CHARLOTTE, N.C. – January 10, 2023 – In this edition of 4×4, Robert Russo, CEO of Independent Advisor Alliance, sat down with Dan Arnold, CEO of LPL Financial when he visited IAA’s corporate headquarters in Charlotte, NC. Dan has been with LPL since 2007 and CEO since 2017. In the last five years, Dan has overseen LPL’s continued evolution and growth as the nation’s largest broker dealer.
R: You run a very large publicly traded company. You’re the largest broker dealer in the country with nearly 21,000 advisors and more than a trillion dollars in assets. How do you serve and deliver on the very different needs of your three major stakeholders (advisors, stockholders, and employees)?
D: That’s a great question and quite frankly, I think everything we do has to start with that question. As we think about it, part of who we are, a part of our culture is being this client-centered company. Everything for us starts with the client or that stakeholder group. If you don’t have an appealing solution for them, then really nothing else matters. So, everything we do starts with – “are we serving our clients well?” – and then if we can complement that with a compelling and engaging work environment, that helps us attract the best talent and retain that best talent.
By matching that up with a compelling value proposition and doing those things well, then you’re usually able to take care of that third stakeholder by producing good, strong financial results – a good return that yields a great outcome. Clients and employees together end up creating good outcomes for the shareholder.
R: I’m all three as a financial advisor, a stockholder, and my wife as an employee. So, I see it from all angles.
D: Well, I appreciate that, and we appreciate you being a client and the opportunity to serve and support you and being a shareholder, too. Thank you for that.
R: Technology is a continuously evolving landscape. Businesses are always trying to innovate, but whatever you introduce technology-wise today can be old news by tomorrow. How do you stay nimble and innovative at a size of a company like LPL and at the speed that’s needed to keep current?
D: I think that is one of the most important questions that face businesses as we go forward. Right in the face of this great change, how do we make sure that we stay innovative and nimble and are solving for what’s coming versus what’s already been? It’s been a journey for us.
If you look at the core of who we are, it’s integrating technology, services, and capabilities together. If you go back eight years, we were not good at it at all. Think about this world where we would go into a vacuum and spend two years trying to create the perfect solution, but never get any input from the client and somehow try to magically pull a rabbit out of the hat at the end with some relevant, somewhat appealing solution. I think you know how that goes. Not very well. We had to pivot and leave that far behind.
When we challenged ourselves to reimagine that, there were three things that we thought we needed to do to oversimplify. The first was shift our mindset and to stop thinking about technology as an enabler or an administrative solution and think about it as a product. If you productize something, you raise the standard of what you’re trying to solve for and the commitment/resources necessary to do it well. That first and foremost served us well.
We also had to be intentional about creating the critical thinking capability, which is to really understand the needs and challenges of the client and get to the core of what they’re really trying to solve for. If it’s a problem or if it’s an opportunity, do we really understand how to help them go capitalize on it? If we’re zeroed in on what we need to solve for, then we also had to create a team; our product development pods that are responsible for then going and developing those solutions and thinking about the business owner who understands the why of which you’re trying to build. The product people help you design something that’s interesting and appealing and solves for what it is you are trying to do.
Then, the technology team goes and builds it. By using a pod that are all integrated together, they stay through that effort all the way until we deliver it. It ensures alignment, accountability, and that we can learn and iterate better so that you deliver prototypes faster. You get feedback from your clients so you can iterate, improve, and enhance that solution and ultimately deliver scalable solutions that are broadly appealing. If you can develop that capability set across the entire organization, then we can deliver much better solutions, much faster in a world where change is only accelerating. That becomes a big advantage for us. We transformed it some eight years ago and we’re on a journey. We’re not great at it yet, but we keep getting better.
R: Constant improvement and I can say I’ve been a witness to it.
D: Thank you.
R: There are many brilliant ideas, but without a solid execution plan, they don’t come to fruition. What is your process for successfully executing on your strategy across the organization?
D: Well said. You can have a great strategy, but if you can’t execute it, it doesn’t really matter at the end of the day. Five years ago, we tried to create what I like to call an operational framework that would heighten the probability if we had a great idea or strategy, we could deliver real value from that concept or idea or strategy. The spirit of what we did, our operational framework is a playbook like a football team would have. The four plays that we have within that playbook are all built around the pillars of our strategy. What that helps do is take all 6,500 employees that we have and make sure they’re really clear on what our priorities are, what we are focused on or what matters most, why we’re doing those things, and how they can contribute to it.
Then, we pull through a feedback loop that we look at it every single month and tie it to the big priorities, our corporate goals, if you will. We learn every single month how we’re doing on those things, and then we figure out how to iterate or pivot along the way. That has been transformational for us executing at a much higher level. Again, always room for improvement, but it’s been a cool framework of which I think will continue to be used for many, many years. This concept of a playbook, it’s common vernacular inside the firm now.
R: Earlier today, we were walking around the office, and you were looking at our core values. We got that through EOS and that’s kind of our version or structure of it, but yours is a little more complicated than ours at our size.
D: It’s all a relative and consistent foundation and framework. I don’t care if you have 30 people or 30,000 folks, if you enable them to go execute and perform in a collaborative way, you tend to get good outcomes.
R: What do you see as the most significant roadblock or obstacle for financial advisors today, and where do you see the industry in the next 5-10 years?
D: I’ll take the second part of your question first. We see a big opportunity for financial advisors as we go forward. That’s sort of the headline. If I put a little color around it, I think you see this ongoing and growing demand for advice – financial advice. The world gets noisier, more complicated and more people need help. That’s a good thing.
What we’re also seeing is the desire or the appeal for this advice to come from a financial professional is growing across all demographics. You take those two things and you’re like, wow there’s a big opportunity today that’s only going to get bigger with sort of that durable growth concept that I just laid out. We think there’s a big opportunity in front of the advisors.
With that said, the challenge is the world is only changing at a faster and faster pace. I think the financial advisor is left with this challenge of how I make sure that I’m agile enough to continuously evolve my business model so I’m relevant and I’m competitive in a world that’s changing quickly.
Interestingly enough, and you probably know this better than I do, I think a lot of advisors up to this point have tried to outrun that pace of change by putting their head down and working harder, and that yields good result, albeit with long hours and probably wearing many hats while they’re in the office. In a world where the pace of change is only going to grow faster inside that paradigm, it challenges us to have to think differently. I think the advisors that will have the most success going forward are those that can focus on what they do well and what matters most, and then figure out leverage points or outsourcing the other things whether that’s technology to help them, whether that’s a service, or whether that’s adding a colleague to their team. If they can find those leverage points, that creates the capacity for their business to evolve more quickly. They’re going to continue to be able to differentiate and really play into that big opportunity that’s in front of them.
R: That’s good advice and I definitely agree. I know I typically give four questions, but I’m going to give you a bonus one. I know you went to Auburn and you’re a big Auburn fan, whether it’s football or basketball.
D: Who knew we’d be a basketball school?
R: I feel the same way about my school. If you could play one sport professionally, what it would be, what team would you be on, and what position would you play?
D: Oh, that’s an easy one. I would play Major League Baseball. I grew up playing baseball all the way through high school and loved the strategy. One of the single hardest things I think in any sport is to hit 100 mile per hour fastball or slider. It’s really challenging so I like the challenge in that.
I’d play for the Atlanta Braves. Growing up in Atlanta, I’ve been a huge Braves fan for a long time. I grew up playing shortstop. When I got to high school, lefties don’t play shortstop, so I moved over to first base. If I was in Major League Baseball, I’d just switch to right-handed and I’d play shortstop.
R: Thank you for joining us. I really appreciate the time and best of luck moving forward.
About LPL Financial
LPL Financial is 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 thriving practices. LPL enables them to provide objective guidance to millions of American families seeking wealth management, retirement planning, financial planning and asset management solutions. LPL.com
Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through Independent Advisor Alliance (IAA), a registered investment advisor. IAA and LPL are separate entities.