Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)



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

For the quarterly period ended September 30, 2017



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

For the transition period from to

Commission File Number: 001-34963

LPL Financial Holdings Inc.

(Exact name of registrant as specified in its charter)



Delaware	20-3717839
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

75 State Street, Boston, MA 02109

(Address of Principal Executive Offices) (Zip Code)

(617) 423-3644

(Registrant’s telephone number, including area code)

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 for 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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o	(Do not check if a smaller reporting company)
		Smaller reporting company o
		Emerging growth company o

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

The number of shares of Common Stock, par value $0.001 per share, outstanding as of October 24, 2017 was 90,190,130.



TABLE OF CONTENTS	Page

WHERE YOU CAN FIND MORE INFORMATION	ii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	ii
PART I — FINANCIAL INFORMATION	1
1. Financial Statements (unaudited)	22
Condensed Consolidated Statements of Income (unaudited)	22
Condensed Consolidated Statements of Comprehensive Income (unaudited)	23
Condensed Consolidated Statements of Financial Condition (unaudited)	24
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	25
Condensed Consolidated Statements of Cash Flows (unaudited)	26
Notes to Condensed Consolidated Financial Statements (unaudited)	28
1. Organization and Description of the Company	28
2. Summary of Significant Accounting Policies	28
3. Acquisitions	30
4. Fair Value Measurements	31
5. Held-to-Maturity Securities	33
6. Goodwill and Other Intangible Assets	33
7. Debt	34
8. Commitments and Contingencies	36
9. Stockholders’ Equity	38
10. Share-Based Compensation	38
11. Earnings Per Share	41
12. Income Taxes	41
13. Net Capital and Regulatory Requirements	41
14. Financial Instruments with Off-Balance-Sheet Credit Risk and Concentrations of Credit Risk	42
15. Subsequent Events	42
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Business Overview	1
Executive Summary	1
Our Sources of Revenue	2
How We Evaluate Our Business	4
Legal & Regulatory Matters	5
Acquisitions, Integrations, and Divestitures	6
Economic Overview and Impact of Financial Market Events	7
Results of Operations	8
Liquidity and Capital Resources	17
Debt and Related Covenants	19
Off-Balance Sheet Arrangements	21
Contractual Obligations	21
Fair Value of Financial Instruments	21
Critical Accounting Policies and Estimates	21
3. Quantitative and Qualitative Disclosures About Market Risk	43
4. Controls and Procedures	47
PART II — OTHER INFORMATION	48
1. Legal Proceedings	48
1A. Risk Factors	48
2. Unregistered Sales of Equity Securities and Use of Proceeds	49
3. Defaults Upon Senior Securities	49
4. Mine Safety Disclosures	49
5. Other Information	49
6. Exhibits	49
SIGNATURES	51

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly, and current reports, proxy statements, and other information required by the Securities Exchange Act of 1934, as amended (“Exchange Act”), with the Securities and Exchange Commission (“SEC”). You may read and copy any document we file with the SEC at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, U.S.A. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC’s internet site at http://www.sec.gov.

On our internet site, http://www.lpl.com, we post the following filings 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. Hard copies of all such filings are available free of charge by request via email (investor.relations@lpl.com), telephone (617) 897-4574, or mail (LPL Financial Investor Relations at 75 State Street, 22nd Floor, Boston, MA 02109). The information contained or incorporated on our website is not a part of this Quarterly Report on Form 10-Q.

When we use the terms “LPLFH”, “we”, “us”, “our”, and the “Company”, we mean LPL Financial Holdings Inc., a Delaware corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this Quarterly Report on Form 10-Q regarding the Company’s future financial and operating results, outlook, success in recruiting and onboarding advisors from the broker/dealer network of National Planning Holdings, Inc. (“NPH”), growth, plans, business strategies, liquidity, future indebtedness, future share repurchases, and future dividends, including statements regarding future resolution of regulatory matters, legal proceedings and related costs, future revenues and expenses, and projected savings and anticipated improvements to the Company’s operating model, services, and technologies as a result of its initiatives, programs and/or acquisitions, as well as any other statements that are not related to present facts or current conditions or that are not purely historical, constitute forward-looking statements. These forward-looking statements are based on the Company’s historical performance and its plans, estimates, and expectations as of October 31, 2017. The words “anticipates,” “believes,” “expects,” “may,” “plans,” “predicts,” “will,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking 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 different than those expressed or implied by forward-looking statements. Important factors that could cause or contribute to such differences include: changes in general economic and financial market conditions, including retail investor sentiment; fluctuations in the value of brokerage and advisory assets; fluctuations in levels of net new assets and the related impact on fee revenue; fluctuations in the number of retail investors served by the Company; effects of competition in the financial services industry; changes in the number of the Company’s financial advisors and institutions, and their ability to market effectively financial products and services; the success of the Company in attracting and retaining financial advisors and institutions; changes in interest rates and fees payable by banks participating in the Company’s cash sweep program, including the Company’s success in negotiating agreements with current or additional counterparties; the Company’s strategy in managing cash sweep program fees; changes in the growth and profitability of the Company’s fee-based business; the effect of current, pending, and future legislation, regulation, and regulatory actions, including the United States Department of Labor (“DOL”) final rule on conflicts of interest (Definition of the term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice, the “DOL Rule”), which became applicable on June 9, 2017, and disciplinary actions imposed by federal and state regulators and self-regulatory organizations; the costs of settling and remediating issues related to pending or future regulatory matters or legal proceedings; changes made to the Company’s offerings and services in response to current, pending, and future legislation, regulation, and regulatory actions, including the DOL Rule, and the effect that such 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 its credit agreement and the indenture governing its senior notes; the price, the availability of shares, and trading volumes of the Company’s common stock, which will affect the timing and size of future share repurchases by the Company; execution of the Company’s plans and its success in realizing the expense savings and service improvements and efficiencies expected to result from its initiatives and programs, particularly its expense plans and technological initiatives; the Company’s success in

negotiating and developing commercial arrangements with third-party services providers; the performance of third-party service providers to which business processes are transitioned; the Company’s ability to control operating risks, information technology systems risks, cybersecurity risks, and sourcing risks; and the other factors set forth in Part I, “Item 1A. Risk Factors” in the Company’s 2016 Annual Report on Form 10-K, as may be amended or updated in the Company’s Quarterly Reports on Form 10-Q. In particular, the Company can provide no assurance that the assets reported as serviced by NPH’s financial advisors will translate into assets serviced at LPL Financial. Important factors that could cause or contribute to such differences include: difficulties and delays in recruiting or transferring the licenses of NPH’s advisors and/or onboarding the clients or businesses of NPH’s advisors; disruptions of the Company’s business due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with its financial advisors and their clients, employees, other business partners or governmental entities; the inability to implement onboarding plans and other consequences associated with acquisitions; the choice by clients of NPH’s advisors not to open brokerage and/or advisory accounts at LPL Financial and/or move their respective assets from NPH to a new account at LPL Financial; changes in general economic and financial market conditions, including retail investor sentiment; fluctuations in the value of assets under custody; and effects of competition in the financial services industry, including competitors’ success in recruiting NPH’s advisors. 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 quarterly report, 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 quarterly report.

PART I — FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Business Overview

We are a leader in the retail financial advice market, the nation’s largest independent broker-dealer (based on total revenues, Financial Planning magazine June 1996-2017), a top custodian for registered investment advisors (“RIAs”), and a leading independent consultant to retirement plans. We provide an integrated platform of brokerage and investment advisory services to more than 14,000 independent financial advisors (our “advisors”), including financial advisors at more than 700 financial institutions across the country, enabling them to provide their retail investors (“clients”) with objective financial advice through a lower conflict model. We also support approximately 3,700 financial advisors who are affiliated and licensed with insurance companies that use our customized clearing, advisory platforms, and technology solutions.

Through our advisors, we are one of the largest distributors of financial products and services in the United States, and we believe we are one of the top five firms in the United States ranked by number of advisors.

We believe that objective financial guidance is a fundamental need for everyone. We enable our advisors to focus on what they do best—create the personal, long-term relationships that are the foundation for turning life’s aspirations into financial realities. We do that through a singular focus on providing our advisors with the front-, middle-, and back-office support they need to serve the large and growing market for independent investment advice. We believe that LPL Financial LLC, our broker-dealer subsidiary (“LPL Financial”), is the only company that offers advisors the unique combination of an integrated technology platform, comprehensive self-clearing services, and open architecture access to a wide range of non-proprietary products, all delivered in an environment unencumbered by conflicts from product manufacturing, underwriting, and market-making.

We believe investors achieve better outcomes when working with a financial advisor. LPL Financial strives to make it easy for advisors to do what is best for their clients, while protecting advisors and investors and promoting independence and choice through access to a wide range of diligently evaluated non-proprietary products.

Executive Summary

Net Income

Net income for the third quarter of 2017 was $58.1 million or $0.63 per share, which compares to $52.0 million, or $0.58 per share, in the third quarter of 2016. Increased cash sweep revenue and advisory fee revenue contributed to the earnings per share growth.

Asset Growth Trends

Total assets served were $560.0 billion as of September 30, 2017, up 11.5% from $502.4 billion as of September 30, 2016. Total net new assets were $2.9 billion for the three months ended September 30, 2017, compared to $1.0 billion for the same period in 2016.

Net new advisory assets were $6.9 billion for the three months ended September 30, 2017, compared to $4.1 billion in the same period in 2016. As of September 30, 2017, our advisory assets had grown to $250.2 billion from the prior year balance of $205.5 billion and represented 44.7% of total brokerage and advisory assets served.

Net new brokerage assets were an outflow of $4.0 billion for the three months ended September 30, 2017, compared to an outflow of $3.1 billion for the same period in 2016. The increase in net new brokerage asset outflows primarily reflected the impact of brokerage to advisory asset conversions between periods. As of September 30, 2017, our brokerage assets had grown to $309.8 billion from $296.9 billion as of September 30, 2016.

Gross Profit Trends

Gross profit, a non-GAAP measure, of $386.9 million for the three months ended September 30, 2017, reflected an increase of 11.5% in comparison to $346.9 million for the quarter ended September 30, 2016. Management presents gross profit, which is calculated as net revenues less commission and advisory expenses and brokerage, clearing, and exchange fees, because we believe that measure may be useful to investors in evaluating the Company’s core operating performance before indirect costs that are general and administrative in nature. See footnote 7 to the Financial Metrics table within the “How We Evaluate Our Business” section for additional information on gross profit. The increase in period-over-period gross profit was primarily due to increases in cash sweep revenue from the impact of the increases in the target range for the federal funds effective rate

announced in each of March and June 2017, increases in advisory revenues resulting from net new assets and market gains as represented by higher levels of the S&P 500 index.

Acquisition of NPH

On August 15, 2017, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with National Planning Holdings, Inc. (“NPH”), and its four broker-dealer subsidiaries (collectively with NPH, the “NPH Sellers”) to acquire certain assets and rights of the NPH Sellers, including business relationships with financial advisors who become affiliated with LPL Financial. We paid $325 million to the Sellers at closing and have agreed to a potential contingent payment of up to $122.8 million.

Capital Management Activity

We returned $47.5 million of capital to shareholders during the three months ended September 30, 2017, including $22.5 million of dividends and $25.0 million of share repurchases (representing 539,385 shares).

On September 21, 2017 we issued $400 million in aggregate principal amount of add-on senior notes above par at a yield to worst of 5.12% (coupon rate of 5.75%). We used $200 million in proceeds of the offering to pay down a portion of our term loan, and we plan to use the remaining proceeds for general corporate purposes, including funding costs related to our acquisition of NPH. As a result of the refinancing, we also reduced the spread on the interest rates on our term loan and revolving credit facility by 25 basis points each.

Our Sources of Revenue

Our revenues are derived primarily from fees and commissions from products and advisory services offered by our 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 revenues through our cash sweep program and the access we provide to a variety of product providers with the following product lines:



• Alternative Investments		• Retirement Plan Products
• Annuities		• Separately Managed Accounts
• Exchange Traded Products		• Structured Products
• Insurance Based Products		• Unit Investment Trusts
• Mutual Funds

Under our self-clearing platform, we custody the majority of client assets invested in these financial products, for which we provide statements, transaction processing, and ongoing account management. In return for these services, mutual funds, insurance companies, banks, and other financial product manufacturers pay us fees based on asset levels or number of accounts managed. We also earn interest from margin loans made to our advisors’ clients.

We regularly review various aspects of our operations and service offerings, including our policies, procedures, and platforms, in response to marketplace developments. We currently expect to implement changes to aspects of our operations and service offerings in order to position our advisors for long-term growth and to align with competitive and regulatory developments. For example, we regularly review the structure and fees of our advisory programs, including related disclosures, in the context of the changing regulatory environment for retirement accounts.

We track recurring revenue, a characterization of net revenue and a statistical measure, which we define to include our revenues from asset-based fees, advisory fees, trailing commissions, cash sweep programs, and certain other fees that are based upon client accounts and advisors. Because certain recurring revenues are associated with asset balances, they will fluctuate depending on the market values and current interest rates. Accordingly, our recurring revenue can be negatively impacted by adverse external market conditions. However, recurring revenue is meaningful to us despite these fluctuations because it is not dependent upon transaction volumes or other activity-based revenues, which are more difficult to predict, particularly in declining or volatile markets.

The table below summarizes the sources and drivers of our revenue:



			Nine Months Ended September 30, 2017
	Sources of Revenue	Primary Drivers	Net Revenues (millions)	% of Total Net Revenue	Recurring Revenues (millions)	% Recurring
Advisor-driven revenue with ~85%-90% total payout ratio	Commission	- Sales - Transactions - Brokerage asset levels	$1,245	39%	$716	57.5%
Advisor-driven revenue with ~85%-90% total payout ratio	Advisory	- Corporate advisory asset levels	$1,033	33%	$1,028	99.5%
Attachment revenue retained by us	Asset-Based - Cash Sweep Fees - Sponsorship Fees - Record Keeping	- Cash balances - Interest rates - Number of accounts - Client asset levels	$515	16%	$507	98.4%
	Transaction and Fee - Trades - Client (Investor) Accounts - Advisor Seat and Technology	- Client activity - Number of clients - Number of advisors - Number of accounts - Premium technology subscribers	$321	10%	$185	57.6%
	Other	- Margin accounts - Alternative investment transactions	$51	2%	$20	39.2%
	Total		$3,165	100%	$2,456	77.6%

How We Evaluate Our Business

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



	Nine Months Ended September 30,
Operating Metrics	2017			2016			% Change
Brokerage Assets (in billions)(1)(2)	$	309.8		$	296.9		4	%
Advisory Assets (in billions)(1)(3)	250.2			205.5			22	%
Total Brokerage and Advisory Assets served(in billions)(1)	$	560.0		$	502.4		11	%

Net New Brokerage Assets (in billions)(4)	$	(12.9	)	$	(5.6	)	n/m
Net New Advisory Assets (in billions)(5)	18.8			$	8.9		n/m
Total Brokerage and Advisory Net New Assets (in billions)	$	5.9		$	3.3		n/m

Insured Cash Account Balances (in billions)(1)	$	21.9		$	21.1		4	%
Deposit Cash Account Balances (in billions)(1)	4.1			4.2			(2	)%
Money Market Account Balances (in billions)(1)	2.3			3.9			(41	)%
Total Cash Sweep Balances	$	28.3		$	29.2		(3	)%

Advisors	14,253			14,185			—	%



	Three Months Ended September 30,						Nine Months Ended September 30,
Financial Metrics	2017			2016			2017			2016
Total net revenues (in millions)	$	1,064.1		$	1,017.4		$	3,165.0		$	3,041.9
Total net revenues increase (decrease) from prior period	4.6		%	(3.5		)%	4.0		%	(6.5		)%
Recurring revenue as a % of net revenue	79.6		%	74.3		%	77.6		%	74.0		%
Pre-tax income (in millions)	$	96.6		$	68.2		$	284.7		$	232.6
Net income (in millions)	$	58.1		$	52.0		$	174.8		$	150.2
Earnings per share, diluted	$	0.63		$	0.58		$	1.90		$	1.67

Non-GAAP Measures(6)
Gross profit (in millions)(7)	$	386.9		$	346.9		$	1,151.6		$	1,047.5
Gross profit growth from prior period(7)	11.5		%	2.1		%	9.9		%	1.2		%
Gross profit as a % of net revenue(7)	36.4		%	34.1		%	36.4		%	34.4		%

_______________________________

(1)

Brokerage and advisory assets served are comprised 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. Insured cash account balances, money market account balances, and beginning in July 2016, deposit cash account balances are included in brokerage and advisory assets served. Our brokerage and advisory assets does not include retirement plan assets, which are custodied with various third-party providers, supported by advisors licensed with LPL Financial. The Company estimated such assets at $137 billion, representing approximately 41,000 retirement plans, at September 30, 2017.


(2)	Brokerage assets consists of assets serviced by advisors licensed with LPL Financial.

(3)

Advisory assets consists of total advisory assets under custody at LPL Financial, consisting of total assets on LPL Financial's corporate advisory platform serviced by advisors who are investment advisor representatives of LPL Financial and total assets on LPL Financial's independent advisory platform serviced by advisors who are investment advisor representatives of separate investment advisor firms (“Hybrid RIAs”) rather than that of LPL Financial. See “Results of Operations” for a tabular presentation of advisory assets.


(4)	Net new brokerage assets consists of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts. We consider conversions from and to advisory accounts as deposits and withdrawals, respectively.


(5)	Net new advisory assets consists of total client deposits into custodied advisory accounts less total client withdrawals from custodied advisory accounts. We consider conversions from and to brokerage accounts as deposits and withdrawals, respectively.

(6)

Our management believes that presenting certain non-GAAP measures by excluding or including certain items can be helpful to investors and analysts who may wish to use some or all of this information to analyze our current performance, prospects, and valuation. Our management uses this non-GAAP information internally to evaluate operating performance and in formulating the budget for future periods. Our management believes that the non-GAAP measures and metrics presented above and discussed below are appropriate for evaluating the performance of the Company.

(7)

Set forth below is a calculation of gross profit (in millions), calculated as net revenues less commission and advisory expenses and brokerage, clearing, and exchange fees. All other expense categories, including depreciation and amortization of fixed assets and amortization of intangible assets, 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 measures that may not be comparable to those of others in our industry. We believe that gross profit amounts can be useful to investors because they show the Company’s core operating performance before indirect costs that are general and administrative in nature.



	Three Months Ended September 30,				Nine Months Ended September 30,
Gross Profit	2017		2016		2017		2016
Total net revenues (in millions)	$	1,064.1	$	1,017.4	$	3,165.0	$	3,041.9
Commission and advisory expense (in millions)	663.8		657.4		1,971.9		1,954.1
Brokerage, clearing, and exchange fees (in millions)	13.4		13.1		41.5		40.3
Gross profit (in millions)	$	386.9	$	346.9	$	1,151.6	$	1,047.5

Legal & Regulatory Matters

As a regulated entity, we are subject to regulatory oversight and inquiries related to, among other items, our compliance and supervisory systems and procedures and other controls, as well as our disclosures, supervision, and reporting. The environment of additional regulation, increased regulatory compliance obligations, and enhanced regulatory enforcement has resulted in additional operational and compliance costs, as well as increased costs in the form of fines, restitution, and remediation related to regulatory matters. In the ordinary course of business, we periodically identify or become aware of purported inadequacies, deficiencies, and other issues. It is our policy to evaluate these matters for potential securities law or regulatory violations and other potential compliance issues. It is also our policy to self-report known violations and issues as required by applicable law and regulation. When deemed probable that matters may result in financial losses, we accrue for those losses, if the amounts can be reasonably estimated, based on an estimate of possible fines, customer restitution, and losses related to the repurchase of sold securities and other losses, as applicable. Certain regulatory and other legal claims and losses may be covered through our wholly-owned captive insurance subsidiary, which is chartered with the insurance commissioner in the State of Tennessee. Our ability to estimate such costs may vary based on the current stage of evaluation and status of discussion with regulators, as applicable.

Our accruals, including those established through the captive insurance subsidiary at September 30, 2017, include estimated costs for significant regulatory matters, generally relating to the adequacy of our compliance and supervisory systems and procedures and other controls, for which we believe losses are both probable and reasonably estimable.

The outcome of regulatory matters could result in legal liability, regulatory fines, or monetary penalties in excess of our accruals and insurance, which could have a material adverse effect on our business, results of operations, cash flows, or financial condition. For more information on management’s loss contingency policies, see Note 8. Commitments and Contingencies, within the notes to the unaudited condensed consolidated financial statements.

In April 2016, the United States Department of Labor issued a final rule (the “DOL Rule”) and related exemptions that, broaden the circumstances under which we may be considered a “fiduciary” with respect to certain accounts that are subject to the ERISA, and the prohibited transaction rules under section 4975 of the Internal Revenue Code. These types of accounts include many employer-sponsored retirement plans and individual retirement accounts ("IRAs"). The DOL also finalized certain prohibited transaction exemptions that allow investment advisors to receive compensation for providing investment advice under arrangements that would otherwise be prohibited due to conflicts of interest. The DOL Rule became applicable on June 9, 2017 and the full implementation date for conditions under related exemptions currently is January 1, 2018; however, a delay in the full implementation date has been proposed. We are continuing to analyze and evaluate the impact of the DOL Rule and related amendments to exemptions on our clients, potential clients, and our business, as the DOL Rule and exemption requirements become applicable. Because ERISA plans and IRAs comprise a significant portion of our business, we continue to expect that compliance with the DOL Rule and reliance on new and amended prohibited transaction exemptions will require increased legal, compliance, information technology, and other costs and could lead to a greater risk of class action lawsuits and other litigation. Please consult the Retirement Plan Services Regulation section within Part I, “Item 1. Business” within our 2016 Annual Report on Form 10-K as filed with the SEC for more information about the risks associated with the DOL Rule and related exemptions and their potential impact on our operations.

Acquisitions, Integrations, and Divestitures

From time to time we undertake acquisitions or divestitures based on opportunities in the competitive landscape. These activities are part of our overall growth strategy, but can distort comparability when reviewing revenue and expense trends for periods presented.

On August 15, 2017, we entered into the Asset Purchase Agreement with the NPH Sellers to acquire certain assets and rights of the NPH Sellers, including the Sellers' business relationships with financial advisors who become affiliated with LPL Financial. We paid $325 million to the NPH Sellers at closing, which occurred on August 15, 2017, and have agreed to a potential contingent payment of up to $122.8 million (the “NPH Contingent Payment”). The NPH Contingent Payment would be paid on an interpolated basis based on the percentage of transferred GDC between 72% and 93.5%. No NPH Contingent Payment would be due in the event that the transferred GDC percentage is less than 72%. We expect to incur increased costs related to this transaction, including: compensation and benefits expense related to the additional staffing, as well as contingent labor costs, needed to support the onboarding of the NPH advisors and their clients to our systems, as well as to provide ongoing support to the anticipated increases in the number of advisors, clients and total assets served on our platform; fees for account closure and transfers that we agreed to pay on behalf of NPH financial advisors under the Asset Purchase Agreement; onboarding financial assistance costs for advisors joining LPL Financial; and technology capacity investments to support the expected increase in demands on our systems. We expect the incurrence of these costs to be largely complete by mid-2018. We also anticipate an increase to amortization related to the purchased intangibles under the Asset Purchase Agreement. See Note 3 Acquisitions, within the notes to the unaudited condensed consolidated financial statements for further detail. There have been no other material acquisitions, integrations, or divestitures during the nine months ended September 30, 2017 or during the nine months ended September 30, 2016.

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. In the United States, economic data continued to point to fairly steady economic growth over the second and third quarter of 2017 after some slowing in the first quarter. According to the most recent estimate by the Bureau of Economic Analysis, real gross domestic product (“GDP”) grew at an annualized rate of 3.0% in the third quarter of 2017. This estimate translates to an overall growth rate over the last four quarters at 2.3%, slightly higher than the average for the expansion. Growth has been supported by a largely healthy labor market, generally steady consumer spending, signs of improved business investment, and continued low interest rates. Stronger global growth has also provided support, with stable or accelerating growth across most major economies. Business and consumer confidence have remained elevated, with only modest declines since the run-up following the U.S. elections in November 2016. Despite economic stability and a healthy labor market, inflation has remained below the Federal Reserve’s (“Fed”) 2% target. While a prospective rise in U.S. economic growth to 2-3% may seem modest by historical standards, it would still be above the Congressional Budget Office’s estimate of potential GDP growth; and could be enough to further tighten the labor market, push wages higher, and increase the probability of the Fed following through on its median projected rate path of one more rate hike in 2017 and three more rate hikes in 2018.

Equity volatility remained low throughout the third quarter of 2017 and into the start of the fourth quarter, while broad measures of financial stress have been subdued. The S&P 500 Index has further extended its rally, posting steady gains supported by solid earnings growth. The 10-year Treasury yield was near flat over much of the third quarter, but has pushed higher in September and October. Stable financial conditions have helped more economically sensitive fixed income sectors generally outperform higher quality sectors.

Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Fed policy. Please consult the Risks Related to Our Business and Industry section within Part I, “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K for more information about the risks associated with significant interest rate changes, and the potential related effects on our profitability and financial condition. Following the conclusion of its September 19 - 20, 2017 policy meeting, the Fed’s policy arm, the Federal Open Market Committee (“FOMC”) announced that it was maintaining the federal funds target rate at 1.00 - 1.25%, as it did at its July meeting. The FOMC also announced that balance sheet normalization would begin in October 2017, which is a process by which the Fed reduces its balance sheet by no longer reinvesting the full amount of principal payments from its bond holdings. The change could be considered a tightening move but had been well telegraphed by the Fed. Economic projections that accompanied the statement saw an increase in the median GDP estimate for 2017 but a decline in core personal consumption expenditure inflation. There was also a small decrease in the expected longer-term federal funds rate.

Results of Operations

The following discussion presents an analysis of our results of operations for the three and nine months ended September 30, 2017 and 2016. Where appropriate, we have identified specific events and changes that affect comparability or trends, and where possible and practical, have quantified the impact of such items.



	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017		2016		% Change		2017		2016		% Change
Revenues
Commission	$	403,011	$	431,686	(6.6	)%	$	1,244,881	$	1,314,168	(5.3	)%
Advisory	356,945		321,911		10.9	%	1,033,319		964,298		7.2	%
Asset-based	183,953		138,291		33.0	%	514,626		412,339		24.8	%
Transaction and fee	103,999		108,413		(4.1	)%	321,522		312,927		2.7	%
Interest income, net of interest expense	6,162		5,372		14.7	%	17,931		15,940		12.5	%
Other	10,038		11,767		(14.7	)%	32,760		22,254		47.2	%
Total net revenues	1,064,108		1,017,440		4.6	%	3,165,039		3,041,926		4.0	%
Expenses
Commission and advisory	663,765		657,432		1.0	%	1,971,874		1,954,123		0.9	%
Compensation and benefits	113,659		107,988		5.3	%	337,170		327,816		2.9	%
Promotional	42,935		42,609		0.8	%	111,595		113,010		(1.3	)%
Depreciation and amortization	21,996		18,434		19.3	%	63,933		56,145		13.9	%
Amortization of intangible assets	9,352		9,502		(1.6	)%	28,296		28,536		(0.8	)%
Occupancy and equipment	22,803		23,530		(3.1	)%	70,989		67,347		5.4	%
Professional services	16,438		17,045		(3.6	)%	50,732		49,184		3.1	%
Brokerage, clearing, and exchange	13,491		13,098		3.0	%	41,567		40,296		3.2	%
Communications and data processing	10,866		10,333		5.2	%	32,525		31,801		2.3	%
Other	24,376		25,356		(3.9	)%	71,140		69,512		2.3	%
Total operating expenses	939,681		925,327		1.6	%	2,779,821		2,737,770		1.5	%
Non-operating interest expense	26,519		23,889		11.0	%	78,131		71,583		9.1	%
Loss on extinguishment of debt	1,268		—		n/m		22,407		—		n/m
Income before provision for income taxes	96,640		68,224		41.7	%	284,680		232,573		22.4	%
Provision for income taxes	38,498		16,270		136.6	%	109,915		82,378		33.4	%
Net income	$	58,142	$	51,954	11.9	%	$	174,765	$	150,195	16.4	%

Revenues

Commission Revenues

We generate two types of commission revenues: sales-based commissions and trailing commissions. Sales-based commission revenues, which occur whenever clients of our advisors trade securities or purchase various types of investment products, primarily represent gross commissions generated by our advisors. The levels of sales-based commission revenues 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. Trailing commission revenues are recurring in nature and are earned based on the market value of investment holdings in trail eligible assets. We earn trailing commission revenues (a commission that is paid over time, such as 12(b)-1 fees) primarily on mutual funds and variable annuities held by clients of our advisors.

The following table sets forth our commission revenue, by product category, included in our unaudited condensed consolidated statements of income (dollars in thousands):



	Three Months Ended September 30,
	2017		2016		$ Change			% Change
Variable annuities	$	163,778	$	169,413	$	(5,635	)	(3.3	)%
Mutual funds	131,339		137,238		(5,899		)	(4.3	)%
Alternative investments	6,676		8,514		(1,838		)	(21.6	)%
Fixed annuities	32,764		44,933		(12,169		)	(27.1	)%
Equities	17,748		20,263		(2,515		)	(12.4	)%
Fixed income	23,912		21,756		2,156			9.9	%
Insurance	17,338		18,083		(745		)	(4.1	)%
Group annuities	9,319		11,266		(1,947		)	(17.3	)%
Other	137		220		(83		)	(37.7	)%
Total commission revenue	$	403,011	$	431,686	$	(28,675	)	(6.6	)%

The following table sets forth our commission revenue, by sales-based and trailing commission revenue (dollars in thousands):



	Three Months Ended September 30,
	2017		2016		$ Change			% Change
Sales-based
Variable annuities	$	46,148	$	57,337	$	(11,189	)	(19.5	)%
Mutual funds	30,638		34,985		(4,347		)	(12.4	)%
Alternative investments	2,550		7,198		(4,648		)	(64.6	)%
Fixed annuities	27,906		41,995		(14,089		)	(33.5	)%
Equities	17,748		20,263		(2,515		)	(12.4	)%
Fixed income	17,967		16,588		1,379			8.3	%
Insurance	15,906		16,520		(614		)	(3.7	)%
Group annuities	1,098		1,258		(160		)	(12.7	)%
Other	137		220		(83		)	(37.7	)%
Total sales-based revenue	$	160,098	$	196,364	$	(36,266	)	(18.5	)%
Trailing
Variable annuities	$	117,630	$	112,076	$	5,554		5.0	%
Mutual funds	100,701		102,253		(1,552		)	(1.5	)%
Alternative investments	4,126		1,316		2,810			213.5	%
Fixed annuities	4,858		2,938		1,920			65.4	%
Fixed income	5,945		5,168		777			15.0	%
Insurance	1,432		1,563		(131		)	(8.4	)%
Group annuities	8,221		10,008		(1,787		)	(17.9	)%
Total trailing revenue	$	242,913	$	235,322	$	7,591		3.2	%
Total commission revenue	$	403,011	$	431,686	$	(28,675	)	(6.6	)%

The decrease in sales-based commission revenue for the three months ended September 30, 2017, compared with the same period in 2016, was primarily due to a decrease in activity for fixed and variable annuities. Fixed and variable annuities commissions were primarily affected by marketplace uncertainties in response to the DOL Rule, which became applicable on June 9, 2017 and changes in commission structures.

Trailing revenues are recurring in nature and the increase in revenue for the period reflects an increase in the market value of the underlying assets.

The following table sets forth our commission revenue, by product category, included in our unaudited condensed consolidated statements of income (in thousands):



	Nine Months Ended September 30,
	2017		2016		$ Change			% Change
Variable annuities	$	498,027	$	514,521	$	(16,494	)	(3.2	)%
Mutual funds	397,323		406,741		(9,418		)	(2.3	)%
Alternative investments	20,565		25,415		(4,850		)	(19.1	)%
Fixed annuities	109,236		150,622		(41,386		)	(27.5	)%
Equities	58,520		61,588		(3,068		)	(5.0	)%
Fixed income	77,664		63,703		13,961			21.9	%
Insurance	51,355		56,297		(4,942		)	(8.8	)%
Group annuities	31,799		34,708		(2,909		)	(8.4	)%
Other	392		573		(181		)	(31.6	)%
Total commission revenue	$	1,244,881	$	1,314,168	$	(69,287	)	(5.3	)%

The following table sets forth our commission revenue, by sales-based and trailing commission revenue (in thousands):



	Nine Months Ended September 30,
	2017		2016		$ Change			% Change
Sales-based
Variable annuities	$	150,103	$	186,963	$	(36,860	)	(19.7	)%
Mutual funds	102,009		111,548		(9,539		)	(8.6	)%
Alternative investments	11,348		20,892		(9,544		)	(45.7	)%
Fixed annuities	94,930		142,962		(48,032		)	(33.6	)%
Equities	58,520		61,588		(3,068		)	(5.0	)%
Fixed income	60,371		48,648		11,723			24.1	%
Insurance	46,914		52,047		(5,133		)	(9.9	)%
Group annuities	3,929		4,222		(293		)	(6.9	)%
Other	392		573		(181		)	(31.6	)%
Total sales-based revenue	$	528,516	$	629,443	$	(100,927	)	(16.0	)%
Trailing
Variable annuities	$	347,924	$	327,558	$	20,366		6.2	%
Mutual funds	295,314		295,193		121			—	%
Alternative investments	9,217		4,523		4,694			103.8	%
Fixed annuities	14,306		7,660		6,646			86.8	%
Fixed income	17,293		15,055		2,238			14.9	%
Insurance	4,441		4,250		191			4.5	%
Group annuities	27,870		30,486		(2,616		)	(8.6	)%
Total trailing revenue	$	716,365	$	684,725	$	31,640		4.6	%
Total commission revenue	$	1,244,881	$	1,314,168	$	(69,287	)	(5.3	)%

The decrease in sales-based commission revenue for the nine months ended September 30, 2017, compared with the same period in 2016, was primarily due to a decrease in activity for fixed and variable annuities, partially, offset by an increase in fixed income commissions that were primarily driven by the anticipation of the federal funds rate increases announced in March and June 2017, respectively. Fixed and variable annuities commissions were primarily challenged by marketplace uncertainties in response to the DOL Rule which became applicable June 9, 2017.

Trailing revenues are recurring in nature and the increase in revenue for the period reflects an increase in the market value of the underlying assets.

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Balance - Beginning of period	$	305.2		$	291.9		$	297.8		$	288.4
Net new brokerage assets	(4.0		)	(3.1		)	(12.9		)	(5.6		)
Market impact(1)	8.6			8.1			24.9			14.1
Balance - End of period	$	309.8		$	296.9		$	309.8		$	296.9

_______________________________


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

Advisory Revenues

Advisory revenues primarily represent fees charged on our corporate RIA platform provided through LPL Financial to clients of our advisors based on the value of their advisory assets. Advisory fees are billed to clients on either a calendar quarter or non-calendar quarter basis of their choice, at the beginning of that period, and are recognized as revenue ratably during the quarter. The majority of our accounts are billed in advance using values as of the last business day of each immediately preceding calendar quarter. The value of the assets in an advisory account on the billing date determines the amount billed, and accordingly, the revenues earned in the following three month period. Advisory revenues collected on our corporate RIA platform are proposed by the advisor and agreed to by the client and average 1.0% of the underlying assets, and the maximum fees charged for these accounts as of September 30, 2017 was 3.0%.

We also support Hybrid RIAs, through our Hybrid RIA platform, which allows advisors to engage us for technology, clearing, and custody services, as well as access to the capabilities of our investment platforms. Most financial advisors associated with Hybrid RIAs carry their brokerage license with LPL Financial and access our fully-integrated brokerage platform under standard terms, although some financial advisors associated with Hybrid RIAs do not carry a brokerage license with us. The assets held under Hybrid RIAs' investment advisory accounts that are custodied with LPL Financial are included in our brokerage and advisory assets, net new advisory assets, and advisory assets metrics. However, the advisory revenue generated by a Hybrid RIA is earned by the Hybrid RIA, and accordingly is not included in our advisory revenue. We charge separate fees to Hybrid RIAs for technology, clearing, administrative, and custody services. The administrative fees collected on our Hybrid RIA platform vary and can reach a maximum of 0.6% of the underlying assets as of September 30, 2017.

Furthermore, we support certain financial advisors at broker-dealers affiliated with insurance companies through our customized advisory platforms and charge fees to these advisors based on the value of assets within these advisory accounts.

The following table summarizes activity in advisory assets (in billions):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Balance - Beginning of period	$	236.8	$	196.1	$	211.6	$	187.2
Net new advisory assets	6.9		4.1		18.8		8.9
Market impact(1)	6.5		5.3		19.8		9.4
Balance - End of period	$	250.2	$	205.5	$	250.2	$	205.5

_______________________________


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

Net new advisory assets for the three and nine months ended September 30, 2017 and 2016 had a limited impact on our advisory fee revenue for those respective periods. Rather, net new advisory assets are a primary driver of future advisory fee revenue. The revenue for any particular quarter is primarily driven by each of the prior quarter’s month-end advisory assets under management. The growth in advisory revenue for the three and nine months ended September 30, 2017 compared to the same period in 2016 was due to net new advisory assets

resulting from our recruiting efforts and strong advisor productivity, as well as market gains as represented by higher levels of the S&P 500 index and brokerage to advisory conversions.

Assets on our Hybrid RIA platform have been growing rapidly through the recruiting of new advisors and the transition of existing advisors onto that platform. This continued shift of advisors to our Hybrid RIA platform has caused the growth in our advisory revenue to appear to lag behind the rate of growth of advisory assets as we earn the administrative and other fees discussed above, as opposed to earning advisory fees.

The following table summarizes the composition of total advisory assets as of September 30, 2017 and 2016 (in billions):



	September 30,
	2017		2016		$ Change		% Change
Corporate Platform Advisory Assets	$	145.0	$	124.9	$	20.1	16.1	%
Hybrid Platform Advisory Assets	105.2		80.6		24.6		30.5	%
Total advisory assets	$	250.2	$	205.5	$	44.7	21.8	%

Asset-Based Revenues

Asset-based revenues are comprised of our sponsorship programs with financial product manufacturers, omnibus processing and networking services, and fees from our cash sweep program. We receive fees from certain financial product manufacturers in connection with sponsorship programs that support our marketing and sales education and training efforts. Omnibus processing revenues are paid to us by mutual fund product sponsors and are based on the value of custodied assets in advisory accounts and the number of brokerage accounts in which the related mutual fund positions are held. Networking revenues on brokerage assets are correlated to the number of positions we administer and are paid to us by mutual fund and annuity product manufacturers. Pursuant to contractual arrangements, uninvested cash balances in our advisors’ client accounts are swept into either insured cash accounts at various banks or third-party money market funds, for which we receive fees, including administrative and recordkeeping fees based on account type and the invested balances.

Asset-based revenues for the three months ended September 30, 2017 increased to $184.0 million, or 33.0%, from $138.3 million for the three months ended September 30, 2016. The increase is due primarily to increased revenues from our cash sweep program. Cash sweep revenue increased to $81.6 million for the three months ended September 30, 2017, from $40.7 million for the three months ended September 30, 2016, due to the impact of an increase in the target range for the federal funds effective rate, partially offset by lower cash sweep balances. As of September 30, 2017, our cash sweep balances decreased compared to September 30, 2016, with average cash sweep balances of $28.0 billion and $29.1 billion during the three months ended September 30, 2017 and 2016, respectively.

Asset-based revenues for the nine months ended September 30, 2017, increased to $514.6 million, or 24.8%, from $412.3 million compared with the same period in 2016. The increase is due primarily to increased revenues from our cash sweep program. Cash sweep revenues increased to $213.1 million for the nine months ended September 30, 2017, from $125.0 million for the nine months ended September 30, 2016, due to the impact of the increase in the target range for the federal funds effective rate, partially offset by lower cash sweep balances. As of September 30, 2017, our cash sweep balances decreased compared to September 30, 2016, with average cash sweep balances of $28.7 billion and $29.7 billion during the nine months ended September 30, 2017 and 2016, respectively.

Transaction and Fee Revenues

Transaction revenues primarily include fees we charge to our advisors and their clients for executing certain transactions in brokerage and fee-based advisory accounts. Fee revenues primarily include IRA custodian fees, contract and licensing fees, and other client account fees. In addition, we host certain advisor conferences that serve as training, education, sales, and marketing events, for which we charge a fee for attendance.

Transaction and fee revenues decreased for the three months ended September 30, 2017 compared to the same period in 2016 due to a decrease in IRA custodian termination fees from an institutional client departure in the prior year, which did not repeat in the current quarter, partially offset by a new fee announced in 2017 for alternative investments effective for 2016.

Transaction and fee revenues increased for the nine months ended September 30, 2017 compared to the same period in 2016 primarily due to a new fee announced in 2017 for alternative investments effective for 2016

that was billed and recorded in the current period, a higher volume of fixed income transactions related to the federal funds rate increases in March and June 2017, partially offset by a decrease in termination fees from an institutional client departure in the prior year that did not repeat in the current period.

Interest Income, Net of Interest Expense

We earn interest income from client margin accounts and cash equivalents, net of operating interest expense. Period-over-period variances correspond to changes in the average balances of assets in margin accounts and cash equivalents.

Other Revenues

Other revenues primarily include marketing allowances received from certain financial product manufacturers, primarily those who offer alternative investments, such as non-traded real estate investment trusts and business development companies, mark-to-market gains and losses on assets held by us for our advisor non-qualified deferred compensation plan and our model research portfolios, and other miscellaneous revenues.

Other revenues decreased for the three months ended September 30, 2017, compared to the same period in 2016 primarily due to a decrease in alternative investment marketing allowances.

Other revenues increased for the nine months ended September 30, 2017, compared to the same period in 2016 primarily due to an increase of $9.2 million in realized and unrealized gains on assets held in our advisor non-qualified deferred compensation plan, which are based on the market performance of the underlying investment allocations chosen by advisors in the plan, partially offset by a decrease in alternative investment marketing allowances.

Expenses

Commission and Advisory Expenses

Commission and advisory expenses are comprised of the following: base payout amounts that are earned by and paid out to advisors and institutions based on commission and advisory revenues earned on each client’s account; production bonuses earned by advisors and institutions based on the levels of commission and advisory revenues 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 each reporting period; and the deferred commissions and advisory fee expenses associated with mark-to-market gains or losses on the non-qualified deferred compensation plan offered to our advisors.

Our production payout ratio is calculated as commission and advisory expenses divided by the sum of our commission and advisory revenues (referred to as gross dealer concessions, or "GDC"), as set forth on our unaudited condensed consolidated statements of income. The following table shows the components of our production payout and total payout ratios, each of which is a statistical or operating measure:



	Three Months Ended September 30,				Change	Nine Months Ended September 30,				Change
	2017		2016		Change	2017		2016		Change
Base payout rate(1)	83.01	%	83.10	%	(9 bps)	82.98	%	82.93	%	5 bps
Production based bonuses	3.04	%	3.04	%	—	2.44	%	2.39	%	5 bps
GDC sensitive payout	86.05	%	86.14	%	(9 bps)	85.42	%	85.32	%	10 bps
Non-GDC sensitive payout(2)	1.29	%	1.10	%	19 bps	1.13	%	0.44	%	69 bps
Total Payout Ratio	87.34	%	87.24	%	10 bps	86.55	%	85.76	%	79 bps

_______________________________


(1)	Our production payout ratio is calculated as commission and advisory expenses, divided by GDC (see description above).


(2)	Non-GDC Sensitive Payout includes share-based compensation expense from equity awards granted to advisors and financial institutions and mark-to-market gains or losses on amounts designated by advisors as deferred.

Our total payout ratio, a statistical or operating measure, increased for the three months September 30, 2017 compared with the same period in 2016 primarily due to an increase in non-GDC sensitive payout, which includes advisor deferred compensation and advisor share-based compensation.

Our total payout ratio increased for the nine months ended September 30, 2017 compared with the same period in 2016 primarily due to an increase in non-GDC sensitive payout, which includes advisor deferred compensation and advisor share-based compensation.

Compensation and Benefits Expense

Compensation and benefits expense includes salaries and wages and related employee benefits and taxes for our employees (including share-based compensation), as well as compensation for temporary employees and consultants.



	Three Months Ended September 30,			Nine Months Ended September 30,
	2017	2016	Change	2017	2016	Change
Average Number of Employees	3,508	3,262	7.5%	3,397	3,332	2.0%

Compensation and benefits expense increased for the three months ended September 30, 2017 compared with the same period in 2016 due to an increase in salary expense resulting from an increase in headcount and an increase in contingent labor costs to support the NPH acquisition, partially offset by an increase in capitalized salary and benefits costs associated with technology projects.

Compensation and benefits expense increased for the nine months ended September 30, 2017 compared with the same period in 2016 due to higher recruiter compensation pursuant to incentive compensation plans, an increase in contingent labor for DOL rule implementation and to support the NPH acquisition and an increase in salaries expense as a result of an increase in headcount, partially offset by an increase in capitalized salary and benefits associated with technology projects.

Promotional Expense

Promotional expenses include costs related to our hosting of certain advisor conferences that serve as training, sales, and marketing events, as well as business development costs related to recruiting, including transition assistance and amortization related to forgivable loans issued to advisors.

Promotional expense remained relatively flat for the three months ended September 30, 2017 compared with the same period in 2016.

The decrease in promotional expense for the nine months ended September 30, 2017 compared with the same period in 2016 was primarily driven by lower conference expenses and a decrease in amounts paid as advisor referral bonuses.

Depreciation and Amortization Expense

Depreciation and amortization expense represents the benefits received for using long-lived assets. Those assets consist of fixed assets, which include internally developed software, hardware, leasehold improvements, and other equipment.

The increase in depreciation and amortization of $3.6 million and $7.8 million for the three and nine months ended September 30, 2017, respectively, compared with the same periods in 2016, was primarily due to increases in purchased hardware and software and an increase in depreciation expense associated with our new office buildings in Fort Mill, South Carolina, which were completed in October 2016.

Amortization of Intangible assets

Amortization of intangible assets is consistent over prior periods and represents the benefits received for using long-lived assets, which consist of intangible assets established through our acquisitions.

Occupancy and Equipment Expense

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

Occupancy and equipment expense remained relatively flat for the three months ended September 30, 2017 compared with the same period in 2016.

The increase in occupancy and equipment expense of $3.6 million for the nine months ended September 30, 2017 compared with the same period in 2016, was primarily due to an increase in costs related to repairs and maintenance of computer hardware and equipment as well as an increase in non-capitalized software costs in support of our service and technology investments, partially offset by a decrease in rent expense and software licensing fees.

Professional Services

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

Professional services remained relatively flat for the three months ended September 30, 2017 compared with the same period in 2016.

The increase in professional services of $1.5 million for the nine months ended September 30, 2017 compared with the same period in 2016, respectively, was primarily due to an increase in costs related to outsourced service and technology enhancements.

Brokerage, Clearing, and Exchange Fees

Brokerage, clearing, and exchange fees include expenses originating from trading and clearing operations as well as any exchange membership fees. Changes in brokerage, clearing and exchange fees fluctuate largely in line with the volume of sales and trading activity.

Brokerage, clearing, and exchange fees have remained relatively flat and consistent with the volume of sales and trading activity for the three and nine months ended September 30, 2017, compared with the same periods in 2016.

Communications and Data Processing

Communications expense consists primarily of the cost of voice and data telecommunication lines supporting our business, including connectivity to data centers, exchanges, and markets. Data processing expense consists primarily of customer statement processing and postage costs.

Communications and data processing expense remained relatively flat for the three and nine months ended September 30, 2017, compared with the same periods in 2016.

Other Expenses

Other expenses include the estimated costs of the investigation, settlement, and resolution of regulatory matters, licensing fees, insurance, broker-dealer regulator fees, and other miscellaneous expenses.

The decrease in other expenses of $1 million for the three months ended September 30, 2017, compared with the same period in 2016, was primarily due to lower costs associated with the investigation, settlement, and resolution of regulatory matters.

The increase in other expenses of $1.6 million for the nine months ended September 30, 2017, compared with the same period in 2016, was primarily driven by an increase in regulatory investigation fees, partially offset by a one time recovery related to a previously settled regulatory matter in the first quarter of 2016 that lowered other expenses for that period.

Non-Operating Interest Expense

Non-operating interest expense results from our credit facilities. Period-over-period variances correspond to higher LIBOR rates, the fixed interest rate on our senior unsecured notes issued in March and September 2017 and an increase in interest expense related to our leasehold financing obligation, which we began recording in the fourth quarter of 2016, after the completion of our new office buildings in Fort Mill, South Carolina in October 2016.

Loss on Extinguishment of Debt

On September 21, 2017, we entered into a second amendment (“the Amendment”) which amended and restated the existing credit agreement of our subsidiary LPL Holdings, Inc. (“LPLH”) and repriced our existing $500.0 million senior secured revolving credit facility and $1,695.8 million senior secured Term Loan B facility. Additionally, we raised $400.0 million in aggregate principal amount of notes (the “Additional Notes”) as an add-on to the existing senior notes due 2025. We used $200 million in proceeds from the offering to pay down our existing Term Loan B to $1,500 million. In connection with the execution of the Amendment, we accelerated the recognition of $1.3 million of unamortized debt issuance costs as a loss on extinguishment of debt in our unaudited condensed consolidated statements of income.

In March 2017, we closed a refinancing of our senior secured credit facilities with a new seven year Term Loan B facility in an aggregate principal amount of $1,700.0 million and a five year revolving credit facility in an aggregate amount of $500.0 million. The proceeds of the new Term Loan B, together with the proceeds from the offering of $500.0 million aggregate principal amount of 5.75% senior notes (the "Original Notes" and together with the “Additional Notes,” the "Notes") and cash, were used to repay our then existing senior secured credit facilities and to pay accrued interest and related fees and expenses. The refinancing led to the extinguishment of the previous Term Loan A and B facilities, which required that we accelerate the recognition of $21.1 million of related unamortized debt issuance costs that had no future economic benefit, and recognize that amount as a loss on extinguishment of debt in our unaudited condensed consolidated statements of income in the first quarter of 2017.

Provision for Income Taxes

We estimate our full-year effective income tax rate at the end of each reporting period. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The tax rate in any quarter can be affected positively and negatively by adjustments that are required to be reported in the quarter in which resolution of a particular item occurs. The effective income tax rates reflect the impact of state taxes, settlement contingencies, tax credits, and expenses that are not deductible for tax purposes.

Our effective tax rate was 39.8% and 23.8% for the three months ended September 30, 2017 and 2016, respectively.

Our effective tax rate was 38.6% and 35.4% for the nine months ended September 30, 2017 and 2016, respectively.

During the third quarter of 2016, we updated our calculation of the tax benefits that we could obtain associated with internally developed software. The total additional tax benefit recorded during the third quarter of 2016, net of potential tax contingencies, was approximately $11.7 million.

Liquidity and Capital Resources

Senior management establishes our liquidity and capital policies. These policies include senior management’s review of short- and long-term cash flow forecasts, review of capital expenditures, and daily monitoring of liquidity for our subsidiaries. Decisions on the allocation of capital are based upon, among other things, projected profitability and cash flow, risks of the business, regulatory capital requirements, and future liquidity needs for strategic activities. Our Treasury Department assists in evaluating, monitoring, and controlling the business activities that impact our financial condition, liquidity, and capital structure and maintains relationships with various lenders. The objectives of these policies are to support our corporate business strategies while ensuring ongoing and sufficient liquidity.

A summary of changes in our cash flow is provided as follows (in thousands):



	Nine Months Ended September 30,
	2017			2016
Net cash flows provided by (used in):
Operating activities	$	134,602		$	262,085
Investing activities	(413,556		)	(96,025		)
Financing activities	109,206			(103,225		)
Net (decrease) increase in cash and cash equivalents	(169,748		)	62,835
Cash and cash equivalents — beginning of period	747,709			724,529
Cash and cash equivalents — end of period	$	577,961		$	787,364

Cash requirements and liquidity needs are primarily funded through our cash flow from operations and our capacity for additional borrowing.

Net cash provided by operating activities includes changes in operating assets and liabilities, including balances related to settlement and funding of client transactions, receivables from product sponsors, and accrued commission and advisory expenses due to our advisors. Operating assets and liabilities that arise from the settlement and funding of transactions by our advisors’ clients are the principal cause of changes to our net cash from operating activities and can fluctuate significantly from day-to-day and period-to-period depending on overall trends and clients’ behaviors.

The decrease in cash flows provided by operating activities for the nine months ended September 30, 2017 compared to the same period in 2016 was primarily attributable to a decrease in cash provided by cash segregated under federal and other regulations, client receivables and an increase in cash used by payables to clients, partially offset by an increase in cash provided by advisor loans.

The increase in cash flows used in investing activities for the nine months ended September 30, 2017 compared to the same period in 2016 was attributable to the NPH acquisition.

The increase in cash flows provided by financing activities for the nine months ended September 30, 2017 compared to the same period in 2016 was primarily attributable to an increase in cash resulting from our September 2017 debt refinancing and an increase in proceeds from stock option exercises, partially offset by an increase in repurchases of our common stock and debt issuance costs incurred in connection with our refinancings completed in March and September 2017.

We believe that based on current levels of operations and anticipated growth, cash flow from operations, together with other available sources of funds, which include three uncommitted lines of credit available and the revolving credit facility established through our senior secured credit agreement, will be adequate to satisfy our working capital needs, the payment of all of our obligations, and the funding of anticipated capital expenditures for the foreseeable future. In addition, we have certain capital adequacy requirements related to our registered broker-dealer subsidiary and bank trust subsidiary and have met all such requirements and expect to continue to do so for the foreseeable future. We regularly evaluate our existing indebtedness, including refinancing thereof, 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.

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 effected in open market or privately negotiated transactions, including transactions with our affiliates, with the timing of purchases and the amount of stock purchased generally determined at our discretion within the constraints of our senior secured credit agreement, the indenture governing our Notes, and general liquidity needs.

During the nine months ended September 30, 2017, we repurchased a total of 2,016,532 shares of our common stock at a weighted-average price of $41.52 per share for a total cost of $83.7 million. As of September 30, 2017, the Company was authorized to purchase up to an additional $141.3 million of shares pursuant to the share repurchase programs approved by the Board of Directors.

Dividends

The payment, timing, and amount of any dividends are subject to approval by our Board as well as certain limits under our senior secured credit agreement and the indenture governing our Notes. See Note 9. Stockholders’ Equity, within the notes to the unaudited condensed consolidated financial statements for additional information regarding our dividends.

Operating Capital Requirements

Our primary requirement for working capital relates to funds we loan to our advisors’ clients for trading conducted on margin and funds that 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 cash equivalents on hand, cash and securities segregated under federal and other regulations, and proceeds from re-pledging 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. As of September 30, 2017, we had approximately $221.3 million of client margin loans, collateralized with securities having a fair value of approximately $309.9 million that we can re-pledge, loan, or sell. Of these securities, approximately $45.0 million were client-owned securities pledged to the Options Clearing Corporation as collateral to secure client obligations related to options positions. As of September 30, 2017, there were no restrictions that materially limited our ability to re-pledge, loan, or sell the remaining $264.9 million of client collateral.

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

Notwithstanding the self-funding nature of our operations, 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 on our uncommitted lines of credit at our broker-dealer subsidiary LPL Financial, or under our revolving credit facility.

Our registered broker-dealer, 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, as defined, equal to the greater of $250,000 or 2.0% of aggregate debit balances arising from client transactions. At September 30, 2017, LPL Financial had net capital of $166.5 million with a minimum net capital requirement of $6.8 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 the Financial Industry Regulatory Authority (“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 National Futures Association’s (“NFA”) financial requirements and it is required to maintain net capital that is in excess of or equal to the greatest of NFA’s minimum financial requirements. The NFA was designated by the Commodity Futures Trading Commission as LPL Financial’s primary regulator for such activities. Currently, the highest NFA requirement is the minimum net capital calculated and required pursuant to the SEC’s Net Capital Rule.

Our subsidiary, The Private Trust Company, N.A. (“PTC”), is also subject to various regulatory capital requirements. Failure to meet the respective 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.

Debt and Related Covenants

On September 21, 2017, we entered into the Amendment and refinanced our existing $500.0 million senior secured revolving credit facility and $1,695.8 million of existing senior secured Term Loan B facility. Additionally, we raised $400.0 million in aggregate principal amount of Additional Notes as an add-on to the Original Notes. The Additional Notes are governed by the same indenture, and have the same terms, as the Original Notes. We used $200 million in proceeds from the offering to pay down our Term Loan B to $1,500 million. As of September 30, 2017 our revolving credit facility remained undrawn. See Note 7. Debt, within the notes to the unaudited condensed consolidated financial statements for further detail.

The Credit Agreement and the indenture governing the Notes 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;


•	pay dividends on, redeem, or repurchase our capital stock;


•	create liens;


•	sell assets;


•	make investments or acquisitions;


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


•	engage in certain transactions with affiliates;


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


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

Credit Agreement EBITDA, a non-GAAP measure, is defined in, and calculated by management in accordance with, the Credit Agreement as “Consolidated EBITDA”, which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense, tax expense, depreciation and amortization, and adjusted to exclude certain non-cash charges and other adjustments (including unusual or non-recurring charges) and gains. We present Credit Agreement EBITDA because we believe that it can be a useful financial metric in understanding our debt capacity and covenant compliance. However, Credit Agreement 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, or as an alternative to cash flows from operating activities as a measure of profitability or liquidity. In addition, our Credit Agreement-defined EBITDA measure can differ significantly from adjusted EBITDA calculated by other companies, depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.

Set forth below is a reconciliation from our net income to Credit Agreement EBITDA for the twelve months ended September 30, 2017 (in thousands):



Net income	$	216,501
Non-operating interest expense	103,026
Provision for income taxes	133,122
Loss on extinguishment of debt	22,407
Depreciation and amortization	83,716
Amortization of intangible assets	37,795
EBITDA	596,567
Credit Agreement Adjustments:
Employee share-based compensation expense(1)	19,973
Advisor share-based compensation expense(2)	9,933
Other(3)	28,699
Credit Agreement EBITDA(4)	$	655,172

_______________________________


(1)	Represents share-based compensation for equity awards granted to employees, officers, and directors. Such awards are measured based on the grant-date fair value and recognized over the requisite service period of the individual awards, which generally equals the vesting period.


(2)	Represents share-based compensation for equity awards granted to advisors and to financial institutions based on the fair value of the awards at each reporting period.


(3)	Represents other items that are adjustable in accordance with our Credit Agreement to arrive at Credit Agreement EBITDA including employee severance costs, employee signing costs, employee retention or completion bonuses, and other non-recurring costs.


(4)	Under the Credit Agreement, management calculates Credit Agreement EBITDA for a four-quarter period at the end of each fiscal quarter, and in so doing may make further adjustments to prior quarters.

Our Credit Agreement and the indenture governing the Notes prohibit us from paying dividends and distributions or repurchasing our capital stock except for limited purposes or in limited amounts. In addition, our revolving credit facility requires compliance with a maximum Consolidated Total Debt to Consolidated EBITDA Ratio ("Leverage Test", as defined in the Credit Agreement) and a minimum Consolidated EBITDA to Consolidated Interest Expense Ratio ("Interest Coverage", as defined in the Credit Agreement), tested as of the last day of each fiscal quarter. The breach of this covenant is subject to certain equity cure rights.

As of September 30, 2017, we were in compliance with all of our revolving credit facility covenant requirements. The maximum permitted ratios under our financial covenants and actual ratios were as follows:



Financial Ratio	Covenant Requirement	Actual Ratio
Leverage Test (Maximum)	5.00	3.21
Interest Coverage (Minimum)	3.00	6.88

Off-Balance Sheet Arrangements

We enter into various off-balance-sheet arrangements in the ordinary course of business, primarily to meet the needs of our advisors’ clients. These arrangements include Company commitments to extend credit. For information on these arrangements, see Note 8. Commitments and Contingencies and Note 14. Financial Instruments with Off-Balance-Sheet Credit Risk and Concentrations of Credit Risk, within the notes to the unaudited condensed consolidated financial statements.

Contractual Obligations

During the nine months ended September 30, 2017, there have been no material changes in our contractual obligations, other than the Asset Purchase Agreement, the Amendment and in the ordinary course of business, from those disclosed in our 2016 Annual Report on Form 10-K. See Note 7. Debt and Note 8. Commitments and Contingencies, within the notes to the unaudited condensed consolidated financial statements, as well as the Contractual Obligations section within Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2016 Annual Report on Form 10-K, for further detail on operating lease obligations and obligations under noncancelable service contracts.

Fair Value of Financial Instruments

We use fair value measurements to record certain financial assets and liabilities at fair value and to determine fair value disclosures. See Note 4. Fair Value Measurements, within the notes to the unaudited condensed consolidated financial statements for a detailed discussion regarding our fair value measurements.

Critical Accounting Policies and Estimates

In the notes to our consolidated financial statements and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2016 Annual Report on Form 10-K, we have disclosed those accounting policies that we consider to be significant in determining our results of operations and financial condition. There have been no material changes to those policies that we consider to be significant since the filing of our 2016 Annual Report on Form 10-K. The accounting principles used in preparing our unaudited condensed consolidated financial statements conform in all material respects to GAAP.

Recently Issued Accounting Pronouncements

Refer to Note 2. Summary of Significant Accounting Policies, within the notes to the unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

Item 1. Financial Statements (unaudited)

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(In thousands, except per share data)



	Three Months Ended September 30,				Nine Months Ended September 30,
REVENUES	2017		2016		2017		2016
Commission	$	403,011	$	431,686	$	1,244,881	$	1,314,168
Advisory	356,945		321,911		1,033,319		964,298
Asset-based	183,953		138,291		514,626		412,339
Transaction and fee	103,999		108,413		321,522		312,927
Interest income, net of interest expense	6,162		5,372		17,931		15,940
Other	10,038		11,767		32,760		22,254
Total net revenues	1,064,108		1,017,440		3,165,039		3,041,926
EXPENSES
Commission and advisory	663,765		657,432		1,971,874		1,954,123
Compensation and benefits	113,659		107,988		337,170		327,816
Promotional	42,935		42,609		111,595		113,010
Depreciation and amortization	21,996		18,434		63,933		56,145
Amortization of intangible assets	9,352		9,502		28,296		28,536
Occupancy and equipment	22,803		23,530		70,989		67,347
Professional services	16,438		17,045		50,732		49,184
Brokerage, clearing, and exchange	13,491		13,098		41,567		40,296
Communications and data processing	10,866		10,333		32,525		31,801
Other	24,376		25,356		71,140		69,512
Total operating expenses	939,681		925,327		2,779,821		2,737,770
Non-operating interest expense	26,519		23,889		78,131		71,583
Loss on extinguishment of debt	1,268		—		22,407		—
INCOME BEFORE PROVISION FOR INCOME TAXES	96,640		68,224		284,680		232,573
PROVISION FOR INCOME TAXES	38,498		16,270		109,915		82,378
NET INCOME	$	58,142	$	51,954	$	174,765	$	150,195
EARNINGS PER SHARE (Note 11)
Earnings per share, basic	$	0.65	$	0.58	$	1.94	$	1.69
Earnings per share, diluted	$	0.63	$	0.58	$	1.90	$	1.67
Weighted-average shares outstanding, basic	89,967		89,092		90,029		89,025
Weighted-average shares outstanding, diluted	92,042		89,951		92,027		89,732

See notes to unaudited condensed consolidated financial statements.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(In thousands)



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
NET INCOME	$	58,142	$	51,954		$	174,765		$	150,195
Other comprehensive income, net of tax:
Unrealized gain (loss) on cash flow hedges, net of tax expense (benefit) of $0, $85, $187 and $133 for the three and nine months ended September 30, 2017 and 2016, respectively	—		135			293			209
Reclassification adjustment for realized gain on cash flow hedges included in the condensed consolidated statements of income, net of tax expense of $0, $48, $406, and $204 for the three and nine months ended September 30, 2017 and 2016, respectively	—		(70		)	(608		)	(318		)
Total other comprehensive income (loss), net of tax	—		65			(315		)	(109		)
TOTAL COMPREHENSIVE INCOME	$	58,142	$	52,019		$	174,450		$	150,086

See notes to unaudited condensed consolidated financial statements.

LPL FINANCIAL HOLDINGS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Financial Condition

(Unaudited)

(In thousands, except share data)



ASSETS	September 30, 2017		December 31, 2016
Cash and cash equivalents	$	577,961	$	747,709
Cash and securities segregated under federal and other regulations	754,683		768,219
Restricted cash	45,224		42,680
Receivables from:
Clients, net of allowance of $490 at September 30, 2017 and $1,580 at December 31, 2016	391,650		341,199
Product sponsors, broker-dealers, and clearing organizations	179,576		175,122
Advisor loans, net of allowance of $3,660 at September 30, 2017 and $1,852 at December 31, 2016	184,328		194,526
Others, net of allowance of $6,351 at September 30, 2017 and $12,851 at December 31, 2016	214,235		189,632
Securities owned:
Trading — at fair value	13,419		11,404
Held-to-maturity — at amortized cost	11,832		8,862
Securities borrowed	16,655		5,559
Fixed assets, net of accumulated depreciation and amortization of $410,902 at September 30, 2017 and $355,919 at December 31, 2016	402,246		387,368
Goodwill	1,365,838		1,365,838
Intangible assets, net of accumulated amortization of $409,070 at September 30, 2017 and $380,775 at December 31, 2016	325,700		353,996
National Planning Holdings acquisition payment	325,000		—
Other assets	249,926		242,812
Total assets	$