Huge growth at LPL comes with C-suite drama

Dan Arnold getting fired at the start of the month by the board of LPL Financial Holdings Inc. is akin to an owner of a baseball team firing his manager, right after the team won the World Series, and not telling anybody the reason why.

LPL has been one of the dominant and fastest growing wealth management brokerage and advisory firm for almost 20 year, ever since it former owner, Todd Robinson, in 2005 sold his 60% stake to two private equity funds.

Arnold took over as CEO in 2017, and LPL’s growth has since rocketed, making his firing all the more mystifying.

Its stock price has jumped from trading in the range of $35 to $40 per share at the start of Arnold’s run as CEO to $289.88 this summer, just weeks before he was fired.

It's not often that a rainmaker such as Arnold gets the ax. 

On October 1, Arnold was terminated for cause, after an investigation revealed that he made statements to employees that violated the company’s code of conduct. Shareholders and LPL’s 23,000 financial advisors don’t know what those statements were.

What’s clear is that LPL’s incredible run of growth has come with high drama in the C-suite, with corporate machinations on a scale worthy of a season of episodes of Mad Men.

Back in 2014, Derek Bruton, managing director for independent advisor services, was “permitted to resign” from LPL, “effective immediately, in light of the company's concerns about Mr. Bruton's interactions with other employees,” the company said in a filing at the time with the Securities and Exchange Commission. 

Sound familiar?

On a recent InvestmentNews Podcast, I discussed the turnover in the LPL corporate offices with editor James Burton, and he wanted to know about Arnold, his personality and how he led LPL.

Knowing Arnold all the way back to 2014, when I first interviewed him and when he was chief financial officer and then president, he was a very buttoned-up guy, driven by data and analysis.

The term super nerd comes to mind.  

And some of the big advisors at LPL, people who run the large branch offices, loved it when he eventually became CEO because he was such a nerd.

Turns out that not every CEO has to be a performer.

Here’s a story that also speaks to his character.

After Arnold became CEO in early 2017, InvestmentNews eventually wanted to do a story about the company’s stated push into the RIA custody business, and how it wanted to take on competitors like Charles Schwab, Fidelity and Pershing, the undisputed leaders in that business.

But Arnold refused to allow InvestmentNews to send a photographer to take photos of him. The public relations people said no, he doesn’t want to take individual photos and overshadow the team.

When was the last time anyone has heard of CEO not wanting his photo taken?

Arnold was the last executive who could be confused as a flashy titan of Wall Street, which makes his being fired for violating the company’s code of conduct so surprising.

Something must have gone terribly wrong in LPL’s C-suite for the board to fire a CEO who has overseen incredible growth and success at the company.

The interim CEO, LPL veteran CEO Rich Steinmeier, who worked with Arnold on mergers and acquisitions as well as recruiting, is now in the spotlight.

Steinmeier is perhaps better positioned for the job; he’s a veteran of McKinsey & Co. and also had notable stints at Merrill Lynch and UBS.

One thing’s for sure. LPL’s board will demand continued and accelerated growth. How will he react?