The Future of Financial Advice: Masters in Business with Rich Steinmeier

Barry speaks with Rich Steinmeier, CEO of LPL Financial. They discuss his early career learnings at McKinsey. They also discuss LPL's $2.7 billion acquisition of Commonwealth, and the evolving relationship of AI and financial advice. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At K K R, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, K K R has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. K K R, understanding what matters. Visit K K R dot com slash what matters.

• 0:31Speaker 01

  This is the Bloomberg Tech Minute brought to you by Chat G P T. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 1:13Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by Chat G P T. Get started at Chat G P T dot com.

• 1:54Barry Ritholtz?

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• 2:29Barry Ritholtz?

  Bloomberg Audio Studios, podcasts, radio, news. This week on the podcast, yet another banger. Rich Steinmeier is my extra special guest. He's C E O at L P L. They run 2.6 trillion with a T, trillion dollars. Really a fascinating conversation. If you're interested in how a giant firm like that interacts with 32,000 advisors plus a staff of 10,000 people in-house and then another 30-plus thousand people working outside, how they provide a variety of options and tools and a giant tech stack for their

• 3:13Barry Ritholtz?

  clients, as well as all sorts of really interesting insights about what's going on in this marketplace. I found this conversation fascinating, and I think you will also. With no further ado, my conversation with L P L's Rich Steinmeier.

• 3:38Barry Ritholtz?

  Rich Steinmeier, welcome to Bloomberg.

• 3:41Speaker 03

  Thanks, Perry. It's great to be here.

• 3:42Barry Ritholtz?

  It's great to have you. My data more or less correct?

• 3:45Speaker 03

  I think you got it.

• 3:46Barry Ritholtz?

  I research it, my research assistant researches it. We run it through A I, which you always have to double check. We're going to talk a lot about what you guys have been doing with A I and Scion. But before we do that, I have to delve into your background. You get a B S in economics from Wharton at University of Pennsylvania and then an M B A from Stanford. What was the original career plan? That looks like banking, consulting, a lot of different finance-related space.

• 4:14Speaker 03

  You know, I think the original career plan was to challenge myself. So when I got to Wharton, I did finance, though I don't know that finance was my life's passion, and ended up as a consultant at McKinsey. And in a pivot, was trying to think about, really wanted to be an entrepreneur. And so for me, it was about, at some point, I thought, owning auto dealerships. And when I came to the conclusion that probably wasn't going to be my pathway, I went back to business school at Stanford to really try to hone my leadership craft and how to lead people, because it felt like that was something that I seemed reasonably good at, and it really filled me.

• 4:52Barry Ritholtz?

  It's funny you say auto dealerships. I just finished The Everywhere Millionaire by Zwick and Zadog, and they talk about it's not the C E Os of public companies, it's people who own auto dealers, H V A C outfits, medical practices, things like that. And they're everywhere, and they outnumber the public wealth, like a thousand's one. It's the numbers are shocking. We'll talk about that in a bit. You meet your wife at Stanford. She also becomes a management consultant.

• 5:27Speaker 03

  We met at McKinsey.

• 5:28Barry Ritholtz?

  Oh, you meet at McKinsey?

• 5:29Speaker 03

  Yeah, we were, there were four business analysts in the Cleveland office. There were three young men and one young female. That was my wife. And so there was a battle of the fittest to try to woo her. I was successful in wooing her, and then we went to business school together. But yeah, the discussions are oftentimes problem-solving oriented, and so it's a little bit odd when we try to get into like emotional discussions about the kids, about we're putting frameworks in place and disaggregation trees. It's not super interesting.

• 6:00Barry Ritholtz?

  You spend time at McKinsey, you get the M B A, you spend some time at Ford. So you have a pretty broad background before going into financial services. Started at Merrill Lynch, was that the first financial services company? What did those outside experiences teach you about running a financial company?

• 6:18Speaker 03

  Well, I never intended to go into wealth management. I was a person that was really into tangible products. I worked on factory floors, did lean manufacturing work, worked with automotives as well as Caterpillar, et cetera. And believe it or not, that pivot came because I liked solving problems. And for me, the problem is the fun of pulling information, putting it together, discerning what a right strategy and pathway might be. And I got a call from a headhunter about an opportunity to take the Merrill Lynch brand to the mass affluent market or to the mass market. And I thought, this is a once in a lifetime opportunity, and I probably shouldn't look

• 6:59Speaker 03

  past it just because it doesn't have kind of hardwood and isn't a finished product.

• 7:04Barry Ritholtz?

  It's a service, not a good.

• 7:05Speaker 03

  Yeah.

• 7:06Barry Ritholtz?

  So your timing is auspicious. You joined Merrill in oh six, just as the financial crisis is starting to gather a little bit of momentum. The market peaked October oh seven, and then everybody knows what happened in oh eight, oh nine. What was that experience like? What did that teach you about risk, about leadership? And especially given your current seat about the relationship between a client and an advisor?

• 7:33Speaker 03

  Yeah, so I learned a lot about leadership and about, look, Merrill Lynch was in a bad way, as so many of the financial services firms were. And there was, we had a change in leadership to where there was more transparency provided to the rank and file. And I would count myself as a rank and file employee at that point, and learning from the leadership and seeing how to be, even in times that are very difficult, be as transparent as possible. Let the people who are there, who are doing the hard work, know, okay, either we have control of this situation or we don't have control of this situation. Here are the risks as we see them. Here's how we're mitigating risks. And actually, in spite of a bad outcome or a challenged outcome, I thought that the firm was well managed during that time.

• 8:17Speaker 03

  How does that kind of relate back into every day? I can tell you that from my upbringing, one of the things that I didn't have the good benefit of was sound financial advice. And I grew up kind of lower middle class.

• 8:31Barry Ritholtz?

  A single mom?

• 8:32Speaker 03

  Yeah.

• 8:33Barry Ritholtz?

  Running a household? That's always a challenge.

• 8:35Speaker 03

  Yeah. And we struggled, I mean, she's amazing, and she was able to figure it out with me. But even to get through college was, you know, sometimes a real struggle monetarily. And so understanding the value of advice, and she actually, her first advisor, I can remember, was an Edward Jones advisor who was actually helping her on her 401 K. And I remember when she was so proud that she had earned the right into advice. And I think for me, it was about, can I work somewhere where we can make advice more available to everyday families, right? Can we get the quality delivery of advice to more American families? It's actually why I went into automotive. I wanted to be in an industry that I thought benefited Americans.

• 9:18Speaker 03

  And at the time, in the early eighties, you could imagine that that could be automotive. And I think I've realized I found my way in wealth management because it's about helping families actually create better outcomes for themselves and for their kids and their future generations.

• 9:31Barry Ritholtz?

  What was the role at Merrill Lynch?

• 9:33Speaker 03

  So I started, I moved into a business called the Financial Advisory Center, which ultimately, which was a call center-based advisor model that ultimately became Merrill Edge in time after bought by Bank of America. And so was running the Merrill Edge Advisory Center or the, call it the remote advice channel for Merrill Lynch. And really came to a realization that I loved financial advisors. I loved what they did, and I wanted to get actually out into the field, not, I liked a lot of what Merrill Edge did, but I loved the Merrill Lynch advisors. And so for me, that charted my path to try to, how can I be more directly involved with financial advisors and help make the road easier for them?

• 10:12Barry Ritholtz?

  And how did you go from Merrill to U B S?

• 10:16Speaker 03

  Yeah, I had gotten to a point in my career, and I think there are points where people come into inflection points in their career, and I had gotten comfortable. And I remember I was 38 years old, but I didn't think I was learning anymore. I felt like I can't, this can't be the capstone. I can't be the head of this business and feel like, okay, this is just my run for the next five years, 10 years, whatever it might be. I didn't feel like I was growing. And so I began to put my head up, even though I really enjoyed what we were doing at Merrill Edge. I put my head up and I really wanted to move towards supporting advisors. And I think of advisors as entrepreneurs. And so less structured in a corporate environment and more in support of those entrepreneurs.

• 10:59Speaker 03

  And people can say different things about how they think about wirehouse advisors, but I think that advisors hang their own shingle. And so for me, I wanted to get to what I thought at the time was the most advisor-centric firm that was a wire. And so I ended up at UBS.

• 11:15Barry Ritholtz?

  And you, I don't know what you started doing there, but eventually you lead the development of all of their digital advice capabilities. That sounds fascinating. Tell us a bit about that.

• 11:25Speaker 03

  Yeah, I started there doing the call center advice model. But part of where my energy is found is in strategy. And so as you, as we began to progress that business and it began to look like there were solutions that were more digital oriented, we're talking about the robo environment. I then realized and played and just kind of raised my hand to play a role that was more active in crafting the strategy. How, how do these technological components not just become a Frankenstein environment where it's just one thing, appendage, one another, appendage. But how can we have a cohesive strategy for how we're going to use technology to advance how advisors deliver advice to their clients? How do we broaden advice?

• 12:06Speaker 03

  And so in that kind of just raising my hand, I started crafting the digital strategy for the firm. And then when that got recognized, I became the chief digital officer, which was more about, okay, you may have the strategy, take the pieces and assemble not only the strategy, but assemble the implementation of our technological footprint to be able to better serve advisors.

• 12:26Barry Ritholtz?

  So that's in the mid two 10s, somewhere along those line runs?

• 12:29Speaker 03

  Yeah, yeah, that's right.

• 12:30Barry Ritholtz?

  It's kind of fascinating because I'm just at the edge of the generation and the younger people in my office grew up so always digital first, always internet first. It seems amazing that it took that long and it wasn't just UBS, it's the whole industry to come around and say, hey, this internet thingy looks like it's going to stick around for a while. Is it just the conservative nature of these big shops? Why is it that it just seems that, and we're certainly making up for lost time with AI, but on the digital platform side, it seems like most of the big shops were very late to the party.

• 13:11Speaker 03

  Yeah, I, I don't know that it's conservative. I think that it is honoring the role of the advisor. And what, what, what you'll see, and I would say even at LPL, one of the things that we certainly don't want to do is get in front of the advisor. We want the advisor to be at the front of the relationship. And I would say at UBS in the same way. I think the answer was that you moved more trepidatiously at that time into technology because you wanted, it was clear who was meant to deliver the advice, who was meant to have the relationship. And the technology was meant and is meant to support the advisor. And so sometimes I think when you see a little bit slower movement, it can often have to

• 13:53Speaker 03

  do with the principle of the firm and how the firm was founded, not necessarily that the firm is slow. It may just be that that's in the principle and it's slower to adjust. And so I would say that's probably more what I would say was the advisor leads, the firm follows, and certainly I feel that way at LPL. But when the firm follows, that means that you need to make sure that the technology is lifting the advisor versus displacing.

• 14:18Barry Ritholtz?

  So do you think investors want something very different from their technology than they want from the advisors? How do you divide that? Because I remember back to the mid 2010s, a number of the big ETF firms and some other shops were kind of terrified the robo advisors were going to take over everything. And that turned out to be very misplaced fear because it looks like high net worth investors want to be able to pick up the phone, get a human being on the end of the line.

• 14:50Speaker 03

  I think the robo, I would say even broader than, than the ETF shops. I mean, I think, I think I can tell you that we were quite scared about what it meant and what was the role of robo. And I'll speak for myself. I don't want to speak broadly for UBS because that's where I was at the time. But I think it was this question, which is like, oh my goodness, is the role of the advisor set to be disintermediated? And what is it that we're going to do? And I think that was a big learning because, you know, it was this, this is going to wash in and wash all the advisors away. And what happened was washed in and there was a lot to be learned there and there were a lot of capabilities. And quite honestly, there was some price transparency there that was helpful. There was performance transparency that was helpful to clients, to end investors.

• 15:33Speaker 03

  And I think you start to realize that there is this combination of technology and human that can be better than either one of them individually. And I think that's, that's the course that, that I saw kind of charted after that inflection point.

• 15:48Barry Ritholtz?

  Let me bounce something off of you because my shop, it was launched by four really middle-class guys that didn't come from money, didn't come from, from wealth and were reluctant to put, as so many firms do, one million, five million, $10 million minimum on accounts. We found that working with either a robo we built or a robo like Betterment that we worked with, we could get rid of minimums because the cost of onboarding went to next to nothing as opposed to lots of hours, lots of people to bring a household on with $25,000. Doesn't make sense if it's going to cost you $1,200 by the time you're done.

• 16:32Barry Ritholtz?

  But if it costs you 11 bucks, well, then why not?

• 16:34Speaker 03

  Yeah, I think that's what you're seeing. I think this is the, the access point into advice is being lowered pretty dramatically. And, and I think that is where technology plays an incredibly important role, especially when you think about account maintenance, account opening, I think rebalancing and even personalized investing and elements of direct indexing that are enabled to get to personalized solutions and derivations of portfolios that are appropriate for individuals. I think that is the pathway that we're on, which is can you raise the level of advice delivered to, to different household levels than would have historically been profitable?

• 17:13Barry Ritholtz?

  You're, you're dancing around one of my favorite topics, which is everybody spent the eighties and nineties chasing market alpha. What we've been seeing over the past, I don't know, 10, 20 years is software driving, for lack of a better word, organizational alpha, the ability to deliver solutions that used to be limited to only the wealthiest households because there was such a high cost of throwing. Here's three accountants, here's a couple of tax attorneys and a state attorney. We're going to clean this up. That's now software today. What does that mean for the future of advice? How do you think that's going to change the interactions with firms such as LPL and all their advisors and clients?

• 17:55Speaker 03

  Yeah. This is where we think about, and you can go back even further and say, okay, it was first about the traders and it was, first it was about capital market access. Then it was about, okay, can I get a balanced portfolio? Can I, can I then update that portfolio? And so much of it, as you say, evolved away from can I outperform the markets? It's about can I actually understand goals? Financial planning is really at the core of, I think, where the great advisors are and will continue to be, which is actually contextualizing a family's experience, contextualizing what they're trying to achieve, and then putting decisions in place and, and making trade-offs relative to those outcomes and then tracking those outcomes. And where you get into that is there's a lot more involved in that engagement than

• 18:39Speaker 03

  just picking a portfolio, updating the portfolio and then quarterly telling you what's going on with the contagion in Europe or whatever it might be. And it is about understanding the discrete actions that are taken. There's a lot more complexity in it and the tools will allow us to manage that complexity. So what does it mean in time? It means that I think the quality of advice delivered will continue to raise. Also, I think the great part about this is I think consumer expectations. And that's where I don't find this huge conflict between the automated solutions. The automated solutions are going to raise the expectations of consumers, right? When you have a Metamuse come out and everyone says, oh my gosh, this is the end of the advisor. It's not. It is, it is the expectation that we will continue to deliver value at a higher level.

• 19:22Speaker 03

  And it will put questions in place to the viability of advisors who are simplistic in the delivery of advice. But that is, it's a raising of the game. I'm excited about the future of advice because I think more families are going to get better advice and make better decisions.

• 19:36Barry Ritholtz?

  That's really fascinating. Coming up, we continue our conversation with Rich Steinmeier, chief executive officer of LPL Financial, discussing how he helped build out the firm to a $2.6 trillion wealth manager. I'm Barry Ritholtz. You're listening to Master in Business on Bloomberg Radio.

• 20:29Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 21:10Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 21:51Speaker 04

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• 22:59Barry Ritholtz?

  I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is Rich Steinmeier. He's chief executive at LPL Financial. The firm manages $2.6 trillion in client assets, one of the largest firms and the largest independent firm in the United States. So I have so many questions about your leadership at LPL. You joined in 2018 for business development, and this is before AI was a household word. What did the firm look like in 2018? And what was biz dev like back then?

• 23:38Speaker 03

  I say when I joined the firm, it looked like a big, small firm. What that meant was that we were substantial, we were sizable, but we were immature. Our processes, our talent evaluation, our strategy and go-to-market, and I don't mean, that's not meant to be demeaning. It's just meant to be a reflection that I had been at a couple of other larger, more mature firms, and it felt like we had some things to do to grow up into. And but the thing that I would say, it had a culture that had been built over three decades of knowing that we served financial advisors. When you come to work and you have a clarity

• 24:20Speaker 03

  as to who your client is and what success means for the firm, and it is, ours is that we make financial advisors successful and institutions, it makes your job easier because you don't have to figure out all these markets. You go, okay, our advisors and our institutions made better off today than they were yesterday. And I think I love that about the culture of the firm.

• 24:41Barry Ritholtz?

  There's a quote of yours that's so on point with that. You played basketball and football when you were younger at school, and the quote was, "I have found more fulfillment setting picks and taking charges than scoring." Tell us about what that reveals about the type of leader you've become.

• 25:00Speaker 03

  What matters is winning, right? And what matters is team. And there are different players that have different roles on a team. And for me, and that's the clarity at the firm that I got the tremendous opportunity to move to, is that we recognize that where do points matter at LPL? Where points matter is when advisors, their clients succeed, not when the firm succeeds. And so for us, it makes it clear when we have to make decisions and trade-offs, it is on balance, and again, we're a public company, we actually have to be profitable, we have to be viable, and we want to be, you know, make sure that we have the capacity to invest. But it is very clear that the role we play, I'll say this when we have home office visits either for, usually for advisors, I will say, in the

• 25:43Speaker 03

  best-case scenario, we're your partner. In the worst-case scenario, we're your vendor. But in either of those scenarios, it is very clear where we stand. We stand to support advisors. And so that, it's that kind of setting picks nature, the firm is filled with people who like to set picks and rebound and try to get the other player free. And I think that's, that's the culture in a nutshell of this firm. It's an enablement firm that tries to help entrepreneurs and institutions be able to be more successful in a partnership with us than in with anyone else.

• 26:15Barry Ritholtz?

  So eventually you become chief growth officer, then interim CEO, and then about a year later, CEO. That's a lot of shuffling at the top in a relatively short period of time. What sort of changes were the firm going through then? And how did you adapt?

• 26:31Speaker 03

  A lot of that was a logical progression as I grew in my career and opportunities. And so as I moved from business development, we had expanded into some new affiliation models and new ways that we went to market. And I started spending more time on our institutional business, which is support of financial institutions and their wealth management business. And so there were some logical progressions that occurred over eight years. And then there was, as I triggered into the CEO role, that was, you know, an external event. That was an event that we were beginning succession planning, and then we had an event that triggered me into the role more quickly than we would have, you know, chosen, I think, to have gone through a normal course of business. I'll tell you that, that's kind

• 27:13Speaker 03

  of trial by fire. That for me, I'd always, I'd always thought I wanted to become a CEO. And as I got into that, I felt reasonably well-equipped, but I felt like it was almost playing a different game because really this job is more for me about making sure constituencies can succeed than individual tasks. And that was a big change for me in just the role type.

• 27:37Barry Ritholtz?

  So for listeners who know who their financial advisor is, but aren't all that familiar with the company behind them, explain what LPL does. Where does your responsibility begin? Where does the advisor's responsibility end?

• 27:52Speaker 03

  Yeah. And I think this is where we're a little bit unique. So for listeners that are familiar with, call it Merrill Lynch, Morgan Stanley, Wells Fargo at all, those advisors work with a broker-dealer, and that broker-dealer happens to employ those advisors. On balance, our firm works with independent entrepreneurs who have established themselves as their own advisory shop. And so they hang their own shingle. It may be Steinmeier Wealth Management. It may, you know, fill in the blank. But we provide the compliance, we provide access to markets, we provide their technology, we provide their supervision, we do the due diligence on the product sets that are available, we do the end investor

• 28:35Speaker 03

  technology as well. But ultimately, in the end, it is their business. They make the decisions as to how they go to market. They make the decisions as to how, which software they choose to use for financial planning, or how they may choose to deliver their client experience. And our job is to make sure that we have a set of options available, that we have support available to them as they try to explore alternative investments or serving high net worth clients. We can help them. We bring, we augment them with capabilities, with humans, et cetera. But ultimately, in the end, we are an independent broker-dealer at heart who has expanded into a full-service wealth manager.

• 29:11Barry Ritholtz?

  Tell us about your five-by-five playbook, five objectives, five initiatives that's shared with every employee.

• 29:17Speaker 03

  Yeah. When I became the CEO, what I realized was that I want to make sure that all of our employees go on the journey with us together. And it wasn't always clear what our strategy was to the more granular level across, you know, we have nearly 10,000 employees at the firm. And you want to make sure that they are able to reflect that to our clients as well. And so what we did was we worked through, we first started by changing our values and our articulation of the values of the firm. And then a level below that, we started with what our strategic pillars are, like how will we win in the marketplace? And then specifically underneath those kind of pillars, we said, okay, what are the top initiatives? And so it was five pillars, each one has five initiatives.

• 29:59Speaker 03

  And the thought was, there are 25, you know, important things and initiatives that we're leading at the firm on any given year. And if you are one of those 10,000 people across the firm, you should see your work reflected there. And so you can see specifically how you're contributing to the success of either our clients or our firm.

• 30:18Barry Ritholtz?

  So 32,000 advisors that are independent contractors or partners, I don't know how you describe the relationship, and 10,000 employees, when you roll something out like five by five, what are the challenges communicating that to 32,000 people all over the whole country, every state?

• 30:40Speaker 03

  Yeah, the challenges are that they don't all hear it. The challenges are that if you do it one time, they won't ingest it. The challenges are that you take things out of context. And so when I see a list and say, these are the pillars and these are the priorities, I don't understand them. And so for us, one of the things that we've realized as we roll out, we're trying to simplify the strategy so that it can be consumable, but it is still complex. And so it is repetition. You've got to make sure that there is repetition, that there is availability. We do town halls quarterly. I do advisor town halls as well. And on all of those, we take live questions to make sure that our audiences are not just hearing what we have to say, but also either challenging it or asking questions.

• 31:24Speaker 03

  And so, look, we're on a journey. We are trying, we are trying to be an incredibly transparent firm that makes it clear how we're going to market, how we do business. And so much of that means then you've got to take a lot of time, taking all of this that sits up in the head and distilling it into something that's consumable so that folks can say, okay, I'm with you. Or alternatively, I don't really like the path you're on and can choose an alternative path. But it's not, I don't think that not sharing is a good idea. I think it is really important to be as forthright and transparent as possible so that folks can understand when times get tough and you have to make difficult decisions, they understand the context by which you make decisions.

• 32:06Barry Ritholtz?

  So let's talk about something that you've shared not too long ago that I'm fascinated by. One of the firm's new value is to, quote, "create and share joy." Not the typical financial services bullet. Where did that come from and how do you create and share joy?

• 32:25Speaker 03

  Look, I was about a week into the CEO role. In fact, I wasn't. I got the job on a Tuesday and Thursday night, there were three of us that got together to say, okay, the values that we had articulated as a firm felt a little bit dated. And so we thought it was time to kind of shed that skin and set more aspirational values. There were two that for me were non-negotiable. First is pursue greatness. The second was, at the time, I called it create joy. It is really important to recognize that work is hard and that there are families that, you know, folks are going to be away from their kids, they're going to be away from their spouses.

• 33:06Speaker 03

  There are times when we have hard work that we have people, our technology people work the weekend, probably two or three weekends each month when we're putting new code into production. And so there are times that are hard. It's why it's called work. But you don't have to take yourself so seriously. Like, there are times to celebrate successes. There are times when people go above and beyond. We delivered a partnership with Prudential. We had articulated a conversion 18 months in advance of that. We spent, you know, over $200 million in development against that opportunity and our team hit that date. We should not yada, yada, yada through that date. We should scream from the mountaintops that our team was unbelievable in achieving that,

• 33:50Speaker 03

  that that was so exceptional because those people busted their humps for months. And so you don't just move on and say, okay, great job, guys, let's get to the next one. It's important to celebrate because I think having fun at work doesn't have to be mutually exclusive from being at work. And if you can try to have fun when the hard times come, it makes them just a little bit easier.

• 34:12Barry Ritholtz?

  So how do you share joy there? I remember, I don't know, 10 years ago, like a Friday pizza party for lunch was thought of as a generous bonus. When a team like that hits a major milestone, give us the real life event that takes place. How do you thank everybody? How do you share the joy of that moment?

• 34:33Speaker 03

  Yeah, I mean, a couple of things that we did, you know, for a long time, we would bring in surprise food trucks, right? Where you would just bring in food trucks and you would let people just eat and enjoy that. We would also do special things that would allow them to, you know, take more time off. So we would give people extra days off that had made those investments. We would also recognize, you know, there's, there's a, sometimes companies get into this hero culture, which is who is the Herculean, who provided the Herculean effort and let's raise that person and put them on a pedestal. This, in this example, this was a team of thousands, right? We recognize the team of thousands that took all of those steps every single day. So we did it through rewards, we did it through recognition, we did it through promotions.

• 35:16Speaker 03

  But we also did it from, like, having those people know how much we cared about what they did. I did a lot of personal outreach, our executives did a lot of personal outreach. We have these surprise and delight moments that we like to do. And so we would take a Friday and the management team would just actually Teams Call out to a subset of those folks to thank them for what we did. And then also recognizing that we didn't just move on and say, okay, wow, that was great, what's the next thing we're going to do? But we celebrated it as well.

• 35:47Barry Ritholtz?

  So let's talk a little bit about how LPL has engaged in a path of very conscious growth, not just rolling up a ton of stuff, but very, very specific deals. The biggest one was Commonwealth, $2.7 billion on top of Atria. And then you mentioned Prudential, Wintrust is another. Walk us through M&A deals like that. How do you identify a target? How do you think about the cultural fit? It's more than just X number of advisors, X number of households and so much AUM. How do you put together a deal that's gonna last for a long time?

• 36:31Speaker 03

  Yeah. And let me clarify just one thing, because my partners at Wintrust and Prudential, those are different in that they're partnerships. And so that's not an M&A, that is actually us working in concert with them and it's their go-to-market business. But I would tell you, as we look at what we think this firm needs to be to be great, and our aspiration is to become the best firm in wealth management. And we've got definitions for how you get to that and when we will know we're there. But ultimately, I would like to have the firm for which advisors, when partnered with us, can be more successful at this firm than they can be at any other firm. Now, I'm sure a lot of firms have that same aspiration, but part of that journey for us was to actually get to a scale for which we could make investments that were outsized.

• 37:13Speaker 03

  And, and the thought process around that was, if you see the investment levels that firms are making to disintermediate advisors, to make investments in emerging technology that basically hop in front of the advisor, the thought was, can we get to the same levels of investment? And so that's raw dollars or capabilities delivered, but can we get there, but take those capabilities in support of advisors? And so you have two alternate paths, both pursuing disruptive and transformative technology, but one of them in promotion of advisor versus one in disintermediation. And so that was what was at the crux of it as, as, as I first started to think through this pathway to us getting to become a scale player with capabilities that were unparalleled.

• 37:56Speaker 03

  I think, though, you hit the key, which is for us, when we look at M&A, especially in the advisor segment, we're thinking about that as an independence. We espouse that advisors own their own firms, the institutions that we work with own their businesses as well. But for us, we're looking at, and especially when you look into, Atria had an incredible entrepreneurial spirit. There was a lot there from the founders that was a lot to like. Commonwealth had this exceptional delivery of exceptional service to advisors, responsiveness to advisors, reflexive technology that ingested advisors, prioritization, feedback, et cetera. And so for us, there is, there is part of this, which is can we grow this firm so that we can be substantive?

• 38:40Speaker 03

  Can we stay aligned with our principles? But then can we grow the firm collectively so that the sum of the parts is greater than the whole?

• 38:48Barry Ritholtz?

  It sounds like when you're doing a post-acquisition evaluation, you're looking at a whole lot more than just AUM. How do you integrate those two very distinct skills and really cultural mindsets, entrepreneurship and very high-quality service?

• 39:08Speaker 03

  So the first is, we have to screen to make sure we want to ingest that. And I think that, that is, that is in the diligence. We look at what will these two firms look like together and what is our goal? And so, so much of where our firm is headed is to make ourselves more malleable. Actually, you know, and this seems counterintuitive, but the larger that we get, we actually need to feel smaller. We have to be large to have the capacity to invest, to deliver fantastic capabilities, technology, product sets, expertise. But it shouldn't feel like we've become impersonal. All right? And so that's been the strategy behind a lot of our more recent acquisitions, which

• 39:50Speaker 03

  is how do we defend what made the individual firms great that we may have acquired? And then you have to make it clear to the firm itself that we're not just swallowing things. Because when, when the firm believes it's swallowing things, it's just going to homogenize everything. And so we actually state to ourselves, part of this goal is to not homogenize, but to actually make us further differentiated.

• 40:14Barry Ritholtz?

  So that's really interesting because the criticism I've heard of a lot of private equity funded rollups, and there's a big one in Canada, there's a ton of them throughout the United States, is that they don't integrate the culture, they just have a collection of Franken firms that are all slapped together and none of the horses are pulling in the same direction. What do you do to avoid that fate when you're thinking about a big acquisition?

• 40:42Speaker 03

  Well, I make two distinctions. One, Part of the practices of the advisors for which we have the benefit of serving, I want those and we want those to stay distinct. And so when you think about Commonwealth and 2,000 advisors, maybe 3,000, depending on how you want to strike the line, there are thousands of individual practices there. There, we want them to go to market exactly how they want to go to market, how they want to represent themselves. But then there is the integration of the Commonwealth home office staff, the Commonwealth service experience. And so for us, there are two different distinctions there, which is, okay, how as a home office team, there is something special that exists at Commonwealth?

• 41:27Speaker 03

  And so how do we make sure that whatever is special and differentiated, we actually keep and insulate? But there are things there that are homogenized, like account opening, right? Like account transfers, like core technology. And there's nuances in core technology, don't get me wrong. But there, there, that can move into a, an integrated approach. But then you keep that, kind of think about, for me, I think about that final mile delivery is differentiated, but, but what sits before in this utility terms, in the distribution versus transmission, in the distribution can be the same. And then as you get to that final mile, you differentiate.

• 42:02Barry Ritholtz?

  So you, you said earlier, when you joined LPL, it was a big, small firm. Have you now become a small, big firm?

• 42:11Speaker 03

  Yeah, that's actually exactly how I call us. I think that we are a small, big firm. We do have more regiment to us. We have more discipline to us. We have more process to us. But I don't think that we have become encumbered by all of that. But I also recognize, I've, I've had the good fortune to traffic with some of the largest firms in the U.S. And in some of the councils that I've joined, and we definitely feel small. And, and there are elements that I love about that entrepreneurial, we feel very responsive, we feel very flat, flat organizationally. We can make decisions quickly and we hold accountability pretty tightly to those decision making.

• 42:54Speaker 03

  And so there's an element there where I definitely feel like, okay, we've matured and I'm proud of what we've become. And I'm also still really proud that I feel like we're still a small firm.

• 43:04Barry Ritholtz?

  Really, really interesting. Coming up, we continue our conversation with Rich Snunmeyer, Chief Executive Officer of LPL Financial, discussing the current environment for independent advice. I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio.

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• 46:54Barry Ritholtz?

  I'm Barry Ritholtz, you're listening to Masters in Business on Bloomberg Radio. My extra special guest this week is Rich Snunmeyer. He's Chief Executive Officer of LPL Financial, a role he's held since '24. He's been with the firm since 2018. So, so let's talk about this current environment for independent advice. And because it's 2026, I'm legally obligated to ask you questions about artificial intelligence. What's the most useful application of AI you've seen for advisors? How, how do you measure this? How do you think about this? What, what's new and exciting about this?

• 47:33Speaker 03

  Yeah. So maybe let's start with how we measure it. And I think for us, there's a recognition that when you look at all of the work that's done inside of an advisor's office, what we see is that 30% of the time, they're actually delivering advice to their clients.

• 47:47Barry Ritholtz?

  That means 70% not so much.

• 47:49Speaker 03

  Yeah, and exactly. And so as we look at the application of emerging technology, we think about shrinking that 70% as much as possible. So obviously, there, you know, we're in 2026, so this is kind of the 2025 story maybe, is, you know, the note takers, the ability to prepare for meetings. I think as you increasingly look into this, then you look at things that say, okay, what does the staff do to get ready, to get the advisor, to get him or her ready? And so you get meeting preparation, you get updating of financial plans, you may get tax optimization and tax planning. And so, and then you move into automated investment solutions. We look at the ability to kind of hit AI in three ways.

• 48:32Speaker 03

  The first is the workflows that, that occur inside of an advisor's office. And so how do we make sure that as they get through fulfillment, even as you get out of that meeting, the next steps of maybe opening a new account where that's auto-populated, it's auto-submitted, then a human in the loop that's, that's approving it? The second is, we look at the workflows that exist inside of our firm. So think about that as compliance reviews, move money, the, those workflows that occur day in and day out, that comprise about 80% of that 70% of the work that isn't client-facing. How do we make those as easy as possible and as automated and put the rails in place so those can be agenticified? And then the third for us is how do we look at how our advise, sorry, our employees perform?

• 49:17Speaker 03

  The easiest one to think about is, we've, we've got about 3,000 developers that are inside of our ecosystem. And how do we make them as efficient as possible in writing code? And so that's, you know, product development, lifecycle redesign and automation through AI. But it also may be our knowledge workers as well, and how do they use tools and agenticified tools to be more productive at work? So those are kind of the three states that we think through.

• 49:39Barry Ritholtz?

  That's a giant tech staff. Let's, let's talk a little bit about that. You're rolling out Scion and a overall $2 billion technology investment, which is massive. How do you simultaneously do that, build out AI, create all these useful tools? And at the same time, inform advisors, hey, this is to support you, not to replace you?

• 50:07Speaker 03

  So I think the good news is through 37 years, we have made very clear that the only reason we come to work is to support them. And so we don't have to prove that case as much out from this firm's perspective because we have historically always gone through supporting advisors. One of the challenges, Barry, is though, as we introduce all of this new capability set is, I think, and we, and I'm sure others, but I will point out ourselves, have underestimated the go-to-market. How do you make sure that people know when the new tools are available so that they can be trained on the new tools? There is a cornucopia of different solutions in the marketplace. And so how are we helping them align their practice and the technology that can support

• 50:52Speaker 03

  their practice to that practice itself? And I think, so for us, a lot more of the go-forward is about how do we make sure people are using the tools properly and using all of this new capability that's coming to market?

• 51:05Barry Ritholtz?

  Really interesting. So let's talk a little bit about those advisors. First, you guys really are agnostic, independent. Advisors can join as independent broker-dealers, as registered investment advisors, as a combination of two, or through banks and credit unions. That's a lot of options. What does that get you, giving all that choice to potential new partnerships with advisory firms?

• 51:32Speaker 03

  It's about allowing advisors and institutions to run the business exactly how they want to run it. You know, there are a lot of firms that have a solution, and when they have one solution, say, this is the best way to do business. And for us, ours is about supporting advisors and recognizing that we think advisors lead, and we think the institutions lead in how they think advice should be delivered. And so we've tried to build our systems, capabilities, and support to be as flexible as possible across either different affiliation models or different advice delivery models as well. So for us, it is about supporting advisors in whatever kind of shape and iteration that they may show up in versus telling them, this is the way you need to, you know, affect your business.

• 52:14Barry Ritholtz?

  So the industry runs about a 5% attrition rate for advisors, brokers, anybody on the advice side. You guys are running a fraction of that, 1.5%. What are you doing differently to keep advisors from leaving? How much of this is contractual and how much of this is cultural?

• 52:32Speaker 03

  Yeah, so none of it is contractual. And that's the, that's the big difference here, which is, we're, like I said a little bit earlier, they're independent advisors. They run their own business the way that they want to run it. And so on any day, we can be fired. And unlike other firms who say, if you choose to leave this firm, we're going to try to take your clients, we help them when they leave.

• 52:55Barry Ritholtz?

  Really?

• 52:56Speaker 03

  Yeah. So if you think about it, we've put ourselves where we have to be client-centric because we have to earn their business every day. And look, we're not perfect. There are, there are times and there are months and there are quarters where advisors are like less than fully satisfied with us or a subset are. But in the end, our job every day is to earn their business today and to earn it tomorrow. And, and actually, the interesting thing about that is because that sets the bar for us so high, it's our job to satisfy them. We focus on advisor satisfaction.

• 53:25Barry Ritholtz?

  That's really unusual. We hire people regularly. I'm constantly seeing crazy aggressive non-competes. Even if you're, most recently, we had, saw somebody, they're in New Jersey, but the contract says Florida law applies, which is the friendliest employer state. So you guys don't do non-competes. What is a contract like? We used to call this the prisoner exchange. Every few years, Morgan Stanley guys go to Merrill, those Merrill guys go to UBS. It's a big prisoner exchange. Everybody gets a big signing check. It sounds like that's a game you guys don't want to play.

• 54:01Speaker 03

  I mean, I think the game that we want to play is that the advisors always change firms. But our goal is to make this their forever home, which is why we built all these different affiliation models. We, we saw advisors who started in a 1099 construct under a shared ADB, I know, corporate RIA model, who then wanted to run their own RIA. And we're like, fine, run your own RIA, we'll be supportive. And then we saw other advisors who said, I don't want to take my own real estate down. I don't want to keep employing my staff. I don't want to structure benefits. There's, that's a bridge too far for me. So we introduced a W2 model, but they still own their clients. They still own their business. Ours is any iteration, as long as ultimately in the end, the client, the, we call advisors clients here.

• 54:44Barry Ritholtz?

  Right.

• 54:45Speaker 03

  And so when I say client, I mean advisor. But our clients, there, it's their business. And, and so we created all of those different constructs. Now, listen, to be completely forthright and fair, when advisors change firms and there's a concept called transition assistance, which is that they get a forgivable loan and those things get forgiven over some period of time, yes, there's, those, those are subject to the forgiveness over some number of years. But on balance, there is no fear factor that occurs inside of this. In fact, the fear factor exists with me and my team. We need to make sure we understand how to satisfy our clients. And again, sometimes we do it great, sometimes we do it less than great, but I can tell you, every day, we are trying to figure out how to be better for our clients.

• 55:27Barry Ritholtz?

  So let's talk a little bit about private market investments, private equity, private debt, private credit. How do you guys think about what you want to have on your platform? What you want your clients, the advisors, to offer their clients, the investors? This became super popular before it suddenly became a whole lot less popular. Give us a little insight into what's going on on the private alt side.

• 55:52Speaker 03

  Yeah, I think what we've seen happen on the alt side and as, even as we think in, and we have a pretty sizable research team, as, as that team has begun to continue to espouse and evolve that portfolio, not surprisingly, we've looked from the evolution, that 60-40 portfolio, to look something that looks more like a 40-30-30 portfolio that's got 30% of those investments being alternative investments or non-correlated assets. And so as such, as we've begun that evolution into having a more sizable component, then we had to really invest pretty heavily in the last five years in expanding our product shelf, making sure that we had appropriate investments that could fit there, some through ETF, some liquid, some are less liquid, so some illiquid investments as well, with due diligence across all of them.

• 56:37Speaker 03

  To where we've gotten to the point now where we have a very robust set of alternatives available. We've got an alternative support desk as well. We've got models that incorporate them, and we can help advisors as they move their construction of their portfolio to more, including more in that alternative space.

• 56:53Barry Ritholtz?

  So let's talk about the 40-30-30.

• 56:56Speaker 03

  Yeah.

• 56:57Barry Ritholtz?

  In particular, the illiquid alts, the five-year, the seven-year lockups. I've seen this debate about this topic all over the map. Some people want that in 401Ks regardless of dollar size. Other people are saying, no, 25 million and up. What's the best practice in this area?

• 57:18Speaker 03

  I think you're going to see that continue to come down market. I think we're supportive of, of legislation that would allow that to move into ERISA plans, so 401Ks, et cetera. And, and we're outspoken in Washington around accessibility of alternatives, but with proper diligence, right? So making sure there just isn't anything that comes into that investment. But it can, it can come in at lower asset levels than you've historically seen. And I think that the, the core component of that is that, and I think this is rejoinder is heard quite a bit in the marketplace, but firms are staying private longer. And so to gain access across the entire, you know, macroeconomic outlook, you need to make sure that you still have access to those private companies as well.

• 58:02Speaker 03

  And so we're looking into private credit, private equity, et cetera, as a critical component that increasingly is an important component of a diversified portfolio.

• 58:10Barry Ritholtz?

  I don't disagree with you about 25. I think where there's a lot of...

• 58:16Barry Ritholtz?

  Just feeling away blindly through the, through the market is, is it 10, is it five, is it two, where is the appropriate, you know, you look at a half a million or $2 million portfolio, do they really need privates, maybe, maybe not, clearly there's a demand, especially from ultra-high net worth and family office, how do you think this plays out, do you think eventually we're just going to look at privates as another asset class?

• 58:43Speaker 03

  I think we are, but I think you're right, I think we're still in a journey that is the evolution of where is that threshold, and whereas, as long as you can properly understand the risk associated with it, and, and, and basically work through that risk and, and the role that it plays inside of a portfolio, I think that is where you want to look to where does that minimum get to, but I think it's an active debate.

• 59:06Barry Ritholtz?

  So let's talk a little bit about market share, which is, this, our industry is so unusual, almost nobody has market share, even at a couple of trillion dollars, it's still fractional, and at the same time, we're, I don't know what inning this is, but we've certainly enjoyed a decade, a decade and a half of massive consolidation, when rates were zero, I think a lot of advisory shops looked to private equity like a, a high-yielding convertible bond, with the, with the possibility of becoming equity down the road, what do you think about the mature, maturation of the industry and this consolidation wave

• 59:50Barry Ritholtz?

  that's been going on for so long, how much further does this, does this go?

• 59:55Speaker 03

  So I do think there's a lot of consolidation that's played out inside of the industry, and I think there's an evolution that's even playing out at the same time, I think as we historically have categorized that RIA segment, as folks who are independent, I think increasingly, a lot of the RIA's and especially the aggregators start to look a lot more like the W2 shops from which a lot of the advisors had broken away from. So you have two different things that are going on for me, there is this, how does a firm like ourselves show up as a good counterparty to advisors and become a platform that can make them very successful, I think the requirements for investment there are so high that you see the thresholds, which has driven the consolidation, what you've seen is a lot of firms who have said, I can't make those investments, I don't know how to be a viable

• 1:00:39Speaker 03

  going concern, and so I think they've opted out of the marketplace, I think on the other side of that, then, I don't know what happens on that RIA side, on that continual aggregation that exists inside of the RIA's, I think there's a second generation issue that may show up, it's why you see some of these contractual issues that say, okay, non-acceptance language, non-compete language, how enforceable are the contracts of advisors who sell their business into an aggregator, I'm not sure where that will play out, there's, there's still some more golf to play there, but I do think you will continue to see the requirements for investments to be a great platform or support of advisors will continue to rise, and it's why I like our institutional business, because we support firms, institutions who

• 1:01:20Speaker 03

  may not be at that threshold to be competitive, but we're the only white labeled platform that is in the marketplace.

• 1:01:26Barry Ritholtz?

  Interesting, so let's look out 10 years, what do you think of the future of financial advice will look like, what do you think, what do you believe that you suspect a lot of other people in the industry might disagree with you about, and how is LPL positioning itself consistent with those beliefs?

• 1:01:45Speaker 03

  Yeah.

• 1:01:46Barry Ritholtz?

  That's a lot in one question.

• 1:01:47Speaker 03

  It is a lot, first is, I do think that if you look at that 10-year arc, I think you will see the inversion of that kind of today is 30% client-facing and 70% kind of process work, I think you will see that revert, I think you will see that be 70% of client delivery and 30% of the process work that occurs in the background, that means there's going to be a freeing up, so, I mentioned, you mentioned that we have 32,000 advisors, but across our entire, the staff that exists inside of advisors' offices, we're closer to 70 to 75,000 individuals.

• 1:02:17Barry Ritholtz?

  That's amazing.

• 1:02:18Speaker 03

  And so what I think you'll see in that is, that so many of those folks are actually doing the work behind the scenes, a lot of that work's going to get done on their behalf, and so you're going to see a freeing of capacity to deliver advice, to the point that you made earlier, to lower levels of assets than we've seen in the past, because at the same, basically, cost, right into the team of, you know, employees, you are going to be able to have more client-facing capacity, and so I think either serve existing clients more broadly, or serve a broader set of clients, and so I think there is a real opportunity for those that are running practices to expand their advice capacity for delivery, and so I, I like that, I don't know that that's controversial, the thing that I might say that's probably controversial is, that of the firms that look of our ilk, I think there's

• 1:03:03Speaker 03

  only going to be a handful that are going to be able to survive, those are firms that are trying to provide a comprehensive set of tools that are available in support of advisors, we believe strongly in actually doing our own tech dev, having our own technology, augmenting it with third-party technology, and so not just an aggregation of third-party technology, but an actual proprietary set, I mentioned the developers, and I think those integrated players who believe that they should have their own workstations, believe they should have their own advisory platforms, believe they should have their own investor capabilities, believe that they should be self-clearing and take all of that data together to harmonize that and put agents against it to make the most productive use of that environment, I think there are only going to be a handful of those firms, we aspire to be one of those firms.

• 1:03:48Barry Ritholtz?

  We mentioned so many firms are staying private longer, both yourself and a lot of the larger competitors are public, how does being a public company affect how you develop the platform, how you build the culture, and how you think about the advice that your clients, the advisors, give their clients, the investors?

• 1:04:10Speaker 03

  Well, I like that we're public, I like that we have to come out and report quarterly, I like that our clients, our advisors and institutions can see the health of the firm, I like that they can see where we're doing well and where we're challenged, they'll feel it in their interactions with us day to day, but they're able to see on the balance sheet, on the income statement, what is the health of this firm and how are we performing in the marketplace, so, in that regard, I actually really like that we're public, I think the other thing about it is, we also then aspire to share our story, so we don't just, we, we tell our story, which is, what is the strategy of this firm, what is the market that we're trying to participate in, what is the way in which we're trying to win in the market, and I think we reveal, and most do, the relative competitive advantages,

• 1:04:55Speaker 03

  and so again, for us, maybe back to that five by five that we alluded to a little bit earlier, we have a lot of transparency about where we think we're taking the firm, and then we have a scorecard that gets published every quarter, we actually publish monthly as well, every month and every quarter, so that you can see as somebody who's in our ecosystem and one of our partners, how well is my partner performing and how healthy are they?

• 1:05:17Barry Ritholtz?

  Anytime I see large acquisitions, such as Commonwealth or Atria, being public has to be a huge advantage versus somebody that has to go out and dig up the, the financing for this, you have valuable paper to use, how does this affect how you look out and think about future acquisitions, what is the, what does the roadway look like over the next couple of years?

• 1:05:41Speaker 03

  Yeah, I think being public does help us, I mean, we have access to the public, public debt markets as well as the public equity markets, and so when we go out and do a transformative acquisition, we think through how the funding occurs, and we think in a responsible way, but I think it does allow the art of the possible to be more readily available to us, I think when we think about the role that M&A plays, I think for us, maybe I'll, I'll take a backwards looking and then forward looking, I think backwards looking, we felt pretty convicted that we needed to get to a scale for which we would be able to control our own destiny, and that meant, as you looked into, and I wouldn't even call it AI eight years ago, I joined eight years ago, I would call, I would have thought about transformative technology, then again, I kind of framed it in my, in

• 1:06:22Speaker 03

  my mind's eye, around our ability to be as powerful and as invested in capabilities in support of advisors as the leading firms who are trying to disintermediate advisors would be, and so there was a threshold, and we thought about that threshold as a capacity for investment, and I think we've gotten to that threshold, where we feel like we can go toe-to-toe in support of advisors, now, that diminishes the need for M&A forward, because I think we needed to get to a critical scale, and I think now it becomes more about what is the right fit, where does it work, and maybe even shifts into, there are a lot of institutional partnerships that make a lot of sense, because we, I've kind of mentioned, the threshold for being an at-scale player is going to continue to grow, but there are

• 1:07:05Speaker 03

  fantastic brands out there that have wealth franchises that may want to partner, and so I think it probably hems a little bit more towards partnership than it does towards M&A.

• 1:07:14Barry Ritholtz?

  Really, really interesting, last question before I get to my favorite questions I ask all, all of my guests, I'm fascinated by how you think of yourself as a change agent, supporting advisors, and how you conceptualize the future of advice, what is it about financial advice, what is it about wealth management that the average investor misunderstands? What do you think people would be more comfortable with if they really understood what was going on behind the scenes?

• 1:07:48Speaker 03

  Advisors deeply care for the success of their clients, you know.

• 1:07:53Barry Ritholtz?

  Full stop.

• 1:07:54Speaker 03

  That's, that is what drives most people, I would say 95 to 98% of advisors are not there to make money, to get rich, those are side effects, you know, that they want to have successful lives, I can tell you that advisors that we deal with day in and day out torture themselves over the success of their clients, in fact, when they make maybe even a bad call, they torture themselves more than their clients would, because they're actually in it because they are empathetic and they care, and, and I think there is this dispassionate view that gets placed on Wall Street, because of whatever the frivolity the riches, whatever those things may be, that's not representative of the financial advisors that I know, the financial advisors that I know don't actually live in this

• 1:08:39Speaker 03

  city, right, they, they live in Poughkeepsie, and they're on Main Street in Poughkeepsie trying to make sure that the school teacher can get through and retire successfully, or that, that, there's just, they are in it for the success of American families.

• 1:08:54Barry Ritholtz?

  Yeah, there's a very backwards 1980s perspective, which hasn't existed for, for decades, all right, let me jump.

• 1:09:01Speaker 03

  It makes for good movies, though.

• 1:09:02Barry Ritholtz?

  It really does, not just The Big Short, but Boiler Room, which is really about that era, is, is really an amazing watch, let me jump to my favorite questions I ask all of my guests, starting with, tell us about your mentors, who helped to shape your career?

• 1:09:18Speaker 03

  Yeah, so I'll give you one in particular, I mentioned that I started at McKinsey, I think I did, I don't know if I, I started in consulting and I started at McKinsey, so there you go, if I didn't mention that earlier, one of the things that happens as a 22-year-old who is a hard-charging and just wants to, is probably insecure and wants to be exceptional, is that you work like crazy.

• 1:09:40Speaker 03

  And I had a mentor, his name's John Stoner. And he was, he had a military background and he'd come out of West Point and he was actually a military attache to Al Gore. And he was a McKinsey partner. And one of the things that he had was balance. He was able to serve his clients, but he also was able to invest in himself and his family and did so in a way I couldn't fathom what it would mean to be able to even have a relationship when I first was at McKinsey because you just, we worked a lot at that, or I did, I don't know that everybody did.

• 1:10:08Barry Ritholtz?

  Eighty hours, a hundred hours, not uncommon a week.

• 1:10:11Speaker 03

  Just felt like a lot. And, and, and John was successful on his terms. And I think he conveyed that to me around, and he was my mentor, around how you can both be successful professionally, but also set boundaries and be, and be successful personally. And I think, I haven't always had that balance at every time in my life, but I think, when I think back to it is when, when it is out of whack in a very material way, you actually can't be your best at work either.

• 1:10:39Barry Ritholtz?

  Huh, really, really interesting. Let's, let's talk about books. What are some of your favorites? What are you reading currently?

• 1:10:45Speaker 03

  Yeah, so a lot of times, business books, I'm looking at a chapter on where this firm needs to go next. And so for us, there is moving towards becoming what we call an execution edge company, meaning we do the things we say we're going to do with regularity. We have processes and we have different leverage points that we use, but we also distribute decision making as low as possible. And so I'm actually right now rereading The Toyota Way because that is about excellence and continuous improvement and empowerment. I love the idea of the and-on cord, which is anybody is empowered to stop the line. We need that as well. If we have somebody, if we're not delivering the right experience to our clients, we need somebody to be able to pull the cord and say, this isn't right. This policy is wrong, this process is wrong, this technology is wrong.

• 1:11:29Speaker 03

  And so, but maybe more broadly, I read anything that Stephen King publishes.

• 1:11:35Barry Ritholtz?

  Oh, really?

• 1:11:36Speaker 03

  Yeah, anything.

• 1:11:37Barry Ritholtz?

  I read his book on writing, which is fascinating.

• 1:11:41Speaker 03

  Yes.

• 1:11:42Barry Ritholtz?

  Who would think that a successful writer wants to stop and write a book, literally on writing?

• 1:11:46Speaker 03

  Dear constant reader, is how that starts.

• 1:11:48Barry Ritholtz?

  That's right. That's right. Let's talk about streaming. What, what do you listen to podcast wise or what are you, what's keeping you entertained when you're not reading Stephen King?

• 1:11:57Speaker 03

  Yeah, so I'll listen to almost anything that is business related, but one of the things that I really like is we have a long drive. We, we like to go skiing as a family and we've got about a six hour drive that, and, and when my kids are in the car, we listen to Business Wars, which, which is a parallel between two different companies. And it's a like Haagen-Dazs and Ben & Jerry's and it will fictionalize some of it of, of the interactions, but it will, it's not, it's nonfiction, but it's delivered in ways that feels like you're in the room. And my kids actually really engage in it. And so we'll talk about how, and look, I'm, I'm a geek this way, we'll talk about the different strategies employed, but I'm, it's an access point, or access point, that my kids and I are able to speak in the same kind of terms. It's pretty cool.

• 1:12:41Barry Ritholtz?

  And my favorite little tidbit is Haagen-Dazs made up name. It sounds, it sounds like it's Dutch or Swedish or something, totally fabricated.

• 1:12:51Speaker 03

  Totally fabricated. Totally fabricated.

• 1:12:54Barry Ritholtz?

  Just really good marketing.

• 1:12:55Speaker 03

  Yes.

• 1:12:56Barry Ritholtz?

  Our final two questions. What sort of advice would you give to a recent college grad interested in a career in either running a financial services company or wealth management?

• 1:13:07Speaker 03

  I'd give broadly to say, basic foundational capabilities will serve any college graduate well. So what I mean by that, the ability to solve problems, the ability to structure problems, the ability to understand how to tell a narrative, right? I think those are, I liked that I started, not everybody should start in management consulting, but one of the things I loved was I started at a firm that trained me. I learned as much, if not more, in those first couple of years I had at McKinsey because there was a structured way of thinking. It has benefited me for my entire career. Now, when you take that and extend it to wealth management, my point would be if you want a career in wealth management and that's your terminal point, it doesn't have to start there.

• 1:13:51Speaker 03

  You may start in a number of different places so that you can understand hospitality. I think there, there'd be great arguments to be made to, to live through a hospitality like a, like a restaurant or a hotel, or maybe even view it from a different bent. Maybe you become a market specialist, a market analyst, but if you know where you want to go, there may be piece parts that you can put together because you're building a career that should crescendo. And I think a lot of people think they have to rush into their final job or their final career very early on. And I would say, take a step back and say, if you know that you want to be there, what are the piece parts that are more likely to make you successful over a longer run?

• 1:14:26Barry Ritholtz?

  Huh, really, really interesting. And our final question, what do you know about the world of investing today? Might've been useful 30 or so years ago when you were first getting started.

• 1:14:36Speaker 03

  The one thing I would say is that maybe more so in wealth management than investing. I have realized, and maybe this, this theme comes back to family, but I have seen so many multi-generational practices in wealth management that had I known that 30 years ago, I think I probably would have become an advisor versus becoming what ultimately is home office staff facilitating advisors being successful. Because I would love to have had that opportunity to have my entire family working together if they so chose. So I think for me, it would be more about the pathway than necessarily one particular insight.

• 1:15:17Barry Ritholtz?

  You, I'm looking up a book that you triggered an association in my head and I couldn't remember the name.

• 1:15:24Speaker 03

  Will.

• 1:15:25Barry Ritholtz?

  Unreasonable hospitality. Are you familiar with that?

• 1:15:28Speaker 03

  That is, that's our mantra. So Will Goddara is fantastic. The book is fantastic.

• 1:15:33Barry Ritholtz?

  That's what I thought you were referring to.

• 1:15:35Speaker 03

  Working through, for us, we are working really hard to get great at the black and white. And if you're, for anybody who's read the book, because we desperately want to get to technicolor. And so we started by trying to get right to technicolor. And I think we realized that you need to understand the foundational elements to be able to be a fantastic hospitality. But yes, Will, we've had Will speak, I've, we've run, we've run an offsite for a day with Will and his team. They're, they're fantastic. It is fantastic. He has a implementation guide that he recently published as well.

• 1:16:08Barry Ritholtz?

  Oh, really? And it's funny because watching The Bear, you see stuff that comes right out of the book. It's absolutely. Rich, this has been absolutely fascinating. Thank you for being so generous with your time. We have been speaking with Rich Snunmeyer, CEO of LPL Financial, helping to oversee $2.6 trillion in client assets. If you enjoyed this conversation, check out any of the 664 we've done over the past 12 years. You can find those at Bloomberg, iTunes, Spotify, Apple Podcasts, wherever you find your favorite shows. I would be remiss finding thank the correct staff that helps put these conversations together each week.

• 1:16:50Barry Ritholtz?

  Elizabeth Sedren is my video producer and engineer. Anna Luke is my podcast producer. Sean Russo is my researcher. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

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