COMPENSATION DISCUSSION AND ANALYSIS

Overview and Philosophy

        The executive compensation program for our named executive officers generally is designed to closely align the interests of our executive management committee with those of our stockholders on both a short-term and long-term basis, and to attract and retain key executives critical to our success. That alignment has been achieved principally by ensuring that a significant portion of compensation is directly related to the financial strength and sustainability of our firm. We believe that this philosophy of seeking to align the interests of our senior managers and other personnel with those of stockholders has been a key contributor to the growth and successful performance of our firm.

        In addressing compensation, the Compensation Committee attempts to balance the short-term and long-term components to properly reward performance, encourage retention and align executive pay with that of executives at comparable companies in our industry. The elements of our executive compensation program are base salary, annual bonus, and a long-term equity incentive program.

        Total executive compensation, including equity-based compensation, is highly differentiated based on individual performance, experience, responsibility and our financial results. A significant portion of each executive's compensation is variable and directly dependent upon individual performance against pre-determined goals.

        In setting executive compensation levels, consideration is given to the totality of the compensation rather than individual elements. Our Compensation Committee reviews and approves the total compensation payable to each member of the executive management committee.

Role of Compensation Committee

        Our Compensation Committee is composed entirely of independent directors and is responsible to the Board of Directors and our stockholders for establishing and overseeing our compensation philosophy and for overseeing our executive compensation policies and programs generally. The Compensation Committee's charter sets forth the Compensation Committee's responsibilities. The Compensation Committee recommends any revisions to the charter to the Board of Directors for approval.

Role of Executive Officers

        Our chief executive officer annually reviews the individual performance of each of his direct reports and provides the Compensation Committee with evaluations of each such direct report as well as recommendations regarding such person's base salary level, annual cash incentive payment, and long term equity award. Our chief executive officer and our managing director, human capital, attend Compensation Committee meetings (although they leave the meetings during discussions of compensation actions affecting them personally) and assist the Compensation Committee in determining the final compensation levels for members of our executive management committee.

Role of Compensation Consultants

        During 2009, Hewitt Associates Inc. was engaged by the Company to provide executive compensation consulting services to the Compensation Committee. These services included providing insight on market compensation practices and program designs with respect to base salary and short- and long-term incentives for companies comparable to us. In addition, high level data with respect to executive compensation issues faced by public companies was provided for informational purposes only. From time to time, other consultants may provide similar information to the Compensation Committee on a limited basis.

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        Hewitt Associates Inc. was also engaged by our management during 2009 to provide services related to the compensation programs for our broader employee population.

Base Salary

        We believe that the base salary element is required in order to provide our executive officers with a stable income stream that is commensurate with their responsibilities and the competitive market conditions. The base salaries of the named executive officers are set based on the responsibilities of the individual, taking into account the individual's skills, experience, prior compensation levels, and competitive market compensation for comparable positions. We review base salary for the named executive officers annually.

Bonus

        We establish annual cash bonus opportunities for our named executive officers based on proposed goals, prior compensation levels, and competitive market compensation for comparable positions. We believe that these cash bonuses provide a significant incentive to our executives to work towards achieving our company objectives as they are tied to certain of our key performance measures. These cash bonuses are discretionary as to the amount, timing, and conditions, subject to the provisions of the LPL Investment Holdings Inc. and Affiliates Corporate Executive Bonus Plan (the "Bonus Plan"). We determine whether the target bonuses are paid based on the individual's performance and corporate profitability. We have the discretion, subject to the terms of the Bonus Plan and applicable employment agreements, to pay bonuses below the established amounts. See pages 29-30 for a detailed description of the Bonus Plan.

401(k) Plan

        We maintain a retirement savings plan, or a 401(k) Plan, for the benefit of all eligible employees. Currently, employees may elect to defer their compensation up to the statutorily prescribed limit. After one year of service, we match contributions in an amount equal to the lesser of 20% of the amount designated by the employee for withholding and 2% of the employee's eligible compensation. An employee's interests in his or her deferrals are 100% vested when contributed. The 401(k) Plan is intended to qualify under Sections 401(a) and 501(a) of the Internal Revenue Code. As such, contributions to the 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) Plan, and all contributions are deductible by us when made. We provide this benefit to all of our eligible employees, and it is provided to our executive officers on the same basis as all other eligible employees.

        Effective January 1, 2009, we suspended contributing the employer match on a "per-pay-period" basis. However, in January 2010, the Compensation Committee approved a special employer match (calculated as described above) to be applied to all eligible contributions during calendar year 2009. In addition, in March 2010, the "per-pay-period" employer match (as described above) was reinstated retroactive to January 1, 2010.

Long-Term Equity Incentive Program

        The purpose of our Long-Term Equity Incentive Program is to retain key executives and incent achievement of goals that drive long-term stockholder value. We provide stock-based, long-term compensation for executive officers through our stockholder-approved equity plans. Stock options entitle the holder to purchase during a specified time period, a fixed number of shares of our common stock at a set price. The plans provide for stock options which vest over a period determined by the Compensation Committee.

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        The Compensation Committee determines the number of stock options to be granted based on a holistic assessment of current and prospective contribution of value by each individual. Stock options are awarded from time to time to eligible recipients. The Compensation Committee also allocates stock options under our equity plans for use in attracting new executives.

Employment Agreements

        We have entered into definitive employment agreements with certain members of senior management including Mr. Casady, Ms. Stearns, Mr. Dwyer, and Ms. Brown. These employment agreements were executed in connection with the acquisition of our Company by H&F and TPG in December 2005. These agreements had an initial term of three years and automatically renew for subsequent one-year terms unless we provide written notice within 90 days prior to the completion of the then-current term.

        We have not entered into a written employment agreement with Mr. Moore.

        The employment agreements required us to adopt option plans under which our employees are eligible to receive awards of stock options for our common stock. See "—Long-Term Equity Incentive Program."

        In addition to the terms of his employment agreement set forth below, Mr. Casady agreed to serve on the Board and, at least until an initial public offering, shall be the chairman of the Board.

Employment Arrangements with Named Executive Officers

Base Salaries

        The employment arrangements provide that Mr. Casady, Ms. Stearns, Mr. Moore, Mr. Dwyer, and Ms. Brown receive an annual base salary for the 2010 fiscal year of no less than $800,000, $625,000, $600,000, $500,000, and $375,000, respectively. The agreements provide that each such executive officer is entitled to participate in the bonus plan that we may establish from time to time and in our stock incentive plans.

Intellectual Property, Confidentiality, and Non-Compete Clauses

        The employment agreements with each of Mr. Casady, Ms. Stearns, Mr. Dwyer, and Ms. Brown require each of them to promptly disclose and assign any individual rights that he or she may have in any intellectual property (including inventions, concepts, business opportunities, etc.) to us. The executive officers must also maintain confidentiality of all information that is confidential and proprietary to us, subject to customary exceptions. Under a non-compete provision, they are prohibited from engaging in certain conduct for a period of two years following termination of the employment agreement for any reason, except in the event of a termination as a result of which the executive officer is entitled to a certain level of severance payment (e.g., severance multiplier of 1.5), in which case the executive officer would be prohibited from engaging in such certain conduct for a period of 18 months. During this time, these executive officers (i) may not engage or participate in, directly or indirectly, any business or entity which is competitive with us, (ii) will refrain from soliciting existing and prospective financial advisors and institutions, targets, suppliers, or employees to terminate their relationship with us and (iii) will refrain from diverting, or attempting to divert, from us or any of our subsidiaries any of our financial advisors and institutions, targets, suppliers, or employees.

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Severance and Change-in-Control Payments

        Under the terms of our employment agreements with Mr. Casady, Ms. Stearns, Mr. Dwyer, and Ms. Brown, we may be obligated to make severance payments following the termination of their employment. These benefits are described below under "—Potential Payments upon Termination or Change-in-Control."

        In the event that any payments to which Mr. Casady, Ms. Stearns, Mr. Dwyer, and Ms. Brown become entitled would be deemed to constitute "parachute payments" within the meaning of Section 280G of the Internal Revenue Code, then such payments that would have been payable during the six months following of termination of employment with us and would otherwise be considered "parachute payments" if paid during that period shall be paid in a lump sum on the business day after the date that is the earlier of (1) six months following the date of termination and (2) such time as otherwise permitted by law that would not result in additional taxation and penalties as a "parachute payment." We, however, have no obligation to grant the executive officer any "gross-up" or other "make-whole" compensation for any tax imposed on payments made to the executive officers, including "parachute payments."

Pension Benefits

        We do not have any qualified or non-qualified defined benefit plans.

Non-qualified Deferred Compensation

        On November 19, 2008, we established an unfunded, unsecured deferred compensation plan to permit employees and former employees that held non-qualified stock options issued under the 2005 Stock Option Plan for Incentive Stock Options and 2005 Stock Option Plan for Non-qualified Stock Options that were expiring in 2009 and 2010 to receive stock units of the 2008 Nonqualified Deferred Compensation Plan. Stock units represent the right to receive one share of common stock. Distribution will occur at the earliest of (a) a date in 2012 to be determined by our Board; (b) a change in control of the Company; or (c) death or disability of the participant. The issuance of stock units, which occurred in December 2008, is not taxable for federal and state income tax purposes until the participant receives a distribution under the deferred compensation plan.

        Certain employees of our subsidiaries participated in non-qualified deferred compensation plans (the "Plans") that permitted participants to defer portions of their compensation and earn interest on the deferred amounts. The Plans have been closed to new participants and no contributions have been made since the date we acquired the subsidiaries. Plan assets are held by the Company in a Rabbi Trust.

COMPENSATION OF EXECUTIVE OFFICERS

        The tables in the following sections of this proxy statement provide information required by the SEC regarding compensation paid to or earned by our named executive officers. We have used captions and headings in these tables in accordance with the SEC regulations requiring these disclosures. The footnotes to these tables provide important information to explain the values presented in the tables and are an important part of our disclosures.

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Summary Compensation Table

        The following table sets forth information concerning the total compensation for the years ended December 31, 2007, 2008, and 2009 for the persons who serve as the chief executive officer, chief financial officer, and the other three most highly compensated executive officers of our company.

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2009 Grants of Plan-Based Awards

        We have provided the following Grants of Plan-Based Awards table to provide additional information about stock awards granted to our named executive officers during the year ended December 31, 2009.

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Outstanding Equity Awards at December 31, 2009

        The following table shows information relating to unexercised options and restricted stock that has not vested and equity incentive plan awards for each named executive officer as of December 31, 2009.

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2009 Options Exercised and Stock Vested

        The following table sets forth the options exercised and stock vested during the year ended December 31, 2009 relating to the named executive officers.

Non-Qualified Deferred Compensation for the
Year Ended December 31, 2009

        The following table shares information relating to non-qualified deferred compensation stock units for each named executive officer as of December 31, 2009:

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Potential Payments upon Termination or Change in Control

        The following table presents, for each named executive officer, the potential post-employment payments upon a termination or change in control and assumes that the triggering event took place on December 31, 2009. Set forth below the table is a description of certain post-employment arrangements with our named executive officers, including the severance benefits and change-in-control benefits to which they would be entitled under their employment agreements.

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Termination without Cause or for Good Reason

        In accordance with the employment agreements with our named executive officers (except Mr. Moore), all compensation and benefits shall terminate on the date of employment termination, except that if the executive officer is terminated without cause or terminates his or her employment for "good reason" (definition of which includes the occurrence of a "change-in-control" event), then we must pay the executive officer, subject to such executive officer's compliance with post-termination obligations relating to confidentiality, intellectual property and non-competition (see "—Employment Agreements—Employment Arrangements with Named Executive Officers—Intellectual Property, Confidentiality and Non-Compete Clauses"), an amount equal to (1) the severance multiplier times the executive officer's base salary and target bonus for the year of termination and (2) any and all accrued and but unpaid compensation (including a prorated portion of the executive officer's target bonus for the year of termination). The severance multiplier may be 1 or 1.5, depending on circumstances set forth in the employment agreements. For two years following termination without cause or for good reason, the executive officer will be eligible to continue participation under our group life, health, dental and vision plans in which the executive officer was participating immediately prior to the date of termination.

        "Cause" under the employment agreements means:

•

the intentional failure to perform his or her duties or gross negligence or willful misconduct in the regular duties or other breach of fiduciary duty or material breach of the employment agreement that remains uncured after 30 days' notice;



•

conviction for a felony; or



•

fraud, embezzlement or other dishonesty that has a material adverse effect on us.

        "Change-in-control" under the employment agreements, subject to certain exceptions, means the consummation of:

•

any consolidation or merger of the Company with or into any other person, or any other similar transaction, whether or not we are a party thereto, in which our stockholders immediately prior to such transaction own directly or indirectly capital stock either (1) representing less than 50% of the equity interests or voting power of the Company or the surviving entity or (2) that does not have directly or indirectly have the power to elect a majority of the entire Board or other similar governing body;



•

any transaction or series of transactions, whether or not we are a party thereto, after giving effect to which in excess of 50% is owned directly or indirectly by any person other than us and our affiliates; or



•

a sale or disposition of all of our assets.

Termination Other than For Good Reason

        Upon voluntary resignation other than for good reason each executive officer party to an employment agreement is entitled to accrued compensation, but not including a prorated portion of current year target bonus. The executive officer is, in that case, subject to a non-competition period of one year only. Subject to such executive officer's continuous compliance with post-termination obligations relating to confidentiality, intellectual property and non-competition (see "—Employment Agreements—Employment Arrangements with Named Executive Officers—Intellectual Property, Confidentiality and Non-Compete Clauses"), at the election of the Board, the executive may be entitled to receive the same benefits as if the executive were terminated without cause or for good reason, except that the severance multiplier would be one, and the executive would be subject to a non-competition period of two years.

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Death, Disability and Retirement

        For each executive officer party to an employment agreement, upon termination due to death, the executive officer's estate will be entitled to the executive officer's accrued compensation, including a prorated portion of current year target bonus, as well as a lump sum payment equal to the costs of COBRA coverage for the executive officer's surviving spouse and family for a one-year period. Upon termination for disability, which must have continued for six months during which the executive officer received full salary and benefits, the executive officer will receive accrued compensation, a prorated portion of current year target bonus, reimbursement for outstanding business expenses, and a lump sum payment equal to the costs of COBRA coverage for the executive officer and his or her family for a one-year period. Upon employment termination resulting from retirement at minimum age of 65, the executive officer will be entitled to accrued compensation, but not including a prorated portion of current year target bonus, as well as a lump sum payment equal to the costs of COBRA coverage for the executive officer and his or her family for a one-year period.

Stock Options

        In accordance with the named executive officers' option agreements, unless otherwise agreed to by the Company, unvested stock options are cancelled upon termination of employment. Unless the named executive officer is terminated for cause, vested options will be exercisable for (1) two years following termination of employment by reason of retirement, but not later than the option expiration date, (2) 12 months following death or disability, in each case, not later than the option expiration date, and (3) 90 days following termination in other cases, but not later than the option expiration date.

        Prior to an initial public offering of the Company, upon termination of the executive officer's employment, we will have the right to purchase his or her equity interests at the then fair market value.

        If, in the case of a change-in-control, provision for the assumption of the executive officer's stock options is not made, then 15 days prior to the scheduled consummation of such change-in-control, all then-unvested options outstanding will become immediately vested and exercisable and will remain vested and exercisable for a period of 15 days. Upon consummation of such change-in-control, all outstanding but unexercised options will terminate.

        All stock options held by named executive officers as of December 31, 2009 were originally granted under our 2005 Option Plans and our 2008 Stock Option Plan.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The table below describes the "beneficial ownership" of our common stock as of April 1, 2010, by (i) persons or "groups" (as that term is used in section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner of 5% or more of the common stock of the Company; (ii) each of our directors and named executive officers, and (iii) all of our current directors and executive officers as a group. The Securities and Exchange Commission's Rule 13d-3 under the Securities Exchange Act of 1934 defines "beneficial ownership" to mean the right to vote or exercise investment power, or to share in the right to vote or exercise investment power, with respect to the specified securities, whether or not

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the specified person has any economic interest in the specified securities. Unless otherwise indicated, the named owner has sole voting and investment power with respect to the specified shares.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review, Approval or Ratification of Transactions with Related Persons

        We have not adopted any formal policies or procedures for the review, approval, or ratification of certain related-party transactions that may be required to be reported under the SEC disclosure rules. Such transactions are reviewed by management and where appropriate, have been (and will continue to be) reviewed by our Audit Committee (other than the committee members involved, if any) on a case-by-case basis.

Agreements with Management

        We and certain members of senior management have entered into employment agreements. Certain of these terms and conditions are more fully described in "Executive Compensation—Employment Arrangements."

Stockholders' Agreement

        On December 28, 2005, we, the investment funds affiliated with TPG and H&F (the "Majority Holders"), the founders, and those executives who had then entered into employment agreements entered into a stockholders' agreement. Certain holders of our common stock are also subject to the terms of the stockholders' agreement, which contains the following provisions among others:

•

a right of the Majority Holders to designate a certain number of directors to the Board and the board of directors of our subsidiaries. Of the current nine members of each of the boards, the Majority Holders currently have the right to designate four of the directors. The Majority Holders also have the right to designate one independent director after consultation with our chief executive officer, if the selection is reasonably acceptable to the founders;



•

in the case of all transfers, the transferee will be required to become a party to the stockholders' agreement and the transferred shares will continue to be subject to the restrictions and provisions thereunder;



•

prior to an initial public offering, the right of the Company to repurchase equity securities of the Company if the holder's employment or service relationship with the Company is terminated;



•

the right of a holder of Common Stock to require the Company to purchase shares if the holder's employment is terminated as a result of death, disability or retirement following the age of 65;



•

from and after December 28, 2009 and prior to an initial public offering, the Company's right of first refusal over any shares of Common Stock proposed to be transferred by a holder to a third party other than a permitted transferee;



•

prior to an initial public offering, the ability of holders of Common Stock to "tag-along" their shares of Common Stock to sales by the Majority Holders on a pro-rata basis (the founders' "tag-along" right provides for the ability to "tag-along" a number of shares equal to two times their pro-rata share of the shares being sold);

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•

the ability of the Majority Holders to "drag-along" Common Stock under certain circumstances;



•

demand registration rights for the Majority Holders and founders and piggyback registration rights for certain holders of Common Stock (the founders' piggyback registration right provides for the ability to register a number of shares equal to two times their pro-rata share of all of the shares being registered);



•

the restriction on the Company to, prior to an initial public offering, enter into any transaction with, or for the benefit of, any of its affiliates involving an aggregate consideration in excess of $2 million, unless approved by a majority of the independent members of the Board;



•

restrictions on dividends, redemptions and repurchases with respect to Common Stock prior to an initial public offering subject to certain exceptions; and



•

prior to an initial public offering, a preemptive right of certain holders of Common Stock to purchase a pro-rata portion of any new securities we offer.

Other Arrangements

        As of December 31, 2009, we had an aggregate principal amount of $1,925,042 in loans outstanding to employees. Interest on these loans is typically accrued monthly at the minimum federal rate prescribed by the Internal Revenue Service. Portions (and in some cases all) of these loans may be forgiven based on the achievement of performance objectives or tenure of employment. During the period since the beginning of our last fiscal year, we forgave loans to four of our employees upon such employees becoming executive officers in an aggregate amount of $1,260,492.

        AlixPartners, LLP ("AlixPartners"), a company majority-owned by one of our majority stockholders, provides consulting services pursuant to an agreement for interim management and consulting services. LPL Financial paid $0.6 million to AlixPartners during the three months ended March 31, 2009, respectively.

        Artisan Partners Limited Partnership ("Artisan"), a company majority-owned by one of our majority stockholders, pays fees in exchange for product distribution and record-keeping services. During the three months ended March 31, 2010 and 2009, LPL Financial earned $0.6 million and $0.3 million, respectively, in fees from Artisan. Additionally, as of March 31, 2010 and December 31, 2009, Artisan owed LPL Financial $0.6 million and $0.5 million, respectively, which is included in receivables from product sponsors, broker-dealers and clearing organizations on the unaudited condensed consolidated statements of financial condition.

        American Beacon Advisor, Inc. ("Beacon"), a company majority-owned by one of our majority stockholders, pays fees in exchange for product distribution and record-keeping services. During the three months ended March 31, 2010 and 2009, LPL Financial earned $0.1 million and, $0.1 million, respectively, in fees from Beacon. Additionally, as of March 31, 2010 and December 31, 2009, Beacon owed LPL Financial $0.1 million and $0.1 million, respectively, which is included in receivables from product sponsors, broker-dealers and clearing organizations on the unaudited condensed consolidated statements of financial condition.

        Genworth Financial, Inc. ("Genworth"), a company majority-owned by one of our majority stockholders, pays fees in exchange for product distribution and record-keeping services. During the three months ended March 31, 2010 and 2009, LPL Financial earned $0.1 million in fees from Genworth.

        XOJETS, Inc. ("XOJETS"), a company majority-owned by one of our majority stockholders, provides chartered aircraft services. LPL Financial paid $0.1 million to XOJETS during the three months ended March 31, 2010.

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        Certain entities affiliated with SunGard Data Systems Inc. ("SunGard"), a company majority-owned by one of our majority stockholders, provide data center recovery services. LPL Financial paid $0.1 million to SunGard during the three months ended March 31, 2010.

        Blue Frog Solutions, Inc. ("Blue Frog"), a privately held technology company in which we holds an equity interest, provides software licensing for annuity order entry and compliance. LPL Financial paid $0.7 million and $0.5 million to Blue Frog for such services during the three months ended March 31, 2010 and 2009, respectively.

PROPOSAL 2: RATIFICATION OF THE APPOINTMENT BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        The Audit Committee of the Board of Directors has selected Deloitte & Touche LLP as our independent registered public accounting firm for the year ended December 31, 2010, and the Board of Directors has directed that management submit the appointment of the independent registered public accounting firm for ratification by stockholders at the Annual Meeting. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2001.

        Neither our bylaws or charter, nor any law require stockholder ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm. However, the Audit Committee of the Board of Directors recommended, and the Board of Directors is, submitting the appointment of Deloitte & Touche LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company and its stockholders.

        We do not expect any representatives from Deloitte & Touche LLP to be present at our Annual Meeting.

        Ratification of the appointment of Deloitte & Touche LLP require that the votes cast favoring the appointment exceed the votes cast opposing it. Abstentions on the proposal to ratify the appointment will not be taken into account in the voting.

Fees Paid to Independent Registered Public Accounting Firm

        Aggregate fees for professional services rendered by Deloitte & Touche LLP as of, and for, the years ended December 31, 2009, and 2008 were as follows:

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Pre-Approval Policies and Procedures

        The Audit Committee pre-approves all audit services provided by our independent registered public accounting firm. The Audit Committee has adopted policies and procedures for the pre-approval of all non-audit related services provided by our independent registered public accounting firm. These non-audit services include performance audits, general research and consulting and tax services. The policy requires that prior to the provision of any non-audit related services, an engagement letter must be provided by the independent registered public accounting firm describing the scope of its engagement. Any engagements above $150,000 must be reviewed and authorized by the chairman of the Audit Committee and the chief financial officer after review and approval by the Audit Committee. Engagements for $150,000 or less can be reviewed and authorized by the chairman of the Audit Committee and the chief financial officer. Engagements for $50,000 or less may be reviewed and authorized by the chief financial officer.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

        The Audit Committee of the Board of Directors (the "Audit Committee") is comprised of the four directors named below. Each member of the Audit Committee is an independent director (as independence is defined in the listing standards of the New York Stock Exchange with respect to membership on audit committees).

        The Audit Committee has adopted a written charter, which has been approved by the Board of Directors. The Audit Committee has reviewed and discussed the Company's audited financial statements with management, which has primary responsibility for the financial statements, and with the Company's independent registered public accounting firm. The Company's independent registered public accounting firm is responsible for expressing opinions on the conformity of the Company's audited financial statements with generally accepted accounting principles and on the Company's internal controls over financial reporting. The Audit Committee has discussed with the Company's independent registered public accounting firm, which was Deloitte & Touche LLP ("Deloitte") for 2009 and 2008, the matters that are required to be discussed by applicable standards of the Public Company Accounting Oversight Board ("PCAOB"), including Statement on Auditing Standards No. 61, "Communication with Audit Committees", as amended, and as adopted by the PCAOB, as well as Rule 2-07 of Regulation S-X of the SEC—"Communication with Audit Committees." Deloitte has also provided to the Committee their communication required by PCAOB Ethics and Independence Rule 3526, "Communications with Audit Committees Concerning Independence," and the Audit Committee discussed with Deloitte the firm's independence. The Audit Committee also considered whether the provision by Deloitte of non-audit related services, which for 2009 and 2008 consisted primarily of tax services, is compatible with the independence standard. Based on the considerations referred to above, the Audit Committee recommended to the Board of Directors that the financial statements audited by Deloitte for 2009 and 2008 be included in the Company's Annual Report on Form 10-K for 2009, and the Committee has appointed Deloitte as the Company's independent registered public accounting firm for 2010. The foregoing report is provided by the following independent directors, who constitute the Audit Committee.

April 28, 2010

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PROPOSAL 3: TO APPROVE THE LPL INVESTMENT HOLDINGS INC. AND AFFILIATES CORPORATE EXECUTIVE BONUS PLAN

Background

        Stockholders are being asked to consider and approve the LPL Investment Holdings Inc. and Affiliates Corporate Executive Bonus Plan (the "Plan"). The Plan was adopted by the Compensation Committee on March 12, 2010, and by the full Board of Directors on March 15, 2010, subject to approval by the stockholders at the Annual Meeting. The principal features of the Plan are summarized below. The summary is qualified in its entirety by reference to the full text of the Plan, which is set forth as Appendix A to this proxy statement.

General

        The purposes of the Plan are to provide an incentive each year for the performance of each of our executive officers (with the exception of the chief financial officer) by making a portion of the executive officer's total cash compensation dependent upon the level of the Company's performance attained for the year, and to do so in a manner which will allow full deductibility of the bonus portion of the executive officer compensation expense under Section 162(m) of the Internal Revenue Code (the "Code").

        Section 162(m) generally limits the Company's federal income tax deduction for total compensation paid to executive officers (other than the chief financial officer) in any year to $1 million unless any excess over $1 million qualifies as "performance-based compensation" as defined in Section 162(m). Under the implementing regulations of Section 162(m), the Plan must be approved by stockholders every five years.

Administration

        The Plan will be administered by the Compensation Committee, which is appointed by the full Board of Directors and consists of not less than two members of the Board, each of whom must be both an "outside director" as defined in Section 162(m) of the Code. As now constituted, the Compensation Committee consists of Richard W. Boyce, James S. Riepe, and Allen R. Thorpe.

Annual Incentive Bonuses

        Under the Plan, the executive officers' annual incentive bonuses will be earned upon the Company meeting certain performance metrics selected by the Compensation Committee for each year the Plan is in effect. Under the Plan, the performance metrics may be based on one or more of the following: EBITDA, adjusted EBITDA, pre-tax net income, after-tax net income, pre-tax operating profit margin, after-tax operating profit margin, operating revenue growth, return on assets, return on equity, return on investment, stockholder return and/or value, earnings per share, increase in assets under management, sales and changes between years or periods that are determined with respect to any of the above-listed performance criteria. Such performance metrics may be measured on a corporate, subsidiary, enterprise or business unit basis, or a combination thereof. Further, performance metrics may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance metrics.

        On or before the 90^th day of each year, the Compensation Committee will determine the performance metrics for such year and the respective bonus amounts which can potentially be earned. The performance metrics and the related levels of achievement, as established by the Compensation Committee, must be objective such that a third party having knowledge of the relevant facts could determine (1) whether or not the performance metrics at each level have been achieved and (2) the total dollar amount of the bonus for each year which has been earned based on such performance.

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        Within 75 days following the end of each year, the Compensation Committee will determine and certify in writing to the full Board whether or not each of the performance metrics has been satisfied and, if so, at what level, and the amount, if any, of the bonus payable to the executive officers. The Compensation Committee may decrease, but may not increase, the amount of the potential bonus for the performance metrics as calculated pursuant to the terms originally established by the Compensation Committee. The amount of the total bonus earned, as certified by the Compensation Committee, will be payable to the executive officers on or before March 15 of the year following the year in which the performance was achieved.

        The maximum amount that may be paid to any executive will not exceed $5,000,000 in any given year. This dollar cap is only a maximum threshold and is not indicative of future payments under the Plan.

Term of the Plan

        If approved by the stockholders at the Annual Meeting, the Plan will continue in effect until terminated by the Board's Compensation Committee. The Compensation Committee may amend, suspend or terminate the Plan at any time, except that no amendment shall be made without stockholder approval if stockholder approval is necessary in order for bonuses payable under the Plan to qualify as "performance based compensation" under Section 162(m) of the Code.

Vote Required for Approval

        Approval of the Plan will require the affirmative vote of the holders of a majority of the shares of common stock represented and cast at the meeting. Abstentions on the proposal to approve the Plan will not be taken into account in the voting. If the Plan is not approved by the stockholders, our Board of Directors anticipates that it will likely continue to grant bonuses to the executive officers. However, under Section 162(m) of the Code, to the extent such bonus causes the total base compensation and bonus paid to each of the executive officers for any year to exceed $1,000,000, the amount of such excess will not be deductible by the Company for federal income tax purposes.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.

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STOCKHOLDER PROPOSALS AND OTHER MATTERS

        Proposals that qualified stockholders intend to present at the 2011 Annual Meeting must be received by our Secretary for inclusion in our proxy statement and form of proxy relating to that meeting no later than February 15, 2011.

        Management knows of no matter to be brought before the meeting which is not referred to in the Notice of Meeting. If any other matters properly come before the meeting, it is intended that the shares represented by proxy will be voted with respect thereto in accordance with the judgment of the persons voting them.

OTHER INFORMATION

        Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, including the financial statements and financial statement schedules, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on the website maintained by the SEC at www.sec.gov. Printed copies of these materials are available free of charge (except for the costs of duplication and mailing in the case of exhibits to such documents) to stockholders who request them in writing from Secretary, LPL Investment Holdings Inc., One Beacon Street, Massachusetts 02108, telephone (617) 423-3644. Information on our website or connected to it is not incorporated by reference into this proxy statement.

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Appendix A

LPL INVESTMENT HOLDINGS INC.
CORPORATE EXECUTIVE BONUS PLAN

Adopted by the Board of Directors on March 15, 2010

Section 1.    Purpose of the Plan

        The LPL Investment Holdings Inc. Corporate Executive Bonus Plan (the "Plan") is established to promote the interests of LPL Investment Holdings Inc. and its subsidiaries (collectively, the "Company") by creating a program of incentive compensation for designated officers and/or key executive employees of the Company and its subsidiaries that is directly related to the performance results of the Company and such employees. This Plan provides annual incentives, contingent upon continued employment and meeting certain corporate goals, to certain key executives who make substantial contributions to the Company.

Section 2.    Administration of the Plan

        The Compensation and Human Resources Committee of the Board of Directors of the Company (the "Committee") shall administer the Plan. The Committee shall be composed solely of two or more "outside directors" within the meaning of Treasury Regulations Section 1.162-27 (or any successor regulation) and shall be appointed pursuant to the Bylaws of the Company and the Compensation and Human Resources Committee Charter. The Committee shall have discretionary authority to interpret the Plan, establish rules and regulations to implement the Plan and make all determinations deemed necessary or advisable for the administration of the Plan in its sole discretion. Decisions of the Committee shall be final and binding on all parties who have an interest in the Plan.

Section 3.    Bonus Awards

        (a)    Eligibility for Awards.    Awards under the Plan may be granted by the Committee to employees who are members of the Executive Management Committee (each, an "Eligible Employee"). Except in the event of retirement, death or disability, an individual in this position shall be eligible to participate in the Plan if he or she is an employee of the Company on the last day of the performance period. An individual who is on a leave of absence shall remain eligible, but his or her award shall be adjusted as provided in Section 3(h).

        (b)    Form of Awards.    Bonus awards under this Plan shall be paid in cash, less applicable withholdings and deductions.

        (c)    Target Award Amounts.    Target award amounts for each performance period shall be determined by the Committee in its sole discretion no later than 90 days after the commencement of such performance period but in no event after 25% of the performance period has elapsed.

        (d)    Bonus Formula.    The formula used to determine bonus awards for each Eligible Employee shall be determined according to criteria that shall be adopted by the Committee within 90 days of the commencement of each performance period, but in no event after 25% of the performance period has elapsed. The criteria may be different for each Eligible Employee and shall be based on one or more objective performance metrics to be selected by the Committee from among the following: EBITDA, adjusted EBITDA, pre-tax net income, after-tax net income, pre-tax operating profit margin, after-tax operating profit margin, operating revenue growth, return on assets, return on equity, return on investment, stockholder return and/or value, earnings per share, increase in assets under management, sales and changes between years or periods that are determined with respect to any of the above-listed

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performance criteria. Performance metrics may be measured solely on a corporate, subsidiary, enterprise, or business unit basis, or a combination thereof. Further, performance metrics may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance metrics. The formula for any such award may include or exclude items to measure specific objectives, such as losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts and any unusual, nonrecurring gain or loss, and will be based on accounting rules and related Company accounting policies and practices in effect on the date the formula is approved by the Committee. Awards shall be determined by applying the bonus formula to the target award amount of each Eligible Employee. Payouts described in this subsection shall be made on an annual basis, based on the Company's results for the full year.

        (e)    Maximum Awards.    The maximum award that may be paid to any Eligible Employee under this Plan for any fiscal year shall not exceed $5,000,000.

        (f)    Power to Reduce Awards.    Notwithstanding anything to the contrary contained in this Plan, the Committee shall have the power, in its sole discretion, to reduce the amount payable to any Eligible Employee, including the chief executive officer (or determine that no amount shall be payable to such Eligible Employee) with respect to any award prior to the time the amount otherwise would have become payable hereunder. In the event of such a reduction, the amount of such reduction shall not increase the amounts payable to other Eligible Employees under the Plan.

        (g)    Entitlement.    No Eligible Employee shall earn any portion of a bonus award under the Plan until the last day of the relevant performance period and only if the Committee has approved the bonus award and, to the extent required by section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), has certified that the applicable performance criteria have been satisfied.

        (h)    Termination of Employment and Leaves of Absence.    Except in the event of retirement, death or disability, if an employee ceases to be employed by the Company for any reason on or before the date when the bonus is earned, then he or she shall not earn or receive any bonus under the Plan. If an Eligible Employee is on a leave of absence for a portion of the relevant performance period, the bonus to be awarded may be prorated to reflect only the time when he or she was actively employed and not any period when he or she was on leave. In the event of retirement, death or disability before the last day of the relevant performance period, the Committee shall have the sole discretion to award any bonus.

        (i)    Payment of Awards.    Bonus awards shall be paid to each Eligible Employee within seventy-five (75) days after the close of the performance period, regardless of whether the individual had remained in employee status through the date of payment.

Section 4.    General Provisions

        (a)    Plan Amendments.    The Committee may at any time amend, suspend or terminate the Plan, provided that it must do so in a written resolution and such action shall not adversely affect rights and interests of Plan participants to individual bonuses allocated prior to such amendment, suspension or termination. Stockholder approval shall be obtained for any amendment to the extent necessary and desirable to qualify the awards hereunder as performance-based compensation under section 162(m) of the Code and to comply with applicable laws, regulations or rules.

        (b)    Benefits Unfunded.    No amounts awarded or accrued under this Plan shall be funded, set aside or otherwise segregated prior to payment. The obligation to pay the bonuses awarded hereunder shall at all times be an unfunded and unsecured obligation of the Company. Eligible Employees shall have the status of general creditors and shall look solely to the general assets of the Company for the payment of their bonus awards.

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        (c)    Termination.    The Committee may, in its discretion, terminate this Plan at any time.

        (d)    Benefits Nontransferable.    No Eligible Employee shall have the right to alienate, pledge or encumber his or her interest in this Plan, and such interest shall not (to the extent permitted by law) be subject in any way to the claims of the employee's creditors or to attachment, execution or other process of law.

        (e)    Exclusive Agreement.    This Plan document is the full and complete agreement between the Eligible Employees and the Company on the terms described herein.

        (f)    Governing Law.    The plan and any actions taken in connection herewith shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principals thereof.

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