Good afternoon. And thank you for joining Third Quarter 2020 Earnings Conference Call for LPL Financial Holdings Inc. Joining the call today are President and Chief Executive Officer, Dan Arnold; and Chief Financial Officer, Matt Audette. Dan and Matt will offer introductory remarks and then the call will be open for questions. [Operator Instructions] The company has posted its earnings press release and supplementary information on the Investor Relations section of the company’s website, investor.lpl.com. Today’s call will include forward-looking statements, including statements about LPL Financial’s future financial and operating results, outlook, business strategies and plans, as well as our other opportunities and potential risks that management foresees. Such forward-looking statements reflect management’s current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward-looking statements. The company refers to listeners to the disclosures put under the caption Forward-looking Statements in the earnings press release, as well as the risk factors and other disclosures contained in the company’s recent filings with the Securities and Exchange Commission for more information about such risks and uncertainties. During the call, the company will also discuss certain non-GAAP financial measures. For a reconciliation of such non-GAAP financial measures to the comparable GAAP figures, please refer to the company’s earnings release, which can be found at investor.lpl.com. With that, I will now turn the call over to Mr. Arnold.

Thank you, Chris, and thanks to everyone for joining our call today. Over the past quarter, our focus has remained on our mission of taking care of our advisors, so they can take care of their clients. This is a credit to our employees who have responded with agility and ingenuity to new working conditions and new opportunities to support our advisors. Their dedication is inspired by the unfailing commitment of our advisors who continue to provide much needed financial advice to millions of Americans managing through a challenging environment. We believe this environment is driving several year’s worth of change in just a matter of months. This pace of change is creating many new constraints and challenges to solve for throughout the industry. We see this change as an opportunity to create additional long-term value by enhancing how we serve our advisors, how our advisors take care of their clients and how we engage with and attract the best employee talent. We entered this year with momentum and the work we have done to operate in this changed environment puts us in an even stronger position to serve our advisors and grow our business going forward. Now looking ahead, we will continue to focus on investing in our platform, which helps our advisors win in the marketplace, attracts new advisors, and in turn, increases our scale and capacity to invest. This will help us deliver a market-leading platform that is the easiest place for the advisors to construct the perfect practice and run a thriving business. Doing this well gives us a sustainable path to higher levels of organic growth, increased market leadership and long-term shareholder value creation. With that context in mind, let’s now turn to the third quarter and discuss how we are executing the key components…

Thank you, Dan. And I am glad to speak with everyone on today’s call. In the third quarter, we remain focused on serving our advisors, growing our business and delivering shareholder value. We continue to drive strong organic growth, recently signed another large bank and closed on three acquisitions and we did all of these while remaining disciplined on expenses. As we look ahead, we are excited about our increasing opportunities to drive organic growth and long-term shareholder value. Now let’s turn to our third quarter results, total advisory and brokerage assets increased to a new high of $810 million, up 6% from Q2, driven by continued organic growth and higher equity markets. Looking at organic growth, total net new assets were $11.1 billion or a 5.8% annualized growth rate. Our results increased throughout the quarter with September organic growth at 7.4%, which was up from July and August as those two months included the impact from client tax payments and summer seasonality. Moving on to recruiting and retention, which are two key drivers of organic growth. We continued to produce strong results in the third quarter. Recruited assets were $10.7 billion in Q3, which brought our 12-month total to $40.8 billion. At the same time, retention remained over 98% year-to-date. Looking at our business mix, we continue to see positive trends in Q3. Advisory net new assets were $10.4 billion or an 11% annualized growth rate, which brought advisory assets to over 50% of our total. Centrally Managed platforms also continued to grow as net new assets were $1.9 billion or a 14% annualized growth rate. Now let’s turn to our Q3 financial results, strong organic growth combined with expense discipline led to EPS prior to intangibles of $1.44. Looking at commission and advisory fees net of payout, they…

Thank you. [Operator Instructions] And our first question comes from the line of Bill Katz with Citigroup. Your line is now open.

Okay. Thank you very much for taking the question. Good evening, everybody. So, Dan, maybe I want start with your big picture, obviously, you detailed three or four things that are really resonating in the marketplace. Could you unpack maybe the organic growth that you are seeing, maybe take it down a little bit to the different channels between sort of the traditional channels versus new one and so maybe speak to what’s particularly resonating in the marketplace that’s driving the very strong both net new assets, as well as the recruited assets?

Yeah. Thanks, Bill. Let me take a stab at that and I will try to give you a little color and then if you have got a follow-on, please fire away. So look, I think, if you think about our growth. We, first and foremost look across all of the different models or parts of the market that we serve and look at how we are doing from new store sales, same-store sales and retention, right? And if you match that to the investments that we make strategically in our model, they are meant to serve or support any parts of that growth formula. So we obviously see record high results in the new store sales, which is referenced in the trailing 12-month recruiting that we have done, where we have brought in over $40 billion in assets, which was a record high for us, so that would reinforce that oar in the water is making good progress. I will come back to that. I think same-store sales has been durable and kind of sustained itself in a similar place over the last couple of years. This year, more of that opportunity is coming from advisors broadening their value to existing clients and ultimately getting rewarded for that value by gathering more assets with those existing clients, which is a bit of a different shift from prior years where they may get a higher mix of that growth from new clients that they attract. And then on the retention front, clearly, that’s us investing in our model, improving and enhancing the service experience, the technology capabilities, our ability to serve and support and evolve the model going forward and sort of play out into the future where our advisor’s needs are. And I think that is best reflected in the…

That’s helpful. It is. Thank you. Maybe one for Matt. Just sort of thinking about your commentary where you ended in terms of capital priorities. Just stepping back as you think about core expense growth as you look out to next year? How much of an opportunity has that been down the underlying expense growth just given everything that’s been going on with COVID and work-from-home and remote office backdrop versus maybe not letting that bend down and reinvesting back in business to further turbo charge organic growth?

Yeah. Hey, Bill. So I think as we think about expenses next year, we will share our plans on the next quarter’s call. But I think from a principal standpoint, I think you hit on it in your question. When I think about Core G&A and spending, it’s really back to the capital allocation priorities. I think we see the highest and best use of capital to invest and drive organic growth. I think that will be the principle that we bring to that and that will be the principle we will bring to laying on our Core G&A plans for next year.

Thank you.

Thank you. And our next question comes from the line of Steven Chubak with Wolfe Research. Your line is now open.

Hi. Good afternoon, Dan. Good afternoon, Matt. Thanks for taking my questions. Maybe just starting off with a strategic question for Dan. Some of the acquisitions, including AdvisoryWorld and more recently Blaze, there are products or services which are being marketed to advisors outside of the LPL channel. And as your strategy evolves and you continue to build out just some of the more proprietary Business Solutions, especially given some of the strong demand for those services you have seen from your own advisors. How are you thinking about the opportunity to maybe white-label and market some of those solutions outside of your current advisor network, especially given some of the wealth competitors within that solution space trade at much higher valuation multiples?

Yeah. Steven, it’s Dan. Hey. Good question. Look, with respect to Blaze and AdvisoryWorld, those are both part of our strategy where we use M&A, in some cases to help accelerate the development of our capabilities and then fully integrating those capabilities into our overall ecosystem or workflows for our advisors. And in this case, that’s very much what we are doing here is capitalizing on a really good solution in property out in the marketplace and bringing it into improve and enhance the overall workflow associated with portfolio construction and development, right, and trading is a big component of that. That said, the second opportunity associated with this acquisition is certainly to continue to support the market share that they have outside of the LPL platform and that is our intent to do that here. It’s to continue to serve and support it, continue to invest and innovate in the capability and tool and certainly evolve that offering to those clients. I think by doing that, it gives us the chance to continue to learn and understand how to serve a marketplace outside of the LPL platform, which then strategically positions us and reserves the right to if we ever want to shift or pivot and begin to serve that third-party marketplace in a more significant way. I think it gives us the foundation to work from and do that well. So though not the priority right now, it certainly is a strategic element of value here that gives us the chance to learn and allows us to be positioned to do that.

Thanks for those remarks, Dan. And maybe just a clarifying question, a follow-up to Bill’s earlier one on organic growth and investment. Matt, I know your investments in recent quarters have been largely focused on driving organic growth, we saw strong momentum in September. I was hoping you can just give us some more color on whether that organic growth momentum has continued into October? And what that can mean for just Core G&A expense in Q4 as we contemplate some of those additional investments?

Yeah. Sure, Steven. We look at what we have seen so far in October, right, being here pretty much at the end of the month. That momentum has continued. So I’d describe it as consistent with September. I would keep in mind the majority of advisory fees are charged and paid in the first month of the quarter. So when you look at the trends from September to October, that’s going to have a natural bias down just from the change in the amount of fees. Putting that aside, October M&A is really trending at a similar level to September, so we have seen that return to organic growth continue. And then on the cash balance side or the cash sweep side, we have continued to see cash build in October at a modest pace. I think we are seeing some good results there. On the Core G&A side to your point, we remain on track for that lower half of our outlook range. So that lower half being, call it, $915 million to around $927 million. I think to the point of your question, where we would land in that range especially with three quarters being completed and just one left. I think the main variable is the variable expense associated with organic growth and how we finish the year. So given the first three quarters, as well as what we have seen so far in October, I’d say, we are probably going to be towards the upper end of that range, meaning the $915 million to $927 million range. But we do have two more months to go, so we will have to see how it plays out, but that would be the perspective where we are today.

That’s great, Matt. Thanks so much for taking my questions.

Thank you. Our next question comes from the line of Alex Blostein with Goldman Sachs. Your line is now open.

Great. Hi, everybody. So I was hoping we could talk a little bit more about the banking channel. You guys announced two sizable deals in the last couple of months. So maybe talk a little bit about what’s changed in that channel that makes you guys more of an attractive place for some of these advisors to join? And then from a financial perspective, maybe you could just kind of walk us through sort of a framework around gross profit ROA and EBITDA ROA for those type of transactions, including amortization of transition assistance that, Matt, I think, you alluded to that in your earlier comments that that’s probably going to pick up next year, some of those FAs on Board?

Yes. So, Alex, it’s Dan. Let me take the first half of that and then I will let Matt finish up with sort of part B of that. So, look, with respect to the general financial institutions marketplace. We have seen some good solid momentum over the last couple of years, and as you all know, it’s roughly a $1 trillion asset marketplace, and roughly a third of that business is outsourced today. So last year, we recruited $5 billion, which mainly would have been share that’s coming from what was already outsourced. This year we are on track to double those results, and again, it’s mainly where there are participants that are already outsourcing that solution or service. I think strategically, we challenged ourselves around this concept of can we add value to a part of the marketplace that traditionally hasn’t outsourced, and if so, how might you do that, in this case, it’s these larger financial institutions. And so I think what we have done is try to go in and innovate or ensure that we could deliver for them a differentiated client experience, which we know is important in their overall offering out in the marketplace and how they position themselves and if we can complement that and extend that overall value proposition in a differentiated way, that’s interesting. If we can find ways of which to optimize the financial contribution of this type of business line within the financial institutions would be a second place that we focused on. And finally, ultimately, shifting the risk profile for them, I think, is typically an appealing characteristic of the model. And so those are the areas that we focused on to try to come up with innovative ways of which to shift that, evolve that, such that this market that had never been outsourced became an opportunity and that’s where we focused. And try to show up with a differentiated solution and have had the opportunity to have that dialogue with some of these financial institutions. We think it’s pretty appealing. It’s a pretty unique model and I think we have got a couple of wins and we are out there actively sharing that concept in that model. Though not for everyone, we think it’s pretty appealing, so that’s the concept we have used to try to extend the market, if you will, in this channel. I hope that answers your question.

Yeah. And, Alex, on the financial side. When you look at the traditional bank channel, usually the majority of the assets at those institutions are on the brokerage side. So you kind of start and look at our gross profit ROA and those assets are in the 15-basis-point to 20-basis-point range and then for the larger banks, given their size, the returns are usually at the lower end of that range. So that’s the way to think about gross profit. On the cost side, I think one of the primary benefits of the transaction is we can really bring our scale to serve them in an efficient way. So there’s really a lower cost to serve. And then on the transition assistance side, we always underwrite to returns, so given those dynamics that the TA rates are typically lower for those banks -- for those larger banks. So when you put all that together, the economics are accretive on the EBITDA margin for us, and then, I think on these two specific ones, as we get closer in future quarters, we will give you a little bit of color on to the extent on how their onboarding and things will impact the financials in those periods.

Awesome. Thanks. And my follow-up, I guess it qualifies as a follow-up, is around M&A broadly. I am just curious to get your thoughts that in case we do have a change in tax law and there’s a change in capital gain taxes. To what extent do you think that could be a driver in increased consolidation in the industry with you as an acquirer potentially or some of your financial advisors acquiring other practices with kind of financial backing of LPL, because I know, obviously, that’s an interesting element to the story that you guys bring to the financial advisor, just kind of allowing them to use your sort of balance sheet for acquisitions?

Yeah. I think the fundamental point, Alex, which is a good one that you are making is, where there’s change, there’s usually a broad set of different questions or new needs that come up or people contemplate new scenarios that they may not have faced before. And we do think the environment, as we look out for any number of reasons, including potential tax law changes, certainly drives more consolidation and activity on the M&A front and whether that be at the advisor level, which is a logical place to ask that question or more at the corporate level. I think we see that landscape being -- and the trajectory of the activity, they are trending up on both fronts. And obviously, as we have said, from a strategic standpoint, we would typically be a participant on both of those levels as we have in the past couple of years and we would take our disciplined approach where we make sure that these acquisitions make sense from a strategic standpoint, a financial one and operationally. But I think we are aligned in the premise of your question that you are going to see more activity.

Great. Thanks very much.

Thank you. Our next question comes on line of Craig Siegenthaler with Credit Suisse. Your line is open.

Thanks. Good evening, everyone, and hope you are all doing well. I wanted to follow-up on NNAs. So 3Q was impacted by taxes and seasonality, and then next year you have two NNA accretive transactions closing. So can you comment on your ability to accelerate off this 6% level into 2021?

Yeah. Hey. Thanks for the question. And let me take a first run at that and you fill in anything, Matt, that you think would be helpful. So I think if you look at Q3 as a jumping off point where you had roughly a 6% annualized growth rate. That was driven by, certainly, July as you say, with the tax payment trends and that will pop up next year in April rather than in July, let’s hope. But I think you will certainly see that headwind in that particular month that the tax payments occurs and then there’s always a little seasonality in the summer. But let’s just say that 6% to 7% is the right more blended jumping off rate. I think as we look out and push ourselves or challenge ourselves to drive that number forward or higher outside of the $34 billion that comes from the two large financial institutions that we referred to. I think we see us continuing to invest in our model that makes it more appealing, improve the effectiveness of our own sales activities and business development activities. Our traditional markets continue to contribute to that -- to a higher growth rate in terms of new recruiting. I think our new markets, as you supplement them then. They begin to contribute because, as I said up to this point, we have had very little contribution from them. So we see that as an opportunity as they ramp in more robustly next year. So those are both places where we would challenge ourselves to continue to extend the growth rate especially as the new store sales. We continue to invest in the model from a service experience standpoint and we have got retention levels at the 98% level now. We think that’s a pretty sound and solid outcome. So I think as we go forward and continue to invest in that service experience, that’s probably a good way to think about retention. And then I think same-store sales is a place that we continue to believe there’s more opportunity there and we continue to innovate, especially inside Business Solutions with a new offering called Growth Solutions that is in the experimental phase right now, where we are being more explicit and coming up with new ways of which to help advisors grow their existing businesses and so though I don’t think that’s a short run opportunity, we do see that as a long-term opportunity to tease out more contribution in same-store sales. So I hope that helps you as we think about at least going into next year, where that ramp would come is probably new store sales and longer term you probably get it from new store and same-store.

Thank you, Dan. Very comprehensive. I have one follow-up P&L question probably for, Matt, but I just wanted your perspective on the 25% increase year-over-year in transition assistance versus, I think, it was a 4% increase in net new advisors?

Yeah. Sure, Craig. I mean I think that the approach on TA is really the same, right? It’s underwritten to returns and those returns based on the assets that come over and I think what you are starting to see not just this year, but over the past several years us starting to recruit larger and larger advisors, and the return hurdles haven’t changed. So I think any dynamic you are seeing there is just related to us being able to bring on more advisors from more assets.

Great. Thanks for taking my questions.

Thank you. And our next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is open.

Hey. Good evening. Thanks for taking the question. I just wanted to circle back on the Centrally Managed assets and platform there. It looks like that’s stabilized here at around 14.5% of client assets. So I just hope you could talk a little bit more about some of the initiatives that you are putting in place when thinking about to further accelerate the penetration. How is the product set evolving and if you could also touch upon maybe and describe the profile of the type of advisors that are participating on the Centrally Managed platform?

Yeah. So let me take some of those and get, if I miss one or two of the different sub-questions in there, please just redirect me. But -- and so look, we believe that this models based approach or models management based approach that’s emerging inside advisor’s practices is a significant and sustainable trend. It’s a really good way for them to optimize portfolio construction in a really efficient way and construction/management. And it applies both as rep as PM all the way over to your Centrally Managed platforms. And so we see the opportunity to make investments in this models based approach being relevant across that entire advisory platform. That said, if you go move over to the Centrally Managed concepts, I think, where we are trying to make investments and where we actually believe we can continue to drive growth and participation on those platforms, continuing to add, what I might call, variations to them. So you heard us talk a lot about rep sleeve, which is an ability to use Centrally Managed platform and just outsource less than the turnkey option or alternative and that extends the applicability now of that model to more advisors as an example. We continue to make other investments in that platform and pull in other underlying securities. So you pull in individual equities, you pull in SMAs and now you are beginning to enrich that overall Centrally Managed platform and you are going to have a lot more advisors utilize it for a variety of different reasons for their clients. So think about variations to the Centrally Managed solution and also think about extending the overlying strategies that you can apply to it and the different securities that you could use within it. So there’s lots of ripe opportunity there to continue to invest in our platform to extend its applicability to a lot more advisors and help us drive more assets there or contribute more assets. I think, also, as you know, we make investments from a pricing standpoint typically each year. And we have tended to focus on advisory and we will continue to do that as we move forward, our advisory platforms and this would be an area where, again, you lower minimums, you simplify pricing, you lower pricing on your Centrally Managed platforms, you are going to draw more utilization of them there too. So that’s sort of the spectrum of how we think about the opportunity to enrich its appeal to the advisors and ultimately how they use it to serve their clients.

Great. Maybe just the last part of that question just around the profile of advisors that are more likely to participate or that are participating today, just any color there that you can share?

Yeah. I think a couple of thoughts there. It’s actually a broad appeal across the Board. So there’s not one segment that we built it for. It’s meant to have broad application across the platform. I think as more advisors are using more advisory solutions in their overall mix, that just overarching demand will tease out the opportunity for more to test, experiment and use it. We see them using it across a client size now. That typically ranges somewhere from $100,000 to $0.25 million in assets and that’s not to say it was built that way, but that tends to today fill a sweet spot in perhaps how it’s used. I think we continue to work on the pricing. You will enable it to be used up market. And I also think you see advisors who have traditionally been rep as PM or had done the portfolio construction and management themselves. As their time is pressured in general or they want to allocate it to other higher value services, you are seeing more and more experiment with shifting some of that traditional rep as PM work over to Centrally Managed model. So making it easy to convert from one model to the other, putting them all inside one platform under one contract takes out the friction associated with that transition or that movement and as we do that over the next year or so, we also think that will unlock some movement towards these Centrally Managed solutions.

Great. Thank you very much.

Thank you. And our next question comes from the line of Chris Harris with Wells Fargo. Your line is now open.

Yeah. Great. A question on the ICA guide for Q4, has the yield on floating balances changed much at all and I asked the question because it seems like a decent step down for just $0.5 billion of fixed that are rolling off?

Yeah. Chris, I think, the -- on the variable balances, it’s really just the contracts associated with LIBOR, resetting and coming down to where current LIBOR is. Fed funds obviously moved pretty immediately back in March and LIBOR has just moved slowly after that. I think where it sits today, if history is a guide, it’s now settled in where it would typically be when Fed funds is near zero, but it’s just those contracts resetting.

Okay. And subsequent to quarter end, there was a move up in some medium-term, long-term interest rates. At what level of rate do you guys need to see where you might entertain the idea of moving potentially some more balances into fixed?

Yeah. I mean our focus on fixed is unchanged, right, targeting that 50% to 75% zone of the overall balances and really to minimize the amount of impact on our economics as interest rates move. I think what’s most relevant today is less about where the curve is and really just the amount of liquidity in the marketplace. I mean there’s just not a lot of demand for those fixed rate contracts. So I think minor movements in the curve probably don’t change that. I think over the long term, if the curve steepens, I think, there’s a lot of opportunity economically for us to move more into fixed rate balances. You just look at where we are today at about 35% fixed. If you just look at the bottom end of that target range moving up to 50%, it’s about $5 billion in balances that we can move. And I think if you look back over the last couple of years when we were moving into the fixed rate market, the sweet spot in that market was really the five-year point on the curve. So if you are just trying to run some math, I think, thinking about the opportunity at the low end of the range of $5 billion on the five-year point of the curve is the opportunity. But I think in the moment right now, there’s just so much liquidity in the market, there’s just not a lot of opportunity today.

Got it. Thank you.

Thank you. Our next question comes from the line of Kyle Voigt with KBW. Your line is now open.

Thank you. Most of my questions have been asked and answered. But maybe just a couple of follow-ups, one, just on Business Solutions, the subscriptions up 250 quarter-over-quarter, just wondering if you can give more color as to which solutions are seeing the most uptake? And then just maybe qualitatively, if you could talk a bit about how the solutions are resonating as part of the value proposition when you are actually pitching the advisors for some of your new channels?

Yeah. It’s Dan. Let me try to swing at that. So maybe the second one first, I think, so first of all, this concept about helping an advisor run and optimize how they operate their business. There’s new capabilities there that the independent space hasn’t always been focused on solving for. And I think our principle was make sure that we build something that is digital in nature so you can scale it and personalize it but also make sure it has the ability to help the business owner or advisor execute versus just sort of sharing more best practices with them. So the concept was to fix an execution challenge not a know-how or a knowledge challenge. And so in that spirit, that continues to be our focus with respect to all of these solutions and that’s what resonates regardless of the model. The traditional independent model, typically the independent has experienced where some of those challenges or friction points are. And when they get the leverage of an admin or a CFO that can provide, in the case of an admin, just leverage points of time where there’s task to do that are better outsourced to someone where they can focus and allocate that time to higher value tasks. The CFO, though, provides them real knowledge and insight that they may not have had or had the luxury of leveraging to help them enrich their decision making. So it resonates for the independent who has actually already experienced the friction. It resonates with the Strategic Wealth Services, because that’s an advisor that’s coming out of an employee model that is curious about and a little apprehensive about running a business and these services being available to them is a great leverage point and a boost to confidence in…

Thanks, Dan. Maybe a follow-up for Matt on capital return. I think the last two quarters, you mentioned or you stated that the buyback was paused, I don’t think I caught that exact phrase in this quarter. But just wondering if we should take that to mean that you are more comfortable restarting some level of buyback, even though you are prioritizing that capital towards organic growth and M&A?

Yeah. I mean, I think, maybe if I bridge us from the beginning of the year, where we were buying back shares in Q1 and pretty consistently in 2019 as well. I think that pause in March was really driven by the macro uncertainty from COVID. And while we continue to monitor the macro, I think, as you heard well in the prepared remarks, the business has really strengthened. So I think all else equal, we likely would have restarted share repurchases by now. But those opportunities in organic growth and M&A have just increased and that’s really where we are deploying the capital, right? Organic growth driving the highest levels in our history, we talked a fair bit about M&T and BMO onboarding next year, where just those two firms alone are $34 billion of AUM and we closed on three M&A deals in as many months in the last three months. So I think you heard right, share repurchases are attractive, but the opportunities that we are focused on right now are on organic growth and M&A. And if that changes, we will adjust consistent with our priorities and that includes allocating capital to share repurchases.

Got it. Thank you.

Thank you. Our next question comes from the line of Gerry O'Hara with Jefferies. Your line is now open.

Great. Thanks. Maybe just one for me on competitive dynamics, but broker recruitment obviously has been strong throughout the pandemic and if historical trends I guess are something to look too there, we might expect sort of a pickup in broker recruitment on the other side of this. So just sort of curious to see or hear, based on conversations, is there kind of a cohort of advisors that’s waiting to kind of get to the other side before engaging with folks, such as yourselves, or perhaps, has this been a different environment, whereby you have been able to kind of just consistently go out and attract advisors despite the uneven backdrop? Thank you.

Yeah. Good question. Certainly, this environment, we have seen movement of advisors are churned as we call it down. As you look over the last nine months, 10 months, churn rates are down but our win rates are up. So the team has done a great job of persevering through some of the complexities created by the environment and I think you have continued to share the story and helped advisors find creative ways of which to still make that transition. We expect that creativity in that approach and sort of that resilient heads down. Keep moving forward approach to be taken by our team as we move forward. We do believe that as you get to the other side of the pandemic that it’s reasonable to expect churn rates to trend up and with the additional models we have, applying them across multiple markets where the churn rate comes up, we think about that as an interesting opportunity. So I think your premise is correct.

Great. Thanks for taking my question, Dan.

Thank you.

Thank you. And our last question comes from the line of Ken Worthington with JP Morgan. Your line is now open.

Hi. Good afternoon. This is Will Cuddy filling in for Ken.

Hi, Will.

So production revenue -- hi. Production revenue has been elevated this year and while still elevated in 3Q, it’s been trending a little lower from the first half of the year. If my math is right, slide four of the deck implies a 97% retention rate of production, down from 98.5% for the first half of the year and it doesn’t look like there’s seasonality in prior years. Why do you think production has trended down in 3Q, and looking ahead, do you expect this to continue down and stabilize around a more normal level of 96%, stabilize at current levels or increase back to levels seen in the first half of the year?

Yeah. So let me take that one. I think to maybe come back to your final point and question. We think somewhere in that 2% to 3% range is what we are trying to play to and we think that’s a reasonable landing place for attrition, so conversely 97% to 98% of retention. I think you had, in the first part of the year, some benefit or tailwind, if you will, around retention, just because of the pandemic and what we said earlier, lower churn in the overall marketplace kind of showed up there, maybe with a little bit of help. But, I think, again, the growing appeal of the model, the capability set that we are trying to invest in, the service experience we can deliver is really the drivers of that retention rate and we think a reasonable place is that 97% to 98% range.

Got it. Thanks, Dan. And then on transaction fee revenue, Matt, thanks for the commentary in the prepared remarks on trading volumes. To help us understand the dynamics a little bit better, could you roughly break out how much of that revenue line is transaction and how much of that is fee? And then as we think about the growth of your Business Solutions and subscriptions, like how can that growth drive that revenue line item further, how are we going to see that on the P&L?

Yeah. I mean the majority of that line is fees. So call it two-thirds, the three-fourth zone is fees. So transactions is a much smaller piece of it, so to answer your first question. On the Business Solutions side, it’s -- right now the run rate gross profit is around $15 million for the solutions that we have so far, and I think, obviously, we expect to grow that from there. And maybe just to emphasize Dan’s color a little bit earlier, we are still in the experimental phase on some of them and learning and growing from here. But I think we feel quite good about growth over the long-term. And perhaps more importantly, they are about setting up advisors for them to be able to manage their businesses and grow their balance sheets, if you will or AUM, as well as operate a more efficient practice. I think if we do that, you are going to see that show up across the P&L. I think that’s really where the long-term success can come from as well.

Got it. Thank you for taking my questions.

Thank you. And this does conclude today’s question-and-answer session. I would now like to turn the call back to Dan Arnold for any closing remarks.

Yeah. Thanks. I just wanted to thank everyone for taking the time to join us this afternoon and we look forward to speaking with you again next quarter. Have a great day and please stay safe.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.