LPL Plans to Sell Business Services to Outside Advisors

"If you think about that premise, if I'm operating my own business and I have local-level services that are necessary to support the operation of that business, well then we believe we could step in and create higher quality solutions at a lower cost using automation and digital capabilities to create real interesting scalability," Arnold explained.

As an example of where this strategy can lead, he noted that if it provides M&A solutions successfully to LPL advisors, "then we could easily take that and point that to an advisor that doesn't necessarily sit on our platform today, and help create growth opportunities associated with the practice by providing or plugging in to that type of solution."

The plan for outside advisors is just in an "experimental phase now" and "it's early days of that experiment," he told analysts.

But, he said: "We will likely take one of these solutions and begin to explore how that might work and present itself outside of the LPL family of advisors, and that will allow us some learning they did and apply and further innovate on how we might take this portfolio outside the LPL advisor base."

Waddell & Reed Advisor Retention

Separately, Waddell & Reed advisors who serve about 80% of that unit's client assets have "already committed to join our platform" following the close of LPL's recent acquisition of Waddell & Reed's wealth management business from Macquarie Asset Management for $300 million, Arnold told analysts.

In announcing that transaction in December, LPL said that Waddell & Reed business had 921 independent advisors and $63 billion of assets under administration.

After the signing of that deal, "our teams have collaborated well with Waddell & Reed and Macquarie, which is contributing to solid progress on the transaction," he said. "We will give you an update on the rest of the retention pipeline next quarter."

The 80% retention "puts us above our 70% modeling assumption thus far in the process," according to Matthew Audette, LPL's chief financial officer. Waddell & Reed Wealth Management assets at the end of Q4 were $70 billion, up $7 billion from Q3, he noted.

Elaborating during the Q&A with analysts, Arnold said that when the transaction was announced in December, "we began our retention efforts associated with the Waddell & Reed advisors and so we've been at that largely six weeks."

The 80% retention rate "has more to do with just the timing and where we are in the overall process than anything else," he explained.

But the CEO was quick to point out that LPL expects to "close and convert in the second quarter, so there is still time left to have that ongoing dialogue and make sure that all advisors can make an informed choice around where that best option is for them."