Q2 2020 AssetMark Financial Holdings Inc Earnings Call
[music].
Good afternoon, everyone and welcome to ask Checkmarks second quarter 2020 earnings Conference call.
This time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time today's call is being recorded now I'd like to turn the call over to tailor Hamilton head of Investor Relations.
Please go ahead Mr. Hamilton.
Thank you.
Everyone and welcome Mark second quarter 2020 earnings Conference call. Joining me remotely marks Chief Executive Officer, Charles Goldman and Chief Financial Officer, Gary's, Iowa, They will discuss the results for the second quarter and provide an update on Mark's business outlook for the remainder of 2020.
Following our introductory remarks, well open up the call for questions.
Also on an earnings presentation, but Charles and Gary for reference during their prepared remarks. It can be accessed on our IR website at IR got Assetmark dotcom.
Before we get started I'd like to note that certain statements made during this conference call. Our forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995. These forward looking statements represent our outlook only a state of this call actual results could differ materially not undertake and expressively disclaim any obligation to update or alter our.
Forward looking statements, whether result of new information future events or otherwise.
Their information on these and other factors that could affect our financial results is included in filings, we make with the FCC from time to time, including the section titled Risk factors and our annual report on form 10-K on file with the FCC and available on our Investor Relations website and in our quarterly report on form 10-Q for the quarter ended June Thirtyth 2020, which.
We expect to file next week.
Additionally, during today's conference call, we'll be discussing that revenue adjusted EBITDA adjusted EBITDA margin and adjusted net income all of which are non-GAAP financial metrics. These non-GAAP metrics are not calculated in accordance with gap and maybe calculated differently than similarly, titled metrics presented by other companies a discussion of why we use non-GAAP financial metrics were.
Reconciliations of adjusted EBITDA, adjusted EBITDA margin and adjusted net income the most directly comparable GAAP measures are available on our press release and our quarterly report on form 10-Q for the quarter ended June Thirtyth 2020, both of which will be available on our Investor Relations website.
I'll turn the call over to my colleagues Charles ticket away.
Thank you Taylor and good afternoon, everybody. Thank you all for joining our second quarter earnings call. We appreciate you taking the time, maybe with US today, we hope to you and your families are safe and healthy also for those of you on East Coast. Please state driving though there's a big story there.
Starting on slide three we're going to focus on four key messages during earnings call first our company is growing despite these challenging times, we're pleased with our performance in the second quarter, especially given this current environment.
Second the world is changing and we will change with it I will take you through a deep dive into the changes that we are seeing for investors advisers industry participants and regulators as well as how.
As well as I'll comment on how these changes are creating opportunity for asset more.
Next I'll spend some time detailing some of the proactive decisions. We are currently making that I believe will position us to whether these times and emerge as an even stronger company post dependent.
Lastly, Gary will walk us through the two Q 20 financial results, which were inline with our expectations. Our record platform assets of $63.2 billion set us up nicely for higher revenue in the third quarter.
Turning to slide four you can see that we are growing despite these challenging times, we continue to grow organically in the second quarter with net flows of $907 million platform assets at the end of the second quarter were 63.2 billion, an all time high.
This was driven by Netflow performance and the market recovery.
During the second quarter, we added 178, new producing advisors. This is a good result, given that we held no and personal meetings with prospects in April and May and very few in June. Additionally, all broker dealer and industry conferences, which had been a valuable marketing opportunity for US we're of course canceled.
We credit our pre endemic sales pipeline and ability of our salesforce to quickly shift and adapt to a virtual environment as key reasons for our success.
Cash flow generation also continued to be a straight we grew our cash position by $13.4 million and ended the quarter was $93.6 million in cash on our balance sheet.
Turning to slide five.
While we are growing and financial performance remains strong there is no doubt that we're growing at a slower pace than we were prior to the pandemic.
When looking at our trend data most of our key operating metrics such as net flows are down quarter over quarter.
A key driver of this is advisor behavior.
Dive into that a little bit deeper.
Historically, the most effective business development strategies for advisors have been in person meetings and events.
These have been hindered as a result of the pandemic.
As a result advisors that previously lack digitally based meeting at new choice, but to learn how to connect with clients and prospects into virtual setting.
While technology is prevalent in our daily lives.
Only 36% of advisor practices were heavily users of technology prior to the pandemic. According to a recent through we studied.
Additionally, we found that a lot of advisors rationally, we're focused on existing clients in order to protect their businesses. While few we're focused on growth.
Given the impact of the environment on advisors during the quarter. We're pleased with our Twoq you 20 results, which demonstrates the resilience of our business model.
Now, let's turn to slide six and our next topic.
Over the course of my 30 years in financial services I cannot think of a time, where the industry is changing has dramatically as it is now.
While we believe that these changes have been in motion for some time. We also believe that they are going to accelerate and accelerating rapidly.
Those firms that fail to adapt are going to lose out.
We believe that the most important changes are coming from investor demand.
In summary, investors want a better experience from our industry. Today. Many advisors are focused on delivering model portfolios and talking about returns relative to benchmarks.
This is not the conversations investors one.
Rather investors want to be deeply understood by their advisors, which means that the advisor needs to know all about the clients goals aspirations for years and challenges.
Investors, one conversations to be about how their portfolios help them reached a change in gold lot about.
Portfolios attributes.
This is a fundamental change in a way advisors build capabilities and interact with clients.
As investors needs change successful advisors will adapt their value proposition has business and as and their business models.
For the advisor is no longer about simply selling a product for managing money advisors needs to become custodians of their clients dreams and fears they need to understand not just the risk tolerances of their clients.
But there are clients true risk capacity, which has been brought into sharp focus given the current environment.
Devices need to focus on comprehensive financial planning and advice and an integrated experience for their clients.
This is the new adviser value proposition.
To be able to do this there will be an increasing reliance on technology and a greater demand for outsourcing value added services.
Outsourcing will help advisors provide a wider breadth of services to their clients ensure they remain price competitive differentiate their offerings and most importantly grow.
Additionally, those advisors, who were able to shift toward independence and fee based practices will be the winters.
This is a tremendous tailwind for us and were not just because of our outsource platform, but also because our practice management and business consulting offers help advisors build more efficient scalable businesses.
Next let me turn to industry participants.
As you all know economics will be under increasing pressure across the broad definition of our industry as we've seen for the last decade. There is a continuing shift towards lower cost investment solutions. We are witnessing this it asset mark as we transition for retail institutional share classes and as we introduce lower cost products onto our.
Platform.
With economics coming under increasing pressure the ability to scale is critical for industry participants.
I'd ask them, where we are focused on building scale. This allows us to reinvest in our platform, which results in further growth and of course additional scale.
At the end of the day that is what organic growth is all about.
Lastly, regulators will focus on investor protections in conflicts of interest.
The key message here is the world is moving towards fiduciary as we see with wrecked VI and has always been the case with the advisors active 1940.
This is a good thing we're proponents of fiduciary advice in helping build fiduciary practices.
We are continuing to focus on advisors, making this transition from commission to advisory and building that fee based fiduciary practice.
We are committed to win in this year environment.
Let me turn to slide seven and discuss what we're doing to best position us for success.
First we are continuing to invest in our strategic pillars.
Pandemic has not changed our strategy instead, it has increased our strategic focus.
Our agile business model ensures that we continue to grow and serve our advisors as day can continue to grow.
Let's briefly touch on each of our strategic pillars.
As you now our technology suite offers fully integrated services. It is our core proprietary technology with third party tools that help advisors get things done more efficiently and effectively.
While we continue to regularly deliver new capabilities in features given the covert crisis. We also rolled out soon for our top advisers in April.
These advisors have conducted nearly 12000 meetings 200, plus webinars and reached over 46000 investors.
Second we deliver personalized and scalable service, we have always provided best in class service and we have continued to go above and beyond during the pandemic.
Our sales teams have had 78000 interactions with our advisors in the second quarter. This number is up 30% quarter over quarter. Additionally, webinars country.
Needs to be a valuable way, we serve our client in the first half year, we just over 320, Webinars, which were attended by over 15000 advisors.
Advisors have been highly complementary of our webinars, giving them a satisfaction rating of 4.3 out of five.
We continue to invest in our service as it is a key competitive advantage for us.
Our third strategic pillar is our holistic and curated investment solutions what are the key takeaways. Many advisors have realized from the pandemic is that they don't have enough time or skills to be effective money managers. As a result, we believe more and more advisors will look to outsource this function to free up time to focus on building deeper planting based.
Relationships with their clients in finding new clients.
And our impact of outsourcing study advisors noted at time benefit of more than eight hours per week when nearly all investment management tasks were outsource imagine if an advisor had an extra 50 plus days a year to focus on what they do best which is working with their clients and then finding new.
Clients to build their businesses.
Our strategy is working.
As proven by our 2020 NPS score of 64 five points from last year and two points away from our all time high.
Net promoters survey was conducted between June 15th in July Twentyth. Thus the score is reflective of a time when advisors relied on technology more than ever our servicing operations team saw higher trading and call volumes and uncertainty persisted in the markets.
In addition to continuing to invest in our strategy. We are also accelerating our investment in financial wellness.
This is a response to the rapidly changing environment that has discussed earlier.
So let's look at slide eight.
Financial wellness in.
Interactions are centered around anticipating investor needs to be able to anticipate investor needs at the advisor has to truly know their client and has to have a deep understanding of their clients goals.
We are investing in the future that delivers what the invite investors really focused on their aspirations hopes dreams and fears.
We're building digital tools that help investors articulate their goals and emotions to their advisor this will aid and creating a stronger client advisor relationship more invested assets in greater loyalty.
The digital future. We are building will make the planning experience risk assessment in the portfolio come together, so that is a rich and dynamic discussion where the investor feels at their advisor understands them and is on top of all the changes in their lives.
Lastly, we are looking to get smarter about what we do and how we do it in all areas or business.
One example is improving our sales capabilities through digital lead generation.
While still.
And it's early stages. We feel this is an effective way to targeted advisors, who will benefit from outsourcing taf remark.
The investment in our strategic pillars financial wireless and getting smarter and everything that we do and our business all have one thing and comment and that is growth.
With that let me turn it over to Gary to discuss our financial performance for the second quarter and our outlook for the remainder of the year Derrick.
Thank you Charles been asked me Jonathan the cone.
Lets transition stance, there's a lot to unpack understanding when everybody.
We feel great about our continued organic growth in the business and the effectiveness of our expense management, given the slowdown and the overall company.
As usual I understand the discussion on our platform and then talk about on revenue and expenses and then earning.
Then there I will discuss our balance sheet and other key financial lines.
And married marks in our outlook for the rest of the year.
Starting on slide nine.
Second quarter platform assets more record $63.2 billion up 12.8% year over year and 12.9% entering the clinic.
Market growth in the second quarter offset a large part in the market decline we saw in the first quarter.
Year to date known the market has generated negative 3.2 billion dollar impact on our platform.
Net flows in the quarter when $970 million inline in arent speaking.
Good morning nickname Armen snack given production being about 80% to pre pandemic level now redemption retention remained.
Relatively stable.
The quarter.
You did a net snows in that 2.7 billion.
For 8.9% send age of beginning of period.
As previously mentioned, we think this strong organic growth.
Selling given the current environment.
Net flows as a percent even beginning appeared assets are expected to be 8% to 10%.
On the 2020 in 2021 barring any dramatic changes in the macro environment. We will look back again, even look to get back to our previous trending and plant.
And gentlemen can be adding 178 npls in the second quarter 2000.
Total advisor base at the end of second quarter, and a little more than 8400 advisors.
2327, when a fine and engaging budgets.
R&D combines account up materially this quarter due to the market appreciation green Sun visors assets above the $5 million national.
One of our 189 engaged by you and its pointer.
Hey, 90 engage advisory and those who came back over the 5 million our threshold in the market appreciation.
You under 99 in Asian buyers, when those who reach engage and is in the first time.
Turning to slide Ken I want to talk about another of our key operating metrics in more detail this quarter.
As a reminder reduction lift coming just seem advisors is calculated by dividing that production attributable to existing advisors Morgan endearing by the platform asset at the beginning in the period.
This metric represents both organic growth means advisors as well as any incremental share wallet on the advisory business and and into our platform.
The second quarter production that from 16.3% versus 23.3% in the first quarter 2020, 24.9% in the second quarter 2019.
This metric was down due to the fact that and by years end client activity, we need you to shelter in place enrich and the volatile equity markets.
This trend has continued in July and many moving now you may know when pre endemic level.
Net suite, you mean release, our July and pain point in shell about $300 million net loans minimum.
We feel positive not unlike engagement in the future we sat down production next to again be north of 20%.
Now, let's turn to slide 11, and discuss the quarters comp line.
Entering the second quarter, our assets were $56 billion, meaning to reported revenue of $99.1 million down 5.1% year over year.
As a reminder.
85% of revenue for the corner is based in the beginning corner no.
As previously discussed we focus on our revenue meant remaining variable expense.
In the second quarter 2020, our net revenues $68.6 million was down 3.7% near beer.
Let's turn now to the components of our net revenue.
Asset base net revenue pump, 3.2% year over year $64.6 million, driven primarily by the growth in platform assets, which is in bolstered by a strong organic growth in the last 12 months.
Outweighing the negative Mark.
Spread based revenue.
And 56.8% year over year $3.1 million.
The decline in spread based net revenue when the result in lower rates offset slightly by higher cash balances.
Our average client cash from the second quarter was $2.9 billion on which we received an annualized net yield 43 basis points.
And the remainder of 2020, we expect annualized net yield impact can be around 30 basis.
And your second quarter cash asking that trust companies $2.96 billion, 98% quarter over quarter.
On the $2.96 million in cash APC, approximately 15% within our high yield cash payment.
Turning to slide 12, let's discuss our net yield on Pullman platform assets, which was 49 basis points in the second quarter down one basis point quarter over quarter and five basis points.
Year over year.
Year over year declines driven by three cents earnings.
First net spread yield declined three basis points as the result of lower spread income minimum rate.
Second one basis point is attributable to me addition, and TCPC Lps, which had lower yielding assets compared to ask Mark corpsman.
The additional one basis point due to normal yield compression as a result in our Mitch.
Now, let me know I'm, sorry, and have noted in the past we do expect one basis point decline interest based net revenue each year.
Just driven by the growing platform and the mix shift of assets and lower costs pumpkin well.
In addition to this and regular trend we will experience three basis point drop in asset aged yield next quarter, primarily driven by our shift and higher cost mutual fund.
As of June Thirtyth, we completed the conversion of all our open third party mutual fund strategies from retail institutional shares.
Mentioned in prior calls this change will reduce as much revenue about $10 million to $11 million on an annualized speeches.
As a result, starting third quarter this will impact our revenue by approximately $2.5 million.
Clarity and transparency calculation and our annualized revenue yield netting variable and you've shown in slide 17, independent and our earnings presentation.
Before we turn to earnings lets discuss extensions in slide 13, meaning remain laser focused on our expense management, especially even certain time assetmark approaches our expenses and the disciplined growth mentality balancing the desire for top line growth with an expectation earnings targets.
Quarter, we took a number of actions to manage consensus.
Elimination of a handful of rolled in the reduction the travel even some comments.
As a result adjustment sentence in the quarter were down 3.7%.
On this slide acetate suspensions and spread based expenses are down due to understand drivers affecting revenue.
Our assets in the platform no marketing.
And a much lower interest rate environment.
The next two lines in the rent Bops compensation and as you may impact our adjusted EBITDA.
Okay compensation was flat year over year, while our headcount grew by 3.7%.
In the asset we are making under control up people costs.
DNA up $1 million.
For 7.2% increase primarily driven by the cost me on the company, which must make me about $6 million manual.
We feel very good about our effort to hold the line on our compensation STN a call.
Also shown on this page arent sense adjustments.
In the second quarter and back to totaled $24 million pre tax if you comprised of four item.
First $13.9 million noncash share based compensation.
Second $5.1 million amortization expense related to our 2016 sale.
Barry.
$2.6 million.
Acquisition related expenses associated with our acquisition and integration get PC and it would be.
For $1.3 million, an add back related reorganization costs and business continuity plan cost in response to Kirby.
As mentioned previously leased at the full meet new set me extensions from the full year 2023 relatively flat to 2019.
For additional color and adjusted expense reconciliation table. Our income statement line item can be found on slide 18 independent color earnings presentation.
Okay.
Now, let's turn to slide 14 discussion around the corner our adjusted net income in the second quarter was $15.1 million.21 per share a decrease in 16% year over year.
This is based in second quarter diluted share count 72.6 point.
The year over year decrease in adjusted net income statement and lower adjusted EBITDA of 3.3 million hours higher amortization of $1.1 million, while offset and lower net interest expense in Q1 million and lower taxes and 837.
Our marginal tax rate year to date.
25.0%.
In addition.
Two adjusted net income we view adjusted EBITDA equally important measure of our company's held for adjusted EBITDA, We add back the same ensigns mention SEC the amortization late at night.
Our second quarter of 2020, adjusted EBITDA was $25.3 million down 11.4% year over year.
Adjusted EBITDA margin for the quarter was 25.6% inline with our expectation given the current environment and down 180 basis points in the second quarter.
As a reminder, our model in normal times is to invest incremental profits back into the business, while achieving 50 to 75 basis points of margin expansion.
During these volatile time will be less focus on margin expansion as only fully focused on the need to serve our client maintainer organic growth and generate cash.
Now, let's look at the second quarter.
Reported balance sheet kind of two items.
This is Charles noted earlier, we added $13.1 million direct connection issue quarter over quarter ended the second quarter at $93.6 million in cash.
Additionally, we still have a $20 million credit line as available from the company, our cash pound well with no debt leverage you gave us flexibility in deploying cash.
Thinking about our cash we are first and foremost focus on growth either organically or through M&A.
Future, we may look at least to return capital to shareholders.
Second capital expenditures, primarily reflect on long term investments in technology to create new capabilities increased scale and improved service in the second quarter, our capital spend is $6.2 million of 6.3% of total revenue.
This is up 5.3% year over year the committee to continue investing in the future.
Now I will discuss our expectations for the remainder of 2020.
Let's turn to slide 15, as a result of building in advance we have in approximately three full quarters in our revenue for the year as in the ended July.
Revenue shown reflects the Venetian inside reflects the range of outcomes. If the market is down 5% nurses up 5% in the third quarter.
Fourth quarter market will have very little impact on our 2020 results due to our maintenance.
In in that market range and the yield applications discussed earlier spread income we expect net revenue for the second half in 2028 about equal first half were between 200, and the $6 million $293 million from the home.
We will continue the dishes with how we spend during these unprecedented times and ensuring that our expense in the relevant was flat year over year.
As a result, we expect adjusted EBITDA for the year to fall between $107 million in $113 million.
Variability in a range.
Based on the third quarter market in.
Control Center, our fourth quarter revenue.
Our margin year to date is 25.1% and we expect net for the full year 2020, our margin will come in around this level.
Can you talk this is down approximately 100 basis points and maintain margin level with the decline driven by the at despite revenue.
We view 2020, and the reset year when an ever we are focusing organic growth.
And our 2020 outlook, our key financial metrics, such net revenue and adjusted EBITDA or expected to be flat year over year. Despite the absence of spread revenue and this difficult operating environment.
Right and I would like to make a comment on the shelf registration Assetmark filed yesterday with the FCC.
As you know this filing and standard patents for most of the companies.
Facilitate easier go to market for any future offerings.
That said nobody has been set for any offering and can be clear it may never happen pending campaign.
And with that I'll hand, it over to Charles for his concluding remarks.
Thanks, Gary well done.
I wish it that it appreciate everyone joining us for the call today.
Really theres one message I'd like you all to take away from this call. It's that we are growing through the pandemic and we are well positioned to grow in the post pin debit world, we're making decisions to strengthen our company, which will benefit our advisors their clients our employees our partners and of course our shareholders.
So that concludes our prepared remarks, I'll now turn it back to the operator to begin the questions and answers. Thank you.
Okay. At this time, if he would like to ask a question. Please press Star then the number one on your telephone keypad.
If your question has been answered I knew wish to remain for yourself from the Q you may do said by pressing the pound key well pause for just a moment to compiled licking your name roster.
Your first question comes from the line as Ken Worthington from JP Morgan Sir Your line is open.
Hi, good afternoon. Thank you so much for taking my questions on a go into production. If the pandemic continues to force people to work remotely and meetings are not holes help drive to what extent should we expect to where can we expect to see net sales recover as brokers further acclimate.
The environment and are there any positive signs are green shoots.
On that you're seeing now the tax season has acted.
That might conclude that that acclamation process is.
Taking place and things are getting better.
Hey, Ken Thanks for the question appreciate you joining the call based Charles.
You know it's interesting as we prepare for the call and thought about how we respond to predictive questions.
The challenge in this environment is it is really hard to predict.
The data coming in on television and spikes, we're seeing in different parts of the country.
Our our hard.
To to interpret in terms of activity, particularly as we see people going back to shelter in place, having said that our sales teams are out in the field and the number of meetings and engagements. So we're having both the new advisors in producing advisors as well as our existing advisers are fantastic as I quoted earlier I've been doing.
And quite a few meetings myself I had one with a group of New York prospects today. They were there where you can see him on June so there were sitting in their homes, mostly some in their offices very engaged in the dialogue was really about growth in this environment.
And it's what I, what we're seeing is in the first part of Kogut.
People were frozen you know about a third of advisors. According to a JD power study said they were they weren't even contacting their advisors im sorry, there their clients according to their clients.
And then we saw quite a few advisors, who were Justin sort of I'm going to just communicate with my existing advice my existing clients.
And see what happens now what we're seeing from a lot of advisors is okay. This is a reality we're going to be at this for a while we've got to start building our capabilities to reach out to talk to people to talk about growth and so the green shoots as you ask we're seeing we're hearing but I think it's too.
Surely to be predictive about that and it's also quite difficult to be predictive given the different dynamics and different statistics in different part of the country.
Okay fair enough.
And then given the production has been weaker in the quarter.
Is there any concept of pent up demand and that weaker sales.
To Q and during this dynamic.
May or may be made up by stronger than typical our production in the future does that do you think that concept sort of exists here or might lower production is that sort of gone forever and you could move forward at a bigger paced but.
So for darn production, just never really be appears so it makes sense.
I understand your question.
History tells us that that in periods of stress and distress things slow down and in post periods of distress.
Things speed up rapidly and that those firms that are prepared whether it's an advisor or people like us or other providers that are prepared that are doing the work that continue to invest in capabilities that continue to reach out and touch clients touch prospects.
Bring intellectual capital brand capabilities accelerate out of out of prices.
So as I said, a minute ago always hard to predict the future, but if you. If you look at past performance you look at what happened after pretty much every crisis money goes in motion people are interested meeting investors are interested in different price different perspectives different advice different capability. So many goes in motion for advisors.
And we definitely see advisor say gosh footwear was working before is working now and I want to do something different and they really appreciate those firms that have delivered during the crisis and so you know.
I won't be predictive and give you a number but but the history would tell us that we do see that kind of acceleration and we are investing for that and preparing for that in everything we do each and every day.
Great. Thank you very much.
Thanks, Ken.
Your next question comes from the line of Brian Bailey from Goldman Sachs. Sir Your line is open.
Good afternoon Charles mentioned.
Scale on slides. So I was wondering if you can speak to the potential for increased competition in the 10 states thered be pulled announcement not consolidation or seeking capital and then any preach focus on on the space from the Roger broken deals now, but not earning as much in revenue. So just wondering if you could elaborate on some of the pump.
Financing.
Yeah, Hey, Ryan.
There is no doubt that we're seeing an increasingly competitive environment.
And we think that it competitive environment is accelerating I think there's number of drivers associated with that one is the broker dealer community that you talked about so for those advisors that are affiliated with a broker dealer we've seen broker dealers change ownership. We've seen scale go through his broker dealers we've seen the.
Economics of those broker dealer shift as they lost spread revenue and as the revenue inside products has started to decline rapidly and so what we're seeing is a broker dealers building internal tams, we've talked about this before and we think that that competition.
Frankly, good for advisors. It's good for investors is we ought to get better or what we do.
But we definitely see that and we see those broker dealers.
Looking to.
Build.
Managed account platforms build some level of technology and.
Build some level of practice management now we think we differentiate from that dramatically in you can see it or net promoter scores in are positive net flows. We think we're able to deliver a better and more integrated technology experience. Our curated investment platform is quite different here most of all the broker dealers are offering.
Massive massive.
Set of invest in choices and and limiting that down to cure rating is actually quite quite hard to do and then this to the magic of our models of scalable service experience is very hard to replicate.
Because it's hard to build its hard to put it in your culture, it's hard to deliver on so to your point, we do see increased competition would you see increased aggressiveness and that's going to make us better of everything we do.
And that scale as we're seeing less fragmentation in the industry less 1 billion $2 billion cans and more stronger larger players we're going to expect to see continued investing at a pretty much everybody.
Okay.
Okay, that's which gives a little bit and ask your question about household growth looks like that we accelerated in since you're so just wondering if you've seen any trends.
Maybe any color you could provide on July in something you're households.
Kind of the same store sales dynamic that exists you buy but I still think it's doing perhaps a little bit better than that.
Assuming that or is this just wondering if you comment on that.
So just trying to repeat accuracy, you're asking about the existing business for advisors and their ability to bring on new households.
Right. So I guess as we looked at kind of the growth in households count.
Between April and May in May and June it looks like churn. So are the acceleration and new households, and I was just wondering if you could elaborate on any of the trend that absence in July.
Advisors, we're actually able to connect with sort of newer clients even the.
Corporate environment.
Yeah, Let me, let me answer that generally and Gary I suspect that Theres a.
Acquisition element to this a GSPC the Ob us element to that so maybe to social check that number and.
To that as the end, but does it.
A key issue here Ryan is that we're seeing a limited set of advisors.
Who are focused on growing their businesses right now.
Right got and this is my personal estimation is somewhere in the 15% to 20% range of advisors and we're seeing about a third of relief.
Basically sheltered in place and aren't really doing a lot we're seeing about half, 50% that that our focus really on their existing clients and making sure those existing clients are pretty darn stable and engaged.
And fueling the love and then 15% to 20% of advisors are saying you know what money is going to be in motion now's, the time and that 15% to 20% our technology enabled they figure out how to communicate with people use them.
Use webinars, we in fact, the summer launched a summer camp set of Webinars that are geared towards advisors and their clients were seeing.
If I use the Wow, that's a great thing I can go out to my clients with content.
And prospects by the way to go out with prospects. So I think the way I would put it is a little bit the weight can put it earlier as sort of green shoots people starting to except the reality.
And those that are aggressive go getters on that really focused on growth are finding ways and the big middle.
Are going to have to find ways, we're going out and do that.
Gary do you ever since that Kinda household number.
Sure. So as you noted Ryan in there in the aim teams working Dean now households grew about half a percent immune from.
From May.
I think that goes along with Charles is Comping that right. He certainly on bringing on the second are growing and you pull back opened in one you know generally our growth rate is going to be somewhere about a half a percent to a full percent now household jumped in February do their acquisition.
That is has a great indicators wonder why one main reason why at one of our or indicators on our aim paperboard medians I think you're absolutely right and focusing on that has a great indicator back yeah organically, we are growing in house in the coming onto our platform and then as a sign that advisers are bringing announcements on.
Understood. Thank you.
Your next question comes from the line.
Chris.
Kettler from William Blair, Sir Your line is open.
Hey, good afternoon, and this is actually a deep chowdhry on for Chris Shutler I'm. Sorry first question is I think your exclusive relationship.
Our capital annex navigator personalized may offering as a small.
So first off is that correct.
Second can you give us a sense of what percent of your asset for invested in that offering and lastly, do you expect the under that exclusivity to impact close and then any type of way.
Yeah.
So so addicted to talk to you.
Clark Clark capital is a great partner of asset Mark.
Joke was brilliant larger CEO that it's the best deal I've ever been involved with ever in my life because it was such a huge win for Clark. It was such a huge win for asset Mark and it was a huge win for our clients and ER.
And their clients the investors.
And our relationship is deep.
Clark Clark has a dedicated sales force that works with our advisors their distribution of another platform is an important part of their business, but but.
The core of their business the core growth in their business is really without some work and so we like the relationship we have there we like the partnership we worked aggressively and carefully on that relationship I'm not sure. We disclose any particular strategist im pretty sure. We don't so Gary I'll, let you talked to that but I don't think.
We disclose any strategist.
And their particular assets.
On the platform, but we are we are actually quite excited about that relationship and the continuing focus in the field from both parts of our organization, they're continuing to light advisors have with their capabilities.
Yeah. Thanks, Okay. I'll, then and then he didn't carry and.
One more color don't transaction, you're right, we don't talk about asset level individual strategist RPM one of our.
You know favorite strategy platform is part of the portfolio on what we kind of can be group together, it's kind of a high net worth offerings.
Hi network offering on our platform along with Clark.
We're not expecting any impact more loans in our modeling and the outlook I gave you.
From known as Charles mentioned, we're not anticipating changing the relationship.
Okay, great. Thank you and second is based on the discussions that you're having with some of your advisors today.
Are you expecting myshrall them or trade merger to be.
More of a catalyst for your new advisor pipeline. Thanks.
Yeah no.
Question, what's that.
I think a lot of speculation in the press that that is going to create a lot of disruption. So far I would tell you that.
There is concern among advisors about what's going to happen, particularly PVA advisors.
But you know the advisor business.
To be particularly as it comes to straight custody pretty darn sticky.
And Ptwop is a nice job in TV is that a nice job on their custody of the assets. So we'll have to see what happens.
For the custodians if.
Our eyes make a pure custody choice and I think if it does happen it will be driven only because service levels and cheery rate meaningfully and we'll see if that happens or not.
Not hurt that thats happening, yet, but we'll we'll see that happens for our business. The driver is not a change in custodian the new producing advisor decision and the advisor decision about outsourcing or not is not really a custodial decision. We offer open architecture capacity you can offer you can and casino.
Thats more trucks, you can cause your fidelity purging TD ameritrade tuning schwab.
And we integrate we create that experience really at the end of the day. It is about the advisor, saying gosh I need to spend more time understanding my clients, helping my clients plan for the future visualize that plan I need tell my clients understand not just the risk tolerance, which is what we all do in the industry.
But there are risks capacity I'm interested they actually take relative to what they can tolerate and what is the risk need to meet their goals, but how do I visualize that and think about that in model that into the portfolio and for the advisor that is spending all their time doing due diligence and trying to model and figure out.
Got to construct portfolios from an unlimited universe.
Devices, it's trying to buy all the technology to do all that work and to make their practice more efficient the advisor that that particularly as the smaller advisors that are looking for high service levels and deep practice management capabilities. Those are the advisors that that we want and that we can serve best and custodial choices isn't part of that.
That as a driver it's really those mega trends around the change in the consumer the change in the Investor and occasionally advisor practices is leading advisors to think about how do we outsource or business and how do we build a better business and serve clients better.
Got it thanks very much.
Yeah.
Okay, ladies and gentlemen, there are no further questions. At this time. This does conclude today's conference call. Thank you for your participation. You may now disconnect everyone has a wonderful day.
Thanks to everybody on and thank you operator.
Yes.
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