LPL’s new CEO intent on moving beyond problems

Dan Arnold strikes a sunny tone at B-D's annual Focus meeting.

It’s obvious that Dan Arnold, LPL Financial’s new CEO, is trying to move beyond problems that have dogged the firm over the last several years, strike a positive tone and, as he emphasized repeatedly, delight the more than 14,000 advisers who work as independent contractors at LPL.

In Boston on Monday, to kick off LPL’s annual meeting of advisers, called Focus, Mr. Arnold was on his toes in his opening remarks. He used the word “awesome” twice, once quoting his daughter in planning her strategy to win a dance competition and the other to describe a new, redesigned client account statement.

A native of Alabama, Mr. Arnold added a southern twang to the phrase “de-light your clients.” He repeated it three times during his speech to describe how LPL advisers could compete in today’s crowded, complicated marketplace for financial advice.

Such a sunny tone was likely a relief to LPL advisers. Many headlines about the company over the past few years have detailed the firm’s troubles, from multimillion-dollar fines from regulators and churn in senior management to a stock that saw the bottom drop out of its price in February 2016.

It’s no surprise that delighting advisers and their clients is obviously a big issue for Mr. Arnold right now. In fact, the word popped up during a July conference call with investors to discuss second quarter results for LPL Financial Holdings Inc., the parent of LPL Financial.

“Next month, clients will receive re-engineered statements offering them a streamlined and more focused perspective on their progress toward achieving their financial objectives,” Mr. Arnold said. “We believe these changes to our advisory solutions and client statements will help advisers delight their clients and grow their practices.”

Are things delightful at LPL right now?

“I think we are at a different stage of our evolution,” said Bill Morrissey, managing director and divisional president of business development. “If you consider the amount of work done over the last couple years in terms of innovating, building technology, supporting our advisers and how they support their clients, we’ve done a lot of work around that.

“One of the things Dan talked about in his presentation was the whole statement redesign project we went through,” he said. “A statement’s a statement, and I don’t think anyone’s got a great statement. They all look pretty much the same.

“But we redesigned our statement not by looking at other brokerage firms but by looking at what Amazon, eBay and Google do as a way for us to improve the experience to the end investor,” Mr. Morrissey said. “We’re always looking for ways to learn and innovate to support advisers and their investors. That’s what I think Dan was alluding to when he mentioned delighting our advisers and making sure we have the right platforms to support them.”

Mark Casady, Mr. Arnold’s predecessor who stepped down at the start of the year, at times could sound overburdened or simply bogged down by the problems the firm was contending with.

At the August 2016 Focus meeting in San Diego, Mr. Casady said that after massive investments in technology, LPL had moved past the “messy middle [of its] journey,” a euphemism he used to describe the complete overhaul of the firm’s inadequate compliance functions.

“We are close to resolving significant enforcement actions,” Mr. Casady said at Focus two years ago, also in Boston. “Advisers have told me, I’m tired of LPL being in the paper. My answer is, ‘Me too.’”

And in October 2014 during a quarterly earnings call, Mr. Casady apologized to shareholders for LPL taking so long to straighten out its compliance issues, which eventually cost the firm $70 million in fines, restitution payments and settlements with regulators over 2014 and 2015.

“It’s been a two-year journey to reduce complexity by increasing automation and controls,” Mr. Casady said on an earnings call. “I apologize to all shareholders for the bumpiness of the journey.”

Compliance at LPL may have been a journey, but it certainly was not awesome or delightful one.

The securities industry is not one for apologies and explanations. Advisers and product wholesalers are pictures of positive thinking. It’s a sales culture, and everyone is supposed to be doing great all the time. Extra firm handshakes — a clear sign of strength and fortitude — are mandatory when doing business.

Mr. Arnold’s upbeat message to LPL advisers is not a mystery, but it remains to be seen whether future events will support it and for how long the delightfulness will continue.