Deals & People October 3, 2024

LPL’s Arnold Has Settlement Chance as Steinmeier Called Worthy Successor

Stock analysts are watching for specific details of Dan Arnold’s dismissal while touting Rich Steinmeier’s business growth credentials.

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LPL Financial Holdings Inc. is giving recently dismissed CEO Dan Arnold a chance to settle over allegations of violating the company’s code of conduct in statements he made to employees, while analysts believe the CEO’s successor may already be in place.

LPL’s board did not reward Arnold with severance benefits upon terminating him on Tuesday, but it did leave open the possibility that he could receive some of his equity awards from the company should the parties reach a settlement, according to a filing with the Securities and Exchange Commission.

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LPL’s board, on recommendation of its compensation and human resources committee, “exercised its discretion to defer the automatic forfeiture solely of a portion of Mr. Arnold’s vested options to purchase common stock of the Company, subject to the satisfactory negotiation of and Mr. Arnold’s entry into a settlement agreement for the benefit of the Company and its shareholders.”

If LPL and Arnold do not reach a settlement agreement, those options would be forfeited, according to the filing.

Interim CEO Rich Steinmeier, meanwhile, will see no changes to his existing compensation arrangement, according to that filing.

But that could change, according to stock analysts covering LPL.

Steven Chubak, leading analysis for Wolfe Research, expressed confidence in Steinmeier in a note to investors, writing that the chief growth officer has “been instrumental to the company’s success” in growing the business organically and that the Wolfe team does not anticipate any change in strategy. Chubak went on to call for LPL to take off the interim CEO label and give Steinmeier the job.

“Investor feedback on Steinmeier has been consistently positive including following our slate of investor meetings last week where he articulated a clear growth strategy / differentiated value prop,” he wrote. “Despite concerns that the CEO transition could prove disruptive to organic growth, we remain confident LPLA will continue to have recruiting success.”

Analysts from JMP Securities agreed, with a team led by Devin Ryan writing in a note that Steinmeier is the “logical choice” for permanent CEO after LPL’s board runs a search process.

The analysts also noted that CFO and Head of Business Operations Matthew Audette has worked closely with Steinmeier and he “could be rewarded with additional responsibility and compensation.”

J.P. Morgan’s lead analyst for the company, Michael Cho, noted that there may be more short-term disruption for the stock and that the timing of the news was “less than fortunate,” as LPL has either recently firmed up or is firming up a number of acquisitions, including its purchase of Atria Wealth Solutions, which the firm reported finalizing on the same day Arnold was let go.

Overall, however, Cho reacted positively to the LPL Board’s quick action and “do[es] not expect another shoe to drop” from the investigation. Cho also wrote that Steinmeier and Audette may remain at the top of the firm.

“We appreciate that interim CEO Rich Steinmeier and current CFO/Head of Business Ops Matt Audette have been successfully driving LPL’s strategy and execution for many years,” he wrote. “Our view is that the current executive team (interim CEO and CFO) will remain in place and will continue to execute on LPL’s strategic initiatives.”

Chubak also wrote that Wolfe analysts do not believe the firing is part of “pervasive cultural issues,” and it “appears more idiosyncratic.”

JPM wrote that: “We were disappointed to read the disclosure but are also encouraged that the Board moved quickly. We also view these events as an isolated incident.”

LPL stock was up as of market close on Thursday.

Products & Services October 3, 2024

Apollo, Athene Targeting DC In-Plan Annuity Market

The asset manager and the country’s top retail annuity seller are working on a TDF that would include annuities and alternative investments.

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Apollo Global Management Inc. and its Athene Annuity & Life Co. insurance business emphasized during an investor day presentation that they consider alternative investments and in-plan annuities in defined contribution plans as a future growth area.

The asset manager, which merged with insurance, annuity and pension risk transfer provider Athene in 2022, described to investors Tuesday the “massive need” for retirement products.

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Grant Kvalheim, president of Athene Holding Ltd., spoke of a “retirement tsunami” in the U.S. forecast in the coming years, calling it a tailwind that will “exist for several decades.” One product the insurance division is working on that would involve Apollo and a third-party target-date-fund manager is a “future state” TDF that includes both alternative investment and guaranteed income, he said.

“We think the combination could produce 60% or more retirement income compared to a traditional target-date fund with a traditional 4% withdrawal rate—[resulting in] zero chance that the retiree will outlive their assets,” he said. “These products as we are constructing them will provide the flexibility and the liquidity that you need in a target-date fund.”

If the organization does bring a retirement income TDF to market, it will join an increasingly crowded field. There are numerous TDF offerings on the market right now, including those from BlackRock Inc., JPMorganChase, TIAA and a consortium called Income America 5ForLife that includes American Century, Lincoln Financial, Nationwide and others.

“Other plans that you’ve seen announced [by other providers] provide for income, but the individual has to select,” Kvalheim said during the investor day. “I think most of us in this room know: Most people don’t select. They set it and forget it. … All we’re saying is we’re throwing our hat in the ring, and we’re devoting serious assets—people and assets—to try to figure it out.”

During the presentation, Apollo Group CEO Marc Rowan highlighted the $45 trillion global retirement market as one of the firm’s growth pillars. Apollo, he said, believes it can grow over the next five years from about $700 billion in assets under management to about $1.5 trillion via growth channels that also include individual wealth services.

“We, as a society, have done a terrible job of planning for retirement,” Rowan said of the U.S. retirement market. “The vast majority of Americans have not made adequate provisions for retirement.”

He described 401(k) investing as heavily tied to the S&P 500, which in the last several years, he noted, has been dominated by about 10 stocks, with four of them determining much of the returns.

“I jokingly say sometimes that we have leveraged the entire retirement of America to Nvidia’s performance; it just doesn’t seem smart,” he said. “We are going to fix this, and we are in the process of fixing this.”

Rowan tied these products to Athene and its annuity business, which, according to LIMRA data, is by far the largest retail annuity seller in the country.

“Whether it is stable value, tax-advantaged products, going after 401(k) or guaranteed lifetime income, there is no shortage of opportunities in retirement,” he said.

Athene has been in the news regularly over the past year linked to numerous lawsuits involving pension risk transfers.

Law firm Schlichter Bogard LLP has led the class action complaints representing plaintiffs alleging in part that Athene annuities chosen by plan spnosors for transfers were not the safest on the market; companies the lawsuits were filed against include General Electric, AT&T Inc., Lockheed Martin and Alcoa Corp.

Athene has denied the allegations and called them “baseless.”

Correction: Story fixes to show that Athene is not a defendant in the PRT lawsuits.

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