Good day ladies and gentlemen, and welcome to the LPL Financial Holdings Third Quarter Earnings Conference 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 call is being recorded. I would now like to introduce your host for today’s conference, Trap Kloman, Head of Investor Relations. Please go ahead.

Thank you, Daniel. Good morning, and welcome to the LPL Financial, third 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’ll 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 would like to note that comments made during this conference call may incorporate certain forward-looking statements. These 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 all listeners to the Safe Harbor disclosures contained in the earnings release in 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. This quarter’s strong revenue growth and ongoing share repurchases contributed to adjusted earnings per share growing 19% year-over-year to $0.56 per share. Revenue grew 16% year-over-year driven by improved advisor productivity. This annualized commissions per advisor, reached $156,000 and net new advisory assets were a record, $4 billion. Our results were further aided by our continued success in supporting and retaining our existing advisors reflected by our year-to-date production retention of 97%. As a result, through the dedicated effort of our advisors and employees, we crossed a notable milestone this quarter, exceeding $400 billion in advisory and brokerage assets. The rate of net new advisor growth improved after a subdued first half of the year, advisor headcount increased by 154 net new advisors over the past three months, and 393 over the past 12 months. Demonstrated in the quality of our offering, net advisors’ sustaining desire to migrate to an independent business model. Our pipeline remains strong and we’re optimistic about the remainder of the year. Turning to our G&A, we experienced a sequential increase in expenses this quarter, primarily due to an increase in regulatory investment, and an elevated level of discrete expenses that were incurred in September that will not remain in our expense base going forward. We remain committed to managing our costs, and strive to realize the scalability of our platform to drive bottom line growth to create shareholder value. Dan will share a greater detail on the drivers behind our expense growth. Our capital-light business model continued to generate robust free cash flow with which we repurchased 3.3 million shares in the third quarter, and paid $20 million in dividends. Since our IPO, we’ve invested $472 million in capital, to repurchase 14.3 million shares…

Thanks, Mark. This morning, I will be discussing four main themes. First, I’ll address our strong top line results for the quarter, and highlight the fundamental drivers behind our growth; second, I’ll review various components of our expense structure, next, I’ll discuss our profitability as measured by adjusted EBITDA and adjusted earnings per share. Lastly, I’ll conclude my remarks with insight into our capital management. In the third quarter, we generated record revenue of $1.1 billion representing 16% growth year-over-year. Total brokerage and advisory assets rose 12% to a record 415 billion or $31 million per advisor. This growth was driven by increasing advisory productivity, improving equity market levels, and accelerating production of 393 net new advisors added over the last 12 months. Advisory asset growth in commission related activities contributed to gains in advisor productivity. The strength and flexibility of our corporate advisory and independent RIA solutions, are clear as over 50% of gross sales now flow to advisory accounts. As a result, net advisory flows in the third quarter grew to a record of $4 billion or 11% annualized growth. In the quarter, annualized commissions per advisor were 156,000, an increase of 4,000 over the second quarter. Commissions from alternative investments grew 75% sequentially which contributed to this growth and mitigated the summer slowdown in commissions that we typically experience in the third quarter. This activity also contributed to a lift in other revenue which was up 76% sequentially to $21 million as a result of marketing reallowances we receive from product manufacturers related to non-traded REITs sales. The increase in alternative investments sales occurred as several large non-trade REITs held by our customers became publicly traded equities. As a result, those investors who held these securities as an income producing alternative investment class, opted to rebalance their…

Thank you. (Operator instructions) And our first question comes from Chris Shutler from William Blair. Please go ahead. Chris Shutler – William Blair: Hi, guys. Good morning.

Good morning.

Hi. Good morning, Chris. Chris Shutler – William Blair: So first on a strong net new advisor number, just hoping you can delve into that a little bit more in terms of the – were there certain pockets of strength in that number? So was it – I think you talked about larger practices, but was retirement a big part of that? And then – was the increase during the first half of the year – was that more due to growth advisor additions or better advisor retention? Thanks.

So Chris, I think your question is – why did it – that it – recruiting picked back up again, right? Chris Shutler – William Blair: Yes, exactly.

In the first half of the year, we had what we’ve experienced before more recently about eight years ago, which is we have really strong same-store sales that kicked up – and after a drought of time, which they haven’t been there and practices then – commenced [ph] to do two things, one is they focused on their existing clients and process the business because they have been waiting for the drought to end or B, what happens as they get used to that level volume and then I start to add staff to deal with the new normal which is a higher amount of revenues they have and that’s exactly what we saw happen in the first half of this year. And therefore the amount of practices that move around the industry goes down and our retention goes up. In the third quarter what we saw was essentially a return somewhat to normal – not quite normal, but somewhat to normal, in terms of recruiting, it was from all over as it’s traditionally been and it fits exactly the pattern we saw again last about eight years ago, the similar kind of circumstances both with market activity and same-store sales. So we would believe that we’re back to a little more normalized amount of movement across the industry. Again we see it from banks, credit unions, from insurance broker dealers, from independent broker dealers coming here to of course the wire houses as well. We see it in the hybrid RIA area as well as the more traditional commission based broker. So it was a good solid quarter in terms of source of advisors and a solid quarter in terms of a – more return to normal.

Chris, the only thing I would add to that is we’ve maintained a retention of about 97% from the beginning of the year through third quarter. So it was more on attracting new advisors that really made the difference in the third quarter. The other thing that I would add is you do have one bit of lumpiness, and that there was a large bank that was recruited inside the quarter that was about 35 to 40 advisors. So that was certainly helpful within the quarter. Chris Shutler – William Blair: Great. And then there’s a bigger picture question, guys, but I just want to get your latest thoughts given the whole fiduciary issue has been in the news a lot recently. So let’s just assume for a second, I know there’s a lot of questions but let’s assume that the – what’s being talked about by the DOL actually would be put into place and there is a fiduciary standard but the fiduciary isn’t really defined as the only, which I think is something that you have supported in the past, so just help us think through the positives and negatives from that type of a scenario for LPL.

I’d be happy to, Chris. So there’s a couple of ways to think about it as we thought about it. And we’ve done some math around this as well although the math is a bit dated – we lasted [ph] about 18 months ago. And let’s take the extreme case which is that the fiduciary standard for many regulator whether it’s Department of Labor or the FCC or FINRA were to make it essentially commission-free then in other words, you couldn’t go to commissions, it would be what most people would see in the UK, it happened to Australia, it’s happened in a number of countries. What would happen in our world as we have the platform to convert advisors to advisory based program, fee-for-service, and in our view, what would end up happening is number one, smaller consumers would not be able to get advise in that world because there just wouldn’t be the economics behind that type of model to support them. But what would happen is you’re actual yield per client goes up because that’s a little more expensive to have them in the advisory platform and presumably there’s lots of people who don’t need an advisory platform services to get there. So our economic model would tell us that conversion to a total advisory model would work just fine. It would be profitable in terms of what the outcome would come for the company but there will also be enormous change over cost and enormous changes in the industry. That’s the most extreme. But on the other side of it, we actually model it in a way – we believe our models would tell us it would be more profitable for LPL than not. But we don’t think it’s a good public policy because it would…

Sure.

Thank you. And our next question comes from Bill Katz from Citi. Please go ahead. Bill Katz – Citi: Thank you so much. It might just be a timing but I’m actually curious if you – you had some very strong net new asset growth in the advisory line, and the assets themselves were up very nicely [ph] helped by market, but yet the related fees were basically flat sequentially. Is that just a timing element on billables or is there any kind of mix shift underway that’s tempering some of the AUM lift?

So Bill, you’ve got several things that are occurring. You’ve got about a 19% lift in overall AUM from advisory, certainly 9% of that is driven approximately by market so the remaining 11% is net new assets being gathered and the differences is that roughly 50% of those net new assets gathered are going to the Hybrid RIA platform or solution which obviously we account for in a different way. So it’s an apples-to-oranges comparison between the growth and assets and the growth in the advisory fees. Bill Katz – Citi: Which line item is capturing the Hybrid RIA solutions in? Is that in the commission line?

Yes. A little bit of it is in the commission. The majority of it is in the attachment revenue areas like trading and things of that nature. Bill Katz – Citi: Okay. That’s helpful. And the second question is so it sounds like you’re more of consolidating your operations and expanding in these dates in terms of efficiencies. How are you thinking about deal appetite right now and then I guess the converse [ph] part of that of that question would be, if not, what would stop the buyback program? Thank you.

Yes, good questions, Bill. And certainly part of what our evaluation is in terms of the best use of shareholder capital. No doubt that we like organic growth the best because it gives us the best return. Then if we see correctly price, obviously in our view, acquisitions, we like those next, we have not seen properties that have come on the market that makes sense to us strategically or we think are priced in the right zone but we’ve continued to look and we’ll continue to really explore whether those are possible for us, so we have an appetite for acquisitions. We have an appetite for deploying capital in that way, we just did not see anything that we think is priced in a level that would make sense to be able to add value to shareholders. Obviously with the discussion around the bank, that would consume capital in a way that we’ve not ever had to consume capital in the business so we want to be prepared for that. So I think given particularly the capital discussion around the bank that would tend to have us be slightly slower on share repurchases because it’d be nice to build up some cash capital of the business for the obvious reason not indicated that we’re going to do a bank but probably better to be a little more on the cautious side, than you might have seen in our buyback behavior in the past quarter. Bill Katz – Citi: Okay. Thank you.

Sure. Bill Katz – Citi: Thank you.

Thank you. And our next question comes from Joel Jeffrey from KBW. Please go ahead. Joel Jeffrey – KBW: Hey, good morning, guys.

Hey. Good morning, Joel. Joel Jeffrey – KBW: Just thinking about the increase in the interest rates particularly, it looks like it’s up about $40 million from when you disclosed it sort of the last quarter. Is this just being driven by the lower fed funds rate during the quarter and a better shift in terms of the assets held at the ICA program versus money market funds?

Yes. That’s – you got it. The adjustment in the fed funds obviously impacts that calculation. And then just the mix shift between ICA and money market balances and the growing disproportionate growth of the ICA versus the money market impacts that calculation. Joel Jeffrey – KBW: Given a year, just give a new [indiscernible] pick up billion dollars of cash and then you can have the normal adjustments that come along, do the asset allocation or people funding accounts of cash, so we’re going to always generally a net grower of cash and that will actually grow the opportunity set for –

In fact if you look at it on a year-on-year basis, we’ve picked up about $3 billion in ICA year-over-year and about a billion dollars in money market funds over that period of time, so it’s that consistent traditional sort of what I call up into the right growth in terms of our cash balances across those two vehicles. Joel Jeffrey – KBW: And then just follow-up on your commentary about the non-traded REITs and the expectations that sales will continue to be relatively strong in the near term. Will that also continue – will we also see stronger returns in the other revenue line as well during that period versus more of a one-time situation?

Yes. There is definitely a correlation between the growth in the alternative investments and the commission dollars that are generated. And with the other revenue line item, those are for marketing re-allowances that we get from the non-traded REIT companies for the distribution of those products.

I think what’s also important is you’ll see some continued expense elevation – we’re going to make sure of this that we’re doing the right job in terms of regulatory oversight of those sales. In terms of reviews we’ve added a significant amount of staff to help us with the processing. Remember this is an entirely paper based process for something – these transactions are not automated at all. And number two, we want to make sure that we’re reviewing transactions that are going through the system from a standpoint of regulatory compliance. We’re strong believers in making sure these sales are good sales and that they’re done and processed correctly even though they are paper based.

Yes. And that’s where you saw sequentially a $2 million increase in the cost associated with that in the third quarter. And we expect another million dollar increase in fourth quarter that was in my comments. Joel Jeffrey – KBW: I appreciate you taking my questions.

Thank you. And our next question comes from Chris Harris from Wells Fargo. Please go ahead. Chris Harris – Wells Fargo: Hey, guys. So the productivity ratio was clearly very strong in the quarter. Just wondering, it sounds like there’s a lot of moving parts to that whether you guys think that there’s really a lot of pent up demand among the client base of the advisors, how much of that is really influencing the increase we’ve seen? And maybe you can help us think about that it has to maybe what inning do you think we are as far as investors may be getting a little bit more re-engaged?

Yes. So in terms of the overall general reinvestment, the mix of business, et cetera, I think a couple of things that have been occurring. One, fundamentally and underlying, we see investor engagement continue to be strong and that has lifted overall baseline productivity on a year-on-year basis. I think if you even go back and look at the comps in third and fourth quarter of last year in front of some of the challenges at the end of the year like the uncertainty around tax policy, it had a real drag on that baseline productivity so we’ve seen great investor re-engagement. We see that’s continuing to sustain itself and ebbs [ph] in any big deal political or macro unexpected occurrence. We think that’s probably in the fourth to fifth inning in terms of a nine-inning game. I think what you’ve seen added on top of that this summer that offset the traditional summer slowdown that we would expect across the board in terms of productivity is this up-weight or uplifting in alternative investment. For the reasons that we said earlier you just had a situation and a circumstance where advisors are helping their clients reallocate assets that were once income generating vehicles that once they transition into an equity status, they lose that characteristic and they just reposition them back into an income generating vehicle. And so very logical that that reposition’s occurring. And we think the conditions are such that that will continue on into next year. Chris Harris – Wells Fargo: Okay. That’s really helpful. And my follow-up question is an unrelated topic. Does the fee for advice for the retirement plans, Mark, you talked about, where are you guys today with this and how should we be thinking about the total revenue opportunity for LPL?

Yes. Very good question and we’ve got, you know, models that’s lay out different revenue and earnings characteristics. So we’re not quite prepared to talk about those specifically just yet so we will plan on having those in future discussions, you know, to give more insight into what we have. What we’ve essentially been able to do is now connect to the record keepers that system to go out and see the first few clients sign up. We’re seeing the early returns of how the individual plan participants use it. We do think it will be a very nice string of income and highly profitable for us and we’ll give you some more dimensions on that as we go forward if that’s all right. Chris Harris – Wells Fargo: Okay. Fair enough.

Thank you. And our next question comes from Devin Ryan from JMP Securities. Please go ahead. Devin Ryan – JMP Securities: Thank you. Good morning.

Good morning, Devin. Devin Ryan – JMP Securities: Good morning. I just want to circle back on the opportunity within your institution the service business. I know you guys have highlighted this business as an area with some pretty significant potential just given the large amount of addressable assets and then obviously you enhanced the offering with the Concord acquisition in 2011. So I just want to get a sense if you’ve been seeing any increase traction in that business and just an update on how you’re thinking about the opportunity there.

Yes. I think we have definitely seen an uptick in activity there. And it’s been related to a number of things. One is looking at some segments that are near the segments which has historically been strong in. Number two it’s been continuing to refine the offer in terms of materials that are unique or capabilities and technologies that are unique to advisors and institutions where you need a lot of sales reporting – a company level reporting and that was an area that was weaker for us, you know, a couple of years ago. That started to have a positive impact. And then if you take Concord’s capabilities and part of what Fortigent has, that really helps us bring together the trust department opportunity and we’re seeing, you know, lots of interest by existing clients and by, you know, prospects to bring together both their brokerage business as well as their trust business and that will allow us – we think they have a very unique offer in the market place that will allow us to win more brokerage business and will allow us to, you know, raise assets in the trust departments. And remember the trust department assets to us will look just like advisory assets. So it will be very profitable. There’ll be – they have really wonderful solutions for the trust side of the financial institution to help them manage those more effectively and to provide more choice to their client which will make them stronger competitors in the market place and we do see that redevelopments if you will. That’s one of the reasons why we’re winning business some of which, you know, have an impact here in Q3.

And being able to service those trust assets would obviously be a new market if you will inside that – inside that space for us. The only other thing that I would add to Mark’s comments is we do see a good strong trend of banks who were previously their own broker-dealer who were contemplating transitioning out of running and operating that broker-dealer and outsourcing it. And so given our market leadership in that space and our capabilities set to uniquely serve larger institutions that’s created a nice competitive advantage and good pipeline of business for us. Devin Ryan – JMP Securities: Great. I appreciate all that color. And then just a follow up, you know, you highlighted your current capital-light business model in the prepared remarks and a bank conversion would clearly change that. And so I, you know, I know that there’s a number of give and takes in the analysis of looking to becoming a BHC but, you know, if you had the capital and charter today, you know, would it be an easy decision or from a structural perspective, are there some other things that we should be thinking about from the outside, you know, that could have a big impact, you know, on the decision?

You know, I think if we had a license, I don’t know if it would make any difference because in the end, right it’s about the return you got. That’s what you’re going to care about, that’s what we’re going to care about, you know, for us or is there some compelling set of services that we’d like to have in the market place. Let’s start with that one first. As we do know that within our advisory platform for assets that have rolled out of 401(k) plans, so the retirement assets on the advisory platform. Today we can only use the money market fund for those clients. We know those clients would like to have access to an FDIC insured product and the only way to provide today is to have in your own bank. There’s a specific exemption for your own bank. So that will allow us to access then – Devin Ryan – JMP Securities: Well 4 billion –

– worth of assets that today are in money fund. So that would be a compelling reason to do it for the client and a compelling reason to do it for the shareholders that that’s the market opportunity that we would identify as the strongest one among several that are there. Next would be at what cost do we – are we able to do that and at what return? And those – that’s the worth that we’re doing now. But there’s no doubt that it would, you know, significant is the right word, amount of capital needed to both capitalize the bank and to remind ourselves that we’re a non-investment grade, you know, company so we would have some capital requirements that are unique to, you know, our current structure for the company and that’s – we’ve got really do the math and discussions but regularly [ph] it’s about – is to understand at what cost in this one got those $4 billion of assets and others, you know, put on to our balance sheet, with the [ph] bank. And then therefore what’s the return to the shareholders. So that’s the math we’re doing now and we’ll have more to talk about as we enter into 2014. Devin Ryan – JMP Securities: Okay. Great. Appreciate it. Looking forward to the update there.

Thank you.

Thank you. And our next question comes from Alex Blostein from Goldman Sachs. Please go ahead. Alex Blostein – Goldman Sachs: Great. Thanks. Good morning, guys. So just taking a step back on, you know, expenses and the way you guys disclose them. I mean I guess we could explain line by line the drivers behind the gap versus the adjusted but at the end of the day that gap keeps widening and I was wondering if you guys had a view over the next year or so if you expect to see any additional kind of expenses that you could kind of consider one time in nature or over and above from what you already typically exclude?

Yes. This is Dan. I don’t anticipate anything. As we look out today I think you’ve got the continued service value commitment and as we experience expenses that will transition through the end of next year as we have originally targeted and that was, if you recall about a $70 million to $75 million total spend of which about $8 million to $9 million of that occurred last year and year-to-date about $18 million to $19 million we’ve incurred thus far. So certainly you’ll see that continue. You see how we treat employee based compensation which is a reoccurring quarterly charge. And there may be a few small things that come up that are not overly immaterial but I don’t see those as we look out today. And then a lot of the adjustments that we’ve made associated with prior acquisition or transactions will be cleaned up this year whether that’s related to retirement partners, Concord –

– it was done already. So there’s really not much beyond FDIC [ph].

And obviously the transition out of NestWise.

Yes.

So most of that will be cleaned up. Alex Blostein – Goldman Sachs: Got you. And then just a follow up on the cash product. And sorry if I missed your comment but I think you guys got it to kind of a 14% decline in the [indiscernible] on ICA year-over-year. So I think that would put you at a low 70 kind of number for the fourth quarter. Right now I believe you’re at 65 so any updated thoughts assuming again kind of the standard no rates [ph] change view where this will end this year and next year?

Yes. So on that number you got to add an additional 6 basis points of fed fund’s adjustment year-over-year. It gets you down from the low 70s into – to around the 67 basis points number. And the 65 was targeted for fourth quarter of which we still think we’re in that right zone. Alex Blostein – Goldman Sachs: So 65 for the next quarter, so flat. And then how should that evolve into ‘14?

Yes. So I think from a guided standpoint on ‘14 we had forecasted an additional 7 to 8 basis points of pressure in ‘14 and I – and I believe we still think that trend is in place and we see it like the guidance we’ve given you. Alex Blostein – Goldman Sachs: Understood. Great. Thanks a lot.

Thank you. And our next question comes from Ken Worthington from JP Morgan. Please go ahead. Ken Worthington – JP Morgan: Hi. Good morning. A couple of questions maybe first one or two on industry. Last year the Department of Labor put in place new rules on fee transparency for 401(k) plans. The question is, are you seeing increased movement in 401(k) plans from administrators and managers to others and does this somehow present an opportunity maybe an increasing opportunity for LPL?

And the simple answer to that is yes and large would be the other word to use. Meaning that – so just to be clear I’m being very optimistic about this part of our business because for exactly that reason. We stand for objective, conflict-free advice and transparency around what the cost is of investing in any number of fronts started in retail and have now moved that into the 401(k) space. And we do believe that there is a wholesale change occurring in which the more costly administrative structures that were there before are put under tremendous pressure. And the consultant approach which we have in which the advisor has a fiduciary obligation is the less expensive and better choice for a plan to be served today. We think our results this quarter alone, you know, demonstrate that with roughly $11 billion moved in of new plan assets that’s not from recruiting, that’s new wins in the business, you know, off of our existing clients quite powerful no matter how you look at it. And we think it all comes from what we thought was very well crafted and smart transparency from the Department of Labor on the 401(k) front. So we’re big supporters of that. I believe that they’ve gotten that part of their work done quite correctly and we think it provides a very strong tailwind to be gathered [ph] – of planned assets. Now on the cautious side of that plan assets have a certain value to us. It’s not nearly as valuable from a shareholder standpoint as assets are. In the retail business they’re probably half as profitable as a retail asset would be. But as we mentioned in my part of the script is what we’re looking for is how we help bring new services to those plans like in plan advice or automated rollover advice in order to essentially capture the retail asset and we’re starting to see the very beginning signs of that strategy, you know, showing some results. And we obviously are hoping that will build over the next several years into something more significant from an earnings standpoint. Ken Worthington – JP Morgan: Okay. And from the industry side are you seeing increased movement though industry wide or do you think it’s more idiosyncratic to you?

Well, we think it is a bit idiosyncratic to us because we put together both the idea of the acquisition of retirement partners which was the premiere and have been a broker-dealer in this space which we have identified about four years before it became for sale is the right way to enter into the space. So there wasn’t a strong to be honest number two in that space and the number two broker-dealers stalled out a bit because they’re just too small as was natural retirement partners. Now we combined with it this implant advice which is a joint venture with Morning Star which has taken us 2.5 years to build which, you know, frankly was longer than we wanted it to be probably twice as long as we wanted it to be but it’s done. And now it’s being installed in the record keepers. And then the rollover part, that was actually pretty straightforward and again, we’re starting to see plan assets go into top of the funnel and retail assets come out of the bottom of the funnel so we’re starting to see the throughput, you know, that we want to see there. So we think that is a very unique combination of the market place of plan consulting as a fiduciary, in-plan advice in our partnership with Morning Star and rollover. Rollover is pretty normalized to the industry these days but that combination of all three is a unique value proposition in the market for us. Remember there’s a huge market though so there’s plenty of people who run record keeping systems who might be in the mutual fund industry or others that have plenty of success that want to take in – anyway [ph] from that, but we think in terms of the way we’re approaching the market it’s a very unique offer and it’s already demonstrated its success through the growth that we’re seeing. Ken Worthington – JP Morgan: Okay. In terms of asset mix I think the – at least investment community has been anticipating some sort of rotation. Have you seen any migration away from fixed income and protection and maybe towards equities I’ll call it like leading indicators? And then just your opinion would you anticipate that kind of change next year given the returns we’ve seen this year? And then the tack-on is do better market conditions impact the migration away from brokerage to advisory? Because that’s been a theme for you guys and I was just wondering if market condition to be either improve that migration to advisory or impede the migration to advisory?

And so a couple of things here and if I don’t answer both those questions just re-ask them. I think from the overall, the rotation of assets we have more planning oriented advisors who use diversification strategies so different changes in the – in the economic or market cycles we don’t see big swings in our asset classes. You may see it on the, you know, 2%, 3%, 4% level but nothing greater than that so have we seen the risk on trade in more equity allocations yes, but again we’re talking about 3% to 4% shifts. So if our average portfolio may have 55% equity, 45% fixed income perhaps it stretches up to 60, 40 but that’s the typical range we would see. So it flexes a little bit with cycle changes so that’s the thought on the overall mix. Relative to advisory versus brokerage I think we’re fundamentally seeing a shift in the industry and more specifically inside LPL where advisors are using a higher proportion of advisory solutions to meet their client’s needs and in fact, in this year if you look at new assets gathered over 50% of assets – new assets gathered or allocated to advisory solutions versus brokerage solutions. And the first time we, you know, passed through that 50-50 mark was last year. So that shows an ongoing trend towards advisors using more advisory oriented solutions just because we’ve given them robust tools and flexibility and capability to meet the needs of the – full spectrum of their clients. And at the end of the day we see more demand from the client level for that type of solution.

It has lead us just to build on that, a moment in the advisory platform to think about the way that we’re priced there and one of the changes we’ve made recently is to make sure that we’re pricing explicitly across the platform for the outside strategies there. So we have essentially two varieties one of rapids portfolio manager which is the SAM platform, the other one where we do centralized rebalancing in which LPL research or Black Rock or JP Morgan or [Cougar] among many others are basically there to provide strategic oversight of the assets and do the asset allocation Dan was just speaking about. So an example of where advisory growth is beneficial to the advisor is using that central platform allows them to not have the expenses of doing local money management. But we realize though is that strategy is part of that wasn’t in price but our ability [ph] to look at the market place and made that change which is effective in 2014. Our advisors, you know, understandably it’s a change. It’s always tough but they’ve done a nice job of understanding how to – how that helped their business by allowing them to outsource the work to us and those are always we’re trying no evolve the platform to allow advisors to create more and more efficiency at the local level which is really why you’re seeing that increase that Dan mentioned to 55% of flows going to advisor. We think it will just continue to grow over the years and we’re committed to reinvesting heavily in the business and appropriately pricing the activities that go on in the advisory platform to drive efficiency at the local level. Ken Worthington – JP Morgan: Okay. Great. And just to be a pick here one more. Maybe Dan when you talked about G&A, I think you expected 6% growth in 2014 offset by the service value commitment. As you kind of do the numbers there does that mean we should expect the net impact of G&A growth to be zero or maybe even shrink a little bit given the size of the value commitment?

Yes. It was a net number, sorry. So if you look at expense growth both from the absorption of this year’s investment plus just normal inflation in growth oriented characteristics next year, less the benefits of service value commitment, you’ll end up in a net range of around 6%. Ken Worthington – JP Morgan: Okay. Awesome. Thank you.

Thank you.

Thank you. And our next question comes from Ken Leon from S&P Capital IQ. Please go ahead. Ken Leon – S&P Capital IQ: Oh, thank you and good morning. And the first question I have which is related to acquisition of talent. There is proposed regulation, [indiscernible] regarding signing bonuses and disclosures which would impact broker-dealers and others. What are your thoughts on that and the impact maybe on your acquisition program?

So we think it’s very wise legislation coming from FINRA related to, you know, the way that we want to have transparency in our industry around essentially what our – your contracts for movement. My argument as to why it makes sense is if an advisor sold their practice to a large warehouse firm or sold their practice to another practitioner, they would have to disclose to their client what they receive in consideration for that practice the client would have, you know, have that knowledge and transparency. We know that an individual moving from one employment situation at a warehouse to another, you know, the sums we’re talking about certainly approach and some cases exceed what they could sell that business for in the open market place. So we think that it’s quite wise of FINRA to have transparency around that activity so consumers can be well informed of the change and that therefore, you know, that they’re fully informed as to why, you know, the advisor maybe moving. We’re in complete support of moving the advisors freely across any, you know, business model they choose. We do think though that the practice of having an employment model pay a significant we would describe it as off market price that this likely transparency will drive that down. You’ve seen some press reports that two of the major warehouses have said they’re unlikely to continue that practice, that means that the non-economic choice for the company for LPL goes away and therefore an advisor is really – they are free to consider what is truly a market base solution to their needs we think it depends of course it’s the best choice for them, creates current income that’s better than where they are today, creates a business that grows significantly that they can resell at a future date and allows them to build a better solution for their clients through objective advice in an organization like LPL where there’s no proprietary products or products created in an investment bank. So we think it just clears the market of a non-economic or unusually driven, you know, compensation packages. Ken Leon – S&P Capital IQ: And recurring revenue as highlighted fairly front-end of the release and – how important a metric is recurring revenue and do you have a – it was 64% the other target looking out.

Yes. We don’t have a target. My experience is we’ve been generally trying to drive it up over time and that’s really – as Dan was mentioning earlier mainly through the provision of the advisory platforms that’s why we invest heavily there and really try to get thoughtful consideration of what’s on offer to help drive advisors use of those platforms and that drive solutions that work for investors, you know, we’ll obviously work with them. We’re looking it both from a cost base as our platforms. When you look at the retail surprise if you will compared to other choices they have are really quite reasonable. They’re anywhere from 5% as much as 20% less expensive [ph] all in. To the retail consumer we know that that’s a winning strategy for the investor. That’s a winning strategy for the advisor and it’s a winning strategy for LPL. That would drive our recurring revenue. If I go back 10 years, our recurring revenue would have been slightly over 50% as I recall and that, you know, today it’s 64 whether it can get to 74, I don’t know but more recurring revenue is better because it just creates certainty and predictability in our top line stream so it creates the same for the advisor and their practice. Ken Leon – S&P Capital IQ: And my last question on the service side or your commitment it looks like two-thirds of the spend is going to be next year and I guess the question is why – is more of it related to next year either on the components or possibly it’s not going to be 65 million, it might 45 million in, you know, for the two years?

Yes. From a timing standpoint it more is triggered by when the different waves of outsourcing occur and so you actually transition to an outsourced model and you experience as an example severance cost or you experience the parallel processing. So it’s just more about the timing of us executing the different ways of transitions. The scope of work that we’ve identified early on hasn’t changed. And then finally I think there’s always the opportunity to optimize the efficiency of which we do this. And so certainly to the extent there’s an opportunity to reduce or mitigate that overall spend we’ll capitalize on that. At this point we’re not – we’re not projecting that but certainly look for those opportunities. Ken Leon – S&P Capital IQ: Okay. Thank you.

Thank you. And our next question comes from Douglas Sipkin from Susquehanna. Please go ahead. Douglas Sipkin – Susquehanna: Yes. Thank you and good morning. Two questions, first just really – I’m trying to understand the accounting around one item. I guess it looks like for Veritas [ph], it was close to an $8 million decrease in contingent consideration. I’m just curious how does that flow, if at all, through the income statement this quarter?

Yes. So in terms of the determination of adjusted earnings, obviously which is non-GAAP [ph], it doesn’t flow through there and you had several different moving parts that occur in order to ultimately drive to what was about a $10 million or $11 million I think offset associated with the closing of NestWise. The specific line item that flows through on the income statement is in other expenses. And the drivers associated with that was the write-down of goodwill, the write-down of fixed assets associated with some of the Veritas technology we acquired as well as some of the technology we developed. And then that was offset. Those were collectively offset by the reduction in the – in the potential earn out that we would have paid associated with that acquisition. Douglas Sipkin – Susquehanna: Great. That’s helpful. And then just a follow up. Appreciate some other color around the potential longer term initiative to start a bank I guess just two questions around that. One, do you guys have any rough idea what sort of the capital ratios you would need to maintain for that bank are? And two how does that factor in with some of the – these ICON contracts do you have, can you get out of those early or are those like variable and not fixed by nature? Because I guess when I look, you guys say 61% expire between 2016 and 2019 would you be able to get out of those earlier than that?

Let’s answer that question first. That really won’t matter to us in terms of contract rollover. Number one, as Dan said, we have a $3 billion increase in deposit levels year-over-year. So we have more than – capital capacity to deal with meaning to fund the bank in essence to give it deposits at a rate that would likely match with what regulators would want to see. We’ve always described this as a bank that would have to grow at very reasons [ph] pace because that’s what the regulatory environment would require and that’s what we would want to do as prudent managers of capital for the firm from a risk management standpoint. So that’s really the answer to that question is we don’t need to worry about that run-off until, you know. Good question but you couldn’t capitalize a bank that quickly. And the second question is, we need to have a whole range of discussions going on with experts around the what the capital ratio – rate is, so we don’t know yet well enough to know what that would look like. That is really the key question though and that we agree that what cap rate matters a lot in terms of course what earnings you drive. And so we’re being very thoughtful and cautious about exploring further, you know, exactly how one could capitalize a bank, what would be unique to our situation in capitalizing a bank, what sort of the standard operating practice because that question will absolutely drive whether there’s – as much value creations we’d like or any value creation informing or acquire in a bank. Douglas Sipkin – Susquehanna: Great. Thank you for answering both questions.

Absolutely.

Thank you. And I’m not showing any further questions. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.