Operator: And our next question comes from the line of Ben Budish with Barclays.
Ben Budish: I think most of might have already kind of been covered, but maybe just one for Matt on the core G&A growth. Can you just talk a little bit about what gets you to the high or low end of the range? It sounds like the potential ramp is going to be not too impactful for this year. So what are the sort of factors that could drive that up or down? And at what point in the year do you start to get a better sense of where that shakes out?
Matt Audette: Yes. I think what typically drives us within the range is the costs associated with supporting the growth that happens during the year. I think if you look at Q4 of ‘23 of this quarter is a good example where we came in within our range, but at the high end of the range, and that was really about the variable costs associated with growing, whether its variable compensation associated with that growth of the direct cost to ramp up. So that’s typically the driver within that range, those things.
Operator: And our next question comes from Michael Cyprys with Morgan Stanley.
Michael Cyprys : I just wanted to come back to, Dan, some of your comments earlier just around the movement of advisors across the industry that you alluded to. Curious what’s driving that? What might change that at the industry level? I hear you on some of the services portfolio innovations that can help move it in your favor for you guys, but just at the macro backdrop for the broader industry. Just curious what might lead that churn to pick up here versus slow down even further? And then how do you see the sort of backdrop evolving if interest rates are cut?
Dan Arnold: Yes, yes, good questions. Look, I do think you’ve got a number of different things that might create a slight headwind on movement than at the aggregate had brought it down from I don’t know, historically, 7% kind of range for movement. And we would expect things to return and normalize over a period of time. These little headwinds that I referenced, some of it is still a bit of a hangover from COVID and just some of the change in complexity that was created as people work through that, I think, is one. I think a second one is you just got — you’ve had a volatile market with a lot of geopolitical uncertainty that surrounds it and advisors avoid sometimes making big strategic moves or pivots or adjustments in periods of time where they’ve really got to be focused on the clients, and they don’t want to create more change in the midst of uncertainty.
And I think that’s been something that we’ve seen over the last couple of years that have created some uncertainty. And I also think you see advisors also pivoting in a new world of how do they operate post pandemic? What they learned from that? What pressures does it put on their practices; the growing complexity of regulations may drive up costs? The whole digitalization of their businesses and their offices and what does that mean? And how do they think about what is the best partner for them going forward? What are the types of services that are new to them to transform their practice? I think just trying to assess what those options and alternatives are in a world that’s flipped on the side. And now you throw AI on top of that, which in the short run, creates lots of noise and exuberance.
Unfortunately, it’s also a shiny penny that sometimes doesn’t always lead to good productive outcomes. And so I think as we get further down the road of assimilating some order to the house being flipped on its side in some cases and helping them really see where they can use technology really wisely to drive productivity with again, either leverage tools or outsource risk management to lower their costs associated with a world that’s getting tougher and tougher from a regulatory standpoint, where they really do think about, hey, how do I drive growth? And what do I need in my value proposition to do that? How do I leverage folks to do? I think those are some of the interesting questions that is they’re able to solve those. It enables them to move forward in a little more informed way and thus at a faster pace.
So those are some of the little, I think, skirmishes, if you will, that we’re trying — we’re overcoming as we go forward in time. It will help return maybe movement back to a more normal 7%.
Michael Cyprys: Great. And just as a follow-up question for Matt. On promotional expense. If I adjust for the large enterprise one-timers over the past couple of years, it looks like the underlying promo expense has been in the mid- to high teens. Does that sound about right to you? And arguably, that’s in the context of high singles organic growth. So another question there. If we expect that sort of organic growth to persist in the high singles. Should we expect a similar mid- to high teens pace of underlying promotional expense going forward, excluding the large one-timers?
Matt Audette: Well, I think the — probably the best way to think about it is just hone in on the key drivers of the growth. And I’d put it in three categories, which could have different trends. I think the first is organic growth overall. That’s typically the biggest driver and the TA associated with bringing recruiting on board is a driver of that. So the amount of recruiting that we do is really the driver there. TA rates really have not — have been fairly stable, haven’t changed recently. So I think where recruiting goes is where that would go. The second is conference spend, and conference spend more kind of trends with the overall number of advisors that we have at LPL, right? They’re really important part of how we engage with them, how they engage with each other.
So as the firm scales, you could expect that spend to scale. And then lastly, as you highlighted, it’s really the onboarding expenses associated with those large enterprises. So that really can be a little bit hard to predict because it depends on the firms that come on board. Prudential is a great example. We’ve got good insight into spending in ‘24 and good insight into spending overall to bring that on board. It just depends on what happens on the other side of it. So I’d really put it into those three categories, that kind of trend differently each. It just depends on how those three things play out.
Operator: And our next question comes from Michael Cho with JPMorgan.
Michael Cho: I just want to touch on enterprise quickly again. And I have just a quick two-parter here. You talked about a healthy pipeline and sort of an uptick in conversations, since the Prudential announcement. But in terms of kind of looking ahead, I mean, does the Prudential onboarding limit your bandwidth at all do more Prudential type deals? And then second, just longer term looking beyond Prudential, I mean, how should we think about framing the potential benefits to LPL’s operating scale and leverage as you continue to gain critical mass within the enterprise opportunity set?
Dan Arnold: I’ll take the first one, Matt. So, look, on the first one, I think we see an interesting pipeline on both sides of that enterprise channel. As I said before, banks and on the insurance/product manufacturer related market space. And with that portfolio, comes the continued opportunity, right, to continue to explore and learn, both how we’re doing with existing programs and how that drives innovation to create more appeal in them. Second is every time you bring one on, how do you create a more automated and have a better playbook to be more efficient at doing that, so you can do that better and faster and more economically for the lower cost. And, so I would tell you we’re much better than we were three years ago when we brought our first larger enterprises on and we continue to automate more and more of that kind of change management onboarding effort process.
