(Bloomberg) — Dan Arnold seemed so perfectly ordinary at the helm of LPL Financial Holdings Inc. that one industry publication complimented him for his “vanilla vision.”
So the abrupt firing this week of the 59-year-old Arnold, who took over as chief executive officer in 2017 and once told the firm’s financial advisers that his mission was about “taking care of you, so you can take care of your clients,” is proving a shock.
The company has said little beyond a statement that charged him with violating LPL’s “commitment to a respectful workplace.” It declined to elaborate beyond that. Arnold didn’t respond to requests for comment.
With an entrepreneurial background and decades of experience, Arnold championed the idea of putting customers first, with long-term growth to follow. He started out as a managing director when his previous employer was taken over by LPL and moved up the ranks, gaining a reputation as an even-keeled leader who oversaw a near tripling of assets and a soaring share price.
“Our impression is that he was generally well liked internally and led the business through a period of success,” Citizens JMP Securities LLC analysts led by Devin Ryan said in a note to clients Wednesday morning, calling it “an unfortunate situation for the company” that will leave investors asking questions.
The termination of Arnold — along with the loss of severance benefits and automatic forfeiture of outstanding equity awards, both vested and unvested — followed a probe by an outside law firm and the recommendation of a special board committee, which found he made statements to employees that violated LPL rules. The firm didn’t disclose what he said.
“LPL’s code of conduct requires every employee, no matter their title, to foster a supportive and professional workplace and show respect to each other, our stakeholders and the broader community,” Chair James Putnam said in a statement. “Mr. Arnold failed to meet these obligations.”
Arnold earned a bachelor’s degree in electrical engineering at Auburn University before going to Georgia State University for his master of business administration. He became a co-owner of a bar in Atlanta while he was attending grad school, working there as a bartender with friends.
“Because we thought that was a cool idea — I’m not so sure it was,” he said in a 2021 interview. “It was fun.”
Company Acquired
He joined LPL in 2007 after the firm acquired UVEST Financial Services, where Arnold had served as president and chief operating officer. He became chief financial officer at LPL in 2012 and was named the firm’s president three years later, given the task of driving its long-term growth strategy as well as overseeing the company’s offerings for its clients.
Court records show no history of criminal or civil proceedings against Arnold in San Diego County, where he lives, and the Financial Industry Regulatory Authority’s BrokerCheck platform shows no complaints against him.
Arnold raked in almost $17 million in compensation awards last year, including a higher-than-targeted bonus. His total compensation awards jumped 23% last year, with the lion’s share in stock incentives, according to company filings.
At the end of February, Arnold had restricted and performance stock awards worth roughly $28 million at their target level, with the opportunity to earn more than $50 million worth of shares, according to the terms of the awards disclosed in the firm’s annual proxy statement.
According to public records, Arnold bought a mansion in the San Diego neighborhood of La Jolla for $11.4 million in 2021. The seven-bedroom, 10-bathroom with Spanish tile roof has panoramic views of the Pacific Ocean, a pool and a sauna. The hillside home’s three stories are reachable by elevator.
Federal Election Commission receipts show that Arnold gave $5,000 last year to LPL’s political action committee, which has contributed to dozens of lawmakers on both sides of the aisle. A June 21 donation of $5,000 went to the campaign of Republican House Speaker Mike Johnson, while a June 20 donation of $2,500 went for the re-election of Congresswoman Terri Sewell, an Alabama Democrat.
Firm’s Growth
While serving as CEO, Arnold steered significant growth at LPL. The company’s total brokerage and advisory assets nearly tripled from $509 billion in the quarter before he took over as CEO to $1.5 trillion in the second quarter of this year. He’s overseen a sixfold jump in LPL’s stock price since taking over at the start of 2017.
He also oversaw an increase in adviser count of more than 60% over the same period, and has often spoken about the importance of furthering the firm’s mission and maintaining a strong company culture. LPL offers financial advisers different ways to affiliate with the firm, and serves more than 23,000 according to the statement announcing Arnold’s termination.
“I became a real believer that culture eats strategy for breakfast,” Arnold once told CEO Magazine. “In order to drive success over the long term, our strategy and ability to execute have to sit atop a strong cultural foundation and be complemented by the best talent.”
‘Quiet’ Demeanor
He’s also spoken about the importance of establishing a “mission-driven culture” with an emphasis on putting clients and their needs first. His “quiet” demeanor has been seen as contrasting with the “boisterous” approach of his predecessor, Mark Casady.
But in LPL’s most recent earnings call, in July, Arnold made comments that veered away from his staid reputation, calling out some of the firm’s collaborators. The company found that a few firms were “strategically misaligned” with LPL’s mission because “they were limiting advisors’ ability to choose how and where they do business,” Arnold said on the call.
“That posture is in stark contrast to our core principles of advisor independence,” Arnold said. “And as a result, we have resolved to separate from these relationships.”
A few days later, Merit Financial Group LLC, a private equity-backed investment-advisory firm overseeing about $12 billion in client assets, ended its relationship with LPL, according to Citywire. A representative for Merit didn’t immediately respond to a request for comment.
Now Arnold is out of a job, and the company is left to search for its next CEO. For the time being, leadership responsibilities will fall to Rich Steinmeier, who previously served as the company’s chief growth officer and was tapped on Tuesday to become interim CEO.
“The board has every confidence in Rich and LPL’s seasoned management team to ensure a smooth and stable transition,” Putnam said in the statement.