Good morning, everyone. Why don't we go ahead and get started? My name's Jeff Schmitt. I cover wealth management stocks here at William Blair, and I'd like to introduce LPL Financial. They're the leading aggregator in the wealth management sector. They have over $2 trillion of client assets, and they've been one of our top picks for about two years now. I think the stock's doubled over that time, so it's done very well. We're pleased to have Matt Audette with us. He's the CFO to discuss the business. Before we begin, I just want.
President, too.
What's, President and CFO. My apologies.
You forgot that one.
I do want to also point people to our website, williamblair.com, for any research disclosures or any potential conflicts of interest. With that, I will turn it over to Matt.
All right. Thanks, Jeff. Morning, everybody. I'll just start off with a couple of housekeeping items that I think everybody's familiar with. I'm going to spend about 30 minutes talking about LPL. I will talk about some forward-looking statements and estimates where actual results could vary materially. Please keep that in mind. We also have a fair bit of non-GAAP disclosures we use to talk about our business. You can see up on the screen, and you can look those up to give you the reconciliation to the relevant GAAP measures. With that, and as Jeff highlighted, I think we've got a company and a business model and, I think, a history of success that we are quite proud of. I'm coming up on almost 10 years with the firm, where the stock had kind of settled into the low 20s at that time.
I think we're trading in the near 380s at this time, largely driven by a strategy that I will talk through today that we feel quite confident that we continue to execute and focus. That the opportunity to continue to drive results really is there. What I will walk through is really six key drivers of that that you see up on the screen. I will double-click on each and every one of these. Just to kind of orient to the overall highest level, I think investment thesis on LPL and our strategy is relatively simple. First and foremost, we are an industry leader at scale, and we operate in a part of the business or part of the industry that by its nature just has structural tailwinds that are helping grow.
You then add to that really our strategy, which is the next two items, horizontal expansion strategy, which is really about us just broadening the number and types of advisors that we can serve to pretty much be able to compete for any advisor operating in the United States, which call that around 300,000 advisors. In addition, our vertical integration strategy, which is really about integrating the tools and capabilities all within one firm as opposed to having someone that goes and plugs into a custodian needs to pull in a bunch of different things that makes it more challenging. It makes the value prop better and keeps more of the overall economic pool involved in an advisor business with LPL. Fourth is going to be our business model and how it's resilient to macro moves, right?
In the nature of our space, it's very common to see, especially today, big swings in the equity markets, big swings in interest rates. There are some natural hedges to that in our business model that really brings us stability to the model that until you kind of click down into that, you may not appreciate that. All four of those things are really about how we drive our overall growth and our overall revenue. You then combine that with a disciplined expense management approach and investments to drive operating leverage, and it really produces some compelling cash flow. Lastly, I would highlight we are a capital-light business model, which is another way of saying we are not a bank. We generate capital, and it doesn't need to be held up on the balance sheet. It can actually be deployed in a much more deliberate way to drive value.
We, of course, have capital requirements, but there's just a lot more flexibility. I think these six things are really what we have been focused on the last five to 10 years and what we're going to be focused on going forward. With that, a little bit of an overview of LPL for those that aren't familiar with us. You can see who we are, who we serve, what we do, and our mission and values on the screen. I would highlight just a few of those things. I think the who we are has really expanded into a top-tier broad wealth management firm. We are known as the number one independent broker-dealer, a top custodian. If you look at the breadth of what we now do, we compete with any firm that you could think of from a wealth management standpoint.
Some quick data on our size and scale. These numbers do not include our most recent acquisition that we announced, which is Commonwealth. When you add that to that, once we close and begin to integrate that, we'll be north of 30,000 advisors. We'll be north of $2 trillion in assets. Maybe the last thing that I would emphasize that really says who we are today versus anybody familiar with us from some time ago is our mission and values, right? Our mission, which is focused on advisors, are our clients. Many firms, it's not very clear to advisors, are they the client or they're customers actually at the client of the firm that we're at?
We are unambiguous and quite clear on who our client is, which is one of the many reasons that they come to us, and our ambition, which is simply to be the best firm in wealth management, not the best independent broker-dealer or the top custodian, but the best firm in wealth management. Now, a little bit of data behind that. If you look at just the last five years and how we've grown, right, our overall AUM has doubled. I think that the manner in which that occurred is really, really important, which is the center panel on the screen, which is organic growth. We lead the industry in organic growth. We're consistently in that high single-digit organic growth range. You can see a couple of periods in the low double-digit range.
You combine that with some strong operating margins you can see on the right-hand side. And then in the bottom right-hand corner, a very strong balance sheet with a low leverage ratio. I think you get a nice compelling financial picture. Now, with that, just to get a little bit more into those secular tailwinds in the part of the industry that we're in, if we move left to right across this slide, there continues to be a growing demand for advice, right? Estimated to continue to grow at that 7% CAGR that you see on the screen, leading to 2027, a $38 trillion marketplace. I think what's most important on this page is the center on the right. The center is the independent channel where we operate, which is the bottom of that chart.
It is really the only part of the space that continues to capture share, right? Wirehouses in the kind of center of that chart continue to lose share. The regionals are maintaining, but the independent space is where advisors time and time again are choosing to move their practice. That is where we are the leading player. On the right-hand side of the page, I think this gives you a little bit of a sense on how we've expanded our offering. If you go back to about 10 years ago, we were competing for a very small part of the overall wealth management space, right? You can see $4 trillion of AUM, and it was just our traditional models. I'll go into some details on this on the next few slides.
We have added tools, capabilities, and affiliation models that really allow us to compete pretty much for the entire advisor-mediated space. Really where that's come from is twofold. One is our horizontal expansion strategy, which is really just broadening the manner in which an advisor can actually affiliate with us. Then our vertical integration strategy which is making sure that we're building out all of those tools and capabilities to make sure the advisor experience is great and they can actually focus on growing their business. Now, more specifically on the horizontal, right? Our firm is over 30 years old, and we were largely known for most of that history, which you see on the far left-hand side, which is we operated in the traditional independent market. We also served and supported small banks and credit unions.
As our clients matured, as our ambitions matured, you start to move across the page to the right, and we started to build out new capabilities and new ways to join LPL. Strategic Wealth is really targeted at the breakaway advisors. It helps them get from an employee model to independence and provides more support and services to actually run their practice. You move to the right, Linsco. Linsco is the first L in LPL. For those who do n't know, LPL is created by a company called Linsco and Private Ledger joining. That is the branding that we use for that model. It is an independent employee model, right? Independent is n't an affiliation model. It really is a mindset.
If you want to continue to be an employee, but you also want to own your clients and have all the benefits of independence, there really was n't a place for us to put you. So we developed that model. You can continue to move across the page all the way to starting to lay out a private wealth affiliation model as our advisors have grown themselves and have more and more sophisticated clients and clients with more net worth where things like lending become more relevant, things like alternatives become more relevant. If you take a step back and just reflect on this entire page, we really are in a position to serve the entire advisor-mediated marketplace.
Now, if you look at the opportunity set, right, and where we operate, even in the spaces where we're the dominant player, which is the independent channel on the left, when you factor in Commonwealth, we're at 12% of the market. And the institution market, where we serve those banks and credit unions and other financial institutions, we're 9%, still a very fragmented market, meaning the opportunity to grow from here is pretty substantial. When you look at the biggest opportunity, which is in the center of the page, is the employee channel and the employee market, we're just scratching the surface, right? If you just reflect on the growth that we've had the last 10 years and you start to think about what's the opportunity going forward, it remains quite compelling.
Now, if we move into each of our two channels, the vast majority of our assets are the independent advisor channels. Of that $1.8 trillion we have today, you can see $1.3 trillion of it is in this channel. The value proposition is what we, in the center of the page, have really developed over the last five+ years, right? Those flexible models that I just walked through, you can choose to affiliate with us in any way that makes sense to you. Differentiated economics, meaning you come to us, you're going to be able to keep more of the economics that you generate as an advisor. Probably the most important one is book ownership, right? If you're an advisor with LPL, those are your clients, and it's one of the things that matters the most to them.
Then you add to that the capabilities and the services that we provide. An independent advisor can come to LPL and really focus on growing their business, not be distracted by all those other things that can take away from that. Now, in addition to the advisor-mediated channel, we have our institutional channel. This is us really providing the same tools and capabilities, but for a financial institution that's able to outsource all of that to us. It is smaller than the advisor-mediated channel, but you can see visually on the right-hand side that it is growing at quite the clip, right? Nearly $500 billion of AUM, up from $200 billion just back in 2020. The key part of this, when you think about the value proposition from a financial institution's lens, is really in the center part of the page, right?
They can plug into LPL. They can focus their time actually on accelerating their growth, reduce their cost, and outsource the risk management to us. Probably the most important thing is the seamless conversion process. This is not something that's very easy to do. If you're a large financial institution, one of our largest, most recent ones, which is Prudential, it's not easy to get from running this yourself onto a third-party platform. We have invested heavily in making sure that we have the technology, the tools, and the people to do that in a pretty seamless way. With that, let's turn through and talk through our vertical integration. As we take through all those tools and capabilities, this slide just gives you a sense as to how those different things apply over the lifecycle of an advisor.
It's not about just supporting them and getting them to independence, which is on the left side, which is where we used to focus. It's about getting them independence. It's about serving them and helping them grow their practice or optimize their practice. It's about helping them when they're at the end and they want to either transition into the next generation or they want to sell it and monetize their practice, which is typically the most valuable thing that they have on their personal balance sheet. We've developed tools and capabilities that support all of this, which I'll double-click on a few of them in some coming slides.
Now, if you look and think through how we monetize here, in a very simple context, that makes sense as the more services that you provide, the more value that you provide, the more economics that we generate, right? If you think at the most basic service and offering that we have, which is in the bottom left-hand corner of the slide, that someone is just simply doing brokerage business with us, right? It's transactional. It's commission. On average, we'll earn 15-20 basis points on that. If any of you start to move up into the right on the more services that we provide, an advisor providing advisory services where we're providing more of our platforms to serve and support that. When they go into our more supported models, Strategic Wealth and Linsco, we're providing more services to actually help them run that business.
When they go into our centrally managed platforms, which is when they can outsource the actual asset management or investment management to us. If they start using some of our services group services, like providing them with an admin or a head of marketing, and you start to add all that up, you can start to return in the 40-45 basis points on that same asset for someone who's using all of these services. It just gives you an idea of the range of economics that can happen as our clients start to use more and more of our services. Now, if we move into the resiliency of the business model, right? I think when you look at a wealth management business model, there are factors that are outside of your control, right?
The two big ones that come up are going to be the level of equity markets, the level of the markets overall, so equity markets, debt markets, as well as the level of interest rates. I think part of our business model is there's just natural hedges to those variables embedded in the model, right? Simplest example is equity market pullback, right? What happens, right? Obviously, we've got a lot of our economics that are generated based on the level of AUM. What typically happens when equity markets pull back is advisors get a little bit defensive and cash balances or the amount of assets allocated to cash simply goes up, right? That is an area where we monetize by placing those deposits with third-party banks, not unlike a bank itself would earn, that offsets that.
If you look at some of the data there, if we just look on the left-hand side of the page, this shows our cash balances, both the dollar amounts in the bars and then the % of AUM that's in cash during those time periods. If we just look at 2022 as an example, right? The last time, super fun year, markets just going down and grinding down every single month. Look at what happened with cash, right? Cash balances, both in dollars and percent of AUM, came up and primarily offset the economics from AUM going down. And then you move to the right on that slide, as equity markets recovered and you started to get some strength there, you can see cash going back into the marketplace, right? There is just a nice natural hedge to that embedded in the model.
The other thing that we do n't control, of course, is the level of interest rates themselves, right? One of the ways that we mitigate that is actually deploying those cash balances into banks in fixed contracts. Even though interest rates can move up and down, 2020 and COVID is an example, interest rates immediately went to zero. If you look on the right-hand side of that chart, that shows how we have laddered out those cash sweep balances into fixed-rate contracts. We consistently deploy them to have a laddered portfolio, typically focusing out three to five years. If you look at the very bottom right of that chart, you can see the yields on those particular contracts. If interest rates went to zero today, you can see how and what we would continue to earn on those balances over that period of time, right?
It is really a strong mitigant to any macro volatility that you would have from interest rates. Now, with that, let's move into expenses. We've got a very focused and unchanged long-term cost strategy, which is really focused ultimately on driving and delivering operating leverage in the core businesses, right? We do that in two ways. One is we prioritize investments that drive growth, right? This is the most powerful way to deliver that, is to drive organic growth in the business, but also make investments that drive productivity and efficiency, and then making sure overall that we are adjusting to the environment that we are in. I think if you look at the bottom left on what we have done over the last five years, I think it shows us executing those principles in a bunch of different environments.
From 2020, when COVID hit and the market pulled back, we really pulled back our levels of investment. To the next few years after that, as markets recovered, interest rates went up, cash balances were up, there was a lot more economics to deploy. We were very deliberate about investing in capabilities that could drive organic growth over the long term, but also invest in capabilities that could really pull through productivity and efficiency and up margin expansion at a later date. I think as we sit here today, you're starting to see the benefits of those investments, right? The organic growth numbers I went through earlier, like a big driver of that are the investments that we made here in 2022 and 2023.
As you start to see that organic growth continuing to maintain at high levels, but the growth rates coming down to that 6%-7.5% that we planned for this year, that really is a benefit of that growth, but also those investments in productivity and efficiency and costs really coming through, which helps pull those economics more to the bottom line. Now, if we turn to the last area, which is capital allocation or capital light model, right? We've got a very deliberate focus on making sure we are allocating capital to the areas that drive the best returns and at the same time maintaining a strong and stable balance sheet, especially in a part of the business, especially in the independent side, where you will see firms run highly levered balance sheets. That is something that we think from a long-term value creation standpoint is not good.
We do n't do that. If you look on the right-hand side of this slide, it just sees how we approach allocating capital, which is very simple. The higher the returns, the more we are focused on allocating capital to that area. Organic growth by far generates the highest returns. M&A is a close second, and then ultimately returning capital to shareholders. Those things can change over time. We are just very deliberate based on what the return dynamics look like, as well as what the opportunity set looks like within that. Now, if we click down on balance sheet strength, and I think this is a key one for our industry. We are not a bank, so kind of bank capital ratios and things do n't really apply. It 's really a debt to EBITDA multiple.
If you look on the top right-hand side, you can see we're quite focused on running a strong balance sheet. We live in that one and a half to two and a half time zone to really position us to be prepared for any unexpected events in the macro, but also to be prepared for opportunities that present themselves from an M&A standpoint or anything that would require a lot of capital that we think can drive value. We want to make sure that we have the capacity to do that. I think if you look in the bottom right-hand corner, I think our journey over the last five to 10 years to really strengthen the balance sheet has really been recognized at a slow pace, but recognized by the credit rating agencies that we're an investment-grade company.
It's really driven by everything that I've talked through here today, combined with maintaining a leverage ratio that does allow us to be able to be positioned for the unexpected. Now, a big part of where we have allocated capital is in the M&A space, right? Building on what I talked a little bit about earlier, even though we have a leading position, it continues to be a fragmented market. This just shows you, going back all the way to 2017, the different types of deals and companies that we have acquired. You can see visually they're getting bigger and bigger. I think I'll click down on the two of the most recent ones or two biggest ones, Atria and Commonwealth. Specific to Atria, this is one where it's kind of down the middle in the independent space.
Atria is a company that acquired seven different firms, really running a very similar business to us in the independent brokerage space. We announced this acquisition over a year ago. We have closed and we are now in the middle of the integration and bringing those seven broker dealers on board to our platform. We 've converted four, three more to go. I mean, the headlines are the integration and conversion is going quite well. You can see the size and scale, over 2,000 advisors, over $100 million of client assets. Then the economics on the bottom right, $150 million of run rate EBITDA. This is the type of transaction that I think we have done many of. This is the largest, but something that I think we are quite good at.
Advisors will get access to all the technology and tools and capabilities that we put on our platform and not only drive the value that you see on the screen, but as they're able to be on that stronger platform, be able to grow from here. The most recent one we announced is Commonwealth. I think this one is as much an acquisition that is growth and financially motivated, but just as much, if not more, it's strategic. For those not familiar with Commonwealth, maybe just look on the bottom left-hand side. I mean, they are the largest independently owned wealth management firm in our space and really the standard bearer for advisor centricity, advisor service. You can see their J.D. Power rankings, number one independent for advisor satisfaction for 11 consecutive years. Really a firm that could have chosen anybody to sell to.
I mean, there were a lot of folks interested in acquiring it, not only because of its reputation, but now that we are on the other side of announcing that, we can tell you with certainty that that reputation is spot on on what a high-quality team advisors that they are. I think when you think about coming to LPL and matching up that advisor centricity and the focus that they have with our size and scale and technology, and you put those two things together, the economics of just getting them onto the LPL platform that you can see on the right-hand side, 3,000 advisors, nearly $300 billion of AUM in the economics associated with that, run rate EBITDA estimated to be $415 million.
When you start to think about on the other side of that, five years from now, 10 years from now, and the growth that could come from that, the capabilities that we're going to integrate that they are very good at to bring to all of LPL, just the strategic opportunity, I think, is really, really compelling. One last key thing to click through and then I'll wrap up is specifically when I was talking earlier about life cycle of their practice. And you get to that last stage where they really are looking to monetize this asset they've built over their life. There really wasn't a great way to do that in our industry. Advisors would either have to sell to a private equity firm.
It was building up an aggregator, which they would begrudgingly do in our view because ultimately when you do something like that, your clients are going to be disrupted. The team that you've built in that office is probably going to be disrupted as well. It is not the thing that advisors typically would want to do. The other alternative would be to find some other advisor to sell to. If you've done really, really well and you've probably grown your business to a size and scale, there's not a lot of people that could buy it. There is this gap in the marketplace that we saw and we were best positioned to actually solve that. That is what you see on the page is our liquidity and succession capability.
Think of this as very simply as we are acting as a bridge between the retiring generation and the next generation of advisors. It is not a small population. If you look at that first bullet under growing opportunity, 1/3 of advisors are expected to leave the industry over the next decade, right? That is not a small number, right? That is nearly $10 trillion of AUM. This offering is basically LPL stepping in, buying the practice, keeping it on our platform, and then we actually help oversee it, manage it, help either identify a successor if they do n't have one, or train one up if they do, ultimately allowing that advisor over time to earn or buy the business back.
At that point, you now have the next generation advisor that probably is going to be on the LPL platform for another 20-30 years. It is pretty compelling. You can see the stats at the top. These end up being relatively small deals at a time, $10 million-$20 million. We think over the long term, this is going to be something that really helps keep advisors at LPL, and it helps recruit advisors to LPL as well, given this is something that's really important for people to solve for because no advisor really wants to move. When they do, they want it to be their last move. I think this really completes our offering set to allow people to make the move to LPL, really their last move. With that, I'll just wrap up with some stats.
Growth and earnings and economics have looked like at LPL for the last five or so years, anchoring off 2020. You can see we're growing assets at 18% per year overall. Organic growth is a big driver of that, which you can see in those upper single digits, low double digits, leading to our revenue or gross profit in the bottom left-hand corner growing at over 20% a year. And then EPS, or just EPS, growing at an even faster pace than that. That's what we've been able to deliver. I think when you take the totality of our focus and plan that I've covered here today, I think our confidence in driving results like that going forward is quite high. With that, do we have a couple of minutes for questions or? We have one question. A couple of minutes for our question?
If not, the breakouts are in the Adler room across the lobby. We'll see you there in 10 minutes.