A smooth transition is expected when Mark Casady hands over the reins of LPL Financial to Dan Arnold in January, with one analyst saying the CEO's departure at this time indicates the company is likely not for sale after all.
According to an email sent to LPL's more than 14,000 advisers Monday morning before the market opened, Mr. Casady, 56, will retire next month and will be replaced by the 51-year old Mr. Arnold, currently the firm's president. Mr. Casady will remain as non-executive chairman until March.
William Katz, an analyst with Citigroup Global Markets Inc., wrote in a research note that LPL's announcement indicated that recent market speculation that the firm was for sale was probably incorrect.
“The announcement likely rules out strategic sale short term,” he wrote, "as we doubt Mr. Casady would decide to walk away if [LPL Financial] was in discussions regarding a potential sale.”
In his note, Mr. Katz pointed to a statement from the company that quoted the board's lead independent director, Jim Putnam, claiming “great confidence” in LPL's ability to thrive as a public company as an indication of LPL's commitment to not being acquired.
“We suspect Mr. Arnold is unlikely to rock the boat, given his 10 years of experience at LPL, including the last two as president when he was responsible for [the company's] corporate strategy and worked closely with CFO Matthew Audette on capital management priorities,” Mr. Katz wrote. “We believe Mr. Arnold is respected within the industry, and do not expect any meaningful adviser attrition from this announcement.”
Mr. Arnold, who will join LPL's board of directors when he becomes CEO next month, has served as LPL president since March 2015. He has more than 20 years of industry experience, having previously served as LPL's chief financial officer and, before that, head of strategy and divisional president of LPL's Institution Services business.
“Dan is a great strategic thinker and is awesome at execution,” said John Hyland, managing director of Private Advisor Group, LPL's largest branch with $27 billion in combined advisory and brokerage assets. “He will make a great CEO for LPL.”
In the company's announcement and in an interview with the Wall Street Journal, Mr. Casady indicated that now was the right time to leave LPL, as the broker-dealer got ready to implement the Department of Labor's fiduciary rule, which requires brokers to work in the best interest of their clients with retirement accounts.
“I had two choices: Retire now, knowing you got a great leader in Dan in place or stay and see it through that phase,” the Journal quoted Mr. Casady as saying. “My view is it is the right time to go.”
In the company announcement, Mr. Casady was quoted as saying, "Now after a long and fulfilling career in financial services, I am looking forward to the gift of more time with my wife and family and the opportunity to pursue personal interests."
Mr. Casady has apparently been contemplating retirement for the past couple of years. The company's former president, Robert Moore,
was widely considered to be the heir to Mr. Casady but did not get the nod from the board and left in 2015. He is now the CEO of a direct rival of LPL, Cetera Financial Group, which recently won a big a coup over LPL when it recruited star broker Ron Carson.
(Related read: Ron Carson's jump from LPL a big win for Cetera)
Jeff Mochal, an LPL Financial spokesman, said that neither Mr. Casady nor Mr. Arnold were available Monday for interviews.
Mr. Casady joined LPL in 2002 and led the company through an acquisition in 2005 by two private equity funds, Hellman & Friedman and Texas Pacific Group. The company expanded at breakneck speed through a combination of aggressive recruiting and acquisitions of smaller broker-dealers, before going public in 2010.
But over the past few years, the company has been beset by regulatory problems, paying more than $70 million in fines and restitution to clients in 2014 and 2015.
Just last week Secretary of the Commonwealth of Massachusetts William Galvin
charged LPL with failing to supervise a top-producing broker who allegedly committed fraud in selling unsuitable variable annuities to retirees. Mr. Galvin cited LPL's “paper-thin compliance” in the complaint.
Mr. Galvin's suit painted compliance culture at LPL in a particularly harsh light and was a sharp rebuke to Mr. Casady, who has consistently said over the past few years that it was working diligently to put compliance failures and problems in its rear view mirror.
LPL Financial is a wholly owned subsidiary of LPL Financial Holdings Inc., which trades under the ticker LPLA. The company's share price for the day was down more than 3% at around 1 p.m., which shares trading at $39.64.
