesvv

tments.

as a result of the risks associated withtt acquisiti

ons

We have made acquisitions and investments in the past and may pursue further acquisitions and investments in the
on
future. These transactions are accompanied by risks. For instance, an acquisition could have a negative effect
our financial and strategic position and reputation, or the acquired business could fail to further our strategic goals.
We can provide no assurances that advisors who join LPL Financial through acquisitions or investments in advisor
practices will remain at LPL Financial. Moreover, we may not be able to successfully integrate acquired businesses
into ours, and therefore we may not be able to realize the intended benefits from an acquisition. We may have a
lack of experience in new markets, products or technologies brought on by the acquisition, and we may have an
initial dependence on unfamiliar supply or distribution partners. An acquisition may create an impairment of
relationships with customers or suppliers of the acquired business or our advisors or suppliers. All of these and
other potential risks may serve as a diversion of our management’s attention from other business concerns, and any
of these factors could have a material adverse effect

on our business.

Our riskii management policies and proceduresrr may not be fullyll effecti
all market environmii

ents or against allll types of risks.

ve in mitigatin

g our riskii

exposurerr

We have adopted policies and procedures to identify, monitor and manage our operational risk. These policies and
procedures, however, may not be effecti
ve and may not be adapted quickly enough to respond effecti
changed circumstances. Some of our compliance and risk evaluation functions depend upon informat
systems, informat
otherwise accessible by us. In some cases, however, that informat
up-to-date. Also, because many of our advisors work in decentralized offices,
challenges may exist, including with regard to advisor officeff
In addition, our existing systems, policies and procedures, and staffingff
significant increase in our advisor population. Any such increase could require us to increase our costs, including

ion regarding markets, clients or other matters that are
ion may not be available, accurate, complete or
ff

ion provided by others and public informat

technology, vendors and informat

additional risk management

levels may be insufficient

vely to
ion technology

ion security practices.

to support a

informat
ion technology costs, in order to maintain our compliance and risk management obligations, or strain our
existing policies and procedures as we evolve to support a larger advisor population. If our systems, policies and
procedures are not effect
ive, or if we are not successful in capturing risks to which we are or may be exposed, we
may suffer
effect

harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse

on our business and financial condition.

We face competititt on in attractingii

and retaini

ii ngii

key talent.

Our success depends upon the continued services of our key senior management personnel, including our
executive officers
employment agreement. The loss of one or more of our key senior management personnel, and the failure to recruit
a suitable replacement or replacements, could have a material adverse effect

and senior managers. Each of our executive officers

is an employee at will, and none has an

on our business.

Moreover, our success and future growth depends upon our ability to attract and retain qualified employees. There
is significant competition for qualified employees in the financial services industry, and we may not be able to retain
our existing employees or fill new positions or vacancies created by expansion or turnover. The loss or unavailability
of these individuals could have a material adverse effect

on our business.

The securirr ties settlement process

exposes us to risksii

to adverse movements in price.

LPL Financial provides clearing services and trade processing for our advisors and their clients and certain financial
institutions. Broker-dealers that clear their own trades are subject to substantially more regulatory requirements than
brokers that outsource these functions to third-party providers. Errors in performing
clearing functions, including
clerical, technological and other errors related to the handling of funds and securities held by us on behalf of our
advisors’ clients, could lead to censures, fines or other sanctions imposed by applicable regulatory authorities, as
well as losses and liabilities in related lawsuits and proceedings brought by our advisors’ clients and others. Any
unsettled securities transactions or wrongly executed transactions may expose our advisors and us to losses
resulting from adverse movements in the prices of such securities.

Our indebtedness could adverselyl affeff ct our financial conditidd on and may limit
future capital needs.

our abilityll

to use debt to fund

At December 31, 2021, we had total indebtedness of $2.8 billion, of which $1.1 billion is subject to floating interest
rates. Our level of indebtedness could increase our vulnerability to general adverse economic and industry
conditions. It could also require us to dedicate a substantial portion of our cash flow from operations to payments on
our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and
other general corporate purposes. In addition, our level of indebtedness may limit our flexibility in planning for
changes in our business and the industry in which we operate and limit our ability to borrow additional funds. If
interest rates increase, our interest expense would increase because borrowings under our Credit Agreement are
based on variable interest rates.

If our cash flows and capital resources are insufficient
liquidity problems and could be forced to sell assets, seek additional capital or seek to restructure or refinance our
indebtedness. These alternative measures may not be successful or feasible. Our Credit Agreement restricts our
ability to sell assets. Even if we could consummate those sales, the proceeds that we realize from them may not be
adequate to meet any debt service obligations then due. Furthermore, if an event of default were to occur with
respect to our Credit Agreement or other future indebtedness, our creditors could, among other things, accelerate
the maturity of our indebtedness.

to fund our debt service obligations, we could face substantial

Our Credit Agreement and the Indentures governing our Notes permit us to incur additional indebtedness. Under
our Credit Agreement we have the right to request additional commitments for new term loans, new revolving credit
commitments and increases to then-existing term loans and revolving credit commitments subject to certain
limitations. Although the Credit Agreement and the Indentures contain restrictions on the incurrence of additional
indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the
indebtedness incurred in compliance with these restrictions could be substantial. Also, these restrictions do not
prevent us from incurring obligations that do not constitute “indebtedness” as defined in the Credit Agreement or the
Indentures. To the extent new debt or other obligations are added to our currently anticipated debt levels, the
substantial indebtedness risks described above would increase.

A credit rating downgrade would not impact the terms of our repayment obligations under the Credit Agreement or
the Indentures. However, any such downgrade would negatively impact our ability to obtain comparable rates and
terms on any future refinancing of our debt and could restrict our ability to incur additional indebtedness. In addition,

if such downgrade were to occur, or if ratings agencies indicated that a downgrade may occur, perceptions of our
financial strength could be damaged, which could affect
investors, clients and counterparties that do business with us.

our client relationships and decrease the number of

Restrictions under our Creditdd Agreement and the Indenturesrr
takingii

actions that we believe would be in the best interest of our business.

governing our Notes may prevent us from

Our Credit Agreement and the Indentures contain customary restrictions on our activities, including covenants that
may restrict us from:

•

incurring additional indebtedness or issuing disqualified stock or preferred

stock;

declaring dividends or other distributions to stockholders;

repurchasing equity interests;

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

• making investments or acquisitions;

•

creating liens;

selling assets;

guaranteeing indebtedness;

engaging in certain transactions with affiliat

es;

entering into agreements that restrict dividends or other payments from subsidiaries; and

consolidating, merging or transferring all or substantially all of our assets.

These restrictions may prevent us from taking actions that we believe would be in the best interest of our business.
d
which may be affecte
Our ability to comply with these restrictive covenants will depend on our future performance,
by events beyond our control. If we violate any of these covenants and are unable to obtain waivers, we would be in
default under our Credit Agreement or the Indentures, as applicable, and payment of the indebtedness could be
accelerated. Acceleration of our indebtedness under our Credit Agreement or the Indentures may permit
acceleration of indebtedness under other agreements that contain cross-default or cross-acceleration provisions. If
our indebtedness is accelerated, we may not be able to repay that indebtedness or borrow suffiff cient funds to
refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on
terms that are acceptable to us. If our indebtedness is in default for any reason, our business could be materially
and adversely affect
favorable to holders of our common stock and may make it more difficult
strategy and compete against companies that are not subject

ed. In addition, complying with these covenants may also cause us to take actions that are not
ff

for us to successfully execute our business

to such restrictions.

sioii

ns of our Credit Agreement and the Indentures could discii ourage an acquisitio

n of us by a third-dd

rr
Provi
rr
party.

Certain provisions of our Credit Agreement and the Indentures could make it more difficult
third-party to acquire us, and any of our future debt agreements may contain similar provisions. Upon the
occurrence of certain transactions constituting a change of control, all indebtedness under our Credit Agreement
may be accelerated and become due and payable and noteholders will have the right to require us to repurchase
the Notes at a purchase price equal to 101% of the principal amount of the Notes plus accrued and unpaid interest,
if any, to but not including the purchase date. A potential acquirer may not have suffiff cient financial resources to
purchase our outstanding indebtedness in connection with a change of control.

or more expensive for a

Our insurance coverag

e may be inadequate or expensive.

We are subject to claims in the ordinary course of business. These claims may involve substantial amounts of
money and involve significant defense costs. It is not always possible to prevent or detect activities giving rise to
claims, and the precautions we take may not be effect

ive in all cases.

, excess- Securities Investor Protection Corporation (“SIPC”), business interruption, cyber and data

We maintain voluntary and required insurance coverage, including, among others, general liability, property, director
and officer
ff
breach, errors and omissions and fidelity bond insurance. We have self-insurance
through a wholly-owned captive insurance subsidiary. While we endeavor to self-insure
and purchase coverage that
is appropriate based on our assessment of our risk, we are unable to predict with certainty the frequency, nature or
magnitude of claims for direct or consequential damages. Assessing the probability of a loss occurring and the
timing and amount of any loss related to a regulatory matter or a legal proceeding is inherently diffiff cult, and there

for certain potential liabilities

are particular uncertainties and complexities involved when assessing the adequacy of loss reserves for potential
liabilities that are self-insured by our captive insurance subsidiary. In addition, certain types of potential claims for
damages cannot be insured. Our business may be negatively affect
ed if in the future some or all of our insurance
proves to be inadequate or unavailable to cover our liabilities related to legal or regulatory matters. Such negative
consequences could include additional expense and financial loss, which could be significant in amount. In addition,
insurance claims may harm our reputation or divert management resources away from operating our business.

Poor service or performance of the finanii
such services or products may cause clients of our advisovv

cial products that we offer

rs to withdrawdd

or competitivevv pressu

res on pricinrr
their assets on short notice.

g of

of the financial products that we offeff

r, the emergence of new financial products or services from

Clients of our advisors have control over their assets that are served under our platforms. Poor service or
performance
others, harm to our reputation or competitive pressures on pricing of such services or products may result in the
loss of clients. In addition, we must monitor the pricing of our services and financial products in relation to
competitors and periodically may need to adjust commission and fee rates, interest rates on deposits and margin
loans and other fee structures to remain competitive. Competition from other financial services firms, such as
reduced or zero commissions to attract clients or trading volume, direct-to-investor online financial services,
including so-called “robo” advice, or higher deposit rates to attract client cash balances, could result in pricing
pressure or otherwise adversely impact our business. The decrease in revenue that could result from such an event
could have a material adverse effect

on our business.

A loss of our markrr ekk tingii
with our advisovv

rs and, in turn, their clienll

ts.

relationshipsii with manufacturers of financial prorr ducts could harm our relation

ship

offeff

Our curated product platformff
rs no proprietary financial products. To help our advisors meet their clients’ needs
with suitable investment options, we have relationships with many of the industry-leading providers of financial and
insurance products. We have sponsorship agreements with some manufacturers of fixed and variable annuities,
mutual funds and ETFs that, subject
ff
manufacturer upon notice. If we lose our relationships with one or more of these manufacturers,
ff
our advisors and, in turn, their clients, and our business, may be materially adversely affect
certain variable annuity product sponsors have ceased offeri
ng and issuing new variable annuity contracts. If this
ff
trend continues, we could experience a loss in the revenue currently generated from the sale of such products. In
addition, certain features of such contracts have been eliminated by variable annuity product sponsors. If this trend
continues, the attractiveness of these products would be reduced, potentially reducing the revenue we currently
generate from the sale of such products.

to the survival of certain terms and conditions, may be terminated by the

ed. As an example,

our ability to serve

Changes in U.S. federal
dd
attractive to clients.

income tax law could make some of the prorr ducts distri

buii

ted by our advisovv

rs less

Some of the financial products distributed by our advisors, such as variable annuities, enjoy favorable treatment
under current U.S. federal income tax law. Changes in U.S. federal income tax law, in particular with respect to
variable annuity products, or with respect to tax rates on capital gains or dividends, could make some of these
products less attractive to clients and, as a result, could have a material adverse effect
operations, cash flows, or financial condition.

on our business, results of

The ffeffects fof the outbreakrr
fof COCOVID-VV 19 havevv
gglobal ffinancial markets, and mayy disrupt our operations and our advisor
materialii adverse fefffect

on our businii ess, ffinii ancialii conditdd iontt

gnegativ yelyvv

fff

and results off operations.

ffaffected the gglobal economyy,

tt
s'rr operatrr

ions

SU.S. econo ymy and
, which could havevv a

The onggoingg COCOVID-19 pandemic has caused signif
ffinancial markets. The spread fof COCOVID-19 and fefffort
cancellation fof events and travel, business shutdowns, reduction in business activityy and ffinancial transactions,
labor short gages, increased
instabilityy. Impacts on our business could be
ffol

unemployment, sup yply chain interruptions and overall economic and ffinancial market
wide-rang ging, and material impacts are possible,

significant disruption in the international and SU.S. economies and
s to contain it have resulted in illness, quarantines,

including the

lowing:
g

fff

•

Emp yloyees contracti gng COCOVID-19,
business operations

including unavailabilityy fof

ykey personnel ne

cessary to conduct our

prolonged downturn in equityy and other ffinancial markets, which would

AA
asset-based and trai gling commission revenue

adversely fafffect

fff

our

advisory,
y

•

AA sustained low interest rate environment, which would reduce revenue ffrom our client cash
included in asset-based revenue

gprograms

Reductions in our service levels or ope
working remot yely

rating fefffect
g

fff

iveness as a substantial

jmajorityy fof our

employees are
y

ff
f

Failure fof our
securities
ransomware or malicious ycyber activityy

informat
g

ion tech

clearing and custo ydy ffunctions, as a result

fof ext

raordinary
y

nology ysystems, which could result in interruptions or errors in

ff
fperf
orming
g
trading volumes, malware,

Disruptions in tech
nology,
gy
cluding fofff-sho
g
vendors, in

fff

processing or support ffunctions as our outsourced service providers or other
re providers, experience disruptions in their business operations

Reduction in our abilityy to recruit advisors or otherwise execute our ggrowth plans due to travel restrictions,
limitations on interpersonal contact and ch

allengi gng macro-economic conditions

CClosure fof our

fofffices

fff

or the fofffices

fff

fof our advisors

fff

s to contain it have also resulted in increased volatilityy. The ffurther spread fof

The COCOVID-19 pandemic and fefffort
COCOVID-19 and attempts to curtail it yby limit ging interpersonal activityy, incl
instabilityy in domestic and international ffinancial markets and materi yally disrupt ggeneral economic and ffinancial
activityy. SignSign fificant disruptions in ffinancial markets could result in a decline in demand ffor the products and services
fofffere
ffinancial results and ggrowth strategygy.

d yby our advisors to their clients, or their abilityy to provide them, which would

uding business activityy, mayy increase

ively impact our and their

gnegat

fff

previously resulted and

In addition, an overall decline in equityy market prices will ggenerallyy reduce the value fof
assets, which has
ymay in the ffuture result in a reduction in the
ffees and tr
COCOVID-19 pandemic, the Federal Reserve reduced the ffederal ffunds rate, which remained near zero
2021. Lower interest rates reduce our revenue ffrom our client cash
ffavorable terms in ffuture gagreements with banks and
y
and these fefffefff cts are

ailing commissions we are entitled to receive. Moreover, in response to the economic ffallout ffrom the
throughout
g
gnegotiate
gprograms,

our abilityy to
money market ffund providers that participate in our

likely to continue ffor as longg as interest rates remain suppressed.

advisory and
advisory ffees, asset-based

gprograms and

ymay fafffect

brokerage

y
y

fff

gdegrees fof limitations on travel and social interaction. In

The COCOVID-19 pandemic could also jjeopardize our abili yty to re yly on our outsourced service providers, includingg
those that operate fofff-fff shore. As COCOVID-19 has spread, ggovernments in the United SStates and around the world,
includingg in jjurisdictions where our service providers have operations, have ffrom time to time imposed or
encouraged va y g
rying
g
partial or complete closure fof businesses,
the disruptions that these closures have caused, and are
there can be no gguarantee that theyy will be fefffect
cost-effffective. In addition, fif business closures are
operations to avoid interruption
gnegative fefffect

ymany cases this has resulted in the
yrely on. While we have taken steps to minimize
seeking to avoid interruptions to our critical operations,
will be sustained or

fmodifyyff our
ymay become more limited or costlyy. Anyy interruption to our operations could have a

prolonged or become more widespread, our abilityy to

including some that we
g

on our reputation and results fof operations.

ive, or, fif theyy are fefffect

ive, that such fefffect

fff

significant interruptions to our critical services, there can be no

yrely on capabilities that we put into place to support these plans. While we believe that these plans

We implemented gsign fificant elements fof our business continuityy plans in response to the COCOVID-19 pandemic, and
we continue to
and their implementation have helped avoid signif
assurance that theyy will be able to do so on a sustained or uninterrupted basis, and reliance on such plans could
expose our business to other operational risks. For example, while we have taken steps to ensure that our remote-
work solutions are reliable and secure, esp
gorage and disposal
ecially those related to the ha
fof sensitive personal or co fnfidential
ffunction as intended, or that th yey will be complet yely fefffect
ycybersecurityy incidents. In addition, there can be no assurance that the third parties that provide and maintain some
fof these solutions will be able to do so on a sustained and uninterrupted basis. Because we do not control these
third parties, we are
operations.
operations could direct yly or indirect yly result in ycybersecurityy incidents, interruptions to our business, and
fefffect

g
ion, there can be no assurance that these solutions will be used or

yAny compromise, ffailure, or interruption in the availabili yty fof the solutions that support our remote-work

subject to the limitations, defficiencies and vulnerabilities fof their services, products, and

ive in prevent ging interruptions in our services or

s on our reputation and results fof operations.

ndling, transmission, st

gnegative

informat

ff
f

fff

Risks Related to Our Regulatory Environment

Any failure to complyl with applpp icall
ll
regulatory

actions, which could increase our costs or negatively affect our reputation.

ble federalrr or state lawsww or regulations exposes us to litigatio

n and

Our business, including securities and investment advisory services, is subject
federal and state laws, rules and regulations. Our subsidiary LPL Financial is:

to extensive regulation under both

•

registered as a broker-dealer with the SEC, each of the 50 states, the District of Columbia, Puerto Rico and
the U.S. Virgin Islands;

registered as an investment adviser with the SEC;

a member of FINRA and various other SROs, and a participant in various clearing organizations, including
the Depository Trust Company, the National Securities Clearing Corporation and the Options Clearing
Corporation;

regulated by the DOL relative to its servicing of retirement plan accounts subject to ERISA and the Code;
and

regulated by the CFTC with respect to the futures and commodities trading activities it conducts as an
introducing broker.

The primary self-regulat
or of LPL Financial’s broker-dealer activity is FINRA. LPL Financial is also subject to state
laws, including state “blue sky” laws, and the rules of the Municipal Securities Rulemaking Board for its municipal
securities activities. The CFTC has designated the NFAFF as LPL Financial’s primary regulator for futures and
commodities trading activities.

The SEC, FINRA, DOL, the CFTC, the OCC, various securities and futures exchanges and other United States and
state-level governmental or regulatory authorities continuously review legislative and regulatory initiatives and may
adopt new or revised laws, regulations or interpretations. There can be no assurance that other federal or state
agencies will not attempt to further regulate our business or that specific interactions with foreign countries or
foreign nationals will not trigger regulation in non-U.S. law in particular circumstances. These legislative and
regulatory initiatives may affeff ct the way in which we conduct our business and may make our business model less
profitable.

Our ability to conduct business in the jurisdictions in which we currently operate depends on our compliance with
the laws, rules and regulations promulgated by federal regulatory bodies and the regulatory authorities in each of
the states and other jurisdictions in which we do business. Our ability to comply with all applicable laws, rules and
regulations and interpretations is largely dependent on our establishment and maintenance of compliance, audit and
reporting systems and procedures, as well as our ability to attract and retain qualified compliance, audit, supervisory
and risk management personnel. We cannot assure you that our systems and procedures are, or have been,
effect
ff
informat
robust
ff
level of compliance. Regulators have in the past raised, and may in the future raise, concerns with respect to the
quality, consistency or oversight of our compliance systems and programs and our past or future compliance with
applicable laws, rules and regulations. As of the date of this Annual Report on Form 10-K, we have a number of
pending regulatory matters.

ive in complying with all applicable laws, rules and regulations and interpretations. In particular, the diversity of
ff

ion security environments in which our services are offered

makes it difficult to ensure a uniformly

Violations of laws, rules or regulations and settlements in respect of alleged violations have in the past resulted in,
and could in the future result in, legal liability, censures, penalties and fines, disgorgement of profits, restitution to
customers, remediation, the issuance of cease-and-desist orders or injunctive or other equitable relief against us,
which individually or in the aggregate could negatively impact our financial results or adversely affect
our ability to
attract or retain financial advisors and institutions. Depending on the nature of the violation, we may be required to
ff
offer

restitution or remediation to customers, and the costs of doing so could exceed our loss reserves.

We have established a captive insurance subsidiary that underwrites insurance for various regulatory and legal
risks, although self-insurance
coverage is not available for all matters. The availability of coverage depends on the
nature of the claim and the adequacy of reserves, which depends in part on historical claims experience, including
the actual timing and costs of resolving matters that begin in one policy period and are resolved in a subsequent
period. Assessing the probability of a loss occurring and the timing and amount of any loss related to a regulatory
matter or a legal proceeding is inherently difficult
procedural status of the matter and any recent developments; prior experience and the experience of others in
similar matters; the size and nature of potential exposures; available defenses; the progress of fact discovery; the
opinions of counsel and experts; potential opportunities for settlement and the status of any settlement discussions;

and requires complex judgments, which may include the

as well as the potential for insurance coverage and indemnification, if available. There are particular uncertainties
and complexities involved when assessing the adequacy of loss reserves for potential liabilities that are self-insured
by our captive insurance subsidiary. As a result, actual self-insurance
ff
which case coverage may not be available, and we could incur material additional expense.

liabilities could exceed our loss reserves, in

Regulator
ll
business less profitab

le.

yrr developments could advevv rsrr ely affeff ct our busines

s by increasingii

our costs or makingii

our

ed by rules and regulations that impact the business and financial communities

Our profitability could be affect
generally and, in particular, our advisors and their clients, including changes to the interpretation or enforcement
of
laws governing standards of care applicable to investment advice and recommendations, taxation, the classification
of our independent advisors as independent contractors rather than our employees, trading, electronic commerce,
privacy, data protection and anti-money laundering. Failure to comply with these rules and regulations could subject
us to regulatory actions or litigation and it could have a material adverse effect
operations, cash flows or financial condition.

on our business, results of

of existing laws, rules or

New laws, rules and regulations, or changes to the interpretation or enforcement
regulations, could also result in limitations on the lines of business we conduct or plan to conduct, modifications to
our current or future business practices, compressed margins, increased capital requirements and additional costs.
For example, the SEC’s Reg BI, which requires broker-dealers and their associated persons to act in the best
interest of their retail customers when making securities recommendations and establishes a number of new
compliance and disclosure obligations for broker-dealers, became applicable on June 30, 2020. Nevada and
Massachusetts enacted statutes that impose fiduciary standards and other obligations on broker-dealers and
investment advisers operating in their states. Other states have adopted or are considering adopting a best interest
standard applicable to broker-dealers or the sale of certain annuity and insurance products. The DOL issued PTE
2020-02 with a new and expanded interpretation of fiduciary status. We expect that these developments could
negatively impact our results, including by increasing our expenditures related to legal, compliance, and informat
technology and could result in other costs, including greater risks of client lawsuits and enforcement
regulators. These changes may also affect
compensation that we and our advisors receive in connection with such products and services.

the array of products and services we offer

ff
activity by

to clients and the

ion

It is unclear how and whether other regulators, including the SEC, FINRA, the DOL, banking regulators and other
state securities and insurance regulators may respond to, or enforce elements of, these new regulations, or develop
their own similar laws and regulations. The impacts, degree and timing of the effect
of these laws and future
regulations on our business cannot now be anticipated or planned for, and may have further impacts on our
products and services and the results of operations. Please consult the “Retirement
tt
section within Part I, “Item 1. Business” for specific informat
related exemptions and their potential impact on our operations.

ion about risks associated with DOL regulations and

Plan Services Regulation”

In addition, the Dodd-Frank Act enacted wide-ranging changes in the supervision and regulation of the financial
industry designed to provide for greater oversight of financial industry participants, reduce risk in banking practices
and in securities and derivatives trading, enhance public company corporate governance practices and executive
compensation disclosures and provide for greater protections to individual consumers and investors. Certain
elements of the Dodd-Frank Act remain subject to implementing regulations that are yet to be adopted by the
applicable regulatory agencies. Compliance with these provisions could require us to review our product and service
offerings
Dodd-Frank Act affect
with which we do business, those institutions may seek to pass on increased costs, reduce their capacity to
transact, or otherwise present ineffici
will have on us, the financial industry and the economy cannot be known until all such applicable regulations called
for under the Dodd-Frank Act have been finalized and implemented.

for potential changes and would likely result in increased compliance costs. Moreover, to the extent the

s the operations, financial condition, liquidity and capital requirements of financial institutions

encies in their interactions with us. The ultimate impact that the Dodd-Frank Act

employment, includingg those related to the Americans with Disabilities Act, are

Likewise, ffederal and state standards prohibit ging discrimination on the basis fof disabilityy in public accommodations
and
number of public spaces, including web-based applications, to be made accessible to the disabled. AAs a result, we
could be required to make
tech
accommodations ffor, disabled persons. This adaptation fof our websites and web-based applications and materials
could result in increased costs and
ymply with ffederal
or state standards could result in li gtigation,

fmodifications to our internet-based applications or to our other client- or ad
nologies, includingg our website, to provide enhanced or accessible service to, or make reasonable

ymay fafffefff ct the products and services we provide. Failure to co

including class action lawsuits.

evolving to require an

acing
f
g
visor-f

increasing
g

In sum, our profitability may be adversely affect
various federal, state and self-regulatory organizations to which we are subject. The effeff ct of these regulatory
developments on our business cannot now be anticipated or planned forff
, but may have further impacts on our
products and services and results of operations.

ed by current and future rulemaking and enforcement

activity by the

We are subjecb
restriction of the conduct or growrr

t to various regulator

requireme
yrr
rr
ii
th of our busines

ntstt , whicww h, if not compliedll

with, could result in the

The business activities that we may conduct are limited by various regulatory agencies. Our membership agreement
with FINRA may be amended by application to include additional business activities. This application process is
time-consuming and may not be successful. As a result, we may be prevented from entering new potentially
profitable businesses in a timely manner, or at all. In addition, as a member of FINRA, we are subject to certain
regulations regarding changes in control. FINRA Rule 1017 generally provides, among other things, that FINRA
approval must be obtained in connection with any transaction resulting in a 25% or more change in our ownership
that results in one person or entity directly or indirectly owning or controlling 25% or more of us. Similarly, the OCC
imposes advance approval requirements for a change of control, and control is presumed to exist if a person
acquires 10% or more of our common stock. These regulatory approval processes can result in delay, increased
costs or impose additional transaction terms in connection with a proposed change of control, such as capital
contributions to the regulated entity. As a result of these regulations, our future efforts
additional capital may be delayed or prohibited.

to sell shares or raise

In addition, the SEC, FINRA, the CFTC, the OCC and the NFAFF have extensive rules and regulations with respect to
capital requirements. As a registered broker-dealer, LPL Financial is subject to Rule 15c3-1 (“Net Capital Rule”)
under the Exchange Act, and related requirements of SROs. The CFTC and the NFAFF also impose net capital
requirements. The Net Capital Rule specifies minimum capital requirements that are intended to ensure the general
soundness and liquidity of broker-dealers. Because our holding companies are not registered broker-dealers, they
are not subject
to the Net Capital Rule. However, the ability of our holding companies to withdraw capital from our
broker-dealer subsidiary could be restricted, which in turn could limit our ability to repay debt, redeem or purchase
shares of our outstanding stock or pay dividends. A large operating loss or charge against net capital could
adversely affect

our ability to expand or even maintain our present levels of business.

re to complyl with ERISASS regulations and certainrr

Failuii
penalties against us.

tax-qualifi

ll ed planll

laws and regulation

s could result in

to ERISA and Section 4975 of the Code, and to regulations promulgated

As discussed above, we are subject
thereunder, insofar as we provide services with respect to plan clients, or otherwise deal with plans, participants and
certain types of investment/savings accounts that are subject to ERISA or the Code. ERISA imposes certain duties
on persons who are “fiduciaries” (as defined in Section 3(21) of ERISA and the DOL’s Five-Part Test and PTE
2020-02 rules or interpretations) and prohibits certain transactions involving plans subject to ERISA and fiduciaries
or other service providers to such plans. Non-compliance with or breaches of these provisions may expose an
ERISA fiduciary or other service provider to liability under ERISA, which may include monetary and criminal
penalties as well as equitable remedies for the affect
transactions involving “plans” (as defined in Section 4975(e)(1)), which include, for example, IRAs and certain
Keogh plans and other qualified savings accounts, and service providers, including fiduciaries (as defined in Section
4975(e)(3)), to such plans. Section 4975 also imposes excise taxes for violations of these prohibitions. Our failure to
comply with ERISA and the Code could result in significant penalties against us that could have a material adverse
on our business or severely limit the extent to which we could act as fiduciaries for or provide services to
effect
these plans.

ed plan. Section 4975 of the Code prohibits certain

Risks Related to Our Technology

We relyl on technology in our business, and technology and execution failures could subjecb
litigation and regulatory actions.

t us to losses,

Our business relies extensively on electronic data processing, storage and communications systems. In addition to
and enables firms
better serving our advisors and their clients, the effect
like ours to reduce costs and support our regulatory compliance and reporting functions. Our continued success will
depend, in part, upon our ability to:

ive use of technology increases efficiency

•

continue to invest significant resources on our technology systems in order to meet industry and regulatory
standards, consumer preferences and the effort

s of threat actors to penetrate our systems;

•

successfully maintain and upgrade the capabilities of our systems;

address the needs of our advisors and their clients by using technology to provide products and services
that satisfy their demands while ensuring the security of the data involving those products and services;

use technology effect

ively and securely to support our regulatory compliance and reporting functions;

comply with the changing landscape of laws and regulations that govern protection of personally identifiable
informat

ion; and

retain skilled informat

ion technology employees.

Extraordinary trading volumes, malware, ransomware or attempts by hackers to introduce large volumes of
fraudulent transactions into our systems, beyond reasonably foreseeable spikes in volumes, could cause our
computer systems to operate at an unacceptably slow speed or even fail. Failure of our systems, which could result
from these or other events beyond our control, or an inability or failure to effect
implement new technology-driven products or services, could result in financial losses, unanticipated disruptions in
our service, liability to our advisors or advisors’ clients, compliance failures, regulatory sanctions and damage to our
reputation.

ively upgrade those systems or

ion in our

ion of advisors and their clients, as well as
them as circumstances warrant, our

Our operations rely on the secure processing, storage and transmission of confidential and other informat
computer systems and networks, including personally identifiable informat
our employees. Although we take protective measures and endeavor to modifyff
computer systems, software and networks are to some degree vulnerable to unauthorized access, human error,
computer viruses, denial-of-service
attacks, malicious code, spam attacks, phishing, ransomware or other forms of
social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability
of our systems. To the extent third parties, such as product sponsors, also retain similarity sensitive informat
about our advisors or their clients, their systems may face similar vulnerabilities. We are not able to protect against
these events completely given the rapid evolution of new vulnerabilities, the complex and distributed nature of our
systems, our interdependence on the systems of other companies and the increased sophistication of potential
attack vectors and methods against our systems. In particular, advisors work in a wide variety of environments, and
although we require minimum security by policy, we cannot ensure the consistent compliance with these policies
across all of our advisors, or that our policy will be adequate to address the evolving threat environment. If one or
more of these events occur, they could jeopardize our own, our advisors’ or their clients’, or our counterparties’
confidential and other informf
networks, or otherwise cause interruptions or malfunctions in our own, our advisors’ or their clients’, our
counterparties’, or third parties’ operations. As a result, we could be subject to litigation, client loss, reputational
harm, regulatory sanctions and financial losses that are either not insured or are not fully covered through any
insurance we maintain. If any person, including any of our employees or advisors, negligently disregards or
intentionally breaches our established controls with respect to client data, or otherwise mismanages or
misappropriates that data, we could also be subject to significant monetary damages, regulatory enforcement
actions, fines and/or criminal prosecution in one or more jurisdictions.

ation processed, stored in and transmitted through our computer systems and

ion

Our information technologygg systems may be vulnerable to security risks.

ion, including personally identifiable informat

The secure transmission of confidential informat
networks is a critical element of our operations. As part of our normal operations, we maintain and transmit
confidential informat
informat
outside of and storing or processing data within our network are increasing based on escalating and malicious cyber
activity, including activity that originates outside of the United States from criminal elements and hostile nation-
states.

ion relating to our business operations. The risks related to transmitting data and using service providers

ion about clients of our advisors, our advisors and our employees, as well as proprietary

ion, over public

Cybersecurity requires ongoing investment and diligence against evolving threats and is subject to federal and state
regulation relating to the protection of confidential informat
resources to modifyff our protective measures, to investigate and remediate vulnerabilities or other exposures, to
make required notifications, or to update our technologies, websites and web-based applications to comply with
industry and regulatory standards, but we may not have adequate personnel, financial or other resources to fully
ly govern, manage
meet these threats and evolving standards. We will also be required to effeff ctively and efficient
and ensure timely evolutions in our systems, including in their design, architecture and interconnections as well as
their organizational and technical protections. The SEC has proposed new cybersecurity regulations for investment
advisers, and other new regulations may be promulgated by relevant federal and state authorities at any time and
compliance with regulatory expectations may become increasingly complex as more state regulatory authorities

ion. We may be required to expend significant additional

issue or amend regulations, which sometimes conflict, governing handling of confidential informat
within their jurisdiction. Several states have promulgated cybersecurity requirements that impact our compliance
obligations. Compliance with these regulations also could be costly and disruptive to our operations, and we cannot
provide assurance that the impact of these regulations would not, either individually or collectively, be material to
our business.

ion by companies

Our application service provider systems maintain and process confidential data on behalf of advisors and their
clients, some of which is critical to our advisors’ business operations. If our application service provider systems are
disrupted or fail for any reason, or if our systems or facilities are infiltrated or damaged by unauthorized persons or
malicious computer code, we or our advisors could experience data loss, operational disruptions, financial loss,
harm to reputation, regulatory violations, class action and commercial litigation and significant business interruption
or loss. In addition, vulnerabilities of our external service providers or within our software supply chain could pose
security risks to client information. If any such disruption or failure, real or perceived, occurs, we or our advisors may
be exposed to unexpected liability, advisors or their clients may withdraw assets, our reputation may be tarnished
and there could be a material adverse effect
cybersecurity attack directed at other financial institutions or financial services companies, whether or not we are
targeted, could lead to a general loss of customer confidence in the use of technology to conduct financial
transactions, which could negatively impact us, including the market perception of the effecti
measures and technology infrastructure. The occurrence of any of these events may have a material adverse effect
on our business or results of operations.

on our business. Further, any actual or perceived breach or

veness of our security

Our own informat
ion technology systems are to some degree vulnerable to unauthorized access and other security
risks. We rely on our advisors and employees to comply with our policies and procedures to safeguard confidential
data, but disloyal or negligent insiders pose risks. The failure of our advisors and employees to comply with such
policies and procedures, either intentionally or unintentionally, could result in the loss or wrongful use of their clients’
confidential informat
policies and procedures, persons who circumvent security measures or bypass authentication controls could
infiltrate or damage our systems or facilities and wrongfully use our confidential informat
informat
informat
applications or technology assets. Such activity could, among other things:

ion or cause interruptions or malfunctions in our operations. Cyber-attacks can be designed to collect
ion, manipulate, destroy or corrupt data, applications, or accounts and to disable the functioning or use of

ion. In addition, even if we and our advisors comply with our

ion or other sensitive informat

ion or clients’ confidential

ff
ff

•

seriously damage our reputation;

allow competitors or hackers access to our proprietary business informat

ion;

subject us to liability for a failure to safeguard client data;

result in the termination of relationships with our advisors;

subject us to regulatory sanctions or obligations, based on state law or the authority of the SEC and FINRA
ff
to enforce

regulations regarding business continuity planning or cybersecurity;

subject us to litigation by consumers, advisors or other business partners that may suffer
result of such activity;

damages as a

result in inaccurate financial data reporting; and
require significant capital and operating expenditures to investigate and remediate a breach.

As malicious cyber activity escalates, including activity that originates outside of the United States, the risks we face
relating to transmission of data and our use of service providers outside of our network, as well as the storing or
processing of data within our network, intensify.ff While we maintain cyber liability insurance, this insurance does not
cover certain types of potential losses and, for covered losses, may not be sufficient
in amount to protect us against
all such losses.

A cyber-attack or other
vendors could subject us to signi

security breach

rr
ificant liabii

ilityll

and harm our reputation.

of our technologygg systems or those of our advisors or third-party

In the course of operations, we share sensitive corporate and personal data with vendors, third parties and other
financial institutions. We also rely upon software and data feeds from various third parties. Despite the measures we
have taken and may in the future take to address and mitigate cybersecurity, privacy and technology risks, we
cannot be certain that our systems and networks will not be subject
some level of due diligence beforeff
uncover administrative, technical or electronic gaps or flaws in their processes or systems. In the past we have
ion security with our vendors, which have led to notification costs and
experienced limited breaches of informat
reputational harm with regulators, current and potential advisors, and advisors’ clients, and we may experience

sharing sensitive data with third-party vendors, this due diligence may not

to successful attacks. Although we conduct

similar or more significant events in the future. Future data security incidents involving individual and regulatory
notifications could lead to litigation involving other financial institutions, class actions, regulatory investigations or
other harm.

Data security incidents within the financial services industry are increasing, and threat actors continue to find novel
ways to attack the security environments of LPL and of our advisors. In light of the diversity of our advisors’ security
environments and the increasing sophistication of malicious actors, an attack could occur and persist for an
extended period of time without detection. We expect that any investigation of a cyber-attack could take substantial
amounts of time, and that there may be extensive delays beforeff
cases, the nature of the attack may be such that full and reliable informff
time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions
could be repeated or compounded beforeff
the costs and consequences of such an attack.

they are discovered and remediated, all of which would further increase

we obtain full and reliable inforff mation. In some

ation may never be available. During such

These incidents could involve operational disruptions, notification costs, ransom payments, and reputational harm,
investigations, litigation and fines with regulators as well as litigation, financial disputes, and reputational harm with
current and potential advisors and advisors’ clients.

Failure to comply with the complex privacy
subjecb

t could result in adverse action from regulators.

and data protection laws and regulation

s to which we arerr

ion, including client and employee informat

Many aspects of our business are subject to comprehensive legal requirements concerning the collection, use and
sharing of personal informat
ion. This includes rules adopted pursuant to
ff
the Gramm-Leach-Bliley Act and an ever-increasing number of state laws and regulations, such as the California
Consumer Privacy Act. We continue our efforts
to safeguard the data entrusted to us in accordance with the
applicable laws and our internal data protection policies, including taking steps to reduce the potential for the
improper use or disclosure of personal informat
protection on both a domestic and international level to assess requirements and impacts on our business
operations. Further developments could negatively impact our business and operations.

ion. We continue to monitor regulations related to data privacy and

ii
Failure to maintain
technology platfor
ll
our business.

technological capabiliii ties, flawsww in existing
mrr or the introduction of a competitivevv platform

technology, difficulties in upgradindd g our

could have a materiarr

l adversrr e effect

We believe that our future success will depend in part on our ability to anticipate and adapt to technological
advancements required to meet the changing demands of our advisors and their clients. We depend on highly
specialized and, in many cases, proprietary technology to support our business functions, including among others:

•

•
•
•

securities trading and custody;

portfolioff

management;

performance reporting;

customer service;
accounting and internal financial processes and controls; and
regulatory compliance and reporting.

Our continued success depends on our ability to effeff ctively adopt new or adapt existing technologies to meet
changing client, industry and regulatory demands. The emergence of new industry standards and practices could
render our existing systems obsolete or uncompetitive. There cannot be any assurance that another company will
not design a similar or better platforff m that renders our technology less competitive.

ion technology systems or capabilities, or offer

Maintaining competitive technology requires us to make significant capital expenditures, both in the near term and
longer-term. There cannot be any assurance that we will have suffiff cient resources to adequately update and expand
our informat
ff
devices that may be preferred by our advisors and/or their clients, nor can there be any assurance that any upgrade
or expansion effort
advisors or their clients. The process of upgrading and expanding our systems has at times caused, and may in the
future cause, us to suffer
system degradations, outages and failures. If our technology systems were to fail and we
were unable to recover in a timely way, we would be unable to fulfill critical business functions, which could lead to a
loss of advisors and could harm our reputation. A breakdown in advisors’ systems could have similar effects.
technological breakdown could also interfere with our ability to comply with financial reporting and other regulatory
requirements, exposing us to disciplinary action and to liability to our advisors and their clients. Security, stability

ly timely, successful, secure and accepted by our current and prospective

our services on the personal and mobile computing

s will be sufficient

and regulatory risks also exist because parts of our infrastructure and software are beyond their manufacturer’s
stated end of life. We are working to mitigate such risks through additional controls and increased modernization
spending, although we cannot provide assurance that our risk mitigation efforts

ve, in whole or in part.

will be effecti

Inadequacy or disruii
event of a catastrophe could advevv rsrr ely affeff ct our busines

ptiu on of our business continuity and disaster rerr covevv ryrr plans

and prorr cedures in the

We have made a significant investment in our infrastructure, and our operations are dependent on our ability to
protect the continuity of our infrastructure against damage from catastrophe or natural disaster, breach of security,
ransomware attack, human error, loss of power, computer and/or telecommunications failure, or other natural or
man-made events. A catastrophic event could have a direct negative impact on us by adversely affecti
advisors, employees or facilities, or an indirect impact on us by adversely affect
overall economy. While we have implemented business continuity and disaster recovery plans and maintain
business interruption insurance, it is impossible to fully anticipate and protect against all potential catastrophes. In
addition, we depend on the adequacy of the business continuity and disaster recovery plans of our third-party
service providers, including off-shore
business continuity and disaster recovery plans and procedures, or those of our third-party service providers, were
disrupted or unsuccessful in the event of a catastrophe, we could experience a material adverse interruption of our
operations.

service providers, in order to prevent or mitigate service interruptions. If our

ing the financial markets or the

ng our

Risks Related to Ownership of Our Common Stock

The pricerr
losses for our investors.

of our common stock may be volatil

e and fluctuate substantially,l which could result in substantial

The market price of our common stock may fluctuate substantially due to the following factors (in addition to the
other risk factors described in this Item 1A):

•

•
•
•

•
•

actual or anticipated fluctuations in our results of operations, including with regard to interest rates or
revenue associated with our client cash programs or key business lines;

variance in our financial performance

from the expectations of equity research analysts;

conditions and trends in the markets we serve;

announcements of significant new services or products by us or our competitors;

additions or changes to key personnel;

the commencement or outcome of litigation or arbitration proceedings;

the commencement or outcome of regulatory actions, including settlements with the SEC, FINRA, DOL or
state securities regulators;

changes in market valuation or earnings of our competitors;

the trading volume of our common stock;

future sales of our equity securities;
changes in the estimation of the future size and growth rate of our markets;
legislation or regulatory policies, practices or actions, including developments related to the “best interest”
and “fiduciary” standards of care;
political developments; and
general economic conditions.

In addition, the equity markets in general have experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance
d. These broad
market and industry factors may materially harm the market price of our common stock irrespective of our operating
performance.
company’s securities, securities class action litigation has often been instituted against the affecte
type of litigation could result in substantial costs and a diversion of our management’s attention and resources.

In addition, in the past, following periods of volatility in the overall market and the market price of a

of the particular companies affecte

d company. This

We arerr a holding company and relyl on dividenddd
of funds fromrr

our subsidiardd iesrr

to meet our debt service and other obligatio

ns.

tt
i

ii
s,dd distri

buii

tions and other

payments, advances and transfers

We have no direct operations and derive all of our cash flow from our subsidiaries. Because we conduct our
operations through our subsidiaries, we depend on those entities for dividends and other payments or distributions

to meet any existing or future debt service and other obligations. The deterioration of the earnings from, or other
available assets of, our subsidiaries forff
distributions to us. In addition, FINRA regulations restrict dividends in excess of 10% of a member firm’s excess net
capital without FINRA’sAA prior approval. Compliance with this regulation may impede our ability to receive dividends
from our broker-dealer subsidiary.

any reason could limit or impair their ability to pay dividends or other

Our futuff
subject to the discii
earnings and cash flows.ww

re abiliii ty to pay regular dividends to holdersdd

retion of our board orr

rr
f dirdd ecto

of our common stock or repur
rr
chase
d by our abilitll y t

rs and willii be limite

t o generate sufficient

shares are

Our board of directors declared quarterly cash dividends on our outstanding common stock in 2021 and has from
time to time authorized us to repurchase shares of the Company’s issued and outstanding shares of common stock.
The declaration and payment of any future quarterly cash dividend or any additional repurchase authorizations will
be subject to the board of directors’ continuing determination that the declaration of future dividends or repurchase
of our shares are in the best interests of our stockholders and are in compliance with our Credit Agreement, the
Indentures and applicable law. Such determinations will depend upon a number of factors that the board of directors
deems relevant, including future earnings, the success of our business activities, capital requirements, alternative
uses of capital, the general financial condition and future prospects of our business and general business
conditions.

The future payment of dividends or repurchases of shares will also depend on our ability to generate earnings and
cash flows. If we are unable to generate sufficff
ient earnings and cash flows from our business, we may not be able
to pay dividends on our common stock or repurchase additional shares. In addition, our ability to pay cash dividends
on our common stock and repurchase shares is dependent on the ability of our subsidiaries to pay dividends,
including compliance with limitations under our Credit Agreement and the Indentures. Our broker-dealer subsidiary
is subject to requirements of the SEC, FINRA, the CFTC and other regulators relating to liquidity, capital standards
and the use of client funds and securities, which may limit funds available forff

the payment of dividends to us.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

A summary of our significant locations at December 31, 2021 is shown in the following table:

Location

Fort Mill, South Carolina

San Diego, California

Boston, Massachusetts

Austin, Texas

Overland Park, Kansas

Approximate Square Footage

Lease Expiration

452,000

420,000

69,000

58,000

30,000

2036

2029

2023

2029

2023

We also lease smaller administrative and operational officeff
believe that our existing properties are adequate forff
additional space will be available as needed.

s in various locations throughout the United States. We

the current operating requirements of our business and that

Item 3. Legal Proceedings

From time to time, we have been subjected to and are currently subject to legal and regulatory proceedings arising
out of our business operations, including lawsuits, arbitration claims, and inquiries, investigations and enforcement
proceedings initiated by the SEC, FINRA and state securities regulators, as well as other actions and claims.

For a discussion of legal proceedings, see Note 14 - Commitment
consolidated financial statements and Part I, “Item 1A. Risk Factors” in this Annual Report on Form 10-K.

nd Contingencies within the notes to the

s att

Item 4. Mine Safety Disclosures

Not applicable.

Information about our Executive Offiff cers

The following table provides certain information about each of the Company’s executive offiff cers as of the date this
Annual Report on Form 10-K has been filed with the SEC:

Name

Dan H. Arnold

Matthew J. Audette

Matthew Enyedi

Edward Fandrey

Greg Gates

Sallie R. Larsen

ff
Michelle Oroschakoff

Dayton Semerjian

Richard Steinmeier
George B. White(1)

______ ____ ____ ____ ____ ____ ____ ____ ____

Ageg

Position

President and Chief Executive Officer

Chief Financial Officer

Managing Director, Business Solutions

Managing Director, Divisional President, Advisor Solutions

Managing Director, Chief Technology & Information Officer

Managing Director, Chief Human Capital Officer

Managing Director, Chief Legal Officer

Managing Director, Chief Customer Care Officer

Managing Director, Divisional President, Business Development

Managing Director, Investor and Investment Solutions, Chief Investment Officer

(1)

Mr. White will be retiring from the Company in March 2022.

Executive Offiff cers

Dan H. Arnol

d — President and Chief Executive Officff

r from June 2012 to March 2015 and was responsible for formulating financial

Mr. Arnold has served as our chief executive offiff cer since January 2017. He has served as our president since
March 2015 with responsibility for our primary client-facing functions and long-term strategy for growth. Mr. Arnold
served as our chief financial officeff
policy, leading our capital management effort
functions. Prior to 2012, he was managing director, head of strategy, with responsibility for long-term strategic
planning for the firm, product and platforff m development and strategic investments, including acquisitions. He has
also served as divisional president of our Institution Services. Mr. Arnold joined our Company in January 2007
following our acquisition of UVEST Financial Services Group, Inc. (“UVEST”). Prior to joining us, Mr. Arnold worked
at UVEST for 13 years serving most recently as president and chief operating officer
. From April 2015 to July 2018,
he served on the board of directors of the Securities Industry and Financial Markets Association (“SIFMA”).
Mr. Arnold earned a B.S. in electrical engineering from Auburn University and holds an M.B.A. in finance from
Georgia State University.

iveness of the organization’s financial

s and ensuring the effect

Matthew J. Audette — Chief Finanii

cial Officer

Mr. Audette is our chief financial officer
. He is responsible for the Company’s core financial functions including:
financial planning and analysis, controllership, tax, internal audit, treasury, corporate development and investor
relations. Prior to joining LPL Financial in 2015, Mr. Audette served as executive vice president and chief financial
officer
of E*TRADE Financial Corporation (E*TRADE”). During his 16 years with E*TRADE, he was a key
contributor in the growth of the franchise, leading a variety of corporate transactions and capital activities. Mr.
Audette began his career in the financial services practice at KPMG. Mr. Audette earned a Bachelor of Science in
accounting from Virginia Polytechnic Institute and State University, popularly known as Virginia Tech.

Matthew Enyedidd — Managingii

Directo

r, Business Solutions

Mr. Enyedi has served as managing director, business solutions of LPL Financial since November 2020. He is
responsible for developing and deploying a suite of automated professional services to LPL Financial advisors, and
aligning them with the firm’s other programs that support advisors as business owners. From January to November
2020, Mr. Enyedi served as managing director, national sales of LPL Financial, overseeing an integrated group of
product and platforff m sales consultants focused on helping financial advisors and institutions navigate and grow in
an increasingly complex financial services landscape. Prior to his promotion to managing director, Mr. Enyedi
served as executive vice president, national sales from March 2015 to January 2020. In that role, he led the firm’s
data analytics and business intelligence effoff
rts, and oversaw a team focused on providing front- and middle-officeff
capabilities to help advisors grow their businesses and reach new segments of clients. He was also previously
responsible for teams supporting LPL Financial’s RIA custody and high-net-worth solutions. Mr. Enyedi joined LPL
Financial in 2003 and has also served as senior vice president, vice president, corporate strategy and assistant vice
president of advisory consulting. Prior to joining the firm, he worked as a financial advisor with UBS PaineWebber.
Mr. Enyedi received a B.A. in speech communication and business administration from the University of San Diego.
He also holds the Certified Investment Management Analyst® designation from the Haas School of Business at the
University of California,

Berkeley.

Edwardrr Fandrey — Managingii

Director, Divisional Presi

dent, Advisor Solutions

Mr. Fandrey has served as managing director, divisional president, advisor solutions of LPL Financial since January
2021. In this role, he is responsible for leading LPL Financial’s strategic plan to expand engagement with advisors,
partnering with them to utilize the firm’s evolving affiliat
ion models, optimally leverage its tools and capabilities, and
fully support their growth initiatives and other business needs. Prior to joining LPL Financial, he served as vice
president of the Financial Services business at Microsoftff Corporation from 2016 to 2021, where he led an
organization of sales, support, technology and customer success professionals driving client-centric digital
transformation across leading banks, insurance companies, hedge funds and capital markets firms. Mr. Fandrey
joined Microsoftff in 2000 and held various leadership roles including chief of staffff for Worldwide Sales and
Marketing. He earned his bachelor’s degree in psychology from the State University of New York at Albany and has
multiple technology and developer certifications.

Gregrr Gates — Managing Dirii ecrr

tor, Chief Technology & Informff

ationtt

Offiff cer

informat

ion technology organization responsible for delivering technology solutions and market-

ff
that enable positive, compelling experiences for LPL Financial advisors and employees. Mr. Gates

Mr. Gates has served as managing director, chief technology & information officer
of LPL Financial since July 2021.
In this role he is responsible for managing all aspects of the firm’s technology and systems applications. He leads a
high-performing
ff
leading platforms
joined LPL in 2018 with nearly two decades of senior-level management experience focused on the application of
technology to solve business challenges on a global scale. Before joining LPL Financial, Mr. Gates led product
management and engineering teams at PayPal from 2011 to 2018, focusing on internal technology platforms,
merchant and consumer experiences, risk and security, and global operations. Prior to that, at Bank of America he
led a number of technology organizations, culminating in leadership of Bank of America’s Contact Center
Technology from 2002 to 2011. Mr. Gates earned his bachelor’s degree in biomedical engineering from Vanderbilt
University in 1999, and has successfully completed multiple leadership, continuing education, and certification
programs from several organizations.

Salliell R. Larsen — Managingii

Director, Chief Human Capital Officer

Ms. Larsen is managing director, chief human capital officer
of LPL Financial. She is responsible for overseeing
ff
executive communication, human resources, talent development, corporate real estate, total rewards and talent
acquisition, advisor and employee learning and development and diversity and inclusion. Ms. Larsen joined us in
of Finance, where she served as the chief human resources
May 2012 from the Federal Home Loan Bank/Officeff
officer
resources for Capital One Financial Corporation, senior vice president of human resources for Marriott International
and vice president of human resources and communications for TRW Inc. Ms. Larsen earned a M.A. in
communications from Purdue University, a B.A. in sociology from California
executive leadership coaching from Georgetown University.

from November 2009 to April 2012. In earlier roles, Ms. Larsen was a managing vice president of human

Lutheran University and a certificate in

Michelle Oroscha

koff — Managingii

Directo

r, Chief Legal Officer

Ms. Oroschakoffff is managing director, chief legal offiff cer of LPL Financial. She is responsible for company-wide legal
and government relations matters, risk management processes and controls, compliance and governance, and has
a leading role in LPL Financial’s ongoing focus on enhancing the corporate risk profile. Ms. Oroschakoffff has more
than 20 years of financial services industry experience in legal, compliance and risk management. She joined LPL
Financial as managing director, chief risk officer
chief legal and risk officer
recently served as managing director and global chief risk offiff cer of the firm’s Global Wealth Management Group
from 2011 to 2013. Previously, while with Morgan Stanley, she served as chief administrative officer
from 2010 to
2011, as well as chief compliance officer
a variety of legal and compliance roles at Morgan Stanley, including associate general counsel and head of the
firm’s San Francisco litigation department. She also served as the general counsel for a large and successful RIA
firm where she became familiar with the independent model. She also serves on the SIFMA Compliance and Legal
Executive Committee. Ms. Oroschakoffff earned a B.A. in English literature from the University of Oregon and a J.D.,
with honors, from the University of Michigan.

from 2006 to 2010. Earlier in her career, Ms. Oroschakoffff spent 11 years in

in September 2013 from Morgan Stanley, and was promoted to

in June 2017. She became chief legal officer

in June 2018. At Morgan Stanley, she most

Dayton Semerjianjj — Managingii

Directo

r, Chief Customer Care Officer

Mr. Semerjian has served as managing director, chief customer care officer
He is responsible for LPL Financial’s customer satisfaction and client-centric efforts
Operations, LPL Financial’s largest business unit. Beforeff
and senior vice president for Global Customer Success at CA Technologies Inc., which he joined in 2005 when the
firm acquired Concord Communication Inc. At Concord, he was executive vice president of marketing and strategic
alliances. Mr. Semerjian also gained experience leading firms in adopting new service models that focus on
improving the customer experience at scale through leadership roles at Intel Corp., Nation Street Inc. and Corente
Inc., which was acquired by Oracle. Mr. Semerjian received a B.B.A. in marketing and management from the
University of Massachusetts and an M.B.A. from Harvard Business School. He was also awarded an advanced
certificate of executive management by the MIT Sloan School of Management.

of LPL Financial since February 2019.
and leads Service, Trading and
joining LPL Financial, Mr. Semerjian was general manager

Richard Steinmeier — Managingii

Directo

r, Divisivv onal Presi

dent, Business Development

Mr. Steinmeier has served as managing director and divisional president, business development of LPL Financial
since August 2018. In this role, he has responsibility for recruiting new financial advisors and institutions to LPL
Financial and to existing advisor practices, as well as exploring new markets and merger and acquisition
opportunities. Prior to joining LPL Financial, Mr. Steinmeier served as managing director, head of digital strategy
and platforms for UBS Wealth Management Americas from September 2017 to August 2018 and as managing
Segment and Wealth Advice Center from August 2012 to September 2017.
director, head of the Emerging Affluent
Prior to UBS, Mr. Steinmeier held a variety of leadership roles at Merrill Lynch, most recently as managing director
of the Merrill Edge Advisory Center from February 2009 to August 2012. Prior to joining Merrill Lynch, he served as
an engagement manager at McKinsey & Company from 2002 to 2006. Mr. Steinmeier earned a B.S. in economics
from the Wharton School at the University of Pennsylvania and an M.B.A. from Stanfordff

University.

George B. White — ManaM

ging Direii ctor, Invesvv

tor and Invesvv

tment Solutions

, Chief Invesvv

tment Offiff cer

Mr. White has served as managing director, investor and investment solutions and chief investment officer
ff
Financial since January 2017. He served as managing director, research, and chief investment officer
December 2016. Mr. White is responsible for the strategic direction and continued growth of LPL Financial’s
research, marketing, products and investment platforms. Prior to joining us in November 2007, Mr. White served as
a managing director and director of research for Wachovia Securities for 10 years. Mr. White was also an
investment analyst for Mercer Investment Consulting where he provided investment advice to institutional clients.
He started his financial services career on the buy side of the business as a research analyst for Thompson, Siegel,
and Walmsley, a value-oriented asset manager. Mr. White received a B.B.A. from the College of William and Mary.

from 2009 to

of LPL

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

PART II

Equity Securities

Market Information

Our common stock is traded on the Nasdaq Global Select Market under the symbol “LPLA.” The closing sale price
as of December 31, 2021 was $160.09 per share. As of that date, there were 1,023 common stockholders of record
based on informat
number of individual or institutional stockholders that beneficially own the Company’s stock because most stock is
held in the name of nominees.

ion provided by our transfer agent. The number of stockholders of record does not reflect the

Performance Graph

The following graph compares the cumulative total stockholder return (rounded to the nearest whole dollar) of the
Company’s common stock, the Standard & Poor’s 500 Financial Sector Index and the Dow Jones U.S. Financial
Services Index for the last five years. The graph assumes a $100 investment at the closing price on December 31,
2016 and reinvestment of the dividends on the respective dividend payment dates without commissions. This graph
does not forecast future perforr

rmance of the Company’s stock.

e
u
a
V

$500

$450

$400

$350

$300

$250

$200

$150

$100

$50

12/31/16

03/31/17

06/30/17

09/30/17

12/30/17

03/31/18

06/30/18

09/30/18

12/31/18

03/31/19

06/30/19

09/30/19

12/31/19

03/31/20

06/30/20

09/30/20

12/31/20

03/31/21

06/30/21

09/30/21

12/31/21

Date

LPLA
S&P 500 Financial Sector Index
Dow Jones U.S. Financial Services Index

Dividend Policy

The payment, amount and timing of any future dividends will be subject to the discretion of our board of directors
and will depend on a number of factors, including future earnings and cash flows, capital requirements, alternative
uses of capital, general business conditions, our future prospects, contractual restrictions and covenants and other
factors that our board of directors may deem relevant. Our Credit Agreement and the Indentures governing the
Notes contain restrictions on our activities, including paying dividends on our capital stock. For an explanation of
these restrictions, see “Item 7. Management’s Discussion and Analysis of Financial Conditiontt
Operations
tt
member firm’s excess net capital without FINRA’sAA prior approval, potentially impeding our ability to receive
dividends from LPL Financial.

” In addition, FINRA regulations restrict dividends in excess of 10% of a

- Debt and Related Covenants.tt

and Results ott

Securities Authorized for Issuance Under Equity Compensation Plans

The table below sets forth informat
issuance as of December 31, 2021:

ion on compensation plans under which our equity securities are authorized for

Plan category

Equity compensation plans approved by security holders

Total

Purchases of Equity Securities by the Issuer

Number of securities
to be issued
upon exercise of
outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available
for future issuance
under equity
compensation plans

1,204,420 $

45.65

14,787,930

The table below sets forth information regarding share repurchases, reported on a trade date basis, during the three
months ended December 31, 2021:

Period

Total
Number of
Shares
Purchased

Weighted-
Average
Price Paid
per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Programs

Approximate Dollar
Value of Shares That
May Yet Be Purchased
Under the Program
(millions)(1)

October 1, 2021 through October 31, 2021

— $

—

November 1, 2021 through November 30, 2021

239,641 $

166.12

December 1, 2021 through December 31, 2021

63,330 $

161.02

Total

302,971

— $

239,641 $

63,330 $

302,971

309.8

270.0

259.8

(1)

On November 13, 2018, the Board of Directors authorized an increase to the Company’s existing share repurchase program to authorize
the repurchase of up to $1.0 billion of its issued and outstanding common shares. See Note 15 - Stockholders’ Equity, within the notes to
the consolidated financial statements for additional information.

The repurchases may be executed from time to time, subject to general business and market conditions and other
investment opportunities, through open market purchases or privately negotiated transactions, including
transactions with affiliates, with the timing of purchases and the amount of shares purchased generally determined
at the discretion of the Company within the constraints of the Credit Agreement, the Indentures, applicable laws and
consideration of the Company’s general liquidity needs.

Item 6. Reserved

GLOSSARY OF TERMS

Adjusted Net Income: A non-GAAP financial measure defined as net income plus the after-tax impact of
amortization of other intangibles and acquisition costs.

Basis Point: One basis point equals 1/100th of 1%.

CFTC: The Commodity Futures Trading Commission.

Core G&A: A non-GAAP financial measure defined as total expense excluding the following expenses: advisory
and commission; depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange;
amortization of other intangibles; loss on extinguishment of debt; promotional; acquisition costs; employee share-
based compensation; and regulatory charges.

Corporate Cash: The sum of cash and equivalents from the following: (1) cash held at the Parent (as defined
herein), (2) excess cash at LPL Financial per the Credit Agreement, which is the net capital held at LPL Financial in
excess of 10% of its aggregate debits, or five times the net capital required in accordance with Exchange Act Rule
15c3-1, and (3) other available cash, which includes cash and equivalents held at The Private Trust Company, N.A.,
in excess of Credit Agreement capital requirements, and cash and equivalents held at non-regulated subsidiaries.

Credit Agreement: The Company’s amended and restated credit agreement.

Credit Agreement EBITDA: The equivalent of “Consolidated EBITDA,” as defined in the Credit Agreement, which
is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense, tax expense, depreciation
and amortization, and is further adjusted to exclude certain non-cash charges and other adjustments (including
unusual or non-recurring charges) and gains, and to include future expected cost savings, operating expense
reductions or other synergies from certain transactions.

Dodd-Frank Act: The Dodd-Frank Wall Street Reform and Consumer Protection Act.

DOL: The United States Department of Labor.

DTC: The Depository Trust Company.

EBITDA: A
income taxes, depreciation and amortization, and amortization fof other int gangibles.

fdefined as net income plus interest expense on

Gnon-GAAP ffinancial measure

borrowings, provision ffor

ERISA: The Employee Retirement Income Security Act of 1974.

EPS Prior to Amortization of Intangible Assets and Acquisition Costs: A non-GAAP financial measure defined
as Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the applicable
period.

FINRA: The Financial Industry Regulatory Authority.

GAAP: Accounting principles generally accepted in the United States of America.

Gross Profit: Non-GAAP financial measure defined as total revenue less advisory and commission expense and
brokerage, clearing and exchange fees.

Indentures: Refers to the indentures governing the Company’s senior unsecured notes.

Leverage Ratio: A financial metric from our Credit Agreement that is calculated by dividing Credit Agreement net
debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA.

NSCC: The National Securities Clearing Corporation.

NFA: The National Futures Association.

OCC: The Officeff

of the Comptroller of the Currency.

RIA: Registered investment advisor.

SEC: The U.S. Securities and Exchange Commission.

SIPC: The Securities Investor Protection Corporation.

SRO: Self-regulatory organization.

Uniform Net Capital Rule: Refers to Rule 15c3-1 under the Securities Exchange Act of 1934, which specifies
minimum capital requirements that are intended to ensure the general financial soundness and liquidity of broker-
dealers at all times.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

of our financial conditiontt

statett mentstt and the notes to those consolidated financial

The followinww g discussion
consolidated financial
Financial Statementstt and Supplementary
forward-lookingii
statementstt
those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K,KK our actual resultstt may diffii erff
materially from those anticipat
heading “Special

included in “Item 8.
Data” of this Annual Report on Form 10-K.KK This discussion contains
As a result of many factors, such as

ed in these forward-looking statements.tt Please also refer to the sectiontt

should be read in conjunctiontt
stt
tt
statement

u
that involve significant

Note Regarding Forward-Looking Statements.”

and resultstt of operations

tt
risks and uncertaint
ies.

withtt our

under

Business Overview

We are a leader in the retail financial advice market and the nation’s largest independent broker-dealer. We serve
independent financial advisors and financial institutions, providing them with the technology, research, clearing and
compliance services and practice management programs they need to create and grow their practices. We enable
them to provide personalized financial guidance to millions of American families seeking wealth management,
retirement planning, financial planning and asset management solutions. Please consult Part I, “Item 1. Business”
for additional informat

ion related to our business activities.

Our Sources of Revenue

Our revenue is derived primarily from fees and commissions from products and advisory services offered
advisors to their clients, a substantial portion of which we pay out to our advisors, as well as fees we receive from
our advisors for the use of our technology, custody, clearing, trust and reporting platforms. We also generate asset-
based revenue through our insured bank sweep vehicles, money market programs and the access we provide to a
variety of product providers with the following product lines:

by our

• Alternative Investments

• Annuities

• Exchange Traded Products
• Insurance Based Products

• Mutual Funds

• Retirement Plan Products

• Separately Managed Accounts

• Structured Products
• Unit Investment Trusts

platform, we custody the majority of client assets invested in these financial products, for

Under our self-clearing
which we provide statements, transaction processing and ongoing account management. In return for these
services, mutual funds, insurance companies, banks and other financial product sponsors pay us fees based on
asset levels or number of accounts managed. We also earn interest from margin loans made to our advisors’
clients. A portion of our revenue is not asset-based or correlated with the equity financial markets.

We regularly review various aspects of our operations and service offerings,
including our policies, procedures and
platforms, in response to marketplace developments. We seek to continuously improve and enhance aspects of our
operations and service offeri
and regulatory developments. For example, we regularly review the structure and fees of our products and services,
including related disclosures, in the context of the changing regulatory environment and competitive landscape for
advisory and brokerage accounts.

ngs in order to position our advisors for long-term growth and to align with competitive

Significant Events

Completed the acquisition of Waddeld

lll & Reed Financial, Inc. and surparr

ssed $1.0 trilrr lill on in assets

On April 30, 2021 we completed the acquisition of the wealth management business of Waddell & Reed Financial
Inc. (the “Waddell & Reed Acquisition”). Concurrent with the closing of the Waddell & Reed Acquisition, we
surpassed $1.0 trillion in total advisory and brokerage assets. We completed the onboarding of $71.2 billion of client
assets representing 99% of assets from the Waddell & Reed Acquisition during the third quarter of 2021.

Generated $118.8 billii ioll n of orgarr nic net new assets

We generated $118.8 billion of organic net new assets during 2021, which included the onboarding of approximately
$35.0 billion of combined total assets from M&T Bank and BMO Harris to our platform. This translated to an annual
organic net new asset growth rate of 13.2%. We also signed an agreement with CBSI to join our platform. CBSI

supports over 500 advisors serving approximately $32 billion in brokerage and advisory assets, which we expect to
onboard during 2022.

Business Solutions subscripti
ll
annualized

run rate basis

ii ons morerr

than doubled,dd drivingii

revenue of approximatel

yl $28 millioll n on an

Total active and contracted Business Solutions subscriptions more than doubled to end the year at 3,022, driving
revenue of approximately $28 million on an annualized run rate basis.

Refinanii

ced our highi

est cost debt, increased

capacity under our Credit

Agreement, and issued senior notes

On March 15, 2021, we took advantage of the low interest rate environment to issue $900.0 million in aggregate
principal amount of 4.00% senior unsecured notes due in 2029 (“2029 Senior Notes”). We used the proceeds from
the 2029 Senior Notes to redeem our existing 5.75% senior unsecured notes due in 2025 (“2025 Senior Notes”),
reduced our annual interest expense by $13.0 million, and created additional borrowing capacity under our Credit
Agreement, which was increased to $1.0 billion. Additionally, on May 18, 2021, we issued $400.0 million in
aggregate principal amount of 4.375% senior unsecured notes due in 2031 (“2031 Senior Notes”). Proceeds from
the 2031 Senior Notes were used to repay borrowings under the Credit Agreement, which were used to finance the
Waddell & Reed Acquisition.

Earned a spot on the Fortune 500 list

In June 2021 the Company earned a spot in the Fortune 500 ranking for 2021 based on our revenue of $5.9 billion
for the year ended December 31, 2020, placing us on the list of largest U.S. companies as ranked by revenue.

Resumed share repurchases during the thirdii

quarter of 2021 and repurchased $90.0 millii ioll n of shares

We resumed share repurchases during the third quarter of 2021 with an initial focff us on repurchasing amounts to
offset
million.

dilution. We repurchased 579,771 shares during the third and fourth quarters of 2021 for a total of $90.0

Executive Summary

Financial

Highlights

Results for the year ended December 31, 2021 included net income of $459.9 million, or $5.63 per diluted share,
which compares to $472.6 million, or $5.86 per diluted share, for the year ended December 31, 2020.

Asset Growt

htt Trends

Total advisory and brokerage assets served were $1.2 trillion at December 31, 2021, up 33.6% from $903.1 billion
at December 31, 2020. Total net new assets were $190.0 billion for the year ended December 31, 2021, compared
to $60.2 billion for the same period in 2020.

Net new advisory assets were an inflow of $123.5 billion for the year ended December 31, 2021, compared to $52.1
billion in 2020. Advisory assets were $643.2 billion, or 53.3% of total advisory and brokerage assets served, at
December 31, 2021, up 39.5% from $461.2 billion at December 31, 2020.

Net new brokerage assets were an inflow of $66.6 billion for the year ended December 31, 2021, compared to $8.1
billion in 2020. Brokerage assets were $563.2 billion at December 31, 2021, up 27.4% from $441.9 billion at
December 31, 2020.

Gross Profit

Trends

Gross profit, a non-GAAP financial measure, was $2,454.7 million for the year ended December 31, 2021, an
increase of 16.7% from $2,103.3 million for the year ended December 31, 2020. See the “Key Performance
section for additional informat

ion on gross profit.

Metrics”

Common Stock Dividends and Share Repurchases

During the year ended December 31, 2021, we paid shareholders cash dividends of $80.1 million and repurchased
579,771 of our outstanding shares for a total of $90.0 million.

VV
COVID-19

Response

In response to the COVID-19 pandemic, we have taken measures to protect the health and safety of our
employees, as well as the stability and continuity of our operations. For example, we have equipped and enabled a

substantial majority of employees to work remotely, enhanced cleaning protocols throughout our corporate offices,
and worked closely with our vendors to maintain service continuity throughout the market volatility and increased
operational volumes that have occurred from time to time during the pandemic. We also made extra support
available to our advisors by extending service hours and providing additional resources to enable them to deliver
differe
ff
Part I, “Item 1A. Risk Factors”rr

ntiated services to their clients. Please consult the “Risks Related to our Business and Industry”

ion about the risks associated with COVID-19.

for more informat

section within

Key Performance Metrics

We focus on several key metrics in evaluating the success of our business relationships and our resulting financial
position and operating performance.

Our key operating, business and financial metrics are as follows:

As of and for the Years
Ended December 31,

2021

2020

643.2

563.2

$ 1,206.4

53.3%

123.5

66.6

190.0

89.4

29.4

118.8

19.4 %

13.2%

30.0

9.3

39.3

16.1

1.9

18.0

57.3

69.1

461.2

441.9

903.1

51.1%

52.1

8.1

60.2

49.6

6.6

56.2

13.6 %

7.4%

37.3

8.2

45.5

1.5

1.9

3.4

48.9

34.3

Operating Metrics (dollars in billions)(1)
Advisory and Brokerage Assets

Advisory assets(2)(3)
Brokerage assets(2)(4)

Total Advisory and Brokerage Assets(2)

Advisory assets as a % of total Advisory and Brokerage Assets

Net New Assets

Net new advisory assets(5)
Net new brokerage assets(6)
Total Net New Assets(7)

Organic Net New Assets

(7)

Net new organic advisory assets

Net new organic brokerage assets

Total Organic Net New Assets

Organic advisory net new assets annualized growth(7)(8)
Total organic net new assets annualized growth(7)(8)

Client Cash Balances(2)
Insured cash account

Deposit cash account

Total Bank Sweep Balances

Money market account

Purchased money market funds

Total Money Market Balances

Total Client Cash Balances

Net buy (sell) activity(9)

Business and Financial Metrics (dollarsll

in millions)

Advisors - period end

Average total assets per advisor(10)
Employees - period end

Share repurchases
Dividends
Leverage ratio(11)

Financial Metrics (dollars in millions, except per share data)

Total revenue

Net income

Earnings per share (“EPS”), diluted

Non-GAAP Financial Metrics (dollars in millions, except per share data)

EPS prior to amortization of intangible assets and acquisition costs(12)
Gross profit(13)
EBITDA(14)
EBITDA as a % of Gross profit

Core G&A(15)

______ ____ ____ ____ ____ ____ ____ ____ ____

As of and for the Years
Ended December 31,

2021

2020

19,876

60.7

5,919

17,287

52.2

4,756

90.0
80.1

2.26

$
$

150.0
79.1

2.16

$
$

Years Ended December 31,

2021

2020

$ 7,720.8

$ 5,871.6

459.9

5.63

7.02

472.6

5.86

6.46

$ 2,454.7

$ 2,103.3

936.4

38.1%

$ 1,058.2

908.9

43.2%

925.1

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

Totals may not foot due to rounding.

Advisory and brokerage assets consist of assets that are custodied, networked and non-networked and reflect market movement in
addition to new assets, inclusive of new business development and net of attrition. Client cash balances are also included in total
advisory and brokerage assets.

Advisory assets consist of total advisory assets under custody at LPL Financial and Waddell & Reed, LLC (“Waddell & Reed”). Please
a tabular presentation of advisory assets.
consult the “Results of Operations” section forf

Brokerage assets consist of brokerage assets serviced by advisors licensed with LPL Financial.

Net new advisory assets consist of total client deposits into custodied advisory accounts less total client withdrawals from custodied
advisory accounts, plus dividends, plus interest, minus advisory fees. We consider conversions from and to brokerage accounts as
deposits and withdrawals, respectively.

Net new brokerage assets consist of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts,
plus dividends, plus interest. We consider conversions from and to advisory accounts as deposits and withdrawals, respectively.

Total net new assets include $71.2 billion of assets related to the Waddell & Reed Acquisition during the year ended December 31, 2021.
Total net new assets during the year ended December 31, 2020 include $2.5 billion of net new assets related to the acquisition of E.K.
Riley Investments, LLC (“E.K. Riley”) and $1.5 billion of net new assets related to the acquisition of Lucia Securities, LLC (“Lucia”).
Organic net new assets and related growth rates exclude these assets in both periods.

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

Represents the amount of securities purchased less the amount of securities sold in client accounts custodied with LPL Financial and
Waddell & Reed. Reported activity does not include any other cash activity, such as deposits, withdrawals, dividends received or fees
paid.

(10)

Calculated based on the end-of-period total advisory and brokerage assets divided by end-of-period advisor count.

(11)

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 plus corporate cash, by Credit Agreement EBITDA. Credit Agreement EBITDA, a non-GAAP 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 forff
adjusted to exclude certain non-cash charges and other adjustments (including unusual or non-recurring charges) and gains, and to
include future expected cost savings, operating expense reductions or other synergies from certain transactions. Please consult the
“Debt and Related Covenants” section forff more information. Below is a reconciliation of corporate debt and other borrowings to Credit
Agreement net debt and net income to EBITDA and Credit Agreement EBITDA (in millions):

income taxes, depreciation and amortization, and amortization of other intangibles, and is further

Credit Agreement Net Debt Reconciliation

s
Corporate debt and other borrowing

Corporate cash

Credit Agreement Net Debt(†)

EBITDA and Credit Agreement EBITDA Reconciliation

Net income

Interest expense on borrowings

Provision forff

income taxes

Depreciation and amortization

Amortization of other intangibles

EBITDA(†)

Credit Agreement Adjustments:

Employee share-based compensation expense

Advisor share-based compensation expense
M&A accretion(16)
Loss on extinguishment of debt

Acquisition costs and other

Credit Agreement EBITDA(†)

Leverage Ratio

(†)

Totals may not foof

t due to rounding.

December 31,

2021

2020

2,838.6

(237.0)

2,601.6

2,359.3

(279.9)

2,079.4

Years Ended December 31,

2021

2020

459.9

104.4

141.5

151.4

79.3

936.4

41.8

2.3

53.6

24.4

92.1

472.6

105.8

153.4

109.7

67.4

908.9

31.7

2.3

—

18.3

961.2

1,150.7

December 31,

2021

2020

2.26

2.16

(12)

EPS prior to amortization of intangible assets and acquisition costs is a non-GAAP financial measure defined as adjusted net income, a
non-GAAP financial measure defined as net income plus the after-tax impact of amortization of other intangibles and acquisition costs,
the applicable period. The Company presents adjusted net
divided by the weighted average number of diluted shares outstanding forf
income and EPS prior to amortization of intangible assets and acquisition costs because management believes that these metrics can
provide investors with useful insight into the Company’s core operating perforr
rmance by excluding non-cash items and acquisition costs
that management does not believe impact the Company’s ongoing operations. Adjusted net income and EPS prior to amortization of
intangible assets and acquisition costs are not measures of the Company's financial performance under GAAP and should not be
considered as alternatives to net income, earnings per diluted share or any other performance measure derived in accordance with
GAAP. Below is a reconciliation of net income and earnings per diluted share to adjusted net income and EPS prior to amortization of
intangible assets and acquisition costs for the periods presented (in millions, except per share data):

Adjusted net income / EPS prior to amortization of intangible assets and
acquisition costs Reconciliation

Net income / earnings per diluted share

Amortization of other intangibles
Acquisition costs(17)
Tax benefit

Years Ended December 31,

2021

2020

Amount Per Share Amount Per Share

459.9 $

79.3

76.4

5.63

0.97

0.93

$ 472.6 $

67.4

—

5.86

0.83

—

(41.4)

(0.51)

(18.9)

(0.23)

Adjusted net income / EPS prior to amortization of intangible assets and
acquisition costs(†)

Weighted-average shares outstanding, diluted

(†)

Totals may not foot due to rounding.

574.1 $
81.7

7.02

$ 521.1 $
80.7

6.46

(13)

Gross profit is a non-GAAP financial measure defined as total revenue less advisory and commission expense and brokerage, clearing
and exchange expense. All other expense categories, including depreciation and amortization of property and equipment and
amortization of other intangibles, are considered by management to be general and administrative in nature. Because our gross profit
amounts do not include any depreciation and amortization expense, we consider our gross profit amounts to be non-GAAP financial
measures that may not be comparable to those of others in our industry. We believe that gross profit amounts can provide investors with
useful insight into our core operating performance before indirect costs that are general and administrative in nature. Below is a
reconciliation of gross profit for the periods presented (in millions):

Gross Profit

Total revenue

Advisory and commission expense

Brokerage, clearing and exchange expense

Gross Profit(†)

______ ____ ____ ____ ____ ____ ____ ____ ____

(†)

Totals may not foof

t due to rounding.

Years Ended December 31,

2021

2020

7,720.8

5,180.1

86.0

5,871.6

3,697.1

71.2

2,454.7

2,103.3

(14(14))

EBITDA is a non G-GAAP ffinancial measure
depreciation and amortization, and amortization off other intanggibles. Th Ce Compa yny presents EBITDA because managgement believes that
it can be a u fsefu fl financial metric in understandingg the CCompa yny’s earn ging fs from operations. EBITDA is not a measure fof the CCompanyy's
ffinancial perfforr
derived in accordance with GGAAP. Below is a reconciliation fof EBITDA to net income ffor the periods presented (in(in millions):ns):

rmance under GGAAP and should not be considered as an alternative to net income or anyy other perfforr

fdefined as net income plus interest expense on borrowinggs, provision ffor income taxes,

rmance measure

EBITDA Reconciliation

Net income

Interest expense on borrowings

Provision forf

income taxes

Depreciation and amortization

Amortization of other intangibles

EBITDA(†)

__
________
__

__
____

____

(†)

Totals may not foot due to rounding.

Years Ended December 31,

2021

2020

459.9

104.4

141.5

151.4

79.3

936.4

472.6

105.8

153.4

109.7

67.4

908.9

(15)

Core G&A is a non-GAAP financial measure defined as total expense less the following expenses: advisory and commission;
depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange; amortization of other intangibles; loss
on extinguishment of debt; promotional; acquisition costs; employee share-based compensation; and regulatory charges. 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. Core G&A is not a measure of the Company’s total expense as calculated in accordance
with GAAP. Below is a reconciliation of Core G&A against the Company’s total expense for the periods presented (in millions):

Core G&A Reconciliation

Total expense

Advisory and commission

Depreciation and amortization

Interest expense on borrowings

Brokerage, clearing and exchange

Amortization of other intangibles

Loss on extinguishment of debt

Total G&A

Promotional (ongoing)(17)
Acquisition costs(17)
Employee share-based compensation

Regulatory charges

Core G&A(†)

______ ____ ____ ____ ____ ____ ____ ____ ____

(†)

Totals may not foof

t due to rounding.

Years Ended December 31,

2021

2020

7,119.5

5,180.1

151.4

104.4

86.0

79.3

24.4

1,493.9

288.0

76.4

41.8

29.4

1,058.2

5,245.6

3,697.1

109.7

105.8

71.2

67.4
—
1,194.4

208.3

—

31.6

29.4

925.1

(16) 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 the transaction.

(17)

Acquisition costs include the cost to setup, onboard and integrate acquired entities and primarily include $36.4 million of compensation
and benefits expense, $18.7 million of professional services expense, $14.3 million of promotional expense, and other expenses that
were incurred during the year ended December 31, 2021 that are included in the respective line items in the consolidated statements of
income.

Acquisitions, Integrations and Divestitures

We continuously assess the competitive landscape in connection with our capital allocation framework as we
pursue acquisitions, integrations and divestitures. These activities are part of our overall growth strategy but can
distort comparability when reviewing revenue and expense trends for periods presented. Our recent acquisitions
include the following:

• Waddell & Reed Financial, Inc. - In April 2021, we acquired the wealth management business of Waddell &

Reed Financial, Inc.

•

Blaze Portfolioff
advisor-facing trading and portfolio rebalancing platform.

Systems LLC - In October 2020, we acquired Blaze, a technology company that provides an

E.K. Riley Investments, LLC - In August 2020, we acquired business relationships with advisors from E.K.
Riley, a broker-dealer and RIA.

Lucia Securities, LLC - In August 2020, we acquired business relationships with advisors from Lucia, a
broker-dealer and RIA.

See Note 4 - Acquisitions

, within the notes to the consolidated financial statements for further detail.

Economic Overview and Impact of Financial Market Events

Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the United States
financial markets. According to the most recent estimate from the U.S. Bureau of Economic Analysis, the U.S.
economy grew at an annualized pace of 6.9% in the fourth quarter of 2021 after growing at an annualized pace of
2.3% in the third quarter of 2021. The equity markets were generally strong in 2021 with the S&P 500 and Russell
2000 and 3000 indices gaining year over year. Non-U.S. stocks continued to trail their U.S. counterparts and rising
interest rates made it a challenging year for fixed income markets, contributing to a near flat return for the
Bloomberg U.S. Aggregate Bond Index for the fourth quarter and a 1.6% loss for the year.

Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Federal
Reserve (“Fed”) policy. At the January 2022 policy meeting, Fed policymakers maintained the target range for the
federal funds rate at 0% to 0.25%. Fed officials
also signaled they would make a decision on whether to raise the
federal funds rate at the March 2022 meeting and announced an intent to end net asset purchases in early March.

Please consult the “Risks Related to Our Business and Industry” section within Part I, “Item 1A. Risk Factors” for
more informat
ion about the risks associated with significant interest rate changes and the potential related effects
ff
on our profitability and financial condition.

Results of Operations

A discussion
of changes in our results ott
this Aii
year ended December 31, 2019 has been omitted fromrr
7. Management’s Discussion
Conditiontt
and Analysis of Financial
ii
fiscal year ended December 31, 2020, filedii
on Form 10-K for thett

iott ns duringii

f operatrr

the yeayy

r ended December 31, 2020 compared to the
nnual Report on Form 10-K, bKK ut may be found in “Item

and Results ott
with t

tt
f Operat
ions”
SEC on February 23, 2021.

tt hett

in our Annual Report

The following discussion presents an analysis of our results of operations for the years ended December 31, 2021
and 2020 (in thousands):

Years Ended December 31,

2021

2020

% Change

REVENUE

Advisory

Commission

Asset-based

Service and fee

Transaction

Interest income

Other

Total revenue

EXPENSE

Advisory and commission

Compensation and benefits

Promotional

Occupancy and equipment

Depreciation and amortization

Interest expense on borrowings

Brokerage, clearing and exchange

Amortization of other intangibles

Professional services

Communications and data processing

Loss on extinguishment of debt

Other

Total expense

INCOME BEFORE PROVISION FOR INCOME TAXES

PROVISION FOR INCOME TAXES

NET INCOME

$ 3,525,430

$ 2,327,519

2,378,683

1,906,560

1,148,067

1,044,517

411,761

156,336

28,577

71,976

357,722

148,349

29,412

57,561

7,720,830

5,871,640

5,180,090

3,697,147

741,003

302,285

185,531

151,428

104,414

86,023

79,260

73,231

60,296

24,400

609,257

208,250

166,389

109,732

105,765

71,185

67,358

57,067

52,399

—

131,540

101,018

7,119,501
601,329

141,463

5,245,567
626,073

153,433

459,866

472,640

51.5 %

24.8 %

9.9 %

15.1 %

5.4 %

(2.8)%

25.0 %

31.5 %

40.1 %

21.6 %

45.2 %

11.5 %

38.0 %

(1.3)%

20.8 %

17.7 %

28.3 %

15.1 %

100.0 %

30.2 %

35.7 %
(4.0)%

(7.8)%

(2.7)%

Revenue

Advisory

Advisory revenue represents fees charged to advisors’ clients’ advisory accounts on our corporate RIA advisory
platform and is based on a percentage of the market value of the eligible assets in the clients’ advisory accounts.
We provide ongoing investment advice and act as a custodian, providing brokerage and execution services on
transactions, and perform administrative services for these accounts. Advisory fees are primarily billed to clients in
advance, on a quarterly basis, and are recognized as revenue ratably during the quarter. The performance
obligation for advisory fees is considered a series of distinct services that are substantially the same and are
satisfied daily. As the value of the eligible assets in an advisory account is susceptible to changes due to customer
activity, this revenue includes variable consideration and is constrained until the date that the fees are determinable.
The majority of our client accounts are on a calendar quarter and are billed using values as of the last business day
of the preceding quarter. The value of the eligible assets in an advisory account on the billing date is adjusted for
estimates of contributions and withdrawals to determine the amount billed, and accordingly, the revenue earned in
the following three-month period. Advisory revenue collected on our corporate advisory platform is proposed by the
advisor and agreed to by the client and averaged 1% of the underlying assets forff
2021.

the year ended December 31,

We also support Hybrid RIAs through our hybrid advisory platform, which allows advisors to engage us for
technology, clearing and custody services, as well as access to the capabilities of our investment platforms. The
assets held under a Hybrid RIA’sAA investment advisory accounts custodied with LPL Financial are included in total
advisory assets and net new advisory assets. The advisory revenue generated by a Hybrid RIA is not included in
our advisory revenue. We charge separate fees
technology, clearing, administrative, oversight
to Hybrid RIAs forff
and custody services, which may vary and are included in our service and fee revenue in our consolidated
statements of income.

Advisory revenue is generated from advisory assets. The following table summarizes the composition of advisory
assets forff

the periods presented (in billions):

Corporate platform advisory assets

RIA platform advisory assets

Total advisory assets

December 31,

2021

2020

$ Change % Change

429.6

291.9

137.7

213.6

169.3

44.3

643.2

461.2

182.0

47.2 %

26.2 %

39.5 %

Net new advisory assets are generated throughout the quarter, therefore, the full impact of net new advisory assets
to advisory revenue is not realized in the same period. The folff
assets forff

lowing table summarizes activity impacting advisory

the periods presented (in billions):

Beginning balance at January 1

Net new advisory assets(1)
Market impact(2)

Ending balance at December 31

______ ____ ____ ____ ____ ____ ____ ____ ____

Years Ended December 31,

2021

2020

461.2

123.5

58.5

643.2

365.8

52.1

43.3

461.2

(1)

(2)

Net new advisory assets consist of total client deposits into custodied advisory accounts less total client withdrawals from advisory
accounts, plus dividends, plus interest, minus advisory fees. We consider conversions from and to advisory accounts as deposits and
withdrawals, respectively.

Market impact is the diffeff
implied growth or decline in asset balances due to market changes over the same period of time.

rence between the beginning and ending asset balance less the net new asset amounts, representing the

The growth in advisory revenue from 2020 to 2021 was due to increases in net new advisory assets resulting from
our recruiting effort
s, advisor productivity and acquisitions, as well as market gains as represented by higher levels
of the S&P 500 Index.

Commission

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. We earn trailing commission
revenue primarily on mutual funds and variable annuities held by clients of our advisors. See Note 3 - Revenue,
within the notes to the consolidated financial statements forff
further detail regarding our commission revenue by
product category.

The following table sets forth the components of our commission revenue (dollars in thousands):

Sales-based

Trailing

Total commission revenue

Years Ended December 31,

2021

2020

$ Change % Change

974,055

770,764

$ 203,291

1,404,628

1,135,796

268,832

$ 2,378,683

$ 1,906,560

$ 472,123

26.4 %

23.7 %

24.8 %

The increase in sales-based commission revenue in 2021 compared to 2020 was primarily driven by increases in
sales fof annuities, mutual ffunds and ffixed income products. The increase in trailing commission revenue in 2021
compared to 2020 was primarily due to the increase in value fof annuities and mutual ffunds as a result
fof market
increases.

Commission revenue is generated from brokerage assets. The following table summarizes activity impacting
brokerage assets forff

the periods presented (in billions):

Beginning balance at January 1

Net new brokerage assets(1)
Market impact(2)

Ending balance at December 31

______ ____ ____ ____ ____ ____ ____ ____ ____

Years Ended December 31,

2021

2020

441.9

66.6

54.7

563.2

398.6

8.1

35.2

441.9

(1)

(2)

Net new brokerage assets consist of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts,
plus dividends, plus interest. We consider conversions from and to brokerage accounts as deposits and withdrawals, respectively.

Market impact is the diffeff
implied growth or decline in asset balances due to market changes over the same period of time.

rence between the beginning and ending asset balance less the net new asset amounts, representing the

Asset-Based

Asset-based revenue consists of fees from our client cash programs, fees from our sponsorship programs with
financial product manufacturers, and fees from omnibus processing and networking services (collectively referred to
as “recordkeeping”). Client cash revenue is generated on advisors’ clients’ cash balances in insured bank sweep
accounts and money market programs. We also receive fees from certain financial product manufacturers
connection with sponsorship programs that support our marketing and sales force education and training efforts.
Compensation for these performance
obligations are either a fixed fee, a percentage of the average annual amount
of product sponsor assets held in advisors’ clients’ accounts, a percentage of new sales or a combination. Omnibus
processing revenue is paid to us by mutual fund product sponsors or their affiff liates and is based on the value of
mutual fund assets in accounts forff which the Company provides omnibus processing services and the number of
accounts in which the related mutual fund positions are held. 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.

in
ff

Asset-based revenue for the year ended December 31, 2021 increased yby $$103.6 millio cn ompared to 2020,
primarily due to increases in revenue ffrom reco
in client cash revenue.

rdkeeping and sponsorship

gprograms, parti yally fofffset

fff

yby a decrease

Revenue for our recordkeeping and sponsorship programs for the year ended December 31, 2021, which is largely
based on the market value of the underlying assets, increased compared to 2020 due to organic growth in our
assets under management and the impact of market appreciation on the value of the underlying assets.

Client cash revenue for the year ended December 31, 2021 decreased compared to 2020 due to the impact of a
lower federal funds effecff
December 31, 2021, our average client cash balances increased to $49.8 billion compared to $44.7 billion for the
year ended December 31, 2020.

by higher average client cash balances. For the year ended

tive rate, partially offset

rr
Service

and Fee

technology, clearing, administrative, oversight and custody services, which may vary. We host certain

Transaction

Transaction revenue includes transaction charges generated in both advisory and brokerage accounts from
products including mutual funds, ETFs, and fixed income products. Transaction revenue for the year ended
December 31, 2021 increased by $$8.0 millio cn ompared to 2020, primarily due to increased transaction volume
related to fixed income trading.

tt
Other

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, 2021 increased by $$14.4 millio cn ompared to 2020, primarily due
to increases in realized and unrealized gains on assets held in our advisor non-qualified deferred compensation
plan, which assets are based on the market performance
advisors in the plan, partially offset
deferred compensation plan.

by a decrease in dividend income on assets held in our advisor non-qualified

of the underlying investment allocations chosen by

Expenxx

Advisory and Commission

Advisory and commission expense consists of the following: payout amounts that are earned by and paid out to
advisors and institutions based on advisory and commission revenue earned on each client’s account; production
based bonuses earned by advisors and institutions based on the levels of advisory and commission revenue they
produce; the recognition of share-based compensation expense from equity awards granted to advisors and
financial institutions based on the fair value of the awards at grant date; and the deferred
fee expense associated with mark-to-market gains or losses on the non-qualified deferred compensation plan
offere

d to our advisors.

advisory and commission

The following table sets forth our payout rate, which is a statistical or operating measure:

Payout rate

Years Ended December 31,

2021

2020

Change

86.74 %

86.12 %

62 bps

Our payout rate increased slightly for the year ended December 31, 2021 compared to 2020, primarily due to higher
production bonus payouts and the impact of onboarding large financial institutions.

Compensationtt

and Benefitsff

Compensation and benefits include salaries, wages, benefits, share-based compensation and related taxes for our
employees, as well as compensation for temporary workers and contractors. The following
average number of employees for the year ended December 31, 2021 as compared to 2020:

table sets forth our

Average number of employees

Years Ended December 31,

2021

5,283

2020

4,560

% Change

15.9%

Compensation and benefits for the year ended December 31, 2021 increased by $131.7 million compared to 2020,
primarily due to an increase in salary and employee benefit expenses resulting from an increase in headcount.

Promotional

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. For the year ended December 31, 2021 promotional expense increased by
$94.0 million compared to 2020,
to support transition assistance and retention, as well as increases in
events.

primarily due to increases in recruited assets and advisors that led to higgher costs
f

conference spend as we returned to in-person

Occupancy and Equipment

Occupancy and equipment expense includes the costs of leasing and maintaining our officeff
licensing and maintenance costs and maintenance expenses on computer hardware and other equipment.
Occupancy and equipment expense for the year ended December 31, 2021 increased yby $$19.1 million compared to
2020, primarily due to increases in expenses related to software licenses and our technology portfolio.

spaces, software

Depreciationtt

and Amortizati

Depreciation and amortization relates to the use of property and equipment, which includes internally developed
software, hardware, leasehold improvements and other equipment. Depreciation and amortization for the year
ended December 31, 2021 increased by $$41.7 million compared to 2020, primarily due to our continued investment
in tech
nology to support the int gegration fof Waddell && Reed, enhance our advisor platfform and end-client experience
and support la grge ffinancial institution onboardi gng.

Brokerage, Clearing and Exchange

Brokerage, clearing and exchange fees include expenses originating from trading or clearing operations as well as
any exchange membership fees. These fees fluctuate largely in line with the volume of sales and trading activity.
Brokerage, clearing and exchange fees increased yby $$14.8 million fof r the year ended December 31, 2021
compared to 2020, primarily due to an increase in the volume of sales and trading activity.

Amortiztt atiott n 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, 2021
increased by $11.9 million compared to 2020, primarily due to increases in intangible assets resulting from the
Waddell & Reed Acquisition on April 30, 2021, as well as amortization related to an acquisition during the fourth
quarter of 2020. See Note 4 - Acquisitions
informat

and Note 9 - Goodwill and Other

s, Net for additional

Intangible

ion.

Proferr

ssional Services

Professional services expense includes costs paid to outside firms for assistance with legal, accounting, technology,
regulatory, and general corporate matters, as well as non-capitalized costs related to service and technology
enhancements. Professional services expense for the year ended December 31, 2021 increased yby $$16.2 million
compared to 2020, primarily due to increases in non-capitalized costs related to the use of consultants.

Communications

and Datat Processing

Communications and data processing expense consists primarily of the cost of voice and data telecommunication
lines supporting our business, including connectivity to data centers, exchanges and markets, as well as customer
statement processing and postage costs. Communications and data processing expenses for the year ended
December 31, 2021 increased by $7.9 million compared to 2020, primarily due to increases in costs associated with
client statement production due to growth in our advisors, which led to an increase in the customer base.

tt
Loss on Extinguishme

nt of Debt

On March 15, 2021, we issued the 2029 Senior Notes and redeemed the 2025 Senior Notes. In connection with
these transactions, we incurred a $24.4 million loss on extinguishment of debt for the year ended December 31,
2021.

tt
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 regulator fees, travel-related
expenses and other miscellaneous expenses. Other expense will depend 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, 2021 increased yby $$30.5 million
compared to 2020 primarily due to costs related to Waddell & Reed transitional support and an increase in licensing
fees.

Provision for Income Taxes

ive income tax rate was 23.5% and 24.5% forff

ff
Our effect
decrease in our effecti
from share-based compensation recognized during the year.

ve tax rate for the year ended December 31, 2021 was primarily due to an increased benefit

the years ended December 31, 2021 and 2020. The

VV
COVID-19

Impact

On March 11, 2020, the World Health Organization designated the spread of COVID-19 as a pandemic. As of the
date of this Annual Report on Form 10-K, the COVID-19 pandemic has had a significant impact on global financial
markets, and we continue to monitor its effects on the overall economy and our operations. We are not yet able to
determine the full impact of the pandemic; however, should it continue, there could be a material and adverse
financial impact to our results of operations. Please consult the “Risks Related to our Business and Industry” section
within Part I, “Item 1A. Risk Factors” for more informat

ion about the risks associated with COVID-19.

Liquidity and Capital Resources

We have established liquidity and capital policies intended to support the execution of strategic initiatives, while
meeting regulatory capital requirements and maintaining ongoing and sufficient
liquidity. We believe liquidity is of
critical importance to the Company and, in particular, to LPL Financial, our primary broker-dealer subsidiary. The
objective of our policies is to ensure that we can meet our strategic, operational and regulatory liquidity and capital
requirements under both normal operating conditions and under periods of stress in the financial markets.

Liquiditydd

Our liquidity needs are primarily driven by capital requirements at LPL Financial, interest due on our corporate debt
and other capital returns to shareholders. Our liquidity needs at LPL Financial are driven primarily by the level and
volatility of our client activity. Management maintains a set of liquidity sources and monitors certain business trends
ent liquidity. We believe that based on current levels
and market metrics closely in an effort
of cash flows from operations and anticipated growth, together with available external liquidity sources, we have
adequate liquidity to satisfyff our working capital needs, the payment of all of our obligations and the funding of
anticipated capital expenditures for the foreseeable future.

to ensure we have suffici

Parent Company Liquidity

LPL Holdings, Inc. (“Parent”), the direct holding company of our operating subsidiaries, considers its primary source
of liquidity to be corporate cash. We define corporate cash as the sum of cash and equivalents from the following:
(1) cash held at the Parent, (2) excess cash at LPL Financial per the Credit Agreement, which is the net capital held
at LPL Financial in excess of 10% of its aggregate debits, or five times the net capital required in accordance with
Exchange Act Rule 15c3-1, and (3) other available cash, which includes cash and equivalents held at PTC, in
excess of Credit Agreement capital requirements, and cash and equivalents held at non-regulated subsidiaries.

We believe corporate cash is a useful measure of the Parent’s liquidity. The following table presents the
components of corporate cash (in thousands):

Corporate Cash

Cash at Parent

Excess cash at LPL Financial per Credit Agreement

Other available cash

Total Corporate Cash

December 31, 2021

December 31, 2020

202,407 $

15,903

18,677

236,987 $

201,385

67,574

10,960

279,919

Corporate cash is monitored as part of our liquidity risk management. We target maintaining $200.0 million in
corporate cash, which covers approximately 24 months of principal and interest due on our corporate debt. The
Company maintains additional liquidity through a $1.0 billion secured committed revolving credit facility. The Parent
has the ability to borrow against the credit facility forff working capital and general corporate purposes. Dividends
from and excess capital generated by LPL Financial are the primary sources of liquidity. Subject to regulatory
approval or notification, capital generated by LPL Financial can be distributed to the Parent to the extent the capital
levels exceed both regulatory requirements and internal capital thresholds. As of December 31, 2021, LPL Financial
maintained excess regulatory capital of $15.9 million over Credit Agreement requirements. During the twelve
months ended December 31, 2021 and 2020, LPL Financial paid dividends of $465.0 million and $635.0 million to
the Parent, respectively.

Cash requirements and liquidity needs are primarily funded through our cash flow from operations and our capacity
for additional borrowing. 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, which include the
impacts of the COVID-19 pandemic. 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 six 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 working capital needs, the payment of
all of our obligations and the funding of anticipated capital expenditures for the foreseeable

future.

We regularly evaluate our existing indebtedness, including potential 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. The earliest principal maturityy dat
and our
markets in the near-term.

revolving credit ffacilities mature between 2022 and 2026, which makes us less dependent on capital

our corporate debt is in 2026

fe forff

Share Repurchases

We engage in share repurchase programs, which are approved by our Board of Directors, pursuant to which we
may repurchase our issued and outstanding shares of common stock from time to time. Purchases may be effecte
d
in open market or privately negotiated transactions. Our current capital deployment framework remains focused on
investing in organic growth first, pursuing acquisitions where appropriate, and returning excess capital to
shareholders. In the first half of 2021, the majority of our capital deployment was focused on supporting organic
growth and acquisitions. While we continue to see opportunities to deploy capital in this manner, we resumed share
dilution. We repurchased $90.0
repurchases in the third quarter of 2021 with the initial focus on an amount to offset
million, representing 579,771 shares, during the year ended December 31, 2021. The timing and amount of share
repurchases, if any, is determined at our discretion within the constraints of our Credit Agreement, the Indentures,
applicable laws and consideration of our general liquidity needs. See Note 15 - Stockholders’ Equityt , within the
notes to the consolidated financial statements forff

ion regarding our share repurchases.

additional informat

Common Stock Dividvv ends

The payment, timing and amount of any dividends are subject to approval by the Board of Directors as well as
certain limits under our Credit Agreement and the Indentures. See Note 15 - Stockholders’ Equityt , within the notes
ff
to the consolidated financial statements forff

ion regarding our dividends.

additional informat

LPL Financial Liquidity

LPL Financial relies primarily on client payables to fund margin lending. LPL Financial maintains additional liquidity
through external lines of credit totaling $575.0 million at December 31, 2021. LPL Financial also maintains a line of
credit with the Parent.

External Liquiditydd

Sources

The following table presents amounts outstanding and available under our external lines of credit at December 31,
2021 (in millions):

Description

Borrower

Maturity Date

Senior secured, revolving credit facility

LPL Holdings, Inc.

March 2026

Broker-dealer revolving credit facility

LPL Financial LLC

July 2024

Secured, uncommitted lines of credit

LPL Financial LLC

Unsecured, uncommitted lines of credit

LPL Financial LLC

Unsecured, uncommitted lines of credit

LPL Financial LLC

Unsecured, uncommitted lines of credit

LPL Financial LLC

Secured, uncommitted lines of credit

LPL Financial LLC

Secured, uncommitted lines of credit

LPL Financial LLC

March 2022

September 2022

None

(1)

Outstanding balances were repaid in January 2022.

Capital Resources

Outstanding(1)
55
$

Available

945
300

unspecified

$
— $

— $

—

The Company seeks to manage capital levels in support of its business strategy of generating and effecti
deploying capital forff

the benefit of our shareholders.

vely

Our primary requirement forff working capital relates to funds we loan to our advisors’ clients forff
margin and funds we are required to maintain for regulatory capital and reserves based on the requirements of our
regulators and clearing organizations, which also consider client balances and trading activities. We have several
sources of funds that enable us to meet increases in working capital requirements that relate to increases in client
margin activities and balances. These sources include cash and equivalents on hand, cash segregated under
federal or other regulations, 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.

trading conducted on

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.

We may sometimes be required to fund timing differe
with the settlement of client transactions in securities markets. These timing differences
internally generated cash flows or, if needed, with funds drawn on our uncommitted lines of credit at LPL Financial
or one of our revolving credit facilities.

nces arising from the delayed receipt of client funds associated

are funded either with

LPL Financial is subject to the SEC’s Uniform Net Capital Rule, which requires the maintenance of minimum net
capital. LPL Financial computes net capital requirements under the alternative method, which requires firms to
maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from client
transactions. At December 31, 2021, LPL Financial had net capital of $87.5 million with a minimum net capital
requirement of $14.3 million.

LPL Financial’s ability to pay dividends greater than 10% of its excess net capital during any 35-day rolling period
requires approval from FINRA. In addition, payment of dividends is restricted if LPL Financial’s net capital would be
less than 5% of aggregate customer debit balances.

LPL Financial also acts as an introducing broker for commodities and futures. Accordingly, its trading activities are
subject to the NFAFF financial requirements and it is required to maintain net capital that is in excess of or equal to the
greatest of NFA’FF s minimum financial requirements. The NFAFF was designated by the Commodity Futures Trading
Commission as LPL Financial’s primary regulator for such activities. Currently, the highest NFAFF requirement is the
minimum net capital calculated and required pursuant to the SEC’s Net Capital Rule.

In April 2021, the Company acquired a broker-dealer as part of the Waddell & Reed Acquisition (the “Waddell &
Reed broker-dealer”). The Waddell & Reed broker-dealer was required to maintain net capital of $250,000, which
represents the greater of 2% of its aggregate debits or the minimum net capital requirement of $250,000. In
December 2021 the SSECC and FINRA approved the Form BDW ffiled yby the Waddell && Reed broker-dealer, which
terminated its broker-dealer
jurisdictions on such date.
jurisdict

gregistration with FINRA, all other selff-reggulat yory

gorganizations, the SSECC and all

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.

Debt and Related Covenants

The Credit Agreement and the Indentures contain 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 affiff liates;

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

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

Our Credit Agreement and the Indentures allow us to pay dividends and distributions or repurchase our capital 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. The financial covenants require the calculation
of Credit Agreement EBITDA, as defined in, and calculated by management in accordance with, the Credit
Agreement. The Credit Agreement defines Credit Agreement EBITDA as “Consolidated EBITDA,” which is
Consolidated Net Income (as defined in the Credit Agreement) plus interest expense, tax expense, depreciation and
amortization, and is further adjusted to exclude certain non-cash charges and other adjustments (including unusual
or non-recurring charges) and gains, and to include future expected cost savings, operating expense reductions or
other synergies from certain transactions.

As of December 31, 2021, we were in compliance with both financial covenants, a maximum Consolidated Total
Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) or “Leverage Ratio” and a minimum
Consolidated EBITDA to Consolidated Interest Expense Ratio (as defined in the Credit Agreement) or “Interest
Coverage”. The breach of these financial covenants would be subject to certain equity cure rights. The required
ratios under our financial covenants and actual ratios were as follows:

Financial Ratio

Leverage Ratio (Maximum)

Interest Coverage (Minimum)

December 31, 2021
Covenant
Requirement

Actual
Ratio

5.0

3.0

2.26

12.40

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

Contractual Obligations

The following table provides informat
(in thousands):

ion with respect to our commitments and obligations as of December 31, 2021

Operating leases(1)
Finance leases(2)
Purchase obligations(3)
Corporate debt and other borrowings, net(4)
Interest payments(5)
Commitment and other fees(6)

Payments Due by Period

Total

< 1 Year

1-3 Years

3-5 Years

> 5 Years

167,437

24,072

45,777

44,520

53,068

259,744

174,705
2,838,600

640,981

14,761

8,802

75,452
45,700

91,657

3,802

17,303

88,145
21,400

182,725

7,299

17,914

10,947
1,071,500

179,349

3,660

215,725

161
1,700,000

187,250

—

Total contractual cash obligations

$ 4,096,228

249,485

362,649

$ 1,327,890

$ 2,156,204

______ ____ ____ ____ ____ ____ ____ ____ ____

(1)

(2)

(3)

(4)

(5)

(6)

Represents future payments under operating leases. See Note 12 - Leases, within the notes to the consolidated financial statements for
further detail.

Represents future payments under finance leases. See Note 12 - Leases, within the notes to the consolidated financial statements for
further detail.

Includes future minimum payments under service, development and agency contracts, and other contractual obligations. See Note 14 -
Commitments att
cancelable service contracts.

nd Contingencies, within the notes to the consolidated financial statements for further detail on obligations under non-

Represents principal payments on our corporate debt and other borrowings. The Company repaid $90.0 million in January 2022, which
related to amounts outstanding under our external lines of credit at December 31, 2021. See Note 11 - Corporate Debt and Other
Borrowings, Net, within the notes to the consolidated financial statements for further detail.

Represents interest payments under our Credit Agreement, which include a variable interest payment for our senior secured credit
facilities and a fixed interest payment forff
December 31, 2021 remain unchanged. See Note 11 - Corporr
financial statements for further detail.

senior unsecured notes. Variable interest payments assume the applicable interest rates at

rate Debt and Other Borrorr wings, Net, within the notes to the consolidated

Represents commitment fees for unused borrowings on the revolving credit facility under our Credit Agreement. See Note 11 - Corporr
Debt and Other Borrowingww s, Net, within the notes to the consolidated financial statements for further detail.

rate

As of December 31, 2021, we have a liability forff
in other liabilities in the consolidated statements of financial condition. This amount has been excluded from the
contractual obligations table because we are unable to reasonably predict the ultimate amount or timing of future tax
payments.

unrecognized tax benefits of $57.0 million, which we have included

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP, which requires management to make
estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. We believe that of our critical accounting policies, the folff

lowing are noteworthy because

they require management to make estimates regarding matters that are uncertain and susceptible to change where
such change may result in a material adverse impact on our financial position and reported financial results.

Revenue Recognitiontt

Revenue is recognized when control of the promised service is transferred to customers in an amount that reflects
the consideration that we expect to be entitled to in exchange for those services. Management exercises judgment
to estimate revenue accruals. In particular, our trailing commission revenue, included in commission revenue on the
consolidated statements of income, is generally received in arrears and therefore requires our management to
ff
estimate accrued amounts based on revenue received in prior periods, market performance
of each product type or sponsor. See Note 2 - Summary of Signif
Policies and Note 3 - Revenue,
ff
icant
within the notes to the consolidated financial statements for more details on our policies and disclosures related to
revenue.

and payment frequency

Accountingtt

tt
Commitment

stt and Continii gencies

Liabilities related to loss contingencies are recognized when we believe it is probable a liability has occurred and the
amount can be reasonably estimated by management. We have established an accrual for those legal proceedings
and regulatory matters for which a loss is both probable and the amount can be reasonably estimated.

We also accrue for losses at our captive insurance subsidiary for those matters covered by self-insurance. Our
captive insurance subsidiary records losses and loss reserve liabilities based on actuarially determined estimates of
losses incurred, as well as specific reserves for proceedings and matters that are probable and
estimable. Assessing the probability of a loss occurring and the timing and amount of any loss related to a legal
proceeding or regulatory matter is inherently difficult
ff
additional informat
Contingencie

and requires management to make significant judgments. For
ff
icant
ion, see Note 2 - Summary of Signif

s - “Legal & Regulatory Matters,” within the notes to the consolidated financial statements.

Policies and Note 14 - Commitment

Accountingtt

stt and

Valuationtt

of Goodwill and Other

Intangible

s, Net

Goodwill is recognized as a result of business combinations and is measured as the excess of the purchase price
over the fair value of the net assets acquired. The valuation of goodwill and other intangibles, net requires
management to apply judgment and assumptions when estimating future earnings and performance.
Management
also applies judgment when testing for impairment of goodwill and other indefinite-lived intangible assets, including
estimating fair values. Goodwill and other indefinite-lived intangible assets are tested annually for impairment in the
fourth fiscal quarter and between annual tests if certain events occur indicating that the carrying amounts may be
impaired.

Intangible assets that are deemed to have definite lives are amortized over their useful lives or the estimated period
the intangible asset will provide economic benefit. Definite-lived intangible assets are reviewed for impairment when
there is evidence that events or changes in circumstances indicate that the carrying amount may not be
recoverable. For additional informat
see Note 2 - Summary of Signif
ff
icant
notes to the consolidated financial statements.

ion on our policies and disclosures related to goodwill and other intangibles, net,
s, Net within the

Policies and Note 9 - Goodwill and Other

Accountingtt

Intangible

Income Taxes

In preparing the consolidated financial statements, we estimate income tax expense based on various jurisdictions
where we conduct business. This requires management to estimate current tax obligations and to assess temporary
differe
nces between the financial statement carrying amounts and the tax basis of assets and liabilities. These
ff
temporary differe
nces result in deferred tax assets and liabilities, which we must then assess the likelihood that the
deferred tax assets will be realized. A valuation allowance is established to the extent that it is more likely than not
that such deferred tax assets will not be realized. Changes in the estimate of tax assets and liabilities occur
periodically due to changes in the tax rates, changes in the business operations, implementation of tax planning
strategies, resolution with taxing authorities of issues where we had previously taken certain tax positions and newly
enacted statutory, judicial and regulatory guidance. For more informat
taxes, see Note 2 - Summary of Significant
consolidated financial statements.

Policies and Note 13 - Income Taxes, within the notes to the

ion on our policies and disclosures related to

Accountingtt

Recently Issued Accounting Pronouncements

Refer to Note 2 - Summary of Signif
ff
icant
statements forff
are of significance, or potential significance, to us.

Accountingtt

a discussion of recent accounting pronouncements or changes in accounting pronouncements that

Policies, within the notes to the consolidated financial

Item 7A Q. Quantitative an Qd Qualitative Disclosures About Market Risk

Market Risk

We maintain trading securities owned and securities sold, but not yet purchased in order to facilitate client
transactions, to meet a portion of our clearing deposit requirements at various clearing organizations, to track the
of our research models and in connection with our dividend reinvestment program. Trading securities
performance
are included in investment securities while securities sold, but not yet purchased are included in other liabilities on
the consolidated statements of financial condition and can include mutual funds, debt securities and equity
securities. Changes in the value of our trading securities may result from fluctuations in interest rates, credit ratings
of the issuer, equity prices or a combination of these factors.

In facilitating client transactions, our securities owned and securities sold, but not yet purchased generally involve
mutual funds, including dividend reinvestments. Our positions held are based upon the settlement of client
transactions, which are monitored by our Service,

Trading and Operations (“Care”) department.

Positions held to meet clearing deposit requirements consist of U.S. government securities. The amount of
securities deposited depends upon the requirements of the clearing organization. The level of securities deposited
is monitored by the settlements group within our Care department.

Our Research department develops model portfolios that are used by advisors in developing client portfolios. We
maintain securities owned in internal accounts based on these model portfolios to track the performance
Research department. At the time a portfolio is developed, we purchase the securities in that model portfolio in an
amount equal to the account minimum, which varies by product.

of our

In addition, we are subject
can require customer trade corrections. We also bear market risk on the fees we earn that are based on the market
value of advisory and brokerage assets, as well as assets on which trailing commissions are paid and assets
eligible forff

to market risk resulting from system incidents or interruptions and human error, which

sponsor payments.

As of December 31, 2021, the fair value of our trading securities was $$39.3 millio ,n and securities sold, but not yet
purchased were not material. The fair value of securities included within other assets was $$623.3 million as of
December 31, 2021. See Note 5 - Fair Vii
statements forff
other assets associated with our client facilitation activities.

ation regarding the fair value of trading securities, securities sold, but not yet purchased and

Measurementstt , within the notes to the consolidated financial

informf

alueVV

Interest Rate Risk

We are exposed to risk associated with changes in interest rates. As of December 31, 2021, $1.1 billion of our
outstanding debt was subject to floating interest rate risk. While our senior secured term loan is subject to increases
in interest rates, we do not believe that a short-term change in interest rates would have a material impact on our
net income given revenue generated by our client cash balances, which is generally subject to the same, but off-ff
setting, interest rate risk.

The following table summarizes the impact of increasing interest rates on our interest expense from the variable
portion of our debt outstanding, calculated using the projected average outstanding balance over the subsequent
twelve-month period (in thousands):

Corporate Debt and Other Borrowings

Term Loan B

______ ____ ____ ____ ____ ____ ____ ____ ____

Outstanding
Balance at
December 31, 2021

Annual Impact of an Interest Rate (†) Increase of
100 Basis
10 Basis

50 Basis

25 Basis

Points

1,048,600

1,042

2,605

5,210

10,419

(†)

Our interest rate for TermTT
of the selected periods the rates will be locked in at the then current rate. The effect
table above.

Loan B is locked in for one, two, three, six or twelve months as allowed under the Credit Agreement. At the end

of these interest rate locks are not included in the

See Note 11 - Corporatrr e Debt and Other Borrowrr
ion.
for additional informat

inww gs, Net, within the notes to the consolidated financial statements

d our advisors and their clients two insured bank sweep vehicles and a money
As of December 31, 2021, we offere
market program, including money market accounts as well as the ability to participate in purchased money market
funds, that are interest rate sensitive. Our sweep vehicles include an (1) insured cash account (“ICA”) for
individuals, trusts, sole proprietorships and entities organized or operated to make a profit, such as corporations,
partnerships, associations, business trusts and other organizations and (2) an insured deposit cash account (“DCA”)
for advisory individual retirement accounts. While clients earn interest on deposits in ICA and DCA, we earn a fee.
The fees we earn from cash held in ICAs are based primarily on prevailing interest rates in the current interest rate
environment. The fees we earn from DCAs are calculated as a per account fee, and such fees increase as the
federal funds target rate increases, subject to a cap. The fees we earn on cash balances in our advisors’ clients’
accounts in our money market program, including administrative and recordkeeping fees based on account type
and the invested balances, are also sensitive to prevailing interest rates. Changes in interest rates and fees for the
bank deposit sweep vehicles are monitored by our Rate Setting Committee (the “RSC”), which governs and
approves any changes to our fees. By meeting promptly around the time of Federal Open Market Committee
meetings, or for other market or non-market reasons, the RSC considers financial risk of the insured bank deposit
sweep vehicles relative to other products into which clients may move cash balances.

Credit Risk

Credit risk is the risk of loss due to adverse changes in a borrower’s, issuer’s or counterparty’s ability to meet its
financial obligations under contractual or agreed upon terms. We are subject to credit risk from certain loans
extended to our advisors as well as the activities of our advisors’ clients during the execution, settlement and
financing of various transactions on behalf of these clients.

Credit risk from certain loans to advisors arises when we extend loans with repayment terms to facilitate advisors’
transition to our platform or to fund business development activities that are not repaid in full or on time. Credit risk
also arises in respect of advisor loans when a forgivable loan converts to repayable upon advisor termination.

Credit risk also arises when collateral posted with LPL Financial by clients to support margin lending or derivative
trading is insufficient
to meet clients’ contractual obligations to LPL Financial. These activities are transacted on
either a cash or margin basis. Our credit exposure in these transactions consists primarily of margin accounts,
through which we extend credit to advisors’ clients collateralized by securities in the clients’ accounts. Under many
of these agreements, we are permitted to sell, repledge or loan these securities held as collateral and use these
securities to enter into securities lending arrangements or to deliver to counterparties to cover short positions.

As our advisors execute margin transactions on behalf of their clients, we may incur losses if clients do not fulfill
to fully cover losses from such investments and
their obligations, the collateral in the clients’ accounts is insufficient
our advisors fail to reimburse us for such losses. Our losses on margin accounts were immaterial during the years
ended December 31, 2021 and 2020. We monitor exposure to industry sectors and individual securities and performff
analyses on a regular basis in connection with our margin lending activities. We adjust our margin requirements if
we believe our risk exposure is not appropriate based on market conditions.

We are subject to concentration risk if we extend large loans to or have large commitments with a single
counterparty, borrower or group of similar counterparties or borrowers (e.g., in the same industry), or if we accept a
concentrated position as collateral for a margin loan. Receivables from and payables to clients and stock borrowing
and lending activities are conducted with a large number of clients and counterparties and potential concentration is
monitored. We seek to limit this risk through review of the underlying business and the use of limits established by
senior management, taking into consideration factors including the financial strength of the counterparty, the size of
the position or commitment, the expected duration of the position or commitment and other positions or
commitments outstanding.

Operational Risk

ion technology systems, as well as third-party service providers and their systems, to manage a large

Operational risk is defined as the risk of loss resulting from failed or inadequate processes or systems, actions by
people or external events. We operate in diverse markets and are reliant on the ability of our employees and
informat
volume of transactions and confidential informat
ively and
securely. These risks are less direct and quantifiable than credit and market risk, but managing them is critical,
particularly in a rapidly changing operating environment with increasing transaction volumes and in light of
increasing reliance on systems capabilities and performance,

ion, including personally identifiable informat

as well as third-party service providers. In the event of

ff
ion, effect

the breakdown, obsolescence or improper operation of systems, malicious cyber activity or improper action by
employees, advisors or third-party service providers, we could suffer
business disruptions, financial loss, data loss,
regulatory sanctions and damage to our reputation. Although we have developed business continuity and disaster
recovery plans, those plans could be inadequate, disrupted or otherwise unsuccessful in maintaining the
competitiveness, stability, security or continuity of critical systems as a result of, among other things, obsolescence,
improper operation, third-party dependencies or limitations of our current technology.

In order to assist in the mitigation and control of operational risk, we have an operational risk framework that is
designed to enable assessment and reporting on operational risk across the firm. This framework aims to ensure
policies and procedures are in place and appropriately designed to identify and manage operational risk at
appropriate levels throughout our organization and within various departments. These control mechanisms attempt
to ensure that operational policies and procedures are being followed and that our employees and advisors operate
within established corporate policies and limits. Please consult the “Risks Related to Our Technology” and the
“Risks Related to Our Business and Industry”
sections within Part I, “Item 1A. Risk Factors” for more informat
about the risks associated with our technology, including risks related to security, our risk management policies and
procedures, and the potential related effects

on our operations.

ion

Our senior management is monitoring developments in the COVID-19 pandemic and has implemented changes to
our policies, procedures and operations to protect the integrity and continuity of our business and the health and
safety of our employees. For example, we equipped and enabled a substantial majority of employees to work
remotely, implemented enhanced cleaning protocols throughout our corporate offices
vendors to maintain service continuity throughout the market volatility and increased operational volumes that have
occurred from time to time during the pandemic. There can be no guarantee that our business continuity plans and
the other efforts
ve, or that there will not be material
adverse effect
about the risks associated with the COVID-19 pandemic.

s on our results of operations. Please consult Part I, “Item 1A. Risk Factors” for more informat

to manage the business implications of COVID-19 will be effecti

and worked closely with our

ion

Regulatory and Legal Risk

The regulatory environment in which we operate is discussed in detail within Part I, “Item 1. Business” of this Annual
Report on Form 10-K. In recent years, and during the period presented in this Annual Report on Form 10-K, we
have observed the SEC, FINRA, DOL and state regulators broaden the scope, frequency and depth of their
examinations and inquiries to include greater emphasis on the quality, consistency and oversight of our compliance
systems and programs. Please consult the “Risks Related to Our Regulatory Environment” and the “Risks Related
to Our Business and Industry”
ion about the risks
associated with operating within our regulatory environment, pending regulatory matters and the potential related
effects

sections within Part I, “Item 1A. Risk Factors” for more informat

on our operations.

Risk Management

We employ an enterprise risk management (“ERM”) framework that is intended to address key risks and
responsibilities, enable us to execute our business strategy and protect our Company and its franchise. Our
framework is designed to promote clear lines of risk management accountability and a structured escalation process
for key risk informat

ion and events.

model to manage risk throughout the organization. Primary ownership for risk
vely

We operate a three-lines-of-defense
and control processes is with the business units and control owners, who are the “first line” of defense in effecti
managing risks, and who are responsible for day-to-day compliance and risk management, including execution of
desktop and supervisory procedures. These business units and certain control owners implement and execute
controls to manage risk, execute risk assessments, identify emerging risks, and comply with risk management
policies. The second line of defense consists of certain departments within Compliance, Legal and Risk (“CLR”) and
ff
provides risk oversight and monitoring. The third line of defense is independent verification of the effecti
risk management practices and internal controls and is conducted by the Internal Audit department.

veness of

Our risk management governance approach includes the Board of Directors (the “Board”) and certain of its
committees; our Risk Oversight Committee (the “ROC”) and its subcommittees; and our three-lines-of-defense
model. We regularly reevaluate and, when necessary, modifyff our processes to improve the identification and
escalation of risks and events.

Audit Committeett

of the Boardrr

In addition to its other responsibilities, the Audit Committee of the Board (the “Audit Committee”) reviews our
policies with respect to risk assessment and risk management, as well as our major financial risk exposures and the
steps management has undertaken to control them. The Audit Committee generally provides reports to the Board at
each of the Board’s regularly scheduled quarterly meetings.

Compensation and Human Resources Committee of the Boardrr

In addition to its other responsibilities, the Compensation and Human Resources Committee of the Board assesses
whether our compensation arrangements encourage inappropriate risk-taking, and whether risks arising from our
compensation arrangements are reasonably likely to have a material adverse effect

on the Company.

Riskii Oversighi

t Committee of LPL Finaii ncial

The Audit Committee has mandated that the ROC oversee our risk management activities, including those of our
subsidiaries. The Chief Risk Offiff cer of LPL Financial serves as chair of the ROC, which generally meets on a
monthly basis 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
members and represent key control areas of the Company. Participation in the ROC by senior offiff cers is
intended to ensure that the ROC covers the key risk areas of the Company, including its subsidiaries, and that the
ROC thoroughly reviews significant matters relating to risk priorities, policies, control procedures and related
exceptions, certain new and complex products and business arrangements, transactions with significant risk
elements, and identified emerging risks.

The Chief Legal Offiff cer provides updates on pertinent ROC discussions to the Audit Committee on a regular basis
and, if necessary or requested, to the Board.

Subcommittees of the Riskii Oversi

ghi

t Committee

The ROC has established multiple subcommittees that cover key areas of risk. The subcommittees meet regularly
and are responsible for keeping the ROC informf
escalation policies. The responsibilities of such subcommittees include, for example, oversight of operational risk;
oversight of the approval of new and complex investment products offered
technology; and issues and trends related to advisor compliance.

ed and escalating issues in accordance with the Company’s

to advisors’ clients; oversight of the firm’s

Internal Audit Department

veness of the Company’s governance, risk management and internal controls by conducting risk assessments

As the third line of defense, the Internal Audit department provides independent and objective assurance of the
effecti
and audits designed to identify and cover important risk categories. Internal Audit reports directly to the Audit
Committee, which provides oversight of Internal Audit’s activities and approves its annual plan. The Internal Audit
department provides regular updates to the ROC and reports to the Audit Committee at least quarterly.

Controlrr Grourr psu

The CLR department provides compliance oversight and guidance, and conducts various risk and other
assessments to address regulatory and Company-specific risks and requirements. The CLR department includes
the Chief Legal Officer
Committee and the Board as necessary. Care and Technology each have risk management teams that identify,
define and remediate risk-related items within their respective groups. Additionally, the Internal Audit department is a
control group.

, who reviews the results of the Company’s risk management process with the ROC, the Audit

Business Lineii Management

Each business line is responsible for managing its risk, and business line management is responsible for keeping
senior management, including the members of the ROC, informed
defined by the Company’s escalation policies). We have conducted Company-wide escalation training for our
employees. Business lines are subject to oversight by the control groups, and the Finance, CLR, Technology and
Human Capital departments also execute certain control functions and report matters to the ROC, Audit Committee
and Board as appropriate.

of operational risk and escalating risk matters (as

Advisor Policies

In addition to the ERM framework, we also have written policies and procedures that govern the conduct of
ff
business by our advisors, employees and the terms and conditions of our relationships with product manufacturers.
Our client and advisor policies address the extension of credit for client accounts, data and physical security,
compliance with industry regulations and codes of conduct and ethics to govern employee and advisor conduct,
among other matters.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm (PCAOB ID: 34) . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019 . . . . . . . . . .

Consolidated Statements of Financial Condition as of December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 1 - Organization and Description of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 2 - Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 3 - Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 4 - Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 5 - Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 6 - Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 7 - Receivables from and Payables to Brokers, Dealers and Clearing Organizations . . . . . . . . . . .

Note 8 - Property and Equipment, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 9 - Goodwill and Other Intangibles, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 10 - Other Assets and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 11 - Corporate Debt and Other Borrowings, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 12 - Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 13 - Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14 - Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 15 - Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 16 - Share-based Compensation, Employee Incentives and Benefit Plans . . . . . . . . . . . . . . . . . . . .

Note 17 - Earnings per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 18 - Net Capital and Regulatory Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 19 - Financial Instruments with Off-Balance-Sheet Credit Risk and Concentrations of Credit Risk

Note 20 - Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

101

102

RE OPORT OOF INDEPENDENT

GREG SISTERED PUBL CIC CACCOCOUNT GING FIRM

To the stockholders and the Board of Directors of
LPL Financial Holdings Inc.
San Diego, California

Opinion on the Financial Statements

y g
y

companying consolidated statements fof ffinancial condition fof LPL Financial
ompany")) as fof December 31, 2021 and 2020, the related consolidated statements fof

We have audited the ac
and subsidiaries (t(the C"C
income, stockholders' equityy, and cash fflows, ffor each fof the three yyears in the period ended December 31, 2021,
and the related notes (col
present ffa yirly, in all material respects, the ffinancial position fof the CCompanyy as fof December 31, 2021 and 2020, and
the results fof its operations and its cash fflows ffor each off the three yyears in the period ended December 31, 2021, in
ff
f
conformit

freferred to as the f"financial statements").s"). In our opinion, the ffinancial statements

nerally accepted in the United SStates fof America.

yy with account ging principles gge

Holdings Inc.
g

(collect

ively
y

We have also audited, in accordance with the standards fof the Public Company
SStates)s) (P(PCCAOOB),), the Company'
criteria established in Internal Control
OrgaOrganizations fof the Tr
opinion on the Company'

Company's internal control over ffinancial report ging.

eadway CCommission and our report dated Fe

tt — Integrated Framework (2013) issued byy the CCommittee fof SSp

onsoring
g
bruary 22, 2022, expressed an unqualiffied

Company's internal control over ffinancial report ging as fof December 31, 2021, based on

Company Account ging Oversight

Oversight Board (Unit

(United

Basis for Opinion

Company's man gagement. OOur responsibil yity is to express an
Company's ffinancial statements based on our audits. We are a public account ging ffirm reggistered with

These ffinancial statements are the responsibilityy fof the Company'
opinion on the Company'
the CPCAOOB and are required to be independent with respect to the Company
securities laws and the applicable rules and
gregulations fof the SSecurities and
CPC OAOB.

Company in accordance with the U.SS. ffederal

Exchange CCommission and the

We conducted our audits in accordance with the standards fof the CPCAOOB. Those standards require that we plan
and pe frform the audit to obtain reasonable assurance about whether the ffinancial statements are ffree fof material
misstatement, whether due to error or ffraud. OOur audits included performing
material misstatement
respond to those risks. SSuch procedures included exa
disclosures in the ffinancial statements. OOur audits also included evaluat ging the account ging principles used and
signif
significant estimates made yby ma gnagement, as well as evaluatingg the overall presentation fof the ffinancial
statements. We believe that our audits provide a reasonable basis ffor our opinion.

rforming procedures to assess the risks fof
ff
orming
g
fperf
regarding the amounts and
g

fof the ffinancial statements, whether due to error or ffraud, and

procedures that
g

gmining, on a test basis, evidence

CCritical Audit Matters

The critical audit matters communicated below are matters ari
statements that were communicated or required to be communicated to the audit committee and that (1)(1) relate to
accounts or disclosures that are material to the ffinancial statements and (2)(2) involved our especiallyy
yany
subjective, or complex j
on the ffinancial statements, taken as a whole, and we are not, yby communicat ging the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which

judgments. The communication fof critical audit matters does not alter in

gsing ffrom the current-period audit

challengi gng,
g
yway our opinion

fof the ffinancial

they relate.

Revenues - Trailingg CCommission Revenue Accrual — Reffer to Note 3 to the ffinancial statements

tt
CCritical

Audit Matter Descriptiontt

ailing commission revenues are ggenerallyy received in arrears and

The CCompanyy’s tr
accrued at yyear-end. The estimate is based on commission revenues received in prior periods,
change ffactors based on market pe frformance and the payyment ffr
sponsor. Because fof the volume fof investment product ytypes and sponsors and variabili yty in the correspondi gng
ypayment ffrequencies, the CCo
revenue estimate.

equency ffor each investment product ytype and

manual calculations and exercises j

estimated and
jadjusted

judgment in determini gng the

thereforeff
f

ff
fperforms

mpany
y

using
g

We identiffied the CCompanyy’s tr
judgment
judgments ne
fefffort
fff
judgments related to the revenue accrual and evaluat ging the results fof those procedures.
judgment

ailing commission revenue accrual as a critical audit matter because fof the
management to estimate the revenue accrual. This required an increased extent
g
rforming audit procedures to evaluate the inputs and

and a ghigh deggree fof auditor jjudggment when performing

cessary ffor

fof audit

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the inputs and judgments used by management to estimate the year-end accrual for
trailing commission revenues included the following, among others:

• We tested the design and effect

iveness of internal controls over the accrual for trailing commission

revenues, including those over the inputs and judgments used by management in the calculation of the
accrual and the historical lookback analysis comparing monthly accruals to subsequent cash receipts

• We compared management’s market performance data to external sources and challenged their

methodology for potential management bias by evaluating the sensitivity of changes in market factors on
the accrual

• We compared the accrual to actual trailing commission revenue received subsequent to year-end

• We tested the historical cash receipts used to estimate the year-end accrual by comparing them to bank

statements

• We evaluated the payment frequency assumption used by management in the estimation of the accrual for
a sample of investment product types and sponsors by comparing the assumption to the actual cash
receipts frequency

• We tested the mathematical accuracy of the accrual

Acquisition of Waddell & Reed Financial, Inc. — Refer to Notes 4 and 9 to the financial statements

tt
Critical

Audit Matter Descriptiontt

On April 30, 2021, the Company acquired the wealth management business of Waddell & Reed Financial, Inc. for
$300 million. The Company accounted for the acquisition under the acquisition method of accounting for business
combinations. Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and
liabilities assumed based on their respective fair values, including intangible assets of $122.7 million, comprised
primarily of advisor relationships. Management used the income approach to estimate the fair value of the advisor
relationship intangible assets, which included using the multi-period excess earnings method. The fair value
determination of the advisor relationship intangible assets required management to make significant estimates and
assumptions related to future net cash flows and the selection of the discount rate.

Given the fair value determination of advisor relationship intangible assets requires management to make significant
estimates and assumptions related to the forecasts of future net cash flows and the selection of the discount rate,
performing
audit procedures to evaluate the reasonableness of these estimates and assumptions required a high
degree of auditor judgment and an increased extent of effort,

including the need to involve our fair value specialists.

How the Critical

Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future net cash flows and the selection of the discount rate for the
advisor relationship intangible assets included the following, among others:

• We tested the design and effect

iveness of internal controls over the valuation of the advisory relationship

intangible assets, including management’s controls over forecasts of future net cash flows and selection of
the discount rate and the valuation methodology used

• We assessed the knowledge, skill, ability, and objectivity

of management’s valuation specialist and

evaluated the work performed

• When assessing the reasonableness of assumptions related to future net cash flows for advisor relationship

intangible assets, we evaluated whether the assumptions used were reasonable considering the past
performance
acquisitions by the Company

of the acquired company, the Company’s strategic plan going forward, and previous

• With the assistance of our fair value specialists, we tested:

▪

the reasonableness of the income approach valuation methodology by assessing management’s
application of the multi-period excess earnings method

▪

the reasonableness of the discount rate by developing a range of independent estimates and
comparing those to the discount rate selected by management

the mathematical accuracy of the valuation by perfrr ormff

ing a recalculation

• We evaluated whether the estimated future cash flows were consistent with evidence obtained in other

areas of the audit

/s/ DELOITTE & TOUCHE LLP

San Diego, California
February 22, 2022

We have served as the Company's auditor since 2001.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data)

REVENUE

Advisory

Commission

Asset-based

Service and fee

Transaction

Interest income

Other

Total revenue

EXPENSE

Advisory and commission

Compensation and benefits

Promotional

Occupancy and equipment

Depreciation and amortization

Interest expense on borrowings

Brokerage, clearing and exchange

Amortization of other intangibles

Professional services

Communications and data processing

Loss on extinguishment of debt

Other

Total expense

INCOME BEFORE PROVISION FOR INCOME TAXES

PROVISION FOR INCOME TAXES

NET INCOME
EARNINGS PER SHARE

Earnings per share, basic

Earnings per share, diluted

Weighted-average shares outstanding, basic

Weighted-average shares outstanding, diluted

Years Ended December 31,

2021

2020

2019

3,525,430 $

2,327,519 $

2,378,683

1,148,067

411,761

156,336

28,577

71,976

1,906,560

1,044,517

357,722

148,349

29,412

57,561

1,982,869

1,892,407

1,165,979

357,844

122,484

46,508

56,765

7,720,830

5,871,640

5,624,856

5,180,090

3,697,147

3,388,186

741,003

302,285

185,531

151,428

104,414

86,023

79,260

73,231

60,296

24,400

131,540

7,119,501

601,329

141,463

609,257

208,250

166,389

109,732

105,765

71,185

67,358

57,067

52,399

—

101,018

5,245,567

626,073

153,433

459,866 $

472,640 $

5.75 $

5.63 $

80,002

81,742

5.96 $

5.86 $

79,244

80,702

556,128

205,537

136,163

95,779

130,001

64,445

65,334

73,887

49,859

3,156

114,546

4,883,021

741,835

181,955

559,880

6.78

6.62

82,552

84,624

See notes to consolidated financial statements.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

(In thousands, except share data)

ASSETS

Cash and equivalents
Cash segregated under federal or other regulations
Restricted cash
Receivables from clients, net
Receivables from brokers, dealers and clearing organizations
Advisor loans, net
Other receivables, net
Investment securities
Property and equipment, net

Goodwill
Other intangibles, net

Other assets
Total assets

LIABILITIES:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Client payables
Payables to brokers, dealers and clearing organizations
Accrued advisory and commission expenses payable

Corporate debt and other borrowings, net
Accounts payable and accrued liabilities
Other liabilities

Total liabilities

Commitments and contingencies (Note 14)
STOCKHOLDERS’ EQUITY:

Common stock, $0.001 par value; 600,000,000 shares authorized; 128,758,086 shares
and 127,585,764 shares issued at December 31, 2021 and 2020, respectively
Additional paid-in capital

Treasury stock, at cost — 48,768,145 shares and 48,115,037 shares at December 31,
2021 and 2020, respectively
Retained earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

See notes to consolidated financial statements.

December 31,

2021

2020

495,246
1,496,463
80,655
578,889
102,503
963,869
581,483
49,192
658,841

1,642,443
455,028

886,988
7,991,600

1,712,224
170,119
222,379
2,814,044

384,025
1,018,276
6,321,067

808,612
923,158
67,264
405,106
97,245
587,553
435,012
42,487
582,868

1,513,866
397,486

735,505
6,596,162

1,534,486
89,743
187,040
2,345,414

309,159
815,466
5,281,308

129
1,841,402

127
1,762,770

(2,498,600)
2,327,602
1,670,533
7,991,600

(2,391,062)
1,943,019
1,314,854
6,596,162

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(In thousands)

BALANCE — December 31, 2018

124,910

125

$1,634,337

39,821

$(1,730,535) $1,070,146

974,073

Common Stock

Amount

Additional
Additional
Paid-In
P id I
Capital
p

reasury Stock

hares

Amount

Retained
Earnings

Total
Stockholders’
Equity

Cumulative effect of accounting change

Net income

Issuance of common stock to settle restricted stock
units

Treasury stock purchases

Cash dividends on common stock - $1.00 per share

Stock option exercises and other

Share-based compensation

BALANCE — December 31, 2019

Cumulative effeff ct of accounting change

Net income

Issuance of common stock to settle restricted stock
units

Treasury stock purchases

Cash dividends on common stock - $1.00 per share

Stock option exercises and other

Share-based compensation

BALANCE — December 31, 2020

Net income

Issuance of common stock to settle restricted stock
units

Treasury stock purchases

Cash dividends on common stock - $1.00 per share

Stock option exercises and other

Share-based compensation

BALANCE — December 31, 2021

—

366

—

1,218
—
126,494
—

—

417

—

675
—
127,586

—

406

—

766
—
128,758

—

1
—
126
—

—

1
—
127

—

2
—
129

—

36,772

32,864

—

5,724

559,880

(5,863)

6,419

(500,370)

—

(55)

—

1,975

—

(82,597)

1,414

—

$1,703,973
—

46,260
—

$(2,234,793) $1,554,567
(7,317)

—

24,822

33,975

—

134

1,810

—

(89)

—

472,640

(9,420)

(150,036)

—

3,187

—

(79,097)

2,226

—

5,724

559,880

(5,863)

(500,370)

(82,597)

40,162

32,864

1,023,873
(7,317)

472,640

(9,420)

(150,036)

(79,097)

30,236

33,975

$1,762,770

48,115

$(2,391,062) $1,943,019

1,314,854

—

34,457

44,175

—

147

580

—

(74)

—

459,866

(20,230)

(90,011)

—

2,703

—

(80,095)

4,812

—

(20,230)

(90,011)

(80,095)

41,974

44,175

$1,841,402

48,768

)
$(2,498,600) $2,327,602
)

(
(

1,670,533

See notes to consolidated financial statements.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

CASH FLOWS FROM OPERATINGAA

ACTIVITIES:

Net income
Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation and amortization
Amortization of other intangibles
Amortization of debt issuance costs
Share-based compensation
Provision for credit losses
Deferred income taxes
Loss on extinguishment of debt
Loan forgiveness
Other

Changes in operating assets and liabilities:

Receivables from clients, net
Receivables from brokers, dealers and clearing organizations
Advisor loans, net
Other receivables, net
Investment securities - trading
Other assets
Client payables
Payables to brokers, dealers and clearing organizations
Accrued advisory and commission expenses payable
Accounts payable and accrued liabilities
Other liabilities
Operating lease assets

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures
Acquisitions, net of cash acquired

Purchases of securities classified as held-to-maturity
Proceeds from maturities of securities classified as held-to-maturity

Net cash used in investing activities

Continued on following page

Years Ended December 31,

2021

2020

2019

459,866

472,640

559,880

151,428
79,260
5,733
44,175
9,168
18,464
24,400
151,427
(10,007)

(174,236)
(4,764)
(526,677)
(140,021)
(8,732)
(136,182)
177,703
80,376
29,771
12,390
211,819
(2,227)
453,134

(215,987)
(245,913)

(1,741)
5,000
(458,641)

109,732
67,358
5,384
33,975
5,824
(23,684)
—
113,126
(12,673)

28,475
(57,372)
(219,813)
(18,480)
16,072
(126,641)
256,977
(2,259)
12,710
(6,585)
137,142
(1,967)
789,941

(155,532)
(30,556)

(6,511)
5,100
(187,499)

95,779
65,334
4,672
32,864
6,698
(18,615)
3,156
92,502
(11,421)

(20,602)
(1,863)
(246,465)
(49,185)
(16,848)
(93,627)
101,529
15,822
8,462
272
96,973
(1,446)
623,871

(156,389)
(25,853)

(3,745)
5,000
(180,987)

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

FLOWS FROM FINANCING ACTIVITIES:

Proceeds from revolving credit facilities

Repayments of revolving credit facilities
Repayment of senior secured term loans
Repayment of senior unsecured notes
Proceeds from senior unsecured notes
Payment of debt issuance costs

Make-whole premium on redemption of senior unsecured notes

Payment of contingent consideration

Tax payments related to settlement of restricted stock units
Repurchase of common stock
Dividends on common stock

Proceeds from stock option exercises and other
Principal payment of finance leases and obligations
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
RESTRICTED CASH
CASH AND EQUIVALENTS
AND RESTRICTED CASH — Beginning of year
AND RESTRICTED CASH — End of year
CASH AND EQUIVALENTS
SUPPLEMENTALTT DISCLOSURES OF CASH FLOW INFORMATION:

AND

VV
VV

Interest paid
Income taxes paid
Cash paid for amounts included in the measurement of operating lease
liabilities
Cash paid for amounts included in the measurement of finance lease
liabilities

NONCASH DISCLOSURES:

Capital expenditures included in accounts payable and accrued liabilities
Lease assets obtained in exchange for operating lease liabilities
Property and equipment obtained in exchange for finance lease liabilities

Cash and equivalents
Cash segregated under federal or other regulations

Restricted cash

Years Ended December 31,

2021

2020

2019

1,585,000

1,806,000

523,000

(1,495,000)
(10,700)
(900,000)
1,300,000
(15,929)

(1,851,000)
(10,700)
—
—
—

(25,875)

(8,941)

(20,230)
(90,011)
(80,095)

41,974
(1,356)
278,837

—

(10,000)

(9,420)
(150,036)
(79,097)

30,236
(1,169)
(275,186)

(478,000)
(411,250)
—
400,000
(17,615)

—

(5,863)
(500,370)
(82,597)

40,162
(692)
(533,225)

273,330
1,799,034
$ 2,072,364

327,256
1,471,778
$ 1,799,034

(90,341)
1,562,119
$ 1,471,778

$
$

$
$
$

103,689
144,556

22,355

9,716

$
$

106,879
169,237

21,368

9,592

$
$

126,949
213,339

19,117

9,079

21,373
3,602

$
$
— $

12,186
7,968

$
$
— $

13,736
108,879
1,453

December 31,

2021
495,246

1,496,463

2020
808,612
923,158

2019
590,209
822,697

80,655

67,264

58,872

Total cash and equivalents and restricted cash shown in the consolidated

statements of cash flows

$ 2,072,364

$ 1,799,034

$ 1,471,778

See notes to consolidated financial statements.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 1 - ORGANIZATION AND DESCRIPTION OF THE COMPANY

LPL Financial Holdings Inc. (“LPLFH”), a Delaware holding corporation, together with its consolidated subsidiaries
(collectively, the “Company”), provides an integrated platform of brokerage and investment advisory services to
independent financial advisors and financial advisors at financial institutions (collectively, “advisors”) in the United
States. Through its custody and clearing platform, using both proprietary and third-party technology, the Company
provides access to diversified financial products and services, enabling its advisors to offeff
r personalized financial
advice and brokerage services to retail investors (their “clients”). The Company’s most significant, wholly owned
subsidiaries are described below:

•

LPL Holdings, Inc. (“LPLH” or “Parent”), a Massachusetts holding corporation, is an intermediate holding
company and directly or indirectly owns 100% of the issued and outstanding common stock of all of
LPLFH’s indirect subsidiaries, including a captive insurance subsidiary (the “Captive Insurance Subsidiary”)
that underwrites insurance for various legal and regulatory risks of the Company.

LPL Financial LLC (“LPL Financial”), with primary offices
ff
Boston, Massachusetts; and Austin, Texas, is a clearing broker-dealer and an investment adviser that
principally transacts business as an agent for its advisors and financial institutions on behalf of their clients
in a broad array of financial products and services. LPL Financial is licensed to operate in all 50 states,
Washington D.C., Puerto Rico and the U.S. Virgin Islands.

in San Diego, California;

Fort Mill, South Carolina;

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

LPL Insurance Associates, Inc. operates as an insurance brokerage general agency that offers
disability insurance products and services for LPL Financial advisors.

life and

AWAA Subsidiary, Inc. is a holding company for AdvisoryWorld and Blaze Portfolio Systems LLC (“Blaze”).
AdvisoryWorld offers
modeling, to both the Company’s advisors and external clients in the wealth management industry. Blaze
provides an advisor-facing trading and portfolio rebalancing platform.

technology products, including proposal generation, investment analytics and portfolio

PTC Holdings, Inc. (“PTCH”) is a holding company for The Private Trust Company, N.A. (“PTC”). PTC is
chartered as a non-depository limited purpose national bank, providing a wide range of trust, investment
management oversight, and custodial services for estates and families. PTC also provides Individual
Retirement Account (“IRA”) custodial services for LPL Financial. Each member of PTCH’s Board of
Directors meets the direct equity ownership interest requirements that are required by the Officeff
Comptroller of the Currency (“OCC”).

of the

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

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basisii of Presen

tation

These consolidated financial statements are prepared in accordance with accounting principles generally accepted
in the United States (“GAAPAA ”), which require the Company to make estimates and assumptions regarding the
valuation of certain financial instruments, goodwill and other intangibles, allowance for credit losses on receivables,
share-based compensation, accruals for liabilities, income taxes, revenue and expense accruals, and other matters
that affect
ff
estimates under differe
financial statements.

the consolidated financial statements and related disclosures. Actual results could differ

nt assumptions or conditions and the differences may be material to the consolidated

from those

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Consolidated Financial Statement Presentation Changes

Certain financial statement line items in the consolidated statements of income and the consolidated statements of
financial condition have been reclassified to more closely align with industry practice and the Company’s business,
and to better serve financial statement users. Prior period amounts have been reclassified to conformff
to the current
presentation as follows:

•

The consolidated statements of income have been reclassified as follows:

◦

The Company has disaggregated the activity previously reported in the Transaction and fee line
item in Total revenue into its Service

and fee and Transaction components;

The Company has included Interest expense on borrowings and Loss on extinguishment of debt in
Total expense. Previously, these amounts were presented after Total operating expense.

•

The consolidated statements of financial condition have been reclassified as follows:

◦

Receivables from product sponsors have been reclassified to Other receivables, net. These were
previously included in Receivables from product sponsors, broker-dealers and clearing
organizations;

Advisor accounts receivable and institutional loans, net of related allowance have been reclassified
to Advisor loans, net. These were previously included in Other receivables, net and Other assets,
respectively;

Trading and held-to-maturity securities, which were previously reported as discrete line items, were
reclassified to Investment securities;

Certain other financial statement line items which were previously reported as discrete line items,
including securities borrowed, operating lease assets, and deferred income taxes, net have been
reclassified to Other assets;

Draftsff payable and Payables to clients, which were previously reported as discrete line items, were
reclassified to Client payables;

Liabilities related to the Company’s deferred compensation plans have been reclassified to Other
liabilities. These were previously included in Accounts payable and accrued liabilities;

Certain other financial statement line items which were previously reported as discrete line items,
including income taxes payable, unearned revenue, securities sold, but not yet purchased, and
lease liabilities have been reclassified to Other liabilities.

These changes did not impact total assets, total liabilities, or total net income; however, the consolidated statements
of cash flows have been updated to conformff

to the current presentation on the statements of financial condition.

The Company concluded that it should account for these shares as a

In addition, during the year ended December 31, 2021, the Company concluded that it is acting in a principal
capacity for fractional shares held in customer brokerage accounts resulting from the dividend reinvestment
program (“DRIP”) that the Company offers.
secured borrowing with underlying financial assets pledged as collateral, and as a result has corrected its
consolidated statement of financial condition to include an asset and related liability of $72.6 million at December
31, 2020 to reflect the investments in fractional shares and the corresponding repurchase obligation in other assets
and other liabilities, respectively. The Company also corrected its consolidated statements of cash flows for the
years ended December 31, 2020 and December 31, 2019, respectively, to reflect the changes in the consolidated
statements of financial condition related to this activity in prior years. As a result, the Company corrected the
consolidated statements of cash flows to reflect an increase in the other assets line items and an offsett
in the other liabilities line items of $13.8 million and $20.6 million for the years ended December 31, 2020 and
December 31, 2019, respectively. This adjustment did not have an impact on earnings, earnings per share, retained
earnings, or net cash provided by operating activities in prior periods. The Company has evaluated the impact of the
error on previously issued consolidated financial statements and determined, based on consideration of quantitative
and qualitative factors, that the impact of the error is immaterial.

ing increase

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Consolidatiott n

These consolidated financial statements include the accounts of LPLFH and its subsidiaries. Intercompany
transactions and balances have been eliminated.

ll
Related

Party Transactions

In the ordinary course of business, the Company enters into related party transactions with beneficial owners of
more than five percent of the Company’s outstanding common stock. Additionally, through its subsidiary LPL
Financial, the Company provides services and charitable contributions to the LPL Financial Foundation, a tax-
exempt charitable organization that provides volunteer and financial support within the Company’s local
communities.

The Company recognized revenue for services provided to these related parties of $6.1 million, $4.8 million and
$4.1 million during the years ended December 31, 2021, 2020 and 2019, respectively. The Company incurred
expense for services provided by these related parties of $2.2 million, $3.8 million and $3.2 million during the years
ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021 and 2020, receivables from and
payables to related parties were not material.

Reportable Segment

Management has determined that the Company operates in one segment, given the similarities in economic
characteristics between its operations and the common nature of its products and services, production and
distribution process and regulatory environment.

Revenue Recognition

Revenue is recognized when control of the promised service is transferred to customers in an amount that reflects
ion,
the consideration the Company expects to be entitled to in exchange for those services. For additional informat
see Note 3 - Revenue.

Compensation and Benefits

The Company records compensation and benefits expense for all cash and deferred compensation, benefits and
related taxes as earned by its employees. Compensation and benefits expense also includes fees earned by
temporary employees and contractors who performff
employees.

similar services to those performed

by the Company’s

Share-Based Compensation

Certain employees, officers,
directors, advisors and financial institutions participate in the Company’s various long-
term incentive plans that provide for granting stock options, warrants, restricted stock awards, restricted stock units,
deferred stock units and perfrr orff mance stock units. Stock options, warrants and restricted stock units generally vest
in equal increments over a three-year period and expire on the tenth anniversary following the date of grant.
Restricted stock awards and deferred stock units generally vest over a one-year period, and performance
units generally vest in full at the end of a three-year performance

period.

stock

The Company recognizes share-based compensation for equity awards granted to employees, officers
directors as compensation and benefits expense on the consolidated statements of income. The fair value of stock
options is estimated using a Black-Scholes valuation model on the date of grant. The fair value of restricted stock
awards, restricted stock units and deferred stock units is equal to the closing price of the Company’s stock on the
date of grant. The fair value of performance stock units is estimated using a Monte-Carlo simulation model on the
date of grant. Share-based compensation is recognized over the requisite service period of the individual awards,
which generally equals the vesting period.

and

The Company recognizes share-based compensation for equity awards granted to advisors and financial institutions
as advisory and commission expense on the consolidated statements of income. The fair value of restricted stock
units is equal to the closing price of the Company’s stock on the date of grant. Share-based compensation is
recognized over the requisite service period of the individual awards, which generally equals the vesting period.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company makes assumptions regarding the number of stock options, warrants, restricted stock awards,
restricted stock units, deferred stock units and perfrr ormff
assumption is ultimately adjusted to the actual forfeiture rate. As a result, changes in the forfeiture assumptions do
not impact the total amount of expense ultimately recognized over the service period. Rather, different
forfeiture
assumptions would only impact the timing of expense recognition over the service period. See Note 16 - Share-
Employee Incentives and Benefit PlanPP s, for additional inforff mation regarding share-based
Based Compensation,
compensation for equity awards granted.

ance stock units that will be forfeited. The forfeiture

Earningii

s Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-
average number of shares of common stock outstanding during the period. The computation of diluted earnings per
share is similar to the computation of basic earnings per share, except that the denominator is increased to include
the number of additional shares of common stock that would have been outstanding if dilutive potential shares of
common stock had been issued.

Income Taxes

nces result in deferred tax assets and liabilities. The Company then must assess the

between the financial statement carrying amounts and the tax basis of assets and liabilities.

In preparing the consolidated financial statements, the Company estimates income tax expense based on various
jurisdictions where it conducts business. The Company needs to estimate current tax obligations and to assess
temporary differences
ff
These temporary differe
likelihood that the deferred tax assets will be realized. A valuation allowance is established to the extent that it is
more likely than not that such deferred tax assets will not be realized. When the Company establishes a valuation
allowance or modifies the existing allowance in a certain reporting period, it generally records a corresponding
increase or decrease to tax expense in the consolidated statements of income. Management makes significant
judgments in determining its provision for income taxes, deferred tax assets and liabilities and any valuation
allowances recorded against the deferred tax assets. Changes in the estimate of these taxes occur periodically due
to changes in the tax rates, changes in the business operations, implementation of tax planning strategies,
resolution with taxing authorities of issues where the Company had previously taken certain tax positions, and newly
enacted statutory, judicial and regulatory guidance. These changes could have a material effect
consolidated statements of income, financial condition or cash flows in the period or periods in which they occur.
Income tax credits are accounted for using the flow-through method as a reduction of income tax expense in the
period they are generated.

on the Company’s

The Company recognizes the tax effeff cts of a position in the consolidated financial statements only if it is more likely
than not to be sustained based solely on its technical merits; otherwise no benefits of the position are to be
recognized. The more-likely-than-not threshold must continue to be met in each reporting period to support
continued recognition of a benefit. Moreover, each tax position meeting the recognition threshold is required to be
measured as the largest amount that is greater than 50 percent likely to be realized upon ultimate settlement with a
taxing authority that has full knowledge of all relevant information.

Cash and Equivalents

Cash equivalents are highly liquid investments with an original maturity of 90 days or less that are not required to be
segregated under federal or other regulations. The Company’s cash and equivalents are composed of interest and
noninterest-bearing deposits, money market funds and U.S. government obligations.

Cash Segregated Underdd Federal or Other Regulation

The Company’s broker-dealer subsidiary, LPL Financial, is required to maintain cash or qualified securities in a
segregated reserve account for the exclusive benefit of its customers in accordance with Rule 15c3-3 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other regulations. At December 31, 2021,
this line item included approximately $100,000 of cash for the proprietary accounts of broker-dealers.

Restricted Cash

Restricted cash primarily represents cash held and for use by the Captive Insurance Subsidiary.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Receivables from Clients, Net and Client Payables

Receivables from clients include amounts due on cash and margin transactions. The Company extends credit to
clients of its advisors to finance their purchases of securities on margin and receives income from interest charged
on such extensions of credit. Client payables represent credit balances in client accounts arising from deposits of
funds, proceeds from sales of securities and dividend and interest payments received on securities held in client
accounts at LPL Financial. The Company pays interest on certain client payable balances.

Receivables from clients are generally fully secured by securities held in the clients’ accounts. To the extent that
margin loans and other receivables from clients are not fully collateralized by client securities, the Company
establishes an allowance that it believes is sufficient
allowance, the Company considers a number of factors, including its ability to collect from the client or the client’s
advisor and its historical experience in collecting on such transactions.

to cover any probable losses. When establishing this

The following table reflects a roll-forff warr
thousands):

rd of the allowance for credit losses on receivables from clients (in

Beginning balance — January 1

Impact of ASU 2016-13 adoption

Provision for credit losses

Charge-offs,

net of recoveries

Ending balance — December 31

vv
Advisor

Loans, Net

December 31,

2021

2020

2019

520

115

640

—

424

—

432

(27)

—

130

(655)

987

520

115

Advisor loans, net includes loans made to advisors and financial institutions and other advisor fee receivables. The
Company periodically extends credit to its advisors in the form of recruiting loans, commission advances and other
loans. The decision to extend credit to an advisor is generally based on the advisor’s credit history and their ability
to generate future revenue. Loans made in connection with recruiting can be either repayable or forgivable over
terms generally up to ten years provided that the advisor remains licensed through LPL Financial. Forgivable loans
are not repaid in cash and are amortized over the term of the loan. If an advisor terminates their arrangement with
the Company prior to the loan maturity date, the remaining balance becomes repayable immediately. An allowance
for credit losses is recorded at the inception of a repayable loan or upon advisor termination for forgivable loans
using estimates and assumptions based on historical lifetime loss experience and expectations of future loss rates
based on current facts. Advisor repayable loans, net totaled $191.2 million and $127.4 million as of December 31,
2021 and 2020.

The following table reflects a roll-forward

of the allowance for credit losses on advisor loans (in thousands):

Beginning balance — January 1

Impact of ASU 2016-13 adoption

Provision for credit losses

Charge-offs,

net of recoveries

Ending balance — December 31

Other Receivables, Net

December 31,

2021

2020

2019

$ 8,797

$13,461

$12,313

—

7,074

8,748

3,642

—

4,806

(4,296)

(17,054)

(3,658)

$11,575

$ 8,797

$13,461

Other receivables, net primarily consist of receivables due from product sponsors and others, miscellaneous
receivables and short-term secured loans to clients. An allowance for credit losses is recorded at inception using
estimates and assumptions based on historical experience, current facts and other factors. Management monitors
the adequacy of these estimates through periodic evaluations against actual trends experienced.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The folff

lowing table reflects a roll-forff warr

rd of the allowance for credit losses on other receivables (in thousands):

Beginning balance — January 1

Impact of ASU 2016-13 adoption

Provision for credit losses

Charge-offs,

net of recoveries

Ending balance — December 31

Investment Securities

December 31,

2021

2020

2019

$ 1,068

805

866

—

1,670

1,097

1,610

—

365

(1,655)

(2,444)

(426)

$ 1,083

$ 1,068

805

Investment securities include trading and held-to-maturity securities. The Company also has securities which have
been sold, but not yet purchased, which are reflected in other liabilities on the consolidated statements of financial
condition. The Company generally classifies its investments in debt and equity instruments as trading securities,
except for U.S. government notes held by its wholly owned subsidiary PTC, which are held to satisfy mff
capital requirements of the OCC and classified as held-to-maturity securities because the Company has both the
intent and the ability to hold these investments to maturity. The Company has not classified any investments as
available-for-sale.

inimum

Securities classified as trading are carried at fair value, while securities classified as held-to-maturity are carried at
amortized cost. The Company uses prices obtained from independent third-party pricing services to measure the
fair value of its trading securities. Prices received from the pricing services are validated using various methods
including comparison to prices received from additional pricing services, comparison to available quoted market
prices and review of other relevant market data including implied yields of major categories of securities. In general,
these quoted prices are derived from active markets for identical assets or liabilities. When quoted prices in active
markets forff
liabilities or inputs other than the quoted prices that are observable, either directly or indirectly. For certificates of
deposit and treasury securities, the Company utilizes market-based inputs, including observable market interest
rates that correspond to the remaining maturities or the next interest reset dates.

identical assets and liabilities are not available, the quoted prices are based on similar assets and

ive yield method over the term of the security and are recorded as an adjustment to the investment yield. The

Interest income is accrued as earned. Premiums and discounts are amortized using a method that approximates the
effect
Company makes estimates about the fair value of investments and the timing for recognizing losses based on
market conditions and other factors. If these estimates change, the Company may recognize additional losses.
Realized and unrealized gains and losses on trading securities are recognized in other revenue on a net basis in the
consolidated statements of income.

ProPP perty at

nd Equipment, Net

Internally developed software, leasehold improvements, computers and software and furniture and equipment are
recorded at historical cost, net of accumulated depreciation and amortization. Depreciation is recognized using the
straight-line method over the estimated useful lives of the assets. The Company expenses software development
costs as incurred during the preliminary project stage, while capitalizing costs at the point at which the conceptual
formulation, design and testing of possible software project alternatives are complete and management authorizes
and commits to funding the project
capitalization are
included in property and equipment and subsequently amortized over the estimated useful life of the software,
which is generally 5 years. The Company does not capitalize pilot project
future economic benefits are less than probable. Leasehold improvements are amortized over the lesser of their
useful lives or the terms of the underlying leases. Computers and software are depreciated over a period of 3 to 5
years. Furniture and equipment are depreciated over a period of 3 to 7 years. Land is not depreciated.

. The costs of internally developed software that qualify f

s or projects forff which it believes that the

ff orff

Management reviews property and equipment forff
indicate the carrying amount of the assets may not be recoverable. No mpi
December 31, 2021, 2020 or 2019.

impairment whenever events or changes in circumstances

airment occurred for the years ended

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Acquisiti

ons

Accounting for business combinations requires the Company to make significant estimates and assumptions with
respect to intangible assets, liabilities assumed and pre-acquisition contingencies. These assumptions include, but
are not limited to, future expected cash flows and discount rates, and are based in part on historical experience,
ion obtained from the management of the acquired companies.
market data and informat

When acquiring companies, the Company recognizes separately from goodwill the assets acquired and the
liabilities assumed at their acquisition date fair values. Goodwill is recognized for business combinations as of the
acquisition date and is measured as the excess of consideration transferred and the net of the acquisition date fair
values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and
assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities
assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result,
during the measurement period, which may be up to one year from the acquisition date, the Company records
to goodwill. Upon the
adjustments to the assets acquired and liabilities assumed, with the corresponding offset
conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed,
whichever comes first, any subsequent adjustments are recorded to the consolidated statements of income.

The Company also enters into asset acquisitions for single identifiable assets. Accounting for asset acquisitions
requires the Company to make significant estimates and assumptions with respect to the useful life of the asset
purchased. These assumptions are based in part on historical experience and market data.

Goodwillii and Other Intangibl

ii es, Net

Goodwill and other indefinite-lived intangibles are tested annually for impairment in the fourth fiscal quarter and
between annual tests if certain events occur indicating that the carrying amounts may be impaired. If a qualitative
assessment is used and the Company determines that the fair value of a reporting unit or indefinite-lived intangible
is more likely than not (i.e., a likelihood of more than 50%) less than its carrying amount, a quantitative impairment
test will be performed.
value, to the extent that it does not exceed the total carrying amount of goodwill. No impairment of goodwill or other
indefinite-lived intangibles was recognized for the years ended December 31, 2021, 2020 or 2019.

An impairment loss will be recognized if a reporting unit’s carrying amount exceeds its fair

Intangibles that are deemed to have definite lives are amortized over their useful lives, generally ranging from 5 to
20 years. They are reviewed for impairment when there is evidence that events or changes in circumstances
indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured
by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the
amount by which the carrying amount of the asset exceeds the estimated fair value. There was no impairment of
definite-lived intangibles recognized for the years ended December 31, 2021, 2020 or 2019. See Note 9 - Goodwill
and Other

ion regarding the Company’s goodwill and other intangibles.

s, Net, for additional informat

Intangible

Securitiett s Borrowed

The Company borrows securities from other broker-dealers to make deliveries or to facilitate customer short sales.
Securities borrowed, which are included in other assets in the consolidated statements of financial condition, are
accounted for as collateralized borrowings and are recorded at the contract value, which represents the amount of
cash provided for securities borrowed transactions (generally in excess of market values). The adequacy of the
collateral deposited, which is determined by comparing the market value of the securities borrowed to the cash
loaned, is continuously monitored and is adjusted when considered necessary to minimize the risk associated with
this activity.

As of December 31, 2021, the contract and collateral market values of borrowed securities were $10.0 million and
$9.7 million, respectively. As of December 31, 2020, the contract and collateral market values of borrowed securities
were $30.1 million and $29.1 million, respectively.

Fractional Shares

The Company acts in a principal capacity in respect of fractional shares resulting from the DRIP that is offered
clients by aggregating dividends received by clients, executing purchases of whole shares, and allocating the whole
shares to clients on a fractional basis based on the dividend amounts that are reinvested. Shares remaining after

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

this process and fractional shares purchased by the Company in client liquidations are included in the Company’s
inventory and reflected as investment securities on the Company’s consolidated statements of financial condition.
Fractional shares that have been allocated to clients do not meet the criteria for sale accounting in ASC 860,
Transfers and Servicing, and are accounted forff
held by clients) with a corresponding investment in fractional shares. These are reflected in other assets and other
liabilities, respectively, on the Company’s consolidated statements of financial condition. The Company has elected
the fair value option to measure these financial assets and the corresponding repurchase obligation and determines
fair value based on quoted prices in active markets.

as a secured borrowing (repurchase obligation related to shares

Debt Issuance Costs

Debt issuance and amendment costs are capitalized and amortized as additional interest expense over the
expected term of the related debt agreement. Debt issuance costs are presented as a direct deduction from the
carrying amount of the related debt liability. Costs incurred while obtaining the revolving credit facility are included in
other assets in the consolidated statements of financial condition and subsequently amortized ratably over the term
of the revolving credit facility, regardless of whether there are any outstanding borrowings on the revolving credit
facility.

Leases

Lease assets and lease liabilities are recognized based on the present value of the future lease payments over the
lease term at the lease commencement date and reflected in other assets and other liabilities, respectively, on the
consolidated statements of financial condition. The Company estimates its incremental borrowing rate based on
informat
informat

ion available at the commencement date in determining the present value of future payments. For additional
ion, see Note 12 - Leases.

ff
ff

Commitments and Contingii

encies

The Company recognizes a liability for loss contingencies when it believes it is probable a liability has occurred and
the amount can be reasonably estimated. If some amount within a range of loss appears at the time to be a better
estimate than any other amount within the range, the Company accrues that amount. When no amount within the
range is a better estimate than any other amount, however, the Company accrues the minimum amount in the
range. The Company has established an accrual for those legal proceedings and regulatory matters for which a loss
is both probable and the amount can be reasonably estimated.

The Company also accrues for losses at its Captive Insurance Subsidiary for those matters covered by self-ff
insurance. The Captive Insurance Subsidiary records losses and loss reserve liabilities based on actuarially
determined estimates of losses incurred, but not yet reported to the Company as well as specific reserves for
proceedings and matters that are probable and estimable. The Captive Insurance Subsidiary is funded by payments
from the Company’s broker-dealer subsidiary and has cash reserves to cover losses, including $77.4 million in
restricted cash at the Captive Insurance Subsidiary. Assessing the probability of a loss occurring and the timing and
and requires management
ff
amount of any loss related to a legal proceeding or regulatory matter is inherently difficult
to make significant judgments. For additional informat
stt and Continii gencies - “Legal &
ion, see Note 14 - Commitment
Regulatory Matters.”

Recently Issued or Adopted Accounting Pronrr ouncements

There are no recently issued accounting pronouncements that would materially impact the Company’s consolidated
financial statements and related disclosures. There are no new accounting pronouncements adopted during the
year ended December 31, 2021 that materially impacted the Company’s consolidated financial statements and
related disclosures.

NOTE 3 - REVENUE

Revenue is recognized when control of the promised services is transferred to customers in an amount that reflects
the consideration the Company expects to be entitled to in exchange for those services. Revenue is analyzed to
determine whether the Company is the principal (i.e., reports revenue on a gross basis) or agent (i.e., reports
revenue on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

over the product or service beforeff
control include primary responsibility over perforff mance obligations, inventory risk beforeff
transferred and discretion in establishing the price.

control is transferred to a customer. The indicators of which party exercises
the good or service is

Advisory

obligation for advisory fees is considered a series of distinct services that are substantially the

Advisory revenue represents fees charged to advisors’ clients’ advisory accounts on the Company’s corporate RIA
advisory platform and is based on a percentage of the market value of the eligible assets in the clients’ advisory
accounts. The Company provides ongoing investment advice and acts as a custodian, providing brokerage and
execution services on transactions, and performs administrative services for these accounts. Advisory fees are
primarily billed to clients in advance, on a quarterly basis, and are recognized as revenue ratably during the quarter.
The performance
ff
same and are satisfied daily. As the value of the eligible assets in an advisory account is susceptible to changes due
to customer activity, this revenue includes variable consideration and is constrained until the date that the fees are
determinable. The majority of our client accounts are on a calendar quarter and are billed using values as of the last
business day of the preceding quarter. The value of the eligible assets in an advisory account on the billing date is
adjusted for estimates of contributions and withdrawals to determine the amount billed, and accordingly, the
revenue earned in the following three-month period. Advisory revenue collected on the Company’s corporate
advisory platform is proposed by the advisor and agreed to by the client and averaged 1.0% of the underlying
assets forff

the year ended December 31, 2021.

The Company also supports independent registered investment adviser firms through its corporate RIA platform,
which allows advisors to engage the Company for technology, clearing and custody services, as well as access to
the capabilities of the Company’s investment platforms.
accounts custodied with LPL Financial are included in total advisory assets and net new advisory assets. The
advisory revenue generated by a RIA is not included in the Company’s advisory revenue. The Company charges
separate fees
are included in service and fee revenue in the consolidated statements of income.

to RIAs for technology, clearing, administrative, oversight and custody services, which may vary and

The assets held under a RIA’sAA investment advisory

Commissi

Commission revenue represents sales commissions generated by advisors for their clients’ purchases and sales of
securities on exchanges and over-the-counter, as well as purchases of other investment products. The Company
views the selling, distribution and marketing, or any combination thereof, of investment products to such clients as a
ff
single performance

obligation to the product sponsors.

The Company is the principal for commission revenue, as it is responsible for the execution of the clients’ purchases
and sales, and maintains relationships with the product sponsors. Advisors assist the Company in performing
obligations. Accordingly, total commission revenue is reported on a gross basis.

its

The following table presents total commission revenue disaggregated by product category (in thousands):

Commission revenue

Annuities

Mutual funds

Fixed income

Equities

Other

Years Ended December 31,

2021

2020

2019

1,210,899

976,357

1,000,806

768,168

126,543

131,975

141,098

590,074

88,714

126,920

124,495

589,411

102,391

79,446

120,353

Total commission revenue

2,378,683

1,906,560

1,892,407

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company generates 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 the Company’s 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 the Company’s
advisors’ clients. The Company earns trailing commission revenue primarily on mutual funds and variable annuities
held by clients of the Company’s advisors. Trailing commission revenue is recognized over the time the client owns
the investment or holds the contract and is generally earned based on a fixed rate applied. The ongoing revenue is
not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control
including market volatility and the client's investment hold period. The revenue will not be recognized until it is
probable that a significant reversal will not occur.

The following table presents sales-based and trailing commission revenue disaggregated by product category (in
thousands):

Commission revenue

Sales-based

Annuities

Mutual funds

Fixed income

Equities

Other

Total sales-based revenue

Trailing

Annuities

Mutual funds

Other

Total trailing revenue

Total commission revenue

Asset-Based

Years Ended December 31,

2021

2020

2019

425,164

327,412

191,449

126,543

131,975

98,924

145,836

88,714

126,920

81,882

380,317

146,695

102,391

79,446

74,003

974,055

770,764

782,852

785,735

648,945

576,719

42,174

444,238

42,613

620,489

442,716

46,350

1,404,628

2,378,683

1,135,796

1,906,560

1,109,555

1,892,407

Asset-based revenue consists of fees from the Company’s client cash programs, fees from our sponsorship
programs with financial product manufacturers, and fees from omnibus processing and networking services
(collectively referred to as “recordkeeping”).

Client Cash Revenue

Client cash revenue is earned daily and is generated based on advisors’ clients’ cash balances in insured bank
sweep accounts and money market programs based on a rate applied, as a percentage, to the deposits placed. The
Company receives fees based on account type and invested balances for administration and recordkeeping. These
fees are earned and recognized over time on a net basis as the Company acts as an agent in these arrangements.
The performance obligation with the financial institutions that participate in the sweep program is considered a
series of distinct services that are substantially the same and are satisfied each day.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Sponsorship

Programs

The Company receives fees from certain financial product manufacturers in connection with sponsorship programs
that support the Company’s marketing and sales force education and training efforts.
performance
held in advisors’ clients’ accounts, a percentage of new sales or a combination of these. As the value of product
sponsor assets held in advisors’ clients’ accounts is susceptible to unpredictable market changes, this revenue
includes variable consideration and is constrained until the date that the fees are determinable.

obligations is either a fixed fee, a percentage of the average annual amount of product sponsor assets

Compensation for these

Recordkeeping

providing recordkeeping, account maintenance, reporting

The Company generates revenue from fees it collects forff
and other related services to product sponsors. This includes revenue from omnibus processing in which the
Company establishes and maintains sub-account records for its clients to reflect the purchase, exchange and
redemption of mutual fund shares, and consolidates clients’ trades within a mutual fund. Omnibus processing fees
are paid to the Company by the mutual fund product sponsors or their affiliat
mutual fund assets in accounts forff which the Company provides omnibus processing services and the number of
accounts in which the related mutual fund positions are held. Recordkeeping also includes revenue from networking
recordkeeping services. Networking revenue on brokerage assets are correlated to the number of positions or value
of assets that the Company administers and are paid by mutual fund and annuity product manufacturers.
Recordkeeping revenue is recognized over time as the Company fulfills its performance obligations. As
recordkeeping fees are susceptible to unpredictable market changes that influence market value and fund positions,
this revenue includes variable consideration and is constrained until the date that the fees are determinable.

es and are based on the value of

The following table sets forth asset-based revenue disaggregated by product category (in thousands):

Asset-based revenue

Client cash

Sponsorship programs

Recordkeeping

Years Ended December 31,

2021

2020

2019

360,847

481,388

385,791

401,429

272,935

290,194

652,793

251,899

261,287

Total asset-based revenue

1,148,067

1,044,517

1,165,979

Service and Fee

technology, clearing, administrative, oversight and custody services, which may vary. The

Service and fee revenue is generated from advisor and retail investor services, including technology, insurance,
conferences, licensing, Business Solutions, IRA custodian, and other client account fees. The Company charges
separate fees to RIAs forff
Company also hosts certain advisor conferences that serve as training, education, sales and marketing events forff
which the Company collects a fee from sponsors. Service and fee revenue is recognized when the Company
satisfies its performance
service is provided once at an identifiable point-in-time or if the service is provided continually over the contract life.
Performance
services that are substantially the same and are satisfied each day over the contract term. The Company is the
principal and recognizes service and fee revenues on a gross basis as it is primarily responsible forff
respective services being provided, which is demonstrated by the Company’s ability to control the fee amounts
charged to customers.

obligations. Recognition varies from point-in-time to over time depending on whether the

and fee revenue recognized over time are considered a series of distinct

obligations for service

delivering the

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The folff

lowing table sets forth service and fee revenue disaggregated by recognition pattern (in thousands):

Service and fee revenue

Point-in-time(1)
Over time(2)

Total service and fee revenue

______ ____ ____ ____ ____ ____ ____ ____ ____

Years Ended December 31,

2021

2020

2019

110,459

85,451

301,302

272,271

411,761

357,722

95,407

262,437

357,844

(1)

(2)

Service and fee revenue recognized at a point-in-time includes revenue such as confirmation fees, IRA termination fees, and conference
fees.

Service and fee revenue recognized over time includes revenue such as error and omission insurance fees, Business Solutions
subscription fees, IRA custodian fees, and technology fees.

Transaction

Transaction revenue includes transaction charges generated by advisory and brokerage accounts from mutual
funds, ETF, and fixed income products and is primarily recognized at a point-in-time. Point-in-time transaction
revenue includes revenue from clearing and transaction charges and is recognized on a trade-date basis as the
performance
agreed upon and the risks and rewards of ownership have been transferred
the principal and recognizes transaction revenue on a gross basis as it is primarily responsible forff
respective services being provided, which is demonstrated by the Company’s ability to control the fee amounts
charged to customers.

obligation is satisfied when the underlying financial instrument or purchaser is identified, the pricing is
to/from the customer. The Company is

delivering the

Interest Income

The Company earns interest income from client margin loans, advisor loans, cash segregated under federal or other
regulations and cash equivalents.

Other

Other revenue primarily includes unrealized gains and losses on assets held by the Company forff
qualified deferred compensation plan and model research portfolios, and other miscellaneous revenue, which is not
generated from contracts with customers.

its advisor non-

Unearned Revenue

The Company records unearned revenue when cash payments are received or due in advance of the Company’s
performance
obligations, including amounts which are refundable. The increase in the unearned revenue balance
for the year ended December 31, 2021 compared to 2020 is primarily driven by cash payments received or due in
advance of satisfying the Company’s perforff mance obligations, offset
was included in the unearned revenue balance as of December 31, 2020.

by $94.3 million of revenue recognized that

The Company receives cash in advance for advisory services to be performed
and conferences to be held in future
periods. For advisory services, revenue is recognized as the Company provides the administration, brokerage and
execution services over time to satisfy the performance obligations. For conference
recognizes revenue as the conferences

revenue, the Company

are held.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 4 - ACQUISITIONS

On April 30, 2021, the Company acquired the wealth management business of Waddell & Reed Financial, Inc. for
$300.0 million in order to expand its addressable markets and complement organic growth. The Company
accounted for the acquisition under the acquisition method of accounting for business combinations. At
December 31, 2021, the Company had provisionally allocated $128.6 million of the purchase price to goodwill,
$122.7 million to definite-lived intangible assets, $62.3 million to cash acquired, and the remainder to other assets
acquired and liabilities assumed as part of the acquisition. The goodwill primarily includes the synergies expected to
result from combining operations and onboarding advisors and assets to the Company’s platform and is deductible
for tax purposes. The int gangible assets are comprised
the income approach, which included usi gng the multi-period excess
fuseful
to make signif
rate. See Note 9 - Goodwill and Othett

flife fof approximat yely 9 yyears. The ffair value determination fof the advisor relationships required the CCompanyy
significant estimates and assumptions related to ffuture net cash fflows and the selection fof the discount

primarily fof advisor relationships, which were valued

r Intangibles, Net, for additional informat

earnings method, with a weigghted a

using
g
g

verage

ion.

On October 26, 2020, the Company acquired Blaze Portfolioff
Systems LLC, a technology company that provides an
advisor-facing trading and portfolio rebalancing platform. The Company paid $11.6 million at closing and agreed to a
potential contingent payment of up to $4.0 million.

On August 18, 2020, the Company acquired business relationships with advisors from E.K. Riley Investments, LLC
(“E.K. Riley”) and Lucia Securities, LLC (“Lucia”), two unrelated broker-dealers and RIAs, for a combined $18.4
million. Both transactions had potential contingent payments.

On August 1, 2019, the Company acquired Allen & Company, and under the transaction structure Allen & Company
advisors and staffff became employees of the Company. The Company paid approximately $24.9 million at closing
and made an additional contingent payment of $10.0 million in February 2020.

The Company incurred $76.4 million of acquisition costs to setup, onboard and integrate the acquired entities during
the year ended December 31, 2021.

NOTE 5 - FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date. Inputs used to measure fair value are prioritized within a three-level fair value
hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of
unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the
fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies
and similar techniques that use significant unobservable inputs.

There have been no transfers of assets or liabilities between these fair value measurement classifications during the
years ended December 31, 2021 or 2020.

The Company’s fair value measurements are evaluated within the fair value hierarchy, based on the nature of inputs
used to determine the fair value at the measurement date. At December 31, 2021 and 2020, the Company had the
following financial assets and liabilities that are measured at fair value on a recurring basis:

Cash Equivalents — The Company’s cash equivalents include money market funds, which are short term in
nature with readily determinable values derived from active markets.

Trading Securitiestt
house account model portfolios established and managed for the purpose of benchmarking the performance

Sold, But Not Yet Purchased — The Company’s trading securities consist of

and Securitiestt

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

of its fee-based advisory platforms and temporary positions resulting from the processing of client
transactions.

The Company uses prices obtained from independent third-party pricing services to measure the fair value of
its trading securities. Prices received from the pricing services are validated using various methods including
comparison to prices received from additional pricing services, comparison to available quoted market prices
and review of other relevant market data including implied yields of major categories of securities. In general,
these quoted prices are derived from active markets for identical assets or liabilities. When quoted prices in
active markets for identical assets and liabilities are not available, the quoted prices are based on similar
assets and liabilities or inputs other than the quoted prices that are observable, either directly or indirectly. For
certificates of deposit and treasury securities, the Company utilizes market-based inputs, including observable
market interest rates that correspond to the remaining maturities or the next interest reset dates. At
December 31, 2021 and 2020, the Company did not adjust prices received from the independent third-party
pricing services.

Assets — The Company’s other assets include: (1) deferred compensation plan assets that are

Other
tt
invested in money market and other mutual funds, which are actively traded and valued based on quoted
market prices; and (2) certain non-traded real estate investment trusts and auction rate notes, which are
valued using quoted prices for identical or similar securities and other inputs that are observable or can be
corroborated by observable market data.

Fractional Shares — The Company’s investment in fractional shares held by customers is reflected in other
assets while the related purchase obligation for such shares is reflected in other liabilities. The Company uses
prices obtained from independent third-party pricing services to measure the fair value of its investment in
fractional shares held by customers and the related repurchase obligation. Prices received from the pricing
services are validated using various methods including comparison to prices received from additional pricing
services, comparison to available quoted market prices and review of other relevant market data including
implied yields of major categories of securities. At December 31, 2021 and 2020, the Company did not adjust
prices received from the independent third-party pricing services.

Accountstt Payable and Accrued Liabilities — The Company’s accounts payable and accrued liabilities include
contingent consideration liabilities that are measured using Level 3 inputs.

Level 3 Recurringii

Fair Value Measurements

The Company determines the fair value for its contingent consideration obligations using a scenario-based
approach whereby the Company assesses the expected number of future transactions. The contingent payment is
estimated by applying a discount rate to the expected payment to calculate the fair value as of the valuation date.
The Company evaluates the underlying projo ections and other related factors used in determining fair value each
period and makes updates when there have been significant changes in management’s expectations.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Recurring Fair Value Measurements

The following table summarizes the Company’s financial assets and financial liabilities measured at fair value on a
recurring basis (in thousands):

December 31, 2021
Assets

Cash equivalents
Investment securities - trading:

Money market funds
Mutual funds
Equity securities
U.S. treasury obligations

Total investment securities - trading
Other assets:

Deferred compensation plan
Other investments
Fractional shares - investment

Total other assets

Total assets at fair value

Liabilities

Accounts payable and accrued liabilities
Other liabilities:

Securities sold, but not yet purchased:

Equity securities
Debt securities

Total securities sold, but not yet purchased
Fractional shares - repurchase obligation

Total other liabilities

Total liabilities at fair value

Level 1

Level 2

Level 3

Total

12,056

— $

12,056

123
19,112
440
19,599
39,274

499,548
—
114,574
614,122
665,452

—
—
—
—
—

—
9,166
—
9,166
9,166

—
—
—
—
—

—
—
—
—
— $

123
19,112
440
19,599
39,274

499,548
9,166
114,574
623,288
674,618

— $

3,530

467
—
467
114,574
115,041
115,041

—
105
105
—
105
105

—
—
—
—
—
3,530

467
105
572
114,574
115,146
118,676

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

lowing table summarizes the Company’s financial assets and financial liabilities measured at fair value on a

The folff
recurring basis (in thousands):

December 31, 2020
Assets

Cash equivalents
Investment securities - trading:

Money market funds
Mutual funds
Equity securities
U.S. treasury obligations

Total investment securities — trading
Other assets:

Deferred compensation plan
Other investments
Fractional shares - investment

Total other assets

Total assets at fair value

Liabilities

Accounts payable and accrued liabilities
Other liabilities:

Securities sold, but not yet purchased:

Equity securities
Debt securities

Total securities sold, but not yet purchased
Fractional shares - repurchase obligation

Total other liabilities

Total liabilities at fair value

Level 1

Level 2

Level 3

Total

6,205

— $

6,205

125
9,137
492
19,498
29,252

371,202
—
72,591
443,793
479,250

—
—
—
—
—

—
8,953
—
8,953
8,953

—
—
—
—
—

—
—
—
—
— $

125
9,137
492
19,498
29,252

371,202
8,953
72,591
452,746
488,203

— $

3,228

203
—
203
72,591
72,794
72,794

—
3
3
—
3
3

—
—
—
—
—
3,228

203
3
206
72,591
72,797
76,025

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Fair Value of Financial Instruments Not Measured at Fair Value

The following tables summarize the carrying values, fair values and fair value hierarchy level classification of
financial instruments that are not measured at fair value (in thousands):

December 31, 2021
Assets

Cash and equivalents
Cash segregated under federal or other
regulations
Restricted cash
Receivables from clients, net
Receivables from brokers, dealers and
clearing organizations
Advisor repayable loans, net(1)
Other receivables, net
Investment securities - held-to-maturity
securities
Other assets:

Securities borrowed
Other investments(2)

Total other assets

Liabilities

Client payables
Payables to brokers, dealers and clearing
organizations
Corporate debt and other borrowings, net

______ ____ ____ ____ ____ ____ ____ ____ ____

Carrying
Value

Level 1

Level 2

Level 3

Total Fair
Value

483,190 $

483,190

— $

483,190

1,496,463
80,655
578,889

1,496,463
80,655
—

102,503
191,242
581,483

9,918

9,958
4,595
14,553

—
—
—

—

—
—
—

—
—
578,889

102,503
—
581,483

9,915

9,958
4,595
14,553

—
—
—

1,496,463
80,655
578,889

—
176,864
—

—

—
—
—

102,503
176,864
581,483

9,915

9,958
4,595
14,553

$ 1,712,224 $

— $ 1,712,224

170,119
2,814,044

—
—

170,119
2,885,536

—
—

170,119
2,885,536

(1)

(2)

Includes repayable loans and forgivable loans which have converted to repayable upon advisor termination.

Other investments include DTC common shares and Federal Reserve stock.

December 31, 2020
Assets

Cash and equivalents
Cash segregated under federal or other
regulations
Restricted cash
Receivables from clients, net of allowance
Receivables from brokers, dealers and
clearing organizations
Advisor repayable loans, net(1)
Other receivables, net
Investment securities - held-to-maturity
securities
Other assets:

Securities borrowed
Other investments(2)

Total other assets

Liabilities

Client payables
Payables to brokers, dealers and clearing
organizations
Corporate debt and other borrowings, net

______ ____ ____ ____ ____ ____ ____ ____ ____

Carrying
Value

Level 1

Level 2

Level 3

Total Fair
Value

802,407 $

802,407

— $

802,407

923,158
67,264
405,106

97,245
127,432
435,012

13,235

30,130
5,799
35,929

923,158
67,264
—

—
—
—

—

—
—
—

—
—
405,106

97,245
—
435,012

13,394

30,130
5,799
35,929

—
—
—

—
115,898
—

—

—
—
—

923,158
67,264
405,106

97,245
115,898
435,012

13,394

30,130
5,799
35,929

$ 1,534,486 $

— $ 1,534,486

89,743
2,345,414

—
—

89,743
2,402,441

—
—

89,743
2,402,441

(1)

(2)

Includes repayable loans and forgivable loans which have converted to repayable upon advisor termination.

Other investments include DTC common shares and Federal Reserve stock.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 6 - INVESTMENT SECURITIES

The Company’s investment securities include debt and equity securities that the Company has classified as trading
securities, which are carried at fair value, as well as investments in U.S. government notes, which are held by The
Private Trust Company, N.A. to satisfy minimum capital requirements of the OCC. These securities are recorded at
amortized cost and classified as held-to-maturity as the Company has both the intent and ability to hold these
investments to maturity.

The following table summarizes investment securities (in thousands):

Trading securities - at fair value:

Money market funds

Mutual funds

Equity securities

U.S. treasury obligations
Total trading securities

Held-to-maturity securities - at amortized cost:

U.S. government notes

Total held-to-maturity securities

Total investment securities

December 31,

2021

2020

$
$

123

19,112

440

19,599
39,274

9,918
9,918

49,192

$
$

125

9,137

492

19,498
29,252

13,235
13,235

42,487

At December 31, 2021, the held-to-maturity securities were scheduled to mature as follows (in thousands):

Within one
year

Afteff

r one but

within five
years

After five but
within ten
years

After ten
years

Total

U.S. government notes — at amortized cost $

U.S. government notes — at fair value

5,013

5,034

4,905

4,881

— $

9,918

9,915

The Company realized gains of $2.0 million, $1.2 million and $54.6 million and losses of $1.0 million, $2.4 million
and $54.6 million on trading securities sold during the years ended December 31, 2021, 2020 and 2019,
respectively.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 7 - RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING

ORGANIZATIONS

Receivables from and payables to brokers, dealers, and clearing organizations were as follows (in thousands):

Receivables:

Receivables from clearing organizations

Receivables from brokers and dealers

Securities failed-to-deliver

Total receivables

Payables:

Payables to clearing organizations

Payables to brokers and dealers

Securities failed-to-receive

Total payables

NOTE 8 - PROPERTY AND EQUIPMENT, NET

December 31,

2021

2020

80,548

4,977

16,978
102,503

89,838

2,550

4,857
97,245

20,112

19,117

78,080

71,927
170,119

50,528

20,098
89,743

The components of property and equipment, net were as follows at December 31, 2021 (in thousands):

Internally developed software

716,179

(342,408) $

373,771

Gross Carrying Value

Accumulated Depreciation
and Amortization

Net Carrying Value

Computers and software

Buildings

Leasehold improvements

Furniture and equipment

Land

Construction in progress(1)

214,223

107,873

88,538

83,356

4,678

68,318

(167,573)

(11,627)

(36,988)

(65,728)

—

46,650

96,246

51,550

17,628

4,678

68,318

Total property and equipment, net

1,283,165

(
(624,324) $
(

)
)

658,841

______ ____ ____ ____ ____ ____ ____ ____ ____

(1)

Construction in progress includes internal software in development of $37.7 million at December 31, 2021.

The components of property and equipment, net were as follows at December 31, 2020 (in thousands):

Gross Carrying Value

Accumulated Depreciation
and Amortization

Net Carrying Value

Internally developed software

418,018

Computers and software

Buildings

Leasehold improvements

Furniture and equipment

Land

Construction in progress(1)

195,800

107,895

88,135

83,365

4,678

174,974

(241,390) $

(151,792)

(7,753)

(31,202)

(57,860)

—

Total property and equipment, net

1,072,865

(
(489,997) $
(

)
)

______ ____ ____ ____ ____ ____ ____ ____ ____

(1)

Construction in progress includes internal software in development of $161.3 million at December 31, 2020.

176,628

44,008

100,142

56,933

25,505

4,678

174,974

582,868

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Depreciation and amortization was $151.4 million, $109.7 million and $95.8 million forff
December 31, 2021, 2020 and 2019, respectively.

the years ended

NOTE 9 - GOODWILL AND OTHER INTANGIBLES, NET

On April 30, 2021, the Company acquired the wealth management business of Waddell & Reed Financial, Inc. for
$300.0 million. At December 31, 2021, the Company had provisionally allocated $128.6 million of the purchase price
to goodwill, $122.7 million to definite-lived intangible assets, and the remainder to other assets acquired and
liabilities assumed as part of the acquisition. The int gangible assets are comprised
with a we gighted

primarily fof advisor relationships
ion.
tt

y9 years S. See Note 4 - AAcquisitions

flife off approximat yely

additional

y
f, forff

average

informat

fuseful

ff
f

A summary of the activity impacting goodwill is presented below (in thousands):

Balance at December 31, 2019

Goodwill acquired

Balance at December 31, 2020

Goodwill acquired

Balance at December 31, 2021

1,503,648

10,218

1,513,866

128,577

1,642,443

The components of other intangibles, net were as follows

at December 31, 2021 (thousands):

Definite-lived intangibles, net:

Advisor and financial institution relationships

Product sponsor relationships

Client relationships

Technology

Trade names

Weighted-
Average Life
Remaining
(in years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Value

5.9

4.1

7.2

6.4

0.3

806,531

(476,000) $

330,531

234,086

45,623

19,040

1,200

(185,255)

(23,379)

(5,477)

(1,160)

48,831

22,244

13,563

Total definite-lived intangible assets, net

$ 1,106,480

(
(691,271) $
(

)
)

415,209

Other indefinite-lived intangibles:

Trademark and trade name

Total other intangibles, net

39,819

455,028

The components of other intangibles, net were as follows

at December 31, 2020 (thousands):

Definite-lived intangibles, net:

Advisor and financial institution relationships

Product sponsor relationships

Client relationships

Technology

Trade names

Total definite-lived intangibles, net

Other indefinite-lived intangibles:

Trademark and trade name

Total other intangibles, net

Weighted-
Average Life
Remaining
(in years)

Gross
Carrying
Value

Accumulated
Amortization

Net
Carrying
Value

5.4

5.1

7.9

7.3

1.3

670,542

(415,169) $

255,373

234,086

44,810

19,040

1,200

(173,345)

(19,237)

(3,220)

(1,040)

60,741

25,573

15,820

160

969,678

(
(612,011) $
(

)
)

357,667

39,819

397,486

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Total amortization of other intangibles was $79.3 million, $67.4 million and $65.3 million for the years ended
December 31, 2021, 2020 and 2019, respectively.

Future amortization is estimated as follows

(in thousands):

2022

2023

2024

2025

2026

Thereafter

Total

83,735

79,566

78,794

70,420

32,164

70,530

415,209

NOTE 10 - OTHER ASSETS AND OTHER LIABILITIES

The components of other assets and other liabilities were as follows (dollars in thousands):

December 31,

2021

2020

Other assets:

Deferred compensation
Fractional shares - investment(1)
Prepaid assets
Operating lease assets(2)
Debt issuance costs, net
Deferred income taxes, net(3)
Other

Total other assets

Other liabilities:

Deferred compensation
Unearned revenue(4)
Operating lease liabilities(2)
Fractional shares - repurchase obligation(1)
Finance lease liabilities(2)
Other

Total other liabilities

________
(1)

_____

_____
See Note 2 - Summary of Significant Accounting Policll

___

499,548

114,574

115,018

95,075

7,303

5,648
49,822

886,988

499,245

160,926

130,304

114,574

106,067

7,160

1,018,276

ies for further information.

371,202

72,591

100,448

101,921

6,052

24,112

59,179

735,505

372,395

95,328

139,377

72,591

107,424

28,351

815,466

(2)

(3)

(4)

See Note 12 - Leases for further information.

See Note 13 - Income Taxes for further information.

See Note 3 - Revenue

for further information.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 11 - CORPORATE DEBT AND OTHER BORROWINGS, NET

The Company’s outstanding corporate debt and other borrowings, net were as follows (in thousands):

Corporate Debt
Term Loan B(1)
2025 Senior Notes(1)
2027 Senior Notes(1)
2029 Senior Notes(1)

2031 Senior Notes(1)

Total Corporate Debt

Plus: Unamortized Premium

Less: Unamortized Debt
Issuance Cost

Corporate debt, net

Other Borrowings

December 31, 2021

December 31, 2020

Balance

Applicable
Margin

Interest
Rate

Balance

Applicable
Margin

Interest
rate

Maturity

$ 1,048,600

LIBOR+175 bps

1.85 % $ 1,059,300

LIBOR+175 bps

1.90 % 11/12/2026

—

400,000

900,000

Fixed Rate

400,000

Fixed Rate

— %

4.63 %

4.00 %

4.38 %

2,748,600

—

(24,556)
$ 2,724,044

900,000

400,000

—

2,359,300

7,083

(20,969)
$ 2,345,414

Fixed Rate

5.75 % 9/15/2025

4.63 % 11/15/2027

— % 3/15/2029

— % 5/15/2031

Revolving Credit Facility(2)
Unsecured, Uncommitted Lines
of Credit

Total other borrowings

55,000

ABR+25 bps

3.50 %

Broker Base
Rate+75 bps

35,000

90,000

1.00 %

—

Corporate Debt and Other
Borrowings, Net

$ 2,814,044

$ 2,345,414

ABR+25 bps

Broker Base
Rate+75 bps

— % 3/15/2026

— % 9/30/2022

________
(1)

_____

_____
No leverage or interest coverage maintenance covenants.

___

(2)

The alternate base rate (ABR) was the PRIME rate and reflects the interest rate incurred on the senior secured revolving credit facility on
the outstanding balances as of December 31, 2021.

The minimum calendar year payments and maturities of the corporate debt and other borrowings as of
December 31, 2021 were as follows (in thousands):

2022

2023

2024

2025

2026

Thereafter

Total

45,700

10,700

1,060,800

1,700,000

2,838,600

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

lowing table presents amounts outstanding and available under the Company’s external lines of credit at

The folff
December 31, 2021 (in millions):

Description

Borrower

Maturity Date

Senior secured, revolving credit facility

LPL Holdings, Inc.

March 2026

Broker-dealer revolving credit facility

LPL Financial LLC

July 2024

Secured, uncommitted lines of credit

LPL Financial LLC

Unsecured, uncommitted lines of credit

LPL Financial LLC

Unsecured, uncommitted lines of credit

LPL Financial LLC

Unsecured, uncommitted lines of credit

LPL Financial LLC

Secured, uncommitted lines of credit

LPL Financial LLC

Secured, uncommitted lines of credit

LPL Financial LLC

March 2022

September 2022

None

(1)

Outstanding balances were repaid in January 2022.

Issuance of 2031 Senior Notes

Outstanding(1)
55
$

Available

945
300

unspecified

$
— $

— $

—

LPLH raised $400.0 million in aggregate principal amount of 4.375% senior notes on May 18, 2021, which were
issued at par (“2031 Senior Notes”). The Company used the proceeds from the issuance to repay borrowings made
under the senior secured revolving credit facility related to the acquisition of the wealth management business of
Waddell & Reed Financial, Inc. The 2031 Senior Notes are unsecured obligations, governed by an indenture, that
will mature on May 15, 2031, and bear interest at the rate of 4.375% per year, with interest payable semi-annually.
The Company may redeem all or part of the 2031 Senior Notes at any time prior to May 15, 2026 at 100% of the
principal amount redeemed plus any accrued and unpaid interest thereon and a “make-whole” premium (subject to
a customary “equity claw” that permits the Company to redeem up to 40% of the aggregate principal amount of the
2031 Senior Notes prior to May 15, 2024 with the proceeds of equity offerings at a redemption price equal to
, the Company may redeem all or part of the 2031 Senior
ff
104.375%, plus accrued and unpaid interest). Thereafter
Notes at annually declining redemption premiums until May 15, 2029, at and after which date the redemption price
will be equal to 100% of the principal amount redeemed plus any accrued and unpaid interest thereon. In
connection with the issuance of the 2031 Senior Notes, the Company incurred $3.8 million in costs, which were
capitalized as debt issuance costs included in other assets in the consolidated statements of financial condition.

Issuance of 2029 Senior Notes

LPLH raised $900.0 million in aggregate principal amount of 4.00% senior notes on March 15, 2021, which were
issued at par (“2029 Senior Notes”). The Company used the proceeds from the issuance of the 2029 Senior Notes,
along with existing corporate cash available, to redeem our existing 5.75% senior unsecured notes due in 2025. In
connection with this redemption, the Company recognized $24.4 million as a loss on extinguishment of debt on the
consolidated statements of income.

The 2029 Senior Notes are unsecured obligations, governed by an indenture, that will mature on March 15, 2029,
and bear interest at the rate of 4.00% per year, with interest payable semi-annually. The Company may redeem all
or part of the 2029 Senior Notes at any time prior to March 15, 2024 at 100% of the principal amount redeemed plus
any accrued and unpaid interest thereon and a “make-whole” premium (subject to a customary “equity claw” that
permits the Company to redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes prior to
March 15, 2024 with the proceeds of equity offerings
interest). Thereafter
redemption premiums until March 15, 2026, at and after which date the redemption price will be equal to 100% of
the principal amount redeemed plus any accrued and unpaid interest thereon. In connection with the issuance of the
2029 Senior Notes, the Company incurred $9.0 million in costs, which were capitalized as debt issuance costs in
the consolidated statements of financial condition.

, the Company may redeem all or part of the 2029 Senior Notes at annually declining

at a redemption price equal to 104%, plus accrued and unpaid

Credit Agreement

On March 15, 2021, LPLFH and LPLH entered into a fifth amendment agreement (the “Amendment”) to the
Company’s amended and restated credit agreement (“Credit Agreement”), which, among other things, increased the
size of its senior secured revolving credit facility to $1.0 billion and extended its maturity date. In connection with the
execution of the Amendment, the Company incurred $3.2 million in costs, which are capitalized as debt issuance
costs in the consolidated statements of financial condition. The Credit Agreement subjects the Company to certain

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

financial and non-financial covenants. As of December 31, 2021, the Company was in compliance with such
covenants.

Parent Revolving Credit Facilityt

Borrowings under the revolving credit facility bear interest at a rate per annum ranging from 125 to 175 basis points
over the Eurodollar Rate or 25 to 75 basis points over the base rate, depending on the Consolidated Secured Debt
to Consolidated EBITDA Ratio (as defined in the Credit Agreement).

Broker-Dealer Revolving Credit Facilityt

On July 31, 2019, LPL Financial, the Company’s broker-dealer subsidiary, entered into a committed, unsecured
revolving credit facility that matures on July 31, 2024 and allows for a maximum borrowing of up to $300.0 million.
Borrowings bear interest at a rate per annum ranging from 112.5 to 137.5 basis points over the Federal Funds Rate
or Eurodollar Rate, depending on the Parent Leverage Ratio (each as defined in the broker-dealer credit
b
agreement). The broker-dealer credit agreement subject
covenants. LPL Financial was in compliance with such covenants as of December 31, 2021.

s LPL Financial to certain financial and non-financial

tt
Other

rr
External

Lines of Credit

LPL Financial maintained six uncommitted lines of credit as of December 31, 2021. Two of the lines have
unspecified limits, which are primarily dependent on LPL Financial’s ability to provide sufficient
collateral. The other
four lines have a total limit of $275.0 million, one of which allows for collateralized borrowings while the other three
allow for uncollateralized borrowings. There was $35 million outstanding under these lines of credit as of
December 31, 2021 and no balances outstanding as of December 31, 2020.

NOTE 12 - LEASES

The Company determines if an arrangement is a lease or contains a lease at inception. The Company has
operating and finance leases for corporate offices and equipment with remaining lease terms of 1 to 15 years, some
of which include options to extend the lease for up to 20 years. For leases with renewal options, the lease term is
extended to reflect renewal options the Company is reasonably certain to exercise.

Operating lease assets and operating lease liabilities are recognized based on the present value of the future lease
payments over the lease term at the commencement date. As most of the Company’s leases do not provide an
implicit rate, the Company estimates its incremental borrowing rate based on informat
commencement date in determining the present value of future payments. Lease expense for net present value of
payments is recognized on a straight-line basis over the lease term.

ion available at the

Finance lease assets are included in property and equipment, net in the consolidated statements of financial
condition and were $97.1 million and $102.2 million at December 31, 2021 and December 31, 2020, respectively.

The components of lease expense were as follows (in thousands):

Operating lease cost

Finance lease cost:

Amortization of right-of-use assets

Interest on lease liabilities

Total finance lease cost

Years Ended December 31,

2021

2020

2019

19,712

18,757 $

17,610

5,150

8,360

13,510

5,141 $

8,423

13,564 $

4,786

8,387

13,173

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Supplemental weighted-average informat

ion related to leases was as follows:

Weighted-average remaining lease term (years):

Finance leases

Operating leases

Weighted-average discount rate:

Finance leases

Operating leases

December 31,

2021

2020

24.6

6.9

7.89 %

6.96 %

25.3

7.9

7.82 %

7.07 %

Maturities fof lease liabilities as fof December 31, 2021 were a fs follows

usands):
(in(in thousands):

2022
2023
2024
2025
2026
Thereafter
Total lease payments

Less imputed interest

Total

NOTE 13 - INCOME TAXES

Operating Leases

Finance Leases

24,072
23,306
22,471
22,126
22,394
53,068
167,437
37,133
130,304

8,802
8,576
8,727
8,879
9,035
215,725
259,744
153,677
106,067

The components of the provision for income taxes were as follows (in thousands):

Current provision for income taxes:

Federal
State

Total current provision for income taxes

Deferred provision (benefit) for income taxes:

Federal
State

Total deferred provision (benefit) for income taxes

Provision for income taxes

December 31,

2021

2020

2019

96,389
26,610
122,999

14,446
4,018
18,464
141,463

137,360
39,757
177,117

(17,991)
(5,693)
(23,684)
153,433

156,378
44,192
200,570

(13,971)
(4,644)
(18,615)
181,955

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

lowing table reflects a reconciliation of the U.S. federal statutory income tax rates to the Company’s effective

The folff
income tax rates:

Federal statutory income tax rates

State income taxes, net of federal benefit
Non-deductible expenses
Share-based compensation
Research and development credits
Other
Effective

income tax rates

Years Ended December 31,

2021

2020

2019

21.0 %
4.1
0.7
(2.7)
(0.4)
0.8
23.5 %

21.0 %
4.4
0.3
(1.0)
(0.3)
0.1
24.5 %

21.0 %
4.1
0.4
(1.4)
(0.3)
0.7
24.5 %

The Company’s effect
certain state taxes, benefits from share-based compensation, and other permanent differences
certain expenses. The decrease in the Company’s effective tax rate for the year ended December 31, 2021 was
primarily due to an increased benefit from share-based compensation recognized during 2021.

ive income tax rate differs from the federal corporate tax rate of 21.0% primarily as a result of
in tax deductibility of

Deferred income taxes reflect the net tax effect
and liabilities for financial reporting purposes and the amounts used for income tax purposes.

s of temporary differences

between the carrying amounts of assets

The components of the net deferred income taxes included in the consolidated statements of financial condition
were as follows (in thousands):

Deferred tax assets:

Accrued liabilities

Share-based compensation

State taxes

Operating lease liabilities

Finance lease liabilities
Provision for credit losses

Forgivable loans

Other

Total deferred tax assets

Deferred tax liabilities:

Amortization of other intangibles

Depreciation of property and equipment

Operating lease assets

Unrealized gains and losses

Total deferred tax liabilities

Deferred income taxes, net

December 31,

2021

2020

148,566

120,638

16,597

5,654

35,182

28,647
3,691

17,369

4,604

15,890

5,537

37,632

28,519
2,810

13,158

4,069

260,310

228,253

(58,833)

(147,659)

(25,832)

(22,338)

(64,907)

(97,612)

(27,681)

(13,941)

(254,662)

(204,141)

5,648

24,112

The following table reflects a reconciliation of the beginning and ending balances of the total amounts of gross
unrecognized tax benefits, including interest and penalties (in thousands):

Balance — beginning of year

Increases for tax positions taken during the current year
Reductions as a result of a lapse of the applicable statute of limitations and
decreases in prior-year tax positions

Balance — end of year

December 31,

2021

2020

2019

54,435

52,098

46,287

15,637

8,053

9,314

(13,058)

(5,716)

(3,503)

57,014

54,435

52,098

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

At December 31, 2021 and 2020, there were $53.8 million and $48.1 million, respectively, of unrecognized tax
benefits that if recognized, would favorably affect

the effective income tax rate in any future periods.

The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes
within the consolidated statements of financial condition. At December 31, 2021 and 2020, the liability for
unrecognized tax benefits included accrued interest of $7.5 million and $7.3 million, respectively, and penalties of
$3.9 million and $4.4 million, respectively.

The CCompa yny and its subsidiaries ffile ffederal and state income tax returns which are
examinations yby the respective taxi gng authorities. The Company
hrough 2011. The ta yx years off 2012 to 2016 and 2018 to 2020 remain open to examination in the
matters ffo yr years t
ffederal jjurisdiction. The tax yyears fof 2012 to 2020 remain open to examination in the state jjurisdictions. In the next
12 months it is reasonab yly possible that the CCompa yny
$$9.3 million related to settlem ne ts and the statute of limitations expiration in federal and various state jurisdictions.

Company has concluded al fl federal and state income tax

ymay realize a reduction in

unrecognized tax
g

subject to routine

benefits off
f

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Service and Development Contracts

The Company is party to certain long-term contracts for systems and services that enable back offiff ce trade
processing and clearing for its product and service offerings.

Future minimum payments under service, development and agency contracts, and other contractual obligations with
initial terms greater than one year were as follows at December 31, 2021 (in thousands):

2022

2023

2024

2025

2026

Thereafter

Total

Guarantees

75,452

56,427

31,718

10,780

167

161

174,705

The Company occasionally enters into contracts that contingently require it to indemnify cff
party claims. The terms of these obligations vary and, because a maximum obligation is not explicitly stated, the
Company has determined that it is not possible to make an estimate of the amount that it could be obligated to pay
under such contracts.

ertain parties against third-

LPL Financial provides guarantees to securities clearing houses and exchanges under their standard membership
agreements, which require a member to guarantee the performance of other members. Under these agreements, if
a member becomes unable to satisfy its obligations to the clearing houses and exchanges, all other members would
be required to meet any shortfall.
exceed the cash and securities it has posted as collateral. However, the potential requirement forff
make payments under these agreements is remote. Accordingly, no liability has been recognized for these
transactions.

The Company’s liability under these arrangements is not quantifiable and could
the Company to

Loan Commitments

From time to time, LPL Financial makes loans to its advisors, primarily to newly recruited advisors to assist in the
nces, LPL Financial may make commitments to
transition process, which may be forgivable. Due to timing differe
issue such loans prior to actually funding them. These commitments are generally contingent upon certain events
occurring, including but not limited to the advisor joining LPL Financial. LPL Financial had no significant unfunded
loan commitments at December 31, 2021 or December 31, 2020.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Legal and Regulatll ory Matters

. While the Company exercises significant and complex judgments to make certain

to extensive regulation and supervision by U.S. federal and state agencies and various

ory organizations. The Company and its advisors periodically engage with such agencies and

The Company is subject
self-regulat
organizations, in the context of examinations or otherwise, to respond to inquiries, inforff mational requests and
investigations. From time to time, such engagements result in regulatory complaints or other matters, the resolution
of which has in the past and may in the future include fines, customer restitution and other remediation. Assessing
the probability of a loss occurring and the timing and amount of any loss related to a legal proceeding or regulatory
matter is inherently difficult
estimates presented in its consolidated financial statements, there are particular uncertainties and complexities
involved when assessing the potential outcomes of legal proceedings and regulatory matters. The Company’s
assessment process considers a variety of factors and assumptions, which may include: the procedural status of
the matter and any recent developments; prior experience and the experience of others in similar matters; the size
and nature of potential exposures; available defenses; the progress of fact discovery; the opinions of counsel and
experts; or the potential opportunities for settlement and the status of any settlement discussions. The Company
monitors these factors and assumptions for new developments and re-assesses the likelihood that a loss will occur
and the estimated range or amount of loss, if those amounts can be reasonably determined. The Company has
established an accrual for those legal proceedings and regulatory matters for which a loss is both probable and the
amount can be reasonably estimated.

Third-Party Insurance

The Company maintains third-party insurance coverage for certain potential legal proceedings, including those
involving certain client claims. With respect to such client claims, the estimated losses on many of the pending
matters are less than the applicable deductibles of the insurance policies.

Self-Insurarr nce

The Company has self-insurance
for certain potential liabilities through the Captive Insurance Subsidiary. Liabilities
associated with the risks that are retained by the Company are not discounted and are estimated by considering, in
part, historical claims experience, severity factors, and actuarial assumptions and estimates. The estimated
accruals for these potential liabilities could be significantly affect
assumptions and historical trends, so there are particular complexities and uncertainties involved when assessing
the adequacy of loss reserves for potential liabilities that are self-insured. As of December 31, 2021 and 2020, these
self-insurance
liabilities were $67.2 million and $51.5 million, respectively, and are included in accounts payable and
accrued liabilities in the consolidated statements of financial condition. The increase in self-insurance
during the year ended December 31, 2021 was driven by $34.8 million of additional reserves for claims that had
been incurred but not reported, which were partially offset
by $19.1 million of payments made during the period.
Self-insurance related charges are included in other expense in the consolidated statements of income for the years
ended December 31, 2021, 2020 and 2019.

ed if future occurrences and claims differ

from such

liabilities

Other Commitments

As of December 31, 2021, the Company had approximately $527.6 million of client margin loans that were
collateralized with securities having a fair value of approximately $738.6 million that LPL Financial can repledge,
loan or sell. Of these securities, approximately $81.0 million were client-owned securities pledged to the Options
Clearing Corporation as collateral to secure client obligations related to options positions. As of December 31, 2021,
there were no restrictions that materially limited the Company’s ability to repledge, loan or sell the remaining $657.6
million of client collateral.

Investment securities on the consolidated statements of financial condition include $4.6 million and $4.5 million of
trading securities pledged to the Options Clearing Corporation at December 31, 2021 and 2020, respectively, and
$15.0 million of trading securities pledged to the National Securities Clearing Corporation at December 31, 2021
and 2020.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 15 - STOCKHOLDERS’ EQUITY

Dividenddd

sdd

The payment, timing, and amount of any dividends are subject to approval by the Company’s Board of Directors as
well as certain limits under the Credit Agreement and Indentures. Cash dividends per share of common stock and
total cash dividends paid on a quarterly basis were as follows (in millions, except per share data):

2021

2020

2019

Dividend
per Share

Total Cash
Dividend

Dividend
per Share

Total Cash
Dividend

Dividend
per Share

Total Cash
Dividend

0.25

20.0

20.1

20.0

0.25

19.7

19.8

0.25 $

21.1

20.8

20.5

20.2

First quarter

Second quarter

Third quarter

Fourth quarter

Share Repurchases

The Company engages in share repurchase programs, which are approved by the Board of Directors, pursuant to
which the Company may repurchase its issued and outstanding shares of common stock from time to time.
Repurchased shares are included in treasury stock on the consolidated statements of financial condition.

On November 13, 2018, the Board of Directors authorized an increase to the Company’s existing share repurchase
program, enabling the Company to repurchase its issued and outstanding common stock from time to time. The
Company suspended share repurchases in early 2020 in light of the business and financial uncertainties created by
the COVID-19 pandemic. The Company resumed share repurchases in the third quarter of 2021 and during the
year ended December 31, 2021 had repurchased 579,771 shares of common stock at a weighted-average price of
$155.25 for a total of $90.0 million. As of December 31, 2021, the Company had $259.8 million remaining under the
existing share repurchase program. Future share repurchases may be effecte
negotiated transactions, including transactions with affiliates, with the timing of purchases and the amount of stock
purchased generally determined at the discretion of the Company within the constraints of the Credit Agreement,
the indentures, and the Company’s general working capital needs.

d in open market or privately

NOTE 16 - SHARE-BASED COMPENSATION, EMPLOYEE INCENTIVES AND BENEFIT PLANS

stock units and other equity-based compensation to the Company’s employees, non-employee

In May 2021, the Company adopted the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”), which provides for
the granting of stock options, warrants, restricted stock awards, restricted stock units, deferred stock units,
performance
directors and other service providers. The 2021 Plan serves as the successor to the Company’s 2010 Omnibus
Equity Incentive Plan (the “2010 Plan”). Following the adoption of the 2021 Plan, the Company is no longer making
grants under the 2010 Plan, and the 2021 Plan is the only plan under which equity awards are granted. However,
awards previously granted under the 2010 Plan will remain outstanding until vested, exercised or forfeited, as
applicable.

There were 17,754,197 shares authorized for grant under the 2021 Plan and 14,787,930 shares remaining available
for future issuance at December 31, 2021.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Stock OptO ions

and WarWW rarr ntstt

The Company did not grant stock options or warrants during the years ended December 31, 2021 or December 31,
2020. The folff
by the Company in calculating the fair value of its employee and officer

lowing table presents the weighted-average assumptions used in the Black-Scholes valuation model

stock options that have been granted:

Expected life (in years)

Expected stock price volatility

Expected dividend yield

Risk-free interest rate

Fair value of options

Year Ended December 31,

2019

5.43

35.80 %

1.49 %

2.47 %

24.41

The following table summarizes the Company’s stock option and warrant activity as of and for the year ended
December 31, 2021:

Outstanding — December 31, 2020

Granted

Exercised

Forfeited and Expired

Outstanding — December 31, 2021

Exercisable — December 31, 2021

Exercisable and expected to vest — December 31,
2021

Number of
Shares

Weighted-
Average
Exercise Price

2,000,383

— $

(764,979) $

(30,984) $

1,204,420

1,114,281

1,203,705

45.57

—

44.96

57.58

45.65

43.07

45.63

Weighted-
Average
Remaining
Contractual
Term
(Years)

Aggregate
Intrinsic
Value
(In thousands)

4.80 $

4.61 $

137,830

130,388

4.80 $

137,771

The following table summarizes informat
2021:

ion about outstanding stock options and warrants as of December 31,

Range of Exercise Prices

$19.85 - $25.00

$25.01 - $35.00

$35.01 - $45.00

$45.01 - $65.00

$65.01 - $75.00

$75.01 - $80.00

Outstanding

Weighted-
Average
Remaining
Life
(Years)

Weighted-
Average
Exercise
Price

4.14 $

0.88 $

5.20 $

2.79 $

6.14 $

7.12 $

4.80 $

19.85

29.38

39.48

48.88

65.50

77.53

45.65

Exercisable

Number of
Shares

305,650

137,384

249,596

81,565

192,415

147,671

1,114,281

Weighted-
Average
Exercise
Price

19.85

29.38

39.48

48.88

65.50

77.53

43.07

Total
Number of
Shares

305,650

137,384

249,596

81,565

192,415

237,810

1,204,420

of $2.6 million, $4.4 million and $9.8 million during the years ended December 31, 2021, 2020 and

The Company recognized share-based compensation related to the vesting of stock options awarded to employees
ff
and officers
2019, respectively. As of December 31, 2021, total unrecognized compensation cost related to non-vested stock
options granted to employees and officers
was $0.2 million, which is expected to be recognized over a weighted-
average period of 0.17 years.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Restricted Stock and Stock Units

The following summarizes the Company’s activity in its restricted stock awards and stock units, which include
restricted stock units, deferred stock units and perforr

rmance stock units, for the year ended December 31, 2021:

Restricted Stock Awards

Stock Units

Number of
Shares

Weighted-
Average
Grant-Date
Fair Value

Number of
Shares

Weighted-
Average
Grant-Date
Fair Value

5,560

1,593

(6,102) $

— $

1,051

64.74

156.54

72.89

—

156.54

904,445

499,227

(404,862)

(82,903)

915,907 (1) $
$
805,492

78.62

143.92

80.47

109.47

110.61

114.94

Outstanding — December 31, 2020

Granted

Vested

Forfeited

Outstanding — December 31, 2021

Expected to vest — December 31, 2021

______ ____ ____ ____ ____ ____ ____ ____ ____

(1)

Includes 72,442 vested and undistributed deferred stock units.

stock units to its employees and officers.

The Company grants restricted stock awards and deferred stock units to its directors and restricted stock units and
performance
subject to forfeiture; however, restricted stock awards are included in shares outstanding upon grant and have the
same dividend and voting rights as the Company’s common stock. The Company recognized $37.2 million, $25.1
million and $18.2 million of share-based compensation related to the vesting of these restricted stock awards and
stock units during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021,
total unrecognized compensation cost for restricted stock awards and stock units was $51.4 million, which is
expected to be recognized over a weighted-average remaining period of 1.92 years.

Restricted stock awards and stock units must vest or are

The Company also grants restricted stock units to its advisors and to financial institutions. The Company recognized
share-based compensation of $2.3 million, $2.3 million and $3.0 million related to the vesting of these awards
during the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, total
unrecognized compensation cost for restricted stock units granted to advisors and financial institutions was $5.0
million, which is expected to be recognized over a weighted-average remaining period of 2.15 years.

EmpEE

loyeeyy

Incentivesvv

and Benefit Plans

The Company participates in a 401(k) defined contribution plan sponsored by LPL Financial. All employees meeting
minimum age and length of service requirements are eligible to participate. The Company has an employer
matching program whereby employer contributions are made to the 401(k) plan, and employees are eligible forff
matching contributions after completing six months of service. For eligible employees, the Company matches up to
75% of the first 8% of an employee’s designated deferral of their eligible compensation. The Company’s total cost
related to the 401(k) plan was $20.9 million, $18.8 million and $16.2 million for the years ended December 31, 2021,
2020 and 2019, respectively, which is classified as compensation and benefits expense in the consolidated
statements of income.

The Company established its Employee Stock Purchase Plan (the “ESPP”) as a benefit to enable eligible
employees to purchase common stock of LPLFH at a discount from the market price through payroll deductions,
subject to limitations. The ESPP provides for a 15% discount on the market value of the stock at the lower of the
grant date price (first day of the offering period) and the purchase date price (last day of the offering period). The
Company recognized $2.0 million, $2.2 million and $1.8 million of share-based compensation related to the ESPP
during the years ended December 31, 2021, 2020 and 2019, respectively. The Company’s 2012 Employee Stock
Purchase Plan was replaced by its 2021 Employee Stock Purchase Plan in May 2021.

The Company maintains a non-qualified deferred compensation plan for the purpose of attracting and retaining
advisors who operate, for tax purposes, as independent contractors, by providing an opportunity forff
participating
advisors to defer receipt of a portion of their gross commissions generated primarily from commissions earned on
the sale of various products. The deferred compensation plan has been fully funded to date by participant
contributions. Plan assets are invested in mutual funds, which are held by the Company in a Rabbi Trust. The
liability for benefits accrued under the non-qualified deferred compensation plan totaled $499.2 million and $372.4

100

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

million at December 31, 2021 and 2020, respectively, which is included in other liabilities in the consolidated
statements of financial condition. The cash value of the related trust assets was $482.5 million and $361.1 million at
December 31, 2021 and 2020, respectively, which is measured at fair value and included in other assets in the
consolidated statements of financial condition.

Certain employees of the Company participate in a non-qualified deferred compensation plan that permits
participants to defer portions of their compensation and may receive a return based on the allocation of notional
investments offered under the plan. Plan assets are held by the Company in a Rabbi Trust and accounted for in the
manner described above. As of December 31, 2021, the Company has recorded assets of $17.1 million and
liabilities of $17.1 million, which are included in other assets and other liabilities, respectively, in the consolidated
statements of financial condition. As of December 31, 2020 , the Company had recorded assets of $10.1 million and
liabilities of $10.1 million.

NOTE 17 - EARNINGS PER SHARE

Net income

Basic weighted-average number of shares outstanding

Dilutive common share equivalents

Diluted weighted-average number of shares outstanding

Basic earnings per share

Diluted earnings per share

Years Ended December 31,

2021

2020

2019

459,866

472,640

559,880

80,002

1,740

81,742

79,244

1,458

80,702

82,552

2,072

84,624

5.75

5.63

5.96

5.86

6.78

6.62

The computation of diluted earnings per share excludes stock options, warrants and stock units that are anti-
dilutive. For the years ended December 31, 2021, 2020 and 2019, stock options, warrants and stock units
representing common share equivalents of 684 shares, 376,598 shares and 407,059 shares, respectively, were
anti-dilutive.

NOTE 18 - NET CAPITAL AND REGULATORY REQUIREMENTS

The Company’s registered broker-dealer, LPL Financial, is subject
under the Exchange Act), which requires the maintenance of minimum net capital. The net capital rules also provide
that the broker-dealer’s capital may not be withdrawn if the resulting net capital would be less than minimum
requirements. Additionally, certain withdrawals require the approval of the SEC and FINRA to the extent they
exceed defined levels, even though such withdrawals would not cause net capital to be less than minimum
requirements. Net capital and the related net capital requirement may fluctuate on a daily basis. LPL Financial is a
clearing broker-dealer and, as of December 31, 2021, had net capital of $87.5 million, which was $73.2 million in
excess of its minimum net capital requirement of $14.3 million.

to the SEC’s Net Capital Rule (Rule 15c3-1

In April 2021, the Company acquired the Waddell & Reed broker-dealer. The Waddell & Reed broker-dealer was
required to maintain net capital of $250,000, which represents the greater of 2% of its aggregate debits or the
minimum net capital requirement of $250,000. In December 2021 the SSECC and FINRA approved the Form BDW

101

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

ffiled yby the Waddell && Reed broker-dealer, which terminated
gorganizations, the SSECC and all jjurisdictions.

gregistration with FINRA, all other

ff
fself
g-regulat

yory

The Company’s subsidiary, PTC, also operates in a highly regulated industry and is subject to various regulatory
capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possible
additional discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary
impacts on PTC’s operations.

As of December 31, 2021 and 2020, LPL Financial and PTC met all capital adequacy requirements to which they
were subject.

NOTE 19 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET CREDIT RISK AND CONCENTRATIONS

OF CREDIT RISK

r repayable loans to recruit or support the transition of an advisor to its platform. LPL
rs forgivable loans for similar purposes that may convert to repayable loans upon advisor

LPL Financial may offeff
Financial also offeff
termination. LPL Financial may incur losses if advisors do not fulfill their obligations with respect to these loans. To
mitigate this risk, LPL Financial monitors the performance
repayable loans.

and creditworthiness of the advisor prior to offeff

ring

LPL Financial’s client securities activities are transacted on either a cash or margin basis. In margin transactions,
LPL Financial extends credit to the advisor’s client, subject to various regulatory and internal margin requirements,
which is collateralized by cash and securities in the client’s account. As clients write options contracts or sell
securities short, LPL Financial may incur losses if the clients do not fulfill their obligations and the collateral in the
clients’ accounts is not suffici
LPL Financial monitors margin levels daily and clients are required to deposit additional collateral, or reduce
positions, when necessary.

ent to fully cover losses that clients may incur from these strategies. To control this risk,

LPL Financial is obligated to settle transactions with brokers and other financial institutions even if its advisors’
clients fail to meet their obligation to LPL Financial. Clients are required to complete their transactions on the
settlement date, generally two business days after the trade date. If clients do not fulfill their contractual obligations,
LPL Financial may incur losses. In addition, the Company occasionally enters into certain types of contracts to fulfill
its sale of when-issued securities. When-issued securities have been authorized but are contingent upon the actual
issuance of the security. LPL Financial has established procedures to reduce this risk by generally requiring that
clients deposit cash or securities into their account prior to placing an order.

LPL Financial may at times hold equity securities on both a long and short basis that are recorded on the
consolidated statements of financial condition at market value. While long inventory positions represent LPL
Financial’s ownership of securities, short inventory positions represent obligations of LPL Financial to deliver
specified securities at a contracted price, which may diffeff
the transaction. Accordingly, both long and short inventory positions may result in losses or gains to LPL Financial
as market values of securities fluctuate. To mitigate the risk of losses, long and short positions are marked-to-
market daily and are continuously monitored by LPL Financial.

r from market prices prevailing at the time of completion of

NOTE 20 - SUBSEQUENT EVENTS

On February 3, 2022, the Company announced that the Board of Directors declared a cash dividend of $0.25 per
share on the Company’s outstanding common stock to be paid on March 29, 2022 to all stockholders of record on
March 15, 2022.

102

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officff er and Chief Financial Offiff cer, evaluated the
effect
iveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive
Officer
covered by this report were effect

and Chief Financial Offiff cer concluded that our disclosure controls and procedures as of the end of the period

ive.

Change in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter ended
December 31, 2021, that have materially affect
over financial reporting.

ed, or are reasonably likely to materially affect

, our internal control

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act as the process designed by, or under the supervision of, our Chief Executive Officer
ff
and effect
regarding the reliability of our financial reporting process and the preparation of our consolidated financial
statements for external purposes in accordance with generally accepted accounting principles.

ed by our board of directors, management and other personnel, to provide reasonable assurance

and Chief Financial Offiff cer,

Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide
reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated
financial statements in accordance with accounting principles generally accepted in the United States, and that
receipts and expenditures are being made only in accordance with authorizations of management and the directors
of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company’s assets that could have a material effect
on our consolidated
financial statements.

As of December 31, 2021, management conducted an assessment of the effecti
– Integrated Framework (2013) issued by
financial reporting based on the framework established in Internal Control
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management
has determined that our internal control over financial reporting as of December 31, 2021 was effect

veness of our internal control over

ive.

Deloitte & Touche LLP,P our independent registered public accounting firm, has issued an audit report appearing on
the following page on the effeff ctiveness of our internal control over financial reporting as of December 31, 2021.

103

RE OPORT OOF INDEPENDENT

GREG SISTERED PUBL CIC CACCOCOUNT GING FIRM

To the stockholders and the Board of Directors of
LPL Financial Holdings Inc.
San Diego, California

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of LPL Financial Holdings Inc. and subsidiaries (the
“Company”) as of December 31, 2021, based on criteria established in Internal Control
tt — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion,
the Company maintained, in all material respects, effecti
December 31, 2021, based on criteria established in Internal Control
COSO.

ve internal control over financial reporting as of

tt — Integrated Framework (2013) issued by

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the
Company and our report dated February 22, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

iveness of internal control over financial reporting, included in the accompanying

The Company’s management is responsible for maintaining effecti
its assessment of the effect
management's annual report on internal control over financial reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.

ve internal control over financial reporting and for

the audit to obtain reasonable assurance about whether effecti

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
performff
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effect
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

iveness of internal control based on the assessed risk, and performing

ve internal control over financial reporting

such other procedures as we

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect

on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effect
iveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

San Diego, California
February 22, 2022

104

Item 9B. Other Information

None.

Item 10. Directors, Executive Offiff cers and Corporate Governance

PART III

Other than the information relating to our executive officers
ff
the information required to be furnished pursuant to this item is incorporated by reference to the Company’s
definitive proxy statement for the 2022 Annual Meeting of Stockholders, which the Company intends to file with the
SEC within 120 days of the end of the fiscal year end to which this report relates.

provided in Part I of this Annual Report on Form 10-K,

Items 11, 12, 13 and 14.

The information required by Items 11, 12, 13 and 14 is incorporated by reference to the Company’s definitive proxy
statement for the 2022 Annual Meeting of Stockholders, which the Company intends to file with the SEC within 120
days of the end of the fiscal year end to which this report relates.

Item 15. Exhibits and Financial Statement Schedules

(a) Consolidated Finanii

cial Statements and Schedules

PART IV

Data” of
Our consolidated financial statements are included in “Item 8. Financial
this Annual Report on Form 10-K. Other financial statement schedules have been omitted because they are not
applicable, not material, or the informat

Statementstt and Supplementary

ion is otherwise included.

(b) Exhibits

Exhibit No.
3.1

3.3

3.4

4.1

4.3

4.4

10.1

p
Amended and Restated Certificate of Incorporation of LPL Investment Holdings Inc., dated
November 23, 2010 (incorporated by reference to Amendment No. 2 to the Registration Statement
on Form S-1 filed on July 9, 2010, File No. 333-167325).

Description of Exhibit

Certificate of Ownership and Merger Merging LPL Financial Holdings Inc. with and into LPL
Investment Holdings Inc., dated June 14, 2012 (incorporated by reference to the Form 8-K filed on
June 19, 2012, File No. 001-34963).

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of LPL Financial
Holdings Inc., dated May 8, 2014 (incorporated by reference to the Form 8-K filed on May 9, 2014,
File No. 001-34963).

Fifth Amended and Restated Bylaws of LPL Financial Holdings Inc. (incorporated by reference to the
Form 8-K filed on March 12, 2014, File No. 001-34963).
Indenture, dated as of March 10, 2017, by and among LPL Holdings, Inc., the Guarantors listed
thereto and U.S. Bank National Association, as Trustee (incorporated by reference to the Form 8-K
filed on March 10, 2017, File No. 001-34963).

First Supplemental Indenture, dated as of September 21, 2017, among LPL Holdings, Inc., certain
subsidiaries of the Company as Guarantors and U.S. Bank National Association, as Trustee
(incorporated by reference to the Form 8-K filed on September 21, 2017, File No. 001-34963).

Indenture, dated as of November 12, 2019, among LPL Holdings, U.S. Bank National Association,
as trustee, and certain subsidiaries of LPL Holdings, as guarantors (incorporated by reference to the
Form 8-K filed on November 12, 2019, File No. 001-34963).

Description of Registrant’s Securities (incorporated by reference to the Form 10-K filed on February
21, 2020 File No. 001-34963).
Form of Indemnification Agreement (incorporated by reference to Amendment No. 2 to the
Registration Statement on Form S-1 filed on July 9, 2010, File No. 333-167325).
LPL Investment Holdings Inc. 2010 Omnibus Equity Incentive Plan (incorporated by reference to
Amendment No. 2 to the Registration Statement on Form S-1 filed on July 9, 2010, File No.
333-167325).

105

Exhibit No.
10.3

10.6

10.7

10.8

10.9

10.10

10.11

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

Description of Exhibit

Form of Senior Management Stock Option Award granted under the LPL Investment Holdings Inc.
2010 Omnibus Equity Incentive Plan (incorporated by reference to the Form 10-K filed on February
26, 2013, File No. 001-34963).
Form of Employee Restricted Stock Unit Award granted under the LPL Financial Holdings Inc. 2010
Omnibus Equity Incentive Plan (incorporated by reference to the Form 10-K filed on February 26,
2014, File No. 001-34963).
Form of Employee Stock Option Award granted under the LPL Financial Holdings Inc. 2010
Omnibus Equity Incentive Plan (incorporated by reference to the Form 10-K filed on February 26,
2014, File No. 001-34963).
Amended and Restated LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan
(incorporated by reference to the Form 8-K filed on May 15, 2015, File No. 001-34963).
Form of Employee Stock Option Award granted under the LPL Financial Holdings Inc. Amended and
Restated 2010 Omnibus Equity Incentive Plan (incorporated by reference to the Form 10-K filed on
February 24, 2017, File No. 001-34963).
Form of Employee Restricted Stock Unit Award granted under the LPL Financial Holdings Inc.
Amended and Restated 2010 Omnibus Equity Incentive Plan (incorporated by reference to the Form
10-K filed on February 24, 2017, File No. 001-34963).
Form of Employee Performance Stock Unit Award granted under the LPL Financial Holdings Inc.
Amended and Restated 2010 Omnibus Equity Incentive Plan (incorporated by reference to the Form
10-K filed on February 24, 2017, File No. 001-34963).

LPL Financial Holdings Inc. 2012 Employee Stock Purchase Plan, as amended and restated,
effective as of October 29, 2019 (incorporated by reference to the Form 10-K filed on February 23,
2021, File No. 001-34963).

LPL Financial Holdings Inc. 2021 Omnibus Equity Incentive Plan (incorporated by reference to the
Form 8-K filed on May 5, 2021, File No. 001-34963).
LPL Financial Holdings Inc. 2021 Employee Stock Purchase Plan (incorporated by reference to the
Form 8-K filed on May 5, 2021, File No. 001-34963).
Form of Employee Restricted Stock Unit Award granted under the LPL Financial Holdings Inc. 2021
Omnibus Equity Incentive Plan (incorporated by reference to the Form 10-Q filed on August 3, 2021,
File No. 001-34963).
Form of Employee Performance Stock Unit Award granted under the LPL Financial Holdings Inc.
2021 Omnibus Equity Incentive Plan (incorporated by reference to the Form 10-Q filed on August 3,
2021, File No. 001-34963).
LPL Financial Holdings Inc. Non-Employee Director Compensation Policy (incorporated by
reference to the Form 10-K filed on February 21, 2020 File No. 001-34963).

LPL Financial Holdings Inc. Non-Employee Director Deferred Compensation Plan (incorporated by
reference to the Form 10-K filed on February 25, 2016, File No. 001-34963).
LPL Financial Holdings Inc. Non-Employee Director Deferred Compensation Plan, as amended May
5, 2021.*
LPL Financial Holdings Inc. Non-Employee Director Compensation Policy, as amended May 5,
2021.*
LPL Financial LLC Executive Severance Plan, amended and restated as of February 23, 2017
(incorporated by reference to the Form 10-K filed on February 24, 2017, File No. 001-34963).
Leave Letter Agreement between LPL Financial LLC and Scott Seese, dated February 25, 2021
(incorporated by reference to the Form 10-Q filed on November 2, 2021, File No. 001-34963).
Credit Agreement, dated as of March 29, 2012, by and among LPL Investment Holdings Inc., LPL
Holdings, Inc., the several lenders from time to time party thereto, and Bank of America, N.A. as
Administrative Agent Collateral Agent, Letter of Credit Issuer, and Swingline Lender (incorporated by
reference to the Form 8-K filed on April 2, 2012, File No. 001-34963).

106

bit No.

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

21.1
23.1
31.1
31.2
32.1

32.2

Description of Exhibit
First Amendment and Incremental Assumption Agreement, dated as of May 13, 2013, by and among
LPL Financial Holdings Inc., LPL Holdings, Inc., certain subsidiaries of the Company, as Guarantors,
the several lenders from time to time party thereto, and Bank of America, N.A. as Administrative
Agent (incorporated by reference to the Form 8-K filed on May 13, 2013, File No. 001-34963).
Second Amendment, Extension and Incremental Assumption Agreement, dated as of October 1,
2014, by and among LPL Financial Holdings Inc., LPL Holdings, Inc., certain subsidiaries of the
Company as Guarantors, the lenders and additional lenders party thereto, Bank of America, N.A. as
Administrative Agent and Current Agent and JP Morgan Chase Bank, N.A., as Future Agent
(incorporated by reference to the Form 10-Q filed on October 30, 2014, File No. 001-34963).
Third Amendment, Extension, and Incremental Assumption Agreement, dated as of November 20,
2015 by and among LPL Financial Holdings Inc., LPL Holdings, Inc., certain subsidiaries of the
Company, as Guarantors, the lenders and additional lenders party thereto, and JPMorgan Chase
Bank, N.A. as Administrative Agent (incorporated by reference to the Form 10-K filed on February
25, 2016, File No. 001-34963).
Fourth Amendment Agreement, dated as of March 10, 2017, among LPL Financial Holdings Inc.,
LPL Holdings, Inc., certain subsidiaries of the Company, as Guarantors, the lenders party thereto,
JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., JPMorgan Chase
bank, N.A. and Morgan Stanley Bank, N.A., as Letter of Credit Issuers and JPMorgan Chase Bank,
N.A. and Morgan Stanley Bank, N.A., as Swingline Lenders (incorporated by reference to the Form
8-K filed on March 10, 2017, File No. 001-34963).

Amendment Agreement, dated June 20, 2017, among LPL Holdings, Inc., LPL Financial Holdings
Inc. and JPMorgan Chase Bank, N.A. as Administrative Agent (incorporated by reference to the
Form 10-Q filed on August 1, 2017, File No. 001-34963).

Second Amendment, dated as of September 21, 2017, among LPL Financial Holdings Inc., LPL
Holdings Inc., certain subsidiaries of the Company, as Guarantors, the incremental lenders party
thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., JPMorgan
Chase bank, N.A. and Morgan Stanley Bank, N.A., as Letter of Credit Issuers and JPMorgan Chase
Bank, N.A., Morgan Stanley Bank, N.A. and Goldman Sachs Bank USA, as Swingline Lenders
(incorporated by reference to the Form 8-K filed on September 21, 2017, File No. 001-34963).

Third Amendment, dated as of April 25, 2019, among LPL Financial Holdings Inc., LPL Holdings Inc.,
certain subsidiaries of the Company, as Guarantors, the incremental lenders party thereto,
JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., JPMorgan Chase
Bank, N.A. and Morgan Stanley Bank, N.A., as Letter of Credit Issuers and JPMorgan Chase Bank,
N.A., Morgan Stanley Bank, N.A. and Goldman Sachs Bank USA, as Swingline Lenders
(incorporated by reference to the Form 10-Q filed on July 30, 2019, File No. 001-34963).

Fourth Amendment, dated as of November 12, 2019, among LPL Financial Holdings Inc., LPL
Holdings Inc., certain subsidiaries of the Company, as Guarantors, the incremental lenders party
thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A., JPMorgan
Chase Bank, N.A. and Morgan Stanley Bank, N.A., as Letter of Credit Issuers and JPMorgan Chase
Bank, N.A., Morgan Stanley Bank, N.A. and Goldman Sachs Bank USA, as Swingline Lenders
(incorporated by reference to the Form 8-K filed on November 12, 2019, File No. 001-34963).

Fifth Amendment, dated March 15, 2021, among LPL Financial Holdings Inc., LPL Holdings, Inc.,
certain subsidiaries of the Company, as Subsidiary Guarantors (as defined therein), the Incremental
Revolving Lenders (as defined therein), JPMorgan Chase Bank, N.A., as administrative agent and
collateral agent, letter of credit issuer and swingline lender, and the lenders and parties party thereto
from time to time (incorporated by reference to the Form 8-K filed on March 15, 2021, File No.
001-34963).
BETA Services First Amended and Restated Master Subscription Agreement, dated as of January
29, 2021, between LPL Financial LLC and Refinitiv US LLC (incorporated by reference to the Form
10-Q filed on May 4, 2021, File No. 001-34963).†
List of Subsidiaries of LPL Financial Holdings Inc.*
Consent of Deloitte & Touche LLP, independent registered public accounting firm.*
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a).*
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a).*
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.**
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.**

107

Exhibit No.

Description of Exhibit

101.SCH Inline XBRL Taxonomy Extension Schema*

101.CAL

101.DEF

101.LAB

101.PRE

104

Inline XBRL Taxonomy Extension Calculation*

Inline XBRL Taxonomy Extension Definition*

Inline XBRL Taxonomy Extension Label*

Inline XBRL Taxonomy Extension Presentation*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______ ____ ____ ____ ____ ____ ____ ____ ___

* Filed herewith.

** Furnished herewith.

† Pursuant to 17 C.F.R. §§230.406 and 230.83, the confidential portions of this exhibit have been omitted and

are marked accordingly.

Item 16. Form 10-K Summary

None.

108

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.

S GSIGNATU SRES

LPL Financial Holdings Inc.

By: /s/ Dan H. Arnold

Dan H. Arnold

President and Chief Executive Officer

Dated: February 22, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed
below by the folff

lowing persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Dan H. Arnold
Dan H. Arnold

/s/ Matthew J. Audette
Matthew J. Audette

/s/ Brent B. Simonich
Brent B. Simonich

/s/ Edward Bernard
Edward Bernard

/s/ Paulett Eberhart
Paulett Eberhart

/s/ William F. Glavin Jr.
William F. Glavin Jr.

/s/ Allison Mnookin
Allison Mnookin

/s/ Anne M. Mulcahy
Anne M. Mulcahy

/s/

James S. Putnam

/s/ Richard P. Schifter
Richard P. Schifter

/s/ Corey E. Thomas
Corey E. Thomas

President, Chief Executive Officer

, and Director

(Principal Executive Officff er)

February 22, 2022

Chief Financial Officff er (Principal Financial Officeff

February 22, 2022

Chief Accounting Officeff

r (Principal Accounting

Officeff

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

Director

February 22, 2022

109

CORPORATE INFORMATION

Transfer Agent
Computershare
P.O. Box 505000
Louisville, KY 40233

Accounting Firm
Deloitte & Touche LLP
San Diego, CA

Legal Counsel
Ropes & Gray LLP
Boston, MA

Stock Listing & Trading Symbol
LPL Financial Holdings Inc.’s common stock
is listed on the Nasdaq Global Select Market
under the trading symbol “LPLA.”

Form 10-K
A copy of our annual report on Form 10-K, ﬁled
with the Securities and Exchange Commission,
is available without charge by contacting
our Investor Relations department.

Annual Meeting
LPL Financial Holding Inc.’s annual meeting
of stockholders will be held at:

8:00 a.m. ET on May 18, 2022
LPL Financial
1055 LPL Way,
Fort Mill, SC 29715

Board of Directors (AS OF 03/21/22)
Dan H. Arnold
President and Chief Executive Officer
LPL Financial Holdings Inc.

Edward C. Bernard
Former Vice Chair and Vice President
T. Rowe Price Group, Inc.

H. Paulett Eberhart
Chair and Chief Executive Officer
HMS Ventures

William F. Glavin, Jr.
Former Chair and Chief Executive Officer
OppenheimerFunds, Inc.

Allison H. Mnookin
Former Chief Executive Officer
Quick Base, Inc.

Anne M. Mulcahy
Former Chair and Chief Executive Officer
Xerox Corporation

James S. Putnam
Chair of the Board of Directors
LPL Financial Holdings Inc.

Richard P. Schifter
Senior Advisor
TPG

Corey E. Thomas
Chair and Chief Executive Officer
Rapid7, Inc.

Investor Relations
Send requests for ﬁnancial information to:

Chris Koegel
Senior Vice President, Investor Relations
LPL Financial
75 State Street, Floor 22
Boston, MA 02109
(617) 897-4574 | investor.relations@lpl.com

LPL 2021 Annual Report

AUSTIN

LPL Financial
13620 N FM 620
Building C, Suite 200
Austin, TX 78717

SAN DIEGO

LPL Financial
4707 Executive Drive
San Diego, CA 92121

CAROLINAS

LPL Financial
1055 LPL Way
Fort Mill, SC 29715

BOSTON

LPL Financial
75 State Street, Floor 22
Boston, MA 02109

(800) 877-7210 | lpl.com

Securities and advisory services offered through LPL Financial LLC (LPL), a registered investment advisor and
broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice
from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no
representation with respect to such entity. Prior periods have not been updated for fractional share activity.

If your ﬁnancial professional is located at a bank or credit union, please note that the bank/credit union is not registered
as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit
union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and
not affiliates of, the bank/credit union.

Securities and insurance offered through LPL or its affiliates are:

Not Insured by FDIC/NCUA or
Any Other Government Agency

Not Bank/Credit Union Guaranteed

Not Bank/Credit Union Deposits or Obligations

May Lose Value

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