This proxy statement and the accompanying Notice of Annual Meeting of Stockholders are being furnished to the holders of common stock, $0.001 par value per share (the “Common Stock”), of LPL Financial Holdings Inc., a Delaware corporation (the “Company” or “we”), in connection with the Company’s 2020 annual meeting of stockholders (the “Annual Meeting”).

As a stockholder of the Company as of 5:00 p.m. Eastern Time on March 9, 2020 (the “Record Date”), you are entitled and requested to vote on the items of business described in this proxy statement.

The Annual Meeting will be held on Wednesday, May 6, 2020, at the offices of the Company, 1055 LPL Way, Fort Mill, South Carolina 29715 at 10:00 a.m., local time.

Notice of Internet Availability of Proxy Statement and Annual Report

As permitted by the Securities and Exchange Commission (the “SEC”), we are making this proxy statement, the accompanying proxy card and our 2019 annual report on Form 10-K (the “Annual Report”) available to our stockholders electronically through the internet in lieu of mailing printed copies to each record holder of Common Stock as of the Record Date. You will not receive a printed copy of our proxy materials unless you request one, which we will deliver free of charge.

On or about March 23, 2020, a Notice Regarding the Availability of Proxy Materials (the “Notice”) was mailed to stockholders of record as of the Record Date. The Notice instructs you how to access and review through the internet all of the important information contained in these proxy materials or request a printed copy. The Notice also instructs you as to how you may vote your proxy.

The Notice, this proxy statement, the Annual Report and the proxy card are also available through the internet at www.proxyvote.com. You will need your 16-digit control number located on the Notice or your proxy card in order to access the materials. The website does not use “cookies” to track or identify visitors to the website.

Record Date, Shares Outstanding and Quorum

Stockholders of record as of the Record Date will be entitled to vote at the Annual Meeting. On the Record Date, there were 79,099,422 outstanding shares of Common Stock.

A list of stockholders of record as of the Record Date will be available at the Annual Meeting. In addition, you may contact our corporate secretary, at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston, Massachusetts 02109, to make arrangements to review a copy of the stockholder list at our offices, for any purpose germane to the Annual Meeting, between the hours of 9:00 a.m. and 5:00 p.m., local time, on any business day from April 26, 2020 up to the time of the Annual Meeting.

A quorum at the Annual Meeting will consist of the presence, in person or by proxy, of a majority of shares of Common Stock outstanding and entitled to vote at the Annual Meeting. Both abstentions and broker non-votes will be counted as present in determining the presence of a quorum. A “broker non-vote” is a proxy from a broker or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the broker or other nominee does not have discretionary voting power. Brokers have the discretion to vote their clients’ proxies only on routine matters. At our Annual Meeting, only the ratification of our auditors is a routine matter. Each share of Common Stock is entitled to one vote.

Attending the Annual Meeting

We invite all stockholders as of the Record Date to attend the Annual Meeting. If you are a record holder of our Common Stock, which means that your shares are represented by ledger entries in your own name directly registered with our transfer agent, Computershare, please bring valid picture identification with you to the Annual Meeting to allow us to verify your ownership. If your Common Stock is held in “street name,” which means that the shares are held for your benefit in the name of a broker, bank or other intermediary, please also bring a brokerage account statement or letter from your broker, bank or other intermediary reflecting stock ownership in order to be admitted to the Annual Meeting. Please note that if you hold your Common Stock in street name, you may not vote your shares in person unless you obtain a legal proxy from your broker, bank or other intermediary giving you the right to vote the shares at the Annual Meeting.

Contingency Due to Exigent Circumstances

As part of our precautions related to COVID-19, we are planning for the possibility that the Annual

Meeting may be held virtually over the internet. If we were to take this step, we would announce the decision to do so via a press release promptly after making such decision, file the announcement with the SEC as additional proxy material and post the announcement on our website. A virtual meeting will have no effect on stockholders’ ability to submit their proxy through the internet or by telephone, or by completing and signing their proxy card and returning it in the envelope provided, each as explained in this proxy statement. As always, we encourage you to vote your shares prior to the Annual Meeting.

Shares of Common Stock represented by properly executed proxy cards received by the Company in time for the meeting will be voted in accordance with the instructions specified in the proxies. If you submit a proxy but do not indicate any voting instructions, your shares will be voted “FOR” the election of each director nominee named in this proxy statement; “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm; and “FOR” the approval, in an advisory vote, of the compensation paid to the Company’s named executive officers.

Our management and Board of Directors know of no other matters to be brought before the Annual Meeting. If other matters are properly presented to the stockholders for action at the Annual Meeting or any adjournments or postponements thereof, it is the intention of the proxy holders named in the proxy card to vote in their discretion on all matters on which the shares of Common Stock represented by such proxy are entitled to vote.

Revocation of Proxies

If you submit a proxy, you are entitled to revoke your proxy at any time before it is exercised in one of the following ways:

A stockholder of record as of the Record Date who voted through the internet or by telephone may also change his or her vote with a timely and valid later internet or telephone vote, as the case may be. Any stockholder of record as of the Record Date attending the Annual Meeting may vote in person whether or not a proxy has previously been given, but the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy. If you hold your shares in street name and would like to change your voting instructions, please follow the instructions provided to you by your broker, bank or other intermediary.

Solicitation of Proxies

The Board of Directors of LPL Financial Holdings Inc. is soliciting proxies. Copies of proxy materials and the Annual Report will be supplied to brokers, dealers, banks and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners, and we will reimburse such record holders for their reasonable expenses. Stockholders who elect to vote through the internet or by telephone may incur costs such as telecommunication and internet access charges for which the stockholder is solely responsible. The telephone and internet voting facilities for stockholders of record will close at 11:59 p.m. Eastern Time on May 5, 2020. The Company will otherwise pay the expenses of solicitation of proxies.

Householding

Only one copy of the Notice is being delivered to multiple stockholders sharing an address, unless we

have received contrary instructions from one or more of the stockholders. We will undertake to deliver promptly, upon written or oral request, a separate copy of the Notice, or copies of the proxy statement and/or Annual Report to a stockholder at a shared address to which a single copy of the Notice was delivered. You may make a written or oral request by sending a written notification to our corporate secretary at LPL Financial Holdings Inc., 75 State Street, 22nd Floor, Boston, Massachusetts 02109, or by calling our offices at (617) 423-3644, extension 4574, and providing your name, your shared address and the address to which we should direct the copies of the proxy statement and Annual Report. Multiple stockholders sharing an address who have received one copy of the Notice and would prefer us to mail each stockholder a separate copy of future mailings should contact us at the address or telephone number above. Additionally, if current stockholders with a shared address received multiple copies of the Notice and would prefer us to mail one copy of future mailings to stockholders at the shared address, please notify us at the address or telephone number above.

Nine director nominees are standing for election at the Annual Meeting, each of whom has been nominated by our Board based on the recommendation of the Nominating and Governance Committee. Each director nominee would hold office until our annual meeting of stockholders in 2021 and until his or her respective successor has been elected.

As of March 23, 2020, our Board of Directors consisted of nine directors: eight independent directors and our chief executive officer, Dan H. Arnold. One of our current independent directors, James R. Riepe, requested that the Board not nominate him to stand for reelection upon expiration of his current term at the Annual Meeting.

Based on the recommendation of our Nominating and Governance Committee, our Board has selected Edward C. Bernard as a new director nominee to stand for election at the Annual Meeting.

As described below, each of our nominees has considerable professional and business expertise. Our Board of Directors recommends a vote “FOR” each nominee based on its carefully considered judgment that the experience, qualifications, attributes and skills of each nominee qualify him or her to serve on our Board of Directors.

Board Membership Criteria

The Nominating and Governance Committee reviews the appropriate skills and characteristics required of directors in the context of the current make-up of the Board. As reflected in the corporate governance guidelines applicable to the Company (the “Corporate Governance Guidelines”), it is the policy of the Board that all directors should:

Director Diversity

Our Corporate Governance Guidelines reflect our commitment to director diversity. Our goal is a balanced and diverse Board, with members who bring a diversity of skills, expertise, experiences, perspectives, tenures and personal characteristics, including with regard to age, race, gender and ethnicity. When conducting director searches, the Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which Board nominees are selected.

In recent years, our Nominating and Governance Committee has focused on the refreshment and continued diversity of the Board. Since 2017, we will have added four new independent directors: Edward C. Bernard, William F. Glavin, Jr., Allison H. Mnookin and Corey E. Thomas. Through the addition of these directors, the Board of Directors has gained seasoned leaders, as well as particularly relevant experience related to our industry, strategic planning, oversight and execution, business innovation, technology and digital transformation, and risk management. The addition of these directors also reflects our balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors as well as fresh perspectives from newer directors.

The charts below reflect the diversity of our Board based on our director nominees, including Mr. Arnold. The average age of our independent director nominees is 60, and the average tenure of our independent director nominees is six years. One-third of our director nominees are women, which places our Board among the top in our industry in gender diversity.

Recommendation of the Nominating and Governance Committee

In its efforts to ensure that our Board has the appropriate mix of skills, expertise, experiences, perspectives and personal characteristics, the Nominating and Governance Committee engaged SpencerStuart, a director search firm, in 2019 to provide ongoing assistance in Board succession planning and identifying, evaluating and recruiting potential additional director candidates. The Nominating and Governance Committee evaluated candidates according to the principles set forth in the Corporate Governance Guidelines and sought an individual who could contribute meaningfully to the Board, particularly in the context of the Company’s evolving business strategy and operating environment. Among other things, the Nominating and Governance Committee sought a candidate with operational leadership experience at scale, as well as industry knowledge and expertise in wealth management.

As part of the process of considering Mr. Bernard as a potential nominee to the Board, members of the Board met with Mr. Bernard both in person and

telephonically. After the course of this evaluation process, the Nominating and Governance Committee determined that Mr. Bernard’s background, skills and experience would make him a valuable addition to the Board and recommended that the Board nominate him to stand for election at the Annual Meeting.

In recommending that the Board nominate each of our current directors other than Mr. Riepe (who, as indicated above, requested not to be nominated) to stand for election at the Annual Meeting, the Nominating and Governance Committee evaluated those directors according to the principles set forth in the Corporate Governance Guidelines and considered the pertinent qualifications and experience of each nominee, as further set forth below.

If any of our nominees is unable or unwilling to serve on our Board of Directors, the shares represented by your proxy will be voted for the election of such other person as may be nominated by our Board of Directors. In addition, in full compliance with all applicable state and federal laws and regulations, we will file an amended proxy statement and proxy card that, as applicable:

We know of no reason why any nominee would be unable or unwilling to serve. All nominees have consented to be named in this proxy statement and to serve if elected.

During 2019, the Board of Directors held six meetings, of which one was held by conference call. Each of our directors attended at least 75% of the aggregate of:

Our Corporate Governance Guidelines provide that each director who is nominated for election is expected to attend the Annual Meeting. Each of the nine nominees for election at the 2019 annual meeting of stockholders attended such meeting.

Corporate Governance Guidelines, Committee Charters and Code of Conduct

We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stakeholders.

Our Board of Directors has adopted our Corporate Governance Guidelines to set clear parameters for the operation of our Board. Our Board of Directors has also adopted charters for the Audit Committee,

Nominating and Governance Committee, and Compensation Committee, as well as a code of conduct for our non-employee directors. We have also adopted a code of conduct that applies to, among others, our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions.

Copies of our Annual Report, committee charters, Corporate Governance Guidelines and codes of conduct are available, free of charge, by writing to us at the following address:

LPL Financial Holdings Inc.

75 State Street, 22nd Floor

Boston, MA 02109

Attn: Investor Relations

Our Annual Report, committee charters, Corporate Governance Guidelines and codes of conduct are also available on our website at www.lpl.com under the “Investor Relations” section. If we make substantive amendments to, or grant waivers from, the code of conduct for certain of our executive officers, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

Director Independence

The listing standards of the Nasdaq Global Select Market (“Nasdaq”) require that, subject to specified exceptions, each member of a listed company’s audit, nominating and governance, and compensation committees be independent. Nasdaq listing rules further provide that a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and compensation committee members are also subject to heightened independence criteria under Nasdaq rules.

After its evaluation of director independence, the Board of Directors has affirmatively determined that

Messrs. Glavin, Putnam, Riepe, Schifter and Thomas, and Mses. Eberhart, Mnookin and Mulcahy are independent directors under applicable Nasdaq rules, and Mr. Bernard will qualify as an independent director if elected.

Board Composition and Leadership Structure of the Board of Directors

Our business and affairs are managed under the direction of the Board of Directors. As of March 23, 2020, our Board of Directors was composed of nine directors. Under our Amended and Restated Certificate of Incorporation, the number of directors shall not be fewer than three or more than 15. The authorized number of directors may be changed only by resolution of the Board of Directors.

The Board does not have a fixed policy regarding the separation of the offices of chair of the Board and chief executive officer of the Company. Rather, the Board believes that it should maintain the flexibility to

select the chair of the Board and its Board leadership structure, from time to time, based on the criteria that it deems to be in the best interests of the Company and its stakeholders.

At this time, the Company believes that having a separate chief executive officer and chair allows Mr. Arnold to focus on his role as president and chief executive officer and increases the Board’s independence from management, leading to effective monitoring and oversight. As non-executive chair, Mr. Putnam serves as a key source of communication between the independent directors and our chief executive officer, establishes the agenda for each meeting of the Board and coordinates the agenda for and leads meetings of the independent directors.

Board Oversight

Strategic Planning

Oversight of the Company’s business strategy and strategic planning is a key responsibility of our Board.    At the beginning of the year, the chair of the Board and our chief executive officer prepare an annual Board work plan that is tied to our strategic framework. As a result, elements of our strategy and operating plans are embedded in the agenda for every quarterly meeting of the Board. All members of our management committee, as well as other senior leaders, regularly attend Board and committee meetings and discuss the Company’s strategy, plans and operating results with the Board and its committees. In addition, the Board dedicates a multi-day session each year to focus on the Company’s long-term strategy and related planning. This session, which is led by our Corporate Strategy team and includes senior management, enables a deep discussion between directors and management regarding the Company’s operating environment, desired strategic positioning, emerging risks and financial outcomes associated with execution of the strategic plan.

The Board also dedicates significant attention to reviewing our capital allocation strategy, which is focused on disciplined capital management to drive long-term stockholder value. Key elements of our current strategy are:

Workplace Conduct and Culture

We are committed to fostering a respectful, rewarding, diverse and inclusive workplace in which all of our employees and advisors are positioned for success. The Compensation Committee, as well as our Board, engages with our leadership team on a regular basis on human capital management topics, including executive succession planning, talent acquisition, development and retention, and diversity and inclusion initiatives. We believe that human capital management and talent development are important to the Company’s continued success.

We also believe that corporate culture is instrumental to executing our strategy. In an effort to ensure the Company’s culture was aligned to its strategy, the Company introduced a new mission statement in 2018 and initiated a cultural transformation that seeks to instill a client-centric mindset, logic-based thinking and mission-driven alignment throughout the Company. Accordingly, oversight of the Company’s culture was an area of focus for the Board and the Compensation Committee in 2019, as management activated the new culture by:

For additional information on the cultural transformation, please see “Compensation Discussion and Analysis.”

At the Compensation Committee’s request, management previously conducted an evaluation of the Company’s workplace conduct practices, including its training, policies and procedures for preventing and responding to workplace conduct matters. The Company’s chief legal officer and chief

human capital officer provide a report to the Board on an annual basis on historical workplace conduct claims, investigations and trends.

Cybersecurity

The Audit Committee and the Board are each involved in overseeing the Company’s management of cybersecurity risk. We believe that cybersecurity

protection is critical to maintaining our proprietary information and the trust of our advisors and their clients. In 2019, management provided regular updates to the Audit Committee and the Board on cybersecurity matters, including projects to strengthen controls and defenses, the threat landscape and the Company’s incident response plans. In 2020, the Board toured the Company’s security and network operations center and also received a presentation from an external consultant on sources of cybersecurity risk for financial services firms, best practices and the role of the Board in addressing cybersecurity risk.

Sustainability

Our mission is to take care of our financial advisors so they can take care of their clients. We enable our advisors to provide objective financial guidance to millions of American families as they work toward their life’s aspirations. Our advisors are a diverse community of entrepreneurial financial services professionals, and we are committed to supporting their vital work with excellence, integrity and ethical standards. Our work makes a positive difference, and we believe that the Company’s sustainability depends not only on the business we conduct but also on how we conduct it.

Our Board supports the Company’s efforts to serve its stakeholders’ interests, including stockholders, employees and advisors and their clients. The Nominating and Governance Committee provides oversight of our environmental, social and governance (“ESG”) program, which began in 2008 as a corporate social responsibility program focused on community involvement. The program subsequently expanded and evolved to encompass additional ESG matters that are aligned with the Company’s business strategy and culture.

ESG was an area of significant focus in 2019 for management and the Nominating and Governance Committee. The Company engaged Ernst & Young LLP to assist in the benchmarking of the Company’s ESG initiatives and the refinement of its strategy and reporting. In 2019, the Company issued its inaugural sustainability report and took steps to strengthen its sustainability efforts and further integrate them into its business practices. For example, we:

Our goal is a sustainability strategy that drives long-term value and related disclosures that are transparent and credible. The Board reviews our corporate social responsibility program at least annually.

To learn more, please see the “Social Responsibility” section of our website at www.lpl.com, through which our 2019 sustainability report is also available.

Annual Board Evaluation

Our Board recognizes that a robust and constructive evaluation process is an important aspect of good corporate governance and board effectiveness. The Nominating and Governance Committee conducts an annual evaluation of our Board, each of its standing committees and individual directors following the end of each year. The goal is to provide a meaningful assessment of whether the Board’s performance, operations, size and composition are effective for the Company, both in the short- and longer-term.

Following discussion by the Nominating and Governance Committee, the 2020 annual evaluation included the following elements:

The director and management questionnaires provided feedback on an unattributed basis and informed the individual director interviews, which provided further opportunity for candid discussion.

The primary topics of the 2020 annual evaluation were:

As part of the 2020 annual evaluation, directors had the opportunity to provide feedback on individual directors, in order to help improve performance or contributions to the Board.

Our Board discussed the results of the 2020 annual evaluation in a closed session co-led by the chair of the Board and the chair of the Nominating and Governance Committee.

Board Committees

The Board of Directors has established three standing committees: the Audit Committee, the Nominating and Governance Committee, and the Compensation Committee, each with the composition and responsibilities described below. The members of each committee were appointed by the Board of

Directors and will serve until their successors are elected and qualified, unless they are removed earlier or resign. In addition, from time to time, special committees may be established under the direction of the Board of Directors when necessary to address specific issues. Each of the standing committees of our Board is chaired by an independent director.

Our Nominating and Governance Committee will reassess the composition of the standing committees of the Board following the election of directors at the Annual Meeting. Following its assessment after the 2019 annual meeting of stockholders:

Audit Committee

Our Audit Committee is composed of the following members: H. Paulett Eberhart, William F. Glavin, Jr., James S. Riepe and Corey E. Thomas. Ms. Eberhart serves as the chair of the Audit Committee.

Each of the Audit Committee members is independent under the listing standards of Nasdaq, including under Rule 10A-3 of the Exchange Act. None of the Audit Committee members is an employee of ours or any of our subsidiaries, nor simultaneously serves on the audit committees of more than three public companies, including ours. All

of the Audit Committee members meet the requirements for financial literacy and are able to read and understand fundamental financial statements, including the Company’s balance sheet, income statement and cash flow statement. Our Board has affirmatively determined that Ms. Eberhart qualifies as an audit committee financial expert under the applicable rules and regulations of the SEC.

The Audit Committee reviews and discusses our annual and quarterly financial statements, our disclosures in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual and quarterly reports filed with the SEC, and our earnings announcements prior to their release. The Audit Committee also reviews matters related to the Company’s related party transaction policy, the operations of the Company’s Technology department and the Company’s whistle-blower and integrity program. For additional information on the Audit Committee’s role in our enterprise risk management framework, please see    “ — Risk Management and Compensation Policies and Practices.”

In addition, the Audit Committee is responsible for overseeing the fee negotiations associated with our retention of Deloitte & Touche LLP, our independent registered public accounting firm (“Deloitte”).

The Audit Committee has authority under its charter to obtain advice and assistance from outside legal counsel, accounting or other outside advisors as deemed appropriate to perform its duties and responsibilities.

The Audit Committee met nine times during 2019.

Nominating and Governance Committee

Our Nominating and Governance Committee is composed of the following members: William F. Glavin, Jr., Allison H. Mnookin, Anne M. Mulcahy and Richard P. Schifter. Mr. Schifter serves as the chair of the Nominating and Governance Committee.

Each member of the Nominating and Governance Committee is independent under the listing standards of Nasdaq.

The Nominating and Governance Committee has authority under its charter to engage such independent legal, accounting and other advisors as it deems necessary or appropriate to carry out its responsibilities. As discussed above, the Nominating and Governance Committee engaged SpencerStuart, a director search firm, in 2019 to provide ongoing assistance in Board succession planning and in identifying, evaluating, and recruiting potential additional director candidates.

The Nominating and Governance Committee met eight times during 2019.

Compensation and Human Resources Committee

The Compensation Committee is composed of the following members: H. Paulett Eberhart, Allison H. Mnookin, Anne M. Mulcahy and James S. Putnam. Ms. Mulcahy serves as the chair of the Compensation Committee.

Each member of the Compensation Committee is independent under the listing standards of Nasdaq, including the heightened standards that apply to compensation committee members. The Compensation Committee is composed entirely of “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act.

In addition, the Compensation Committee reviews our executive and non-executive officer talent to ensure that we attract and develop employees with the skill sets needed to execute our business strategy. The Compensation Committee focuses on ongoing development and coaching for future leadership positions, including:

The Compensation Committee has authority under its charter to access such internal and external resources, including retaining legal, financial or other advisors, as the Compensation Committee deems necessary or appropriate to fulfill its responsibilities. In 2019, the Compensation Committee engaged an independent compensation consultant, Meridian Compensation Partners, LLC (the “Compensation Consultant”), to advise on compensation matters and provide experiential guidance on what is considered fair and competitive practice in our industry, primarily with respect to the compensation of our executive officers, and also with regard to director compensation.

The Compensation Committee has the authority to delegate to subcommittees of the Compensation Committee any responsibilities of the full committee. The Compensation Committee may also delegate to a committee of one or more directors, or one or more of our executive officers, subject to certain restrictions, the power to grant stock options, restricted stock units, performance stock units or other equity awards, and amend the terms of such awards, pursuant to our equity plans. References to the Compensation Committee in this proxy statement also refer to its subcommittees and its delegates, where applicable.

The Compensation Committee met five times during 2019.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is or was during 2019 an officer or employee of ours or any of our subsidiaries. Mr. Putnam, who joined the Compensation Committee in May 2019, served as an officer of LPL Financial prior to 2006. None of our executive officers serves or has served as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.

Risk Management and Compensation Policies and Practices

We employ an enterprise risk management (“ERM”) framework that is intended to address key risks and responsibilities, enable us to execute our business strategy, and protect our firm and its franchise. Our framework is designed to promote clear lines of risk management accountability and a structured escalation process for key risk information and events. In addition to the ERM framework, we have written policies and procedures that govern the conduct of business by our employees and independent financial advisors, and the terms and conditions of our relationships with financial product sponsors.

Our risk management governance approach is discussed in our Annual Report under “Item 7A. Quantitative and Qualitative Disclosures About Market Risk — Risk Management.” This approach includes the Board of Directors, the Audit Committee and the Compensation Committee, as well as the Company’s Risk Oversight Committee (the “ROC”) and its subcommittees, the Company’s Internal Audit department, the Company’s Compliance, Legal and Risk department, and business line management.

Role of the Audit Committee

In addition to its other responsibilities, the Audit Committee reviews our policies with respect to risk assessment and risk management, as well as our major regulatory, litigation and financial risk exposures and the steps management has undertaken to monitor and control them. The Audit Committee generally provides reports to the Board at each of the Board’s regularly scheduled quarterly meetings.

The Audit Committee has mandated that the ROC oversee our risk management activities, including those of our subsidiaries. The Company’s chief legal officer provides updates on pertinent ROC discussions to the Audit Committee on a regular basis and, if necessary or requested, to the Board. In addition, our Internal Audit department provides independent and objective assurance of the effectiveness of the Company’s governance, risk management and internal controls by conducting risk assessments and audits designed to identify and cover important risk categories. Our Internal Audit

department reports directly to the Audit Committee, which provides oversight of the department’s activities and approves its annual plan. Our Internal Audit department provides regular reports to the ROC and reports to the Audit Committee at least as often as quarterly.

Role of the Compensation Committee

In addition to its other responsibilities, the Compensation Committee assesses whether our compensation arrangements encourage inappropriate risk-taking, and whether risks arising from our compensation arrangements are reasonably likely to have a material adverse effect on the Company.

The Compensation Committee has reviewed and evaluated the development and implementation of our compensation practices across our Company. It is our belief that our compensation practices do not encourage inappropriate actions by our executive officers or other employees and are not reasonably likely to have a material adverse effect on the Company. Specifically, we believe that our compensation practices avoid:

We believe that the following serve to mitigate the potential for adverse risk that may be caused by the action of our executive officers or other key employees:

Director Compensation Policy

Our director compensation policy provides that each of our non-employee directors receives an annual service retainer of $235,000. Of this amount, $80,000 is paid in a lump sum in cash (or, at the director’s election, in the form of shares of our Common Stock as described below) and $155,000 is paid in the form of restricted shares of our Common Stock granted under our Amended and Restated 2010 Omnibus Equity Incentive Plan (the “2010 Plan”).

The following table sets forth the additional annual service retainers under our director compensation policy that a committee member received for his or her additional duties during 2019:

Our director compensation policy also provides that the chair of the Board receives an additional annual service retainer of $140,000 in connection with his additional duties. The retainers for committee and chair service are paid in cash in installments following the end of each quarter of service. Our directors are also reimbursed for expenses incurred in connection with their attendance at Board and committee meetings. Mr. Arnold does not receive additional compensation for his service as a director.

The Compensation Committee reviews the director compensation practices of our compensation peer group annually, as described under “Benchmarking” in the Compensation Discussion and Analysis, with the assistance of the Compensation Consultant. The 2019 benchmarking analysis indicated that the annual service retainer for our non-executive chair was below the median of our peer group. After reviewing this analysis, the Compensation Committee recommended, and the Board approved, an increase in such retainer from $120,000 to $140,000, effective as of October 1, 2019.

As noted above, in 2019, each of our non-employee directors was granted an annual award of restricted stock having a grant date value of $155,000 (based on the average of the closing price of our Common Stock for the trailing thirty consecutive trading days including the grant date). These awards vest in full on May 5, 2020, which is the day prior to the Annual Meeting, generally subject to the director’s continued service through that date. We believe these equity grants serve

to further align our directors’ interests with the interests of our stockholders.

Our director compensation policy permits non-employee directors to make an election to be issued, in lieu of the cash portion of their annual service retainer, fully vested shares of our Common Stock. In 2019, the number of fully vested shares was determined by dividing $80,000 by the average of the closing price of our Common Stock for the trailing thirty consecutive trading days, ending on and including the date such shares were granted.

Deferred Compensation Plan

Under the LPL Financial Holdings Inc. Non-Employee Director Deferred Compensation Plan (the “Deferred Plan”), non-employee directors may make an annual election to defer receipt of the equity portion, or both the equity and cash portion, of their annual service retainer for Board service. For directors who make such a deferral election, a book-entry account is established and credited with a number of deferred stock units granted under our 2010 Plan equal in value to the shares and, if so elected by the director, the cash, that would otherwise be granted or paid absent such deferral election, with each deferred stock unit representing the right to receive a share of our Common Stock. Dividend equivalent rights are credited to a director’s book-entry account, in the form of additional stock units, on both vested and unvested deferred stock units. All such shares will be paid only upon a director’s separation from service or a change in control, as defined in the Deferred Plan.

Equity Ownership Guidelines

Our Corporate Governance Guidelines include equity ownership guidelines for non-employee directors. Within five years of the date of his or her election to the Board, each non-employee director must maintain ownership of shares of Common Stock equal to five times the cash portion of the annual service retainer for Board service then in effect, not including any retainers for committee or chair service. All shares owned outright and beneficially owned by a non-employee director, including all shares of unvested restricted stock and all shares issuable pursuant to vested and unvested deferred stock units, are counted in determining compliance with such minimum ownership requirement. Neither vested nor unvested stock options are counted, however. As of March 9, 2020, each of our non-employee directors except for Ms. Mnookin and Mr. Thomas, who were elected to the Board in June 2018 and May 2019, respectively, satisfied this minimum ownership requirement.

            Non-Employee Director Compensation Mix

Gross profit increased to $2.2 billion in 2019, up 12% from the prior year.

Gross Profit

($ in millions)

The increase in the Company’s gross profit combined with disciplined expense management generated operating leverage, as Adjusted EBITDA increased 20% year-over-year to $1,069 million. This result exceeded our 2019 performance target of $993 million by 8%.

Adjusted EBITDA

($ in millions)

Total Brokerage and Advisory Assets

($ in billions)

Advisory Assets

($ in billions)

Capital Returned to Shareholders

($ in millions, except amount per share)

Components of Compensation

The core components of our executive compensation program are:

The Compensation Committee retains flexibility to determine the appropriate level and mix of the various compensation components consistent with our business needs. The mix of compensation components is intended to provide our NEOs with a competitive total compensation package that both rewards short-term results and drives long-term corporate performance.

The annual cash bonus awards incentivize our NEOs to achieve pre-determined annual Company and individual performance goals. The long-term equity incentive awards incentivize our NEOs to increase stockholder value over a sustained period of time and to achieve pre-determined long-term Company performance goals, which align the interests of our NEOs with the interests of our stockholders.

The charts below show that variable compensation comprised 87% of Mr. Arnold’s 2019 total target compensation mix and 76% of our other NEOs’ 2019 average total target compensation mix. Total target compensation consists of base salary, target annual cash bonus and the grant date fair value of LTI awards, with performance stock units (“PSUs”) valued at target.

We pay our NEOs base salaries in order to provide a level of competitive and stable income. The base salaries of our NEOs are set based on the responsibilities of the individual, taking into account the individual’s skills, experience and prior compensation levels, as well as market compensation levels of our peer group and other survey data, as described below. The Compensation Committee reviews base salaries for our NEOs on an annual basis, although salary changes may occur on a less frequent basis.

Generally, the Compensation Committee will increase an NEO’s base salary when individual performance, job scope or market compensation data indicate that an increase is warranted. As the responsibilities of our NEOs increase in the future, the Compensation Committee generally plans to adjust compensation through increases in the size of long-term equity awards and, to a lesser extent, annual cash bonus opportunity, rather than through adjustments to base salary.

With regard to our NEOs’ base salaries for 2019:

In determining the salary increase for Mr. Arnold, the Compensation Committee considered, among other things, the competitiveness and mix of his total compensation opportunity based on benchmarking data prepared by the Compensation Consultant. This benchmarking data included compensation data for comparable roles at relevant peer companies and other survey data, as described further in the “Benchmarking” section (“Benchmarking Data”). The Compensation Committee considered the same information in determining that the salaries remained appropriate for Messrs. Audette, Seese and Steinmeier.

In setting Mr. Semerjian’s base salary, the Compensation Committee considered his expertise, the nature and scope of his responsibilities at the Company and his experience prior to joining the Company, as well as Benchmarking Data and internal equity considerations.

The 2019 salaries for all of our NEOs appear in the Summary Compensation table that follows this CD&A.

Annual Cash Bonus Awards

We provide annual cash bonus awards in order to tie a significant portion of the overall cash compensation of each of our NEOs to the achievement of annually-established, key short-term corporate objectives and financial goals of the Company. See “2019 Goals and Performance Evaluation” below for a description of these objectives and goals and our 2019 performance against them. The Compensation Committee believes that our NEOs, as key members of the Company’s leadership team, share responsibility for supporting the goals and performance of the Company.

At the beginning of 2019, the Compensation Committee established:

Target Award Amounts

The Compensation Committee sets each NEO’s individual target award amount by taking into account Benchmark Data, the nature of the NEO’s role and the NEO’s potential contribution to the execution of the Company’s overall performance goals, rather than focusing only on their individual business unit or function.

Bonus Funding Framework

In establishing the 2019 bonus pool funding framework, the Compensation Committee maintained the same approach to assessing corporate performance that it implemented in 2018. This approach combined a quantitative assessment with a level of discretion for the Compensation Committee, given the variety of factors that affect the Company’s Adjusted EBITDA results, including prevailing interest rates and equity market performance.

To determine the bonus pool funding for 2019, the Compensation Committee reviewed the following criteria, with the indicated weightings:

Criteria Weightings

Target performance as it related to the financial and corporate goals would yield a 2019 bonus funding pool of $53.7 million (“Target Funding”). Bonuses to our NEOs, other executives and employees were paid from this pool.

Financial Performance Goals. For the Company’s 2019 financial performance goals, the Compensation Committee established a range of bonus funding based on the Company’s actual Adjusted EBITDA results relative to a performance target of $993 million. The range of bonus funding was scaled such that performance above target would yield a proportionately greater payout and performance below target would yield a proportionately lesser payout. This approach was intended to ensure that the financial results were a motivating element in the funding framework:

The Company generated Adjusted EBITDA of $1,069 million in 2019, which was 8% greater than the performance target. This level of achievement resulted in a funding level above target for this component of the funding framework.

Corporate Goals. The Compensation Committee established the following weights for each of the Company’s 2019 corporate goals:

The Compensation Committee assigned equal weighting to each of the goals because it determined that each was a priority element of the Company’s longer-term strategy.

The Committee also established a range of bonus funding per goal using the performance rating scale below.

As further described under “2019 Goals and Performance Evaluation.” the Compensation Committee rated:

The collective achievement of these corporate goals resulted in a funding level above target for this component of the funding framework.

Committee Discretion. After determining the applicable funding level, the Compensation Committee had discretion to adjust bonus pool funding up or down based on its subjective assessments of key drivers of performance (including business and market factors affecting the Company’s financial results) and the degree of difficulty of the individual 2019 corporate goals.

For 2019, the collective level of achievement of the Company’s financial and corporate goals yielded total bonus pool funding of $61.7 million, which exceeded Target Funding. The Compensation Committee declined to exercise its discretion to increase or decrease the level of 2019 bonus pool funding. The 2019 bonus pool was 5.8% of 2019 Adjusted EBITDA, compared to 6.2% as a percentage of 2018 Adjusted EBITDA for the 2018 bonus pool.

Individual Cash Bonus Award Determinations

The Compensation Committee evaluates each NEO’s contribution to the Company’s overall performance, as well as the NEO’s performance against additional, previously established individual goals. In determining whether and to what extent bonuses are paid, the

Compensation Committee takes into account discussions with management and the Compensation Consultant. For additional information, including the assessing process for our chief executive officer, please see “How Compensation Decisions Were Made” on page 43 of this proxy statement.

The Compensation Committee generally has the discretion to pay bonuses above or below the established targets based upon its assessment of each NEO’s contributions, performance and potential, and other considerations such as internal pay equity.

Our chief executive officer and chief financial officer met with the Compensation Committee in December 2019 and January 2020 to discuss the Company’s actual performance compared to its financial and corporate goals for 2019. In February 2020, the Compensation Committee reviewed the individual performance in 2019 of each of our NEOs, including their respective contributions to the Company’s overall performance against its financial and corporate goals. The Compensation Consultant participated in each of the meetings.

Based primarily on these assessments, the Compensation Committee exercised its discretion to award annual cash bonuses to our NEOs above each executive’s target award amount for 2019. In making its individual determinations, the Compensation Committee considered the collective level of achievement of the Company’s financial and corporate goals and each NEO’s individual performance, including: