Good day ladies and gentlemen and welcome to the LPL Financial Holdings’ Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder this conference is being recorded. I would now turn the call over to your host Trap Kloman, Head of Investors Relations. Please go ahead.

Thank you, Stephanie. Good morning and welcome to the LPL Financials’ second quarter earnings conference call. On the call today is Mark Casady, our Chairman and Chief Executive Officer, who will provide his perspective on our performance. Following his remarks Dan Arnold, our Chief Financial Officer will speak to our financial results and capital deployment. Following the introductory remarks, we will open the call for questions. We would appreciate if each analyst would ask no more than two questions each. Please note that we have posted a financial supplement on the Events section of the Investor Relations page on lpl.com. Before turning the call over to Mark, I'd like to note that comments made during this conference call may incorporate certain forward-looking statements, this may include statements concerning such topics as earnings growth targets, operational plans and other opportunities we foresee. Underpinning these forward-looking statements are certain risks and uncertainties. We refer our listeners to the Safe Harbor disclosures contained in the earnings release and our latest SEC filings to appreciate those factors that may cause results to differ from those contemplated in such forward-looking statements. In addition, comments during this call will include certain non-GAAP financial measures governed by SEC Regulation G. For reconciliation of these measures, please refer to our earnings press release. With that I'll turn the call over to Mark Casady.

Thank you, Trap. And thank you everyone for joining today’s call. I’m pleased to report another solid quarter. The momentum that was established in the first three months of the year was maintained through Q2 as retail investors continue to reengage in stock market. This trend reflects a continued improvement underlying economic conditions as well as investors’ recognition they need to actively commit to an investment strategy in order to achieve their financial goals as such investor assets and brokerage and advisory counts posted double-digit growth. Turning to our top-line results, net revenue grew 12% year-over-year exceeding $1 billion for the quarter for the first time in our company’s history. Our results year-to-date a representative of the growth trajectory LPL’s been on over the past decade and support our expectations for long-term growth going forward. While advisors same-store sales growth and market appreciation drive low double-digit revenue growth, our model produces robust earnings growth. We capitalized on these dynamics this quarter as adjusted earnings per share grew 24% year-over-year to $0.61 per share. Revenue growth was driven by advisor productivity. Annualized commissions per advisor increased to 11% year-over-year to $152,000 this quarter from $137,000 in the second quarter of 2012. Advisory asset growth remains strong increasing 11% on an annualized basis on $3.7 billion of net new assets for the quarter. Our second quarter results were further aided by our continued success in supporting and retaining our existing advisors reflected by our production retention of 97%. However, growth of 32 net new advisors remain modest this quarter. As it is typical during periods of improving market conditions following a period of an extended investor disengagement advisors are particularly focused on supporting investor needs. We are not in a unique position as the overall level of advisor movement remains muted across…

Thanks Mark. This morning I will be discussing five main themes. First, I will address top line results for the quarter and highlight the fundamental drivers behind our growth. I will then share insight into developments in our ICA program and what means for our related fees through 2015. Third, I will review various components of our expense structure, next I will discuss our adjusted earnings per share which grew 24% year-over-year to $0.61 per share. And finally, I will conclude my remarks with a review of our capital management activity. With respect to the top line, in the second quarter we generated record revenue of $1 billion representing 12% growth year-over-year. Total brokerage and advisory assets rose 12% to $397 billion or $29.6 million per advisor. This growth was driven by improved advisor productivity, improving equity market levels and accelerating production of 2024 net new advisors added over the last 12 months. Enhanced advisor productivity was reflected in both the growth of annualized commissions per advisor of $152,000 which is the highest levels since the second quarter of 2008 and in net new advisory flows of $3.7 billion or 11% annualized growth. In line with our advisor production growth transaction in other fee revenue increased 12% to $89 million year-over-year. This was primarily driven by increased trading activity that further reflects increased levels of advisor productivity. I would like to now briefly review the drivers behind our cash sweep revenue. This quarter asset-based revenue growth moderated to 5% due to interest rate headwinds that affected our cash sweep programs. Cash sweep revenue declined by $3 million or 9% year-over-year through a combination of a 10 basis points decrease in our ICA bank contracts and the effective fund rate declining 3 basis points, our ICA fee was down 13 basis…

Stephanie, please open up the call.

Thank you. (Operator Instructions) Our first question comes from Alex Klam with UBS. Your line is open.

Okay. Good morning everyone. Just wanted to quickly talk about the recruitment trends I think Mark you said it again, I think you said it last quarter as well that recruitment is a little bit slower here and that’s the reflection of the current environment. One of your bigger competitors recently said that they don’t see really a change in their recruitment. So, just wondering if you can maybe just flush it out a little bit more for us? Is it the advisors you are going at or are you walking away from teams or why do you – what do you think some of your bigger competitors are seeing other things?

Yes. As a (matter), who are the competitors who are seeing other things item, I’m not sure whom you are referring to or what their read of the market situation. If we look at the discovery database information which is a good proxy for movement in the markets it’s not perfect that’s good. What you will see is that movement overall in the industry is down about half the level of what it would have been last year and so what I’m referring to is basically just movement in the industry is down. And we are going to reflect that through our recruiting efforts. In the first quarter, where we have full view of the market we came at number 1 in terms of that new additions to the industry. So we stand by our short-term and long-term record that we are going to do well. We are going to be in the top three of net new additions vis-à-vis any competitor in the industry. So this second quarter we don’t have everybody’s data in yet, we look like we are strong versus the data that we see in terms of net new advisors. We are definitely seeing the pipeline increase and maybe what you are referring to is the same thing we are seeing which is that there are lots of advisors who are interested in moving they just are not to the point of actually making the move and we actually have a 10 point chart that shows basically where somebody is, enquiry would be the first level of that all the way through to movement which should be number 10 in our chart. And what we are seeing is a lot of good activity in the early part of the activity mapping that we do which are people responding to advertising, lease and so forth. I think leads are up 8.5% year-over-year here in the second quarter. So that tells us that there is a desire to move just not particularly a movement occurring at the current time.

Okay. Fair enough. And actually, I was referring to swaps, so if you have anything else to say, please do. Let me just use my second question for Dan. Thanks for the update or the details on the expenses as we look at the remainder of 2013. Can you give us a little bit of early look on 2014, you obviously you have the efficiency program going on right now. But, you also just talked about higher regulatory spending and things like that. So may be just flushing out how all that should impact 2014 expense growth rates? Thank you very much.

Thanks for the question. We continue to work on 2014 and so what I would do is suggest that answering that later in this quarter and even in a more in-depth way at next earnings call will be the timing that we will address that.

Our next question comes from William Katz with Citi. Your line is open.

Okay. Thanks very much. First question is, when you look at the sequential improvement in productivity, maybe to cover more sense deeper into the dynamics around that was there – general acceleration to activity as the quarter progress, what happened in June, was it just the mix of the advisors seasoning. If you are also so curious than I’m because as you mentioned it was pretty strong quarter for average productivity.

Yes. This is Dan. I think of course we saw a momentum building in Q1 with the investor reengagement that occurred at the very beginning of the first quarter. We saw that momentum sustain itself into the second quarter and continue in fact and if you look at the average commissions per advisor per year, it was up about 4% to 5% sequentially from Q1 to Q2. So it reinforced that momentum in that activity. And again, I think we saw that sustain itself through tax season. You always see a little seasonality just coming out of tax season that occurs in May and June but as we moved into third quarter, we have seen that momentum continue and are very encouraged by the continued productivity levels of our advisors moving into third quarter.

That’s helpful. And then second question a little bit broader in scope and just still reflecting on your -- continue around your ICA contracts. When we look at some of your peers, you need space they are benefiting from the better bank opportunity here. I’m so curious have you contemplated, I recognize you have a pretty high ownership private equity sweep right now but to the extent that would have come down over time. What was your – what are the pros and cons if you want to develop a bank rather relying on third party because back of the envelop math, this just could be pretty powerfully accretive net of any kind of capital need and maybe give you the more strategic flex. What are your thoughts on that?

Bill, it’s Mark. So absolutely agree with your assessment that a bank is the new area for us to think about for all the reasons you stated. It could be highly accretive and so forth. We don’t want to -- taking lightly because it brings with it other risks and other activities that we have to think about would bring us a new regulator and bring us some other activities that we want to understand better. On the flip side, what it would do is certainly give us more capabilities for our advisors let me know they would like to have so that could be very helpful to us in terms of growing the business and helping them. And cost of capital would allow us to take deposits into your own bank and as you say there is math around what the trade-off is of how much capital it takes versus the earnings that accrete. As you also said, our BE firm ownership is about 31% today precludes us from any activities, we will need a bank they would have to be below 25% for us to be able to consider that. So as we get to that point what we would do is then undertake a study there to look at the pluses and minuses fully of a bank and decide what we would do about it. To be clear though for everyone in the call this would be, what I would describe as utility bank meant to do exactly as you described taking on deposits from cash sweep and then having a very safe and rather boring portfolio that would allow us to pick up the spread. I think those important factors for shareholders to understand, we have approximate $6 billion in deposits that are in money funds today for retirement accounts that were precluded from putting into bank sweep programs. We know from our advisors, their clients would actually prefer to be in bank sweep programs for the FDIC coverage, if we had a bank there is a exemption that would allow you to basically move those sweep -- those monies into the bank. As you couldn’t do that overnight, it would take you several years to build the capital base and move those monies but that would be a perfectly smart reason to think about why you would do it Bill in addition to what we do in placing deposits in the banking system through ICA.

Okay. Thanks for taking my questions.

Sure.

Our next question comes from Chris Shutler with William Blair. Your line is open.

Yes, good morning.

Good morning.

And good morning, Chris.

First question is on the ICA, so you talked about $200 million revenue benefit there, I think Mark previously talked about $170 million. So is that just higher balances are helping me think about that change. And then on the ICA renewal, I was hoping you can just help me out with thinking about exactly what you gave up in order to renew -- to push it out by years, just yield is going to be a little bit lower within next year than it would have been?

So, Chris on the first question, $200 million EBITDA replacement is subsequent to just the increase in balances that we’ve seen over the year and so it’s nothing more than the simple math applying it to $25 billion to $26 billion cash balances base versus the lower base that we used previously relative to the renegotiation in what we gave up, we did give up some rate in 2013 and 2014 to extend out and have above market level rate in 2015. And I think what you are seeing is about a two basis point adjustment this year and we had previously gave guidance on about a 10 basis point drop next year of which we were able to secure only a 7 basis point drop and that’s point to point for fourth quarter to fourth quarter. Another way to look at it is, over the first 2 years 2013 and 2014, we are giving guidance somewhere collectively over the those 2 years of about a 20 to 22 basis points drop and what you are doing is ultimately seeing that in the form of 14 in the first year and then 7 the second year. So based on our prior guidance, we are in line with that we are just getting there in a slightly different way.

The one thing I had is that we still have all the way upside to fed fund, so this is, we talked about it before, is that fed funds parcel number and the adjustment to basis point that Dan speaking to are the plus number not fed funds. So fed funds will rise tomorrow this contracts deposits value would rise as well.

All right, thanks. And then just one more, on the change to the home office to provision structure, which I know carries with it some increase in fees or spend a little bit of advisors. Just hoping you can help us better understand, how that structure will play out both from a business and financial perspective?

Yes. So from a business standpoint, finance advisors definitely understand the changes are very supportive of it because they understand that the world has changed in terms of over site and review. And we had very productive conversations with literally 100s if not 1000s at this point of advisors and we very much appreciate their patience and thoughtfulness about the questions that they have asked. So I don’t think as a matter of principle nor insight to the smartest way to oversee a system, I think everyone is in a agreement with that. I call things in (light) if it comes down to and what the expense of that. What we have laid out for our advisors is a very thoughtful program that says there is cost of this to us, what we would like to do is cover our costs and so that we can make sure that we are not letting one part of our systems support another part of our system that’s a fair stalker that we have between advisors because they have very different business models. What we have also done is that for 2014 and the rest of this year we will absorb the cost of that as part of getting everyone into the program and thinking through their shoes and working together on it. Then started in 2015, we would have the actual charges in place. It will continue to look for ways to help advisors work that through. An example of that would be that the advisors could join together and decide to form a larger branch and then have the infrastructure for compliance oversight that’s necessary under our new guidelines and in working with our regulator. And we do probably have some of that activity occurs. I think -- how I would look at it financially in answering where the analyst questions and Dan can correct me, there is a different way to think about it, it is effectively there will be some additional cost next year and then tend to be a wash in the year following as the expenses and the revenues match off, we can see each other, we don’t see it. As a profit maker, we don’t see it also as a big loss maker either what we are trying to do is, just get it to a point in which we are fairly charging each part of our system for the activities that we have received.

The only thing that I would add to that is, I think you do get a spectrum of different responses from the advisors. The large majority of them are seeing the opportunity that it gives them. In terms of driving efficiency into their own practice and reallocating their time from doing that administrative and supervisory or compliance work reallocating that to serving and supporting their existing customers prospecting for new customers et cetera. So I think they ultimately get the trade off and the value that they create for their practice in exchange for the cost of the charge or the price to be charged for.

All right, thanks.

True.

Our next question comes from Joel Jeffrey with KBW. Your line is open.

Good morning guys.

Good morning.

I know recruiting has been down in the first half of the year but I would have imagine that’s also saved you guys some money in terms of transition payments but you got to pay out for these guys. Can you by any chance quantify how much you saved on the expense line from just low recruiting?

Yes. Let me take that one. First of all, when you think about the cost of recruiting we look at it many times and what that transition assistance would be on a percentage of the gross trailing 12 of the advisor being recruited. And year-on-year that number has been very stable and we haven’t seen an inflation if you will in the overall cost of recruiting. So if you look at it purely from a non-GAAP way of looking at it, we haven’t seen rates go up and because the pace of recruiting has slowed obviously that you would see the downward trend in terms of the overall payment for transition assistance. Where they get a bit more complex is for a GAAP for accounting purposes, we have a mix of how we provide that transition assistance. In some cases, it’s paid all upfront and expensed in other cases especially with lager practices we will give it in the form of a loan that’s amortized over a 3 to 5 year period of time. And in second quarter what you saw is a reflection of some of the larger practices that we have been successful at attracting over the past couple of years the amortization associated with those loans has been quicker to build in the loans that are actually maturing. And thus you see a increase or an up tick in terms of overall transition expenses as its measured by GAAP. So hopefully that helps you. It’s just a bit complex because of the accounting structure.

Okay. But there is now sort of, I guess (inaudible) absolute number but there is no way to sort of quantify given that you serve at it nearly 60 net new advisors versus how much lower run rate than you did last year, any kind of expense number or savings that came along with that?

Yes. We are reflecting the net number here so I don’t have that at hand but what you are seeing is the reduction in the expense of what we would have expensed upfront in terms of transition assistance for new recruits. It then is offset by the building amortization of the loans. And we can follow up with you and happy to give you more clarity. I just don’t have it at hand.

You might characterize it as – its not significant – its not at the half the level or even 20% less the level is that fair.

Yes. I think that’s right. And again, I think the important point is the rate of which we are paying transition is assistance year-on-year hasn’t shifted or hasn’t changed, consequently we are not seeing sort of any dynamic in terms of inflation but typically those same characteristics that we saw last year in terms of the determination of the value of the upfront in the transition assistance.

Okay. And then just lastly for me, commission revenue came in a bit stronger than what we were looking for, just, can you give a sense for how much to that was due to certain mutual fund trailers or was there anything else fairly that was driving that?

Yes. On the -- you got a combination of both good solid growth on advisory assets which obviously is driving sound growth from year-on-year advisory revenue growth. And then from a commission standpoint, you got a combination of that being driven by productivity which on a year-on-year basis was up 11% to 12%. So, I think in that the lower the trough you saw average commissions per advisor down in the 132 to 134 range. And so, the 152 reflected in last quarter gives you a good indication of the momentum and the strength it’s building in terms of share productivity. And then your trial commissions typically we are about 1/3rd of the overall commissions revenue and you saw a commissions revenue year-on-year building in that same or similar trend of around 14%, 15%. So, overall, you get to commissions year-over-year growth in the 12% to 13% range.

Great. Thanks for taking my questions.

Thank you.

Our next question comes from Douglas Sipkin with Susquehanna. Your line is open.

Yes, thank you and good morning guys. Two questions, one, I was just hoping to get a little bit of color on sort of the client asset mix, obviously very strong flows in the quarter yet, I guess the total client asset level wasn’t up as much you would have expected, so I’m just trying to gain -- how much of that 397 is fixed income versus equity or sort of fixed income orientation versus equity?

So, generally speaking, the best way to think about -- the investors or advisors and therefore their client assets is that those are typically, the non-income Americans who are saving for a long-term retirement and would basically have a very balanced portfolios. So, we do typically skew with a very reasonable amount of assets in fixed income, traditionally we would say its about 50/50 and when we see movement, so, we’re not necessarily a good indicator of the March factor equities, what we would tend to see and what we’re seeing in the second quarter was that a bit more than that the 50% going to the equity market a bit less than fixed income. Because we also had June numbers where you had pretty significant downturn across all markets but particularly the fixed income market manufactured a little bit. So, what you definitely, premises quite correct which is that you’re going to see a more conservative result of asset growth as a result to that being a balanced portfolio that of course helps us in downturns because that same balanced portfolio protects us on the downside, it was just one of the things that we like about it.

Great. And then just a follow-up, I appreciate the new color on the ICA fees, I guess, I’m trying to understand a little bit more about this renegotiation. Well, not likely, let’s just assume fed funds rate don't change by the end of 2014, how is that all, does that sort of change the negotiation you have or is it sort of the best way to think about it is kind of what you’ve said 2015 will be I guess you indicated 2013 bps below 2014 and I guess.

And that is the right way to think about it. That’s assuming fed funds rate does not change, contractual arrangement right, geared over number of years this is what Dan given you the numbers that have frozen all other variable market.

Yes.

And remember we maintain upside with fed funds. So, if fed funds rate moves up, obviously that improves the economics and its offsets that downward pressure caused the contractual pricing.

Great. Thanks for taking my questions.

Sure.

Our next question comes from Alex Blostein with Goldman Sachs. Your line is open.

Good morning. Started to beat the dead horse but again on ICA, $200 million and (2013) number that you provide, any outside scenario. Can you just help us understand if there is anything at all that could change that with respect to the way you negotiate these contracts?

The answer is no. I think it is simple and possible.

Okay, simple enough. Now back to the business part of the equation I guess when you think about normalized expense growth in the business and you outlined a number of growth opportunity you guys see in front of you but it does also sound like did involve, little bit of catch up in that in investment stand to get you there but also perhaps some more -- a little bit of higher normalized level of expense run rate. So, when we think about you kind to getting through this investment stage, what do you think is a reasonable growth and kind of like your core G&A?

So, what we’ve talked about is targeting just normal expense growth in the mid-single digit range, let’s call it the 4% to 6% range. And I think as we’ve shared this year that number, it would be more in the 8% range a lot doing with the absorption of the up weighted cost from last year’s investment and things like Fortigent, NestWise et cetera. And so what you’ve seen is a balance of expense growth that started out at much higher levels throughout the year and then have moderated through the remaining quarters. We do have some up weighted investment as we said and some of the newer initiatives around the regulatory and compliance front, great example being in the home office supervision. But again, those are more an opportunity of which to drive value in a certain area of the business and once absorbing that and I think you will get back into that normal mid-single digit range of 4% to 6%.

Okay. Great. And lastly, on just the investment environment obviously seems like the retailer that has improved a bit in the second quarter. But, when we look at your cash balances just as a percentage of total assets, seems like it also picked up and I’m not sure if its just a June dynamic where the risk appetite might have done a little bit worse, so people look into cash and we should think about maybe some outflows from the cash balances heading into the third quarter or if not just trying to better reconcile the dynamic.

Yes, you did. You saw a pickup in balances beginning second half of May and into June which certainly had a lot to do with the conversation and the concerns around the fixed income market. That said, we’ve seen certainly some of those balances begin to flow out in July. But as you know our cash balances tend to be pretty sticky. And so on a net-net basis, at the end of July, you’ll see a balance that’s higher than you did at the end of May as an example. And so the pace were increase of the cash that’s come into the account just flow it out at a much slower pace. We will see some rotation but I think overall, if you think about that trajectory of that cash balances over time, we typically would expect to see a positive trend up into the right and that overall balance of $1 billion to $2 billion a year.

Got you. Thanks a lot.

Our next question comes from Ken Worthington with JPMorgan. Your line is open.

Thank you for taking my question. First on productivity, you mentioned they were the highest level since 2Q 2008, based on the data I’ve seen 2Q 2008 was one of the peak levels for LPL. However, if you can help for the advisor mix change and then some of the acquisitions you’ve made, can you frame it how high productivity could realistically go. In other words, everything is kind of improved since 2008 and therefore, I would think the productivity would go higher in the future than it was in the past all is being equal. But I would love to get you to frame or somehow, help us think about the upside from where it was way back when?

There is three underlying dynamics that I think about just from the true math. And then certainly Mark, you can add any comments from a macro standpoint about thoughts about advisors activity and performance levels. But there is a couple of things that I think our helpful tailwinds in terms of creating a larger number than power that were set in the past. One, you have bigger asset levels per advisor and thus trials are factored into that number of a $152,000. And so if you just think about larger asset levels per advisor and a contribution of those larger assets to trials that – we tend to have an upward lift in that number. I think you also have a mix of larger practices who have larger broader capabilities and skills that are helping them win and attract new customers and new assets which would tend to support and help that number go higher. And then something that might have pressure on it, downwardly would be just the fundamental bigger shift towards advisory that we see over time than what was historically used. A great example being I think is, if you look back then, the average assets and advisory would have been in the 30% range and now they are closer to that 35% range in terms of overall assets and our advisors practices. And so again that’s a fundamental shift towards advisory which would then suggest that the more of their overall total revenue or fees would be -- being allocated to that advisory fee line in commissions. So, those are three drivers that I think that that sort of help you think about where that number could go and how it might trend over time.

Okay, great, thank you. And then just on advisor growth. I guess in your comments you implied that the sales cycle has extended, can you talk about how the pipeline looks and maybe how effective the recent strategies being employed by the wirehouse and independents are advocating the talent. And then if we go back to 2003, kind of just after that tech bubble burst, actually tech bubble burst certainly recover. How long did it take for broker recruitment to kind of return to a more normalized levels? Did it take a year, did it take two years, I do not even know if that’s a good gauge but I thought it would help frame this as well.

Yes, let me take your last part of your question first. We will have to go back and look specifically but I was here and I do recall it being relatively slow and it was exactly the same dynamic which was that same-store sales were recovering for advisors until they -- therefore busy taking care of their clients and adding new clients. I don’t remember the exact magnitude of it. So many years ago, but do recall it being slower than it was slow in late 2002 in the second half because that was actually the beginning of the recovery back then. So this to me does feel the same way, if we just take it to go, except that as a math proven answer to the question. And so then coming to your first part of your question, so why would we be optimistic about future is, I think good way to think about it, is because we have seen a lift of leads mentioned before its about 8.5% year-over-year in terms of new leads coming in that’s a very significant lead database for us. That’s a very significant growth of leads for us historically and what we are saying are each system, whether it’s a wirehouse or an independent system, whatever it is, they all through different changes and so there are some that are quite specific their group make a change. There is some issues that goes on in their company and that tends to send people out or twice down attempt to people stay. But we do recruit, two things remember about us is we recruited across a large number of broker dealers, over 200 typically are the numbers that broker dealers that we end up having end recruits from. So it’s a very large field. And number two, there are a lot of markets, they are A markets, the retirement markets, the retail market, the institutional market and that really serves us well. And we see different competitors in each of those markets. We don’t find somebody who is able to go across all those markets in a way that we are. So I think we have a very good picture of where people are moving and which segment of the markets are doing well. So for example, this year is a little hidden in the numbers but our banking channels doing quite well, both in terms of recruiting within existing clients which is a nice source of growth for us and for those clients. And of course new clients themselves and that’s a good example of the mix shift that occurs and that’s one of the reasons we like this range and places that we can recruit from as a business. So, that maybe some background of color for you that to help win the details.

Great. Thank you very much.

Sure.

Our next question comes from Chris Harris with Wells Fargo Securities. Your line is open.

You guys mentioned that investors are kind of reengaging the market, I know this is a very hard question to answer but as you speak to advisors they speak to their customers, how far long would you guys say we are in the cycle of investors coming back to the market. And I know this question is kind of asked few times earlier, but trying to get a sense of maybe how this might affect productivity going forward?

That’s a tough question. I think the answer is, we don’t know the answer. We are hopeful and we will point back to that 2003, 2004, 2005 period. They were very strong for a number of years. It’s a bankrupt and economy that recovered and political system that was working reasonably well. I would say these were extraordinary times that we have never been in a situation, I’m lying a bit, where we have the fed doing what it is doing, we have the government trade arms with each other and so forth. So there is always plenty of reasons to worry bout whether some aspect – the general economy will get affected which effect confidence of investors. So it feels to me like there is more opportunities for volatility today than they would have been in the early 2000. But the last trend, I can look at like this one was what we saw on the early 2000s, we had a quite significant run about 3 years of improved productivity across advisors as the general economy was good and people reengaged in investment programs.

And Chris, maybe one added level of detail on that, I think what you do hear from our advisors when you talk to them in detail, is there is a fundamental shift in the conversation in the interest and in engagement of that client versus the past 3 years or prior three years, so you do have a sense of need that needs to be addressed and I think they are realizing and recognizing, it’s a very different conversation than they had the prior three years. And that I think because of the nature of that pent-up demand also helps smooth out if you will some of the volatilities that maybe occurring or potentially may occur in the marketplace because of the fundamental growing of the need itself. So I do think that’s worth thinking about in terms of some of the stability if you will through fluctuations of potential change in geopolitical or economic conditions.

Okay. That’s real helpful guys. My follow up question would be maybe a strategy type question. In the recent past year you have really rounded out your capabilities, whether it’s in the high network channel and then more recently the mass market. As we sit here today, do you feel like there is any kind of holes in your service offering or areas you like to develop more and where do you think you are going to be spending most of your resources you are going forward?

Great question. And I think as we look at it as part of our emphasis on the strategy that we have, is we actually think we have got all the greenfields we need to be able to do a great job with advisors and growing their businesses and then attracting additional advisors either to existing practices or on their own across a wide spectrum of types. So that were definitely signaling with our focus on simplicity both to our customers and to our shareholders is that we see an enormous opportunity for growth of what we have today, which means as the capital matter we wouldn’t need to use capital for acquisitions and it’s really about the fundamentals, the earlier question about the bank for example, the question about how we spend on IT and technologies spend in all the areas, we will continue to look at. We certainly will look at broker dealers for acquisition opportunities merely as a financial matter and if they are in a range that makes sense and have that kind of brokerage participants that makes sense to us then we certainly will take a look and consider them. We have generally looked at properties that have come up and haven’t found them to be a lot interesting either from our price standpoint or from the type of brokers who were there to be very blunt about it. So therefore, that leads us to the area that Dan highlighted so well which is that about a third free cash flow goes to just existing business uses, about a third to dividend and about a third therefore to share buyback. And that’s a lovely position to be as a company, that have that kind of strong cash flow and be able to return capital shareholders so well.

Thank you.

And our final question comes from Alex Klam with UBS. Your line is open.

Hey, thanks again for the follow up. I’m not trying to drag the call, but just a couple of things. Mark, I think in your prepared remarks you made a very brief comment around your I guess mass market opportunities and that you continue to refine it and maybe even look for more efficiency. So, obviously you are talking about (inaudible) is a change in strategy or are you not hitting targets or you are just trying to do something different, or I am trying to read too much into that?

You are not reading too much into it. I think what we are trying to say is that, we are very, very focused on return to shareholders. We made the significant investment here. What we want to make sure is that we are getting a return on that investment and understand how best to support that need. The need we should just make sure and point out; I want to make sure the subtlety of the languages it was. We enter the need to really think about training. And to think about how to provide training to advisors to get new people into this industry. We think it’s a great industry. We think we have got a bright future for individuals to join it, so anybody listening, great career choice for you. And that was really hard time to get there and what we have to evaluate is that the most cost effective way for us to do that or not that’s really what we are saying.

Okay. That’s helpful. And then just lastly to wrap it up, I think you gave a decent review of transition even though there were a couple of questions on it but just in terms of the level, I think Dan, you said it’s fairly I guess stable right now. But on the other hand, I think from the wire house perspective it looks like they are not being as aggressive anymore so it’s the stable function of, now you are recruiting from 200 different brokers or is there actually potential for things to maybe come down a little bit and ensure this isn’t actually go down, as there is not of much competition maybe.

Yes, so, I think and again it is important to keep this into perspective that over the past couple of years we have seen a gradual and only slight up tick in terms of the overall cost of transition assistance. You remember, we look at it as really helping someone start a business. So we are making an investment and helping them in terms of transitioning into to starting a business. So, when we talk about transition a system its usually on a magnitude of call it 20% if you will on trailing 12 production versus what the lawyers may have been offering in the 200% to 300% range. And so, we do believe that that number will continue to trend up slightly, no big volatility and other changes. I don’t see it coming down, but again, I think it’s important to think about how we look at it in context and the purpose of what our transition system stands for versus perhaps how the wires use it as a strategy to drive change or movement in any one short period of time.

Fine. That’s helpful. Thanks again.

Thank you.

Thank you, ladies and gentleman for your participation. This concludes the conference you may all disconnect. And have a wonderful day.