Q3 2021 AssetMark Financial Holdings Inc Earnings Call

[music].

Good afternoon, everyone and welcome to the asset March 3rd quarter, 20th 21 earnings Conference call. At this time all participants are in a listen only mode. Later cause that's the question and answer session and instructions will be given at that time.

Today's call is being recorded now I would like to turn the call over to tailor Hamilton head and that's the relations. Please go ahead Mister Hamilton.

Thank you good afternoon, everyone and welcome to ask March 3rd quarter of 2021 earnings Conference call Jordan.

Joining me are Assetmark, Chief Executive Officer, Natalie Wilson, and Chief Financial Officer, Gary Villa.

They didn't discuss the results for the third quarter and provide an update to ask marks business outlook for the remainder of 2021 and 2022.

All in our introductory remarks will open up the call for questions. We also have an earnings presentation that Natalie in general reference during the prepared remarks, it can be accessed on our on our website at <unk> Dot Assetmark Dot com.

Before we get started I would like to note that certain statements made during this conference call are forward looking statements. These forward looking statements represent our outlook only as the date of this call an actual results to differ materially.

Additionally, during today's conference call will be discussing net revenue adjusted EBITDA adjusted EBITDA margin and adjusted net income all of which are non-GAAP financial metrics. Please refer to our earnings press release, and FCC filing for more information and forward looking statements risk factors associated with our business and required disclosures related non-GAAP finance.

Some information.

I'll turn the call over to my colleagues Natalie taken away. Thanks, So much Taylor and good afternoon, everyone and thank you for joining our third quarter earnings call I hope everyone's doing well today.

Turning on slide three I just wanted to highlight that Assetmark continues to make a difference in the lives of our advisers and their client which is positioned us to deliver a record results in the third quarter, while also continuing to advance our strategy.

Platform assets ended the third quarter at a record 86.8 billion driven by an all time high in net flows at 2.8 million.

This marks the third consecutive quarter of record setting organic press.

Households, and engaged advisers ended the third quarter at all time highs.

Growth of our households, and engage advisers points to the value of our platform as well as our extended total addressable market, which we discussed on previous call.

We've also experienced record results for both top and bottom line financial metrics.

Net revenue was up a little less than 40% year over year to 101.5 million, making the first quarter net revenue, making this the first quarter that net revenue has exceeded $100 million.

Adjusted EBITDA was at more than 50% year over year to 44.8 million and adjusted net income with that more than 60% to 29.99.

For the third quarter year to date, adjusted EBITDA and adjusted net income I'm more than those for the full year in 2020.

Trying to fight for our ecosystem empowers growth oriented independent fee based advisers, all sizes at the highest quality capabilities and services.

We deliver a fully integrated technology platform personalized and scalable service ensure it invests installations.

We provide everything an advisor needs to run a successful and growing business, while our valued combination seems simple we are the only participant this providing a comprehensive open architecture outsourced solution for IBD affiliated advisors are a hybrid advisors. This alone separate separate us from other providers in the industry.

In order to execute on our strategy. We are focused on five key components as we talked about last time.

Similar to last quarter I will discuss each of the five key areas of our growth and our strategy and detailed progress.

Detailed the progress we're making it each.

The first component of our a frame crust strategy on five five is to meet advisers, where they are catering to varying affiliations and new and growth oriented or lifestyle advisors.

Last quarter, we discussed how advisers continue to migrate to the R. A channel and how after mark institutional or am I looks to capitalize on the secular trend.

Today I want to discuss our target demographic can provide some color around how aftermarket institutional is designed to help these advisers grow.

Date of is to really shows it's smaller alrighty firms or those with less than 500 million in assets are growing at a much slower rate and large or 80 cents.

Both business owners and practitioners, the smaller or a face many competing priorities and demands on their time.

Therefore, they need to strategically outdoors core parts of their operations in order to remain productive and profitable.

In fact findings from our 2019 impacted outdoor some study shows that advisers to outsource benefit from stronger client relationships higher acquisition of new clients include increased client retention and stronger acid in our management correct.

Asthma institutional offers the smaller or as an outdoor solution help them grow.

Well still in the early innings I do want to provide an update on asthma institutional we're building a strong pipeline of qualified leads and in the past quarter. We've expanded our ask mark institutional leadership team to increase our focus on growing or or a offering.

Lastly, asthma institutional was officially approved participate in a leading custodians are a referral program.

Now turning to five six the second component of our strategy is to deliver a holistic.

Deliver a holistic differentiate it experienced two advisers and their clients providing in N N easy to use platform designed to create meaningful conversations between advisers in a quiet while also saving advisers time.

We discuss the past few quarters, we are building a financial wellness program the solutions to support meaningful wellness conversations between the adviser and your client.

Great Me advanced our financial Wellness vision this quarter by clothing boy and beginning our initial integration one of the strategic rationale for the acquisition was to accelerate our financial decision and expand our ability to attract advise and core and adjacent channels.

We are making making progress and realizing this rationale.

Added a single fine I'm from your wealth manager, which is our advisor portal, allowing advisers to sign up for free trial.

We've been hunting, while demonstrations and went for all of our advisers and our sound team is actively using income planner at two O powered by Wiant income planning conversations between advisers in a quiet.

And lastly, we started discussing boy it with several large broker dealer partners.

Early reaction from our advisors tavoy it has been fantastic.

At our platinum summit in August advisers mentioned wanting an alternative to current financial planning awesome options and felt that black with the perfect solution as the only financial planning tool that shows advisors.

Bold faced and cash flow based planning side by side and allows them to show the trade off between the two.

Sabin about advisers initial reaction to the <unk> and plan to complete the integration of lamps financial planning capability in the fourth quarter.

The third component of our growth strategy is to enable advisers to serve more investors across the world spectrum.

Bring life stages and across generations.

Turn to slide seven where I Wanna share too exciting additions to our platform.

First quarter, we launched the Assetmark pets are pulled employer plan.

According to our annual Sharon wallet study retirement is one of the largest areas where advisors are doing business away from us tomorrow.

You've been diligently focused on enhancing our retirement offering which account for about 1.6 billion in platform assets at the end of the third quarter.

<unk> allows us to provide a more complete retirement solutions for our clients.

According to to really 51% of employers with 50 workers or fewer do not have access to your retirement plan one more than half of Americans, either one or work for small business.

The past helps to close this retirement plan coverage gap for smaller employers by allowing employers of any size industry. Your location to band together in a single 401k plan I.

By doing so smaller employers benefit from economies of scale and lower cost while also gaining access diversified investment and it has fiduciary support normally reserved for larger plans.

The pet while still very new further enhances our retirement offering and we are already seeing proposals from our advisors.

Second we launched a sweet separately managed accounts last quarter.

This launch included 12 SMA from 10 best in class investment managers, many of whom are new to the asthma platform. They include large cap growth value in core dividend equity and thematic growth strategies among others.

As an investor preferences continue to evolve separately managed accounts enable advisers to personalise client portfolios with targeted ask the classic exposure and manage their tax efficiency as well as offering increase transparency to direct ownership of security.

This new sweet and estimates complement the wide range of investment solutions on the asked my platform and can be combined in a single account with other eligible solutions.

Since launched in early September advisers have submitted over 1500 SMA proposal in the amount of about 130, sorry, 100, sorry 375 million.

The fourth component of our growth strategy as seen on slide eight is to help advisors grow in scale their businesses by offering turnkey advisor solutions and programs.

This quarter I Wanna talk a bit more about one of our establish programs business consulting and offering which we believe is a huge competitive advantage for ask mark.

Admission of your business consulting team has to health advisors build a business that is sustainable and successful so that they can help their clients cheap their financial dreams.

A business consultant support our advisers and their businesses at every stage of growth scalable guidance and by identifying opportunities to increase value drive growth and boost their firms performance.

In the simplest terms our business consulting team helps drive advisor growth in business health, which in turn helps drive our company for us.

Over 500 advisers, representing a quarter of our total platform asset for taking advantage of our business consulting services right. Now these advisers exhibit higher engagement and lower overall redemption rates.

Currently our business consultants.

Currently our business consultants are actively reaching out to advisers to help them through their advisor growth plan, which basically means our consultants are helping advisers take a look at their goals for 2022 and consulting with them on how to achieve those goals.

Turning to five nine the final component of our growth strategy is to pursue strategic transactions, adding capabilities N F. S that improve our advisers ability to serve their investors and expand their businesses.

We are more deliberately focused on emanated than we have ever been before we continue to look at every opportunity that comes across our desk and or an active dialogue with companies that we feel would be a strong fit for a platform.

In addition, we continue to be a very disciplined buyer.

And while emanate serendipitous, you remain well positioned to execute on M&A as evidenced by our $50.4 million of cash on our balance sheet and $135 million remaining on our credit facility.

In summary, the third quarter was the best in our company's history.

<unk> posted record results and have advanced our strategy of empowering our advisers to continue to grow while attracting new advisor C. As in my platform.

I'm now going to turn over the call to Gary to take us through a deeper dive and a quarterly results and to provide some color on our outlook for the remainder of 2021 and 2022.

Natalie and good afternoon to all those on the call I'll, let you all know more in our office today something together for the first time in a year and a half inches.

Quite a sighting.

And my only discuss third quarter results were outstanding highlighted by an all time high and platform asset in record numbers for net flows revenue adjusted EBITDA adjusted an income and adjust V. P. S.

As usual I will start with a discussion of our platform assets then talk about a revenue sentences and then the room that will include an update our 20th 21 outlook and introduce an hour I would look for 2022.

Don't even fly 10 third quarter platform as a for a record $868 billion up 29% year over year.

Grocery flips record net flow into $2.8 billion, partially offset by negative point $6 billion market impact <unk>.

On the market has me abounded in October and so far November we remain as always cautious with our market outlook, given macro political and economic uncertainty.

Year to date annualize net flows as a percentage of the beginning of your assets, 12.5% strong organic growth has continued October as we will announce net flows of $890 million and platform asset north of $90 billion and R. A M. K report, which will be released tomorrow.

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Let's now turn our attention to our our environment.

Third quarter, we added 201, new producing advisors or M. P. As for the second consecutive quarter. We are encouraged by the growing quantity and quality of new advisors on our platform.

<unk> engaged advisers at the end of the third quarter since 2729th May increase of 351 advisors.

For a quarter of 2020 alright.

<unk> Goodbye now make up 92 per cent of our platform assets.

Rolling the number of engage advises on our platform is crucial to driving further growth.

All of our business and finance.

Now, let's turn to slide 11 to discuss this quarter's revenue and create a third quarter our assets four at $84.6 billion, maybe to record revenue approximately $140 million.

You know we focus our revenue net related variables in the third quarter of 2021 or net revenue of $101.5 million with 38% year over year.

This is driven by acid based net revenue, which was up 36% to $95.5 million and the introduction of revenue from point, which one in total $3.5 million.

Boys revenue falls into two categories on are interesting.

Birth, <unk> contributed 3.2 million of subscription based revenue, which represents revenue <unk> financial planning and wealth management software solution.

<unk> <unk> consulting and training revenue was one zero point $3 million for the third quarter.

This revenue falls seem to be other income statement online <unk>.

<unk> I'm sorry, the other income line on our income statement.

As an aside we are so excited to welcome you Awesome <unk> T V. After my family.

Turning to slide 12, I wanted to provide some perspective about the revenue opportunity in front of us as discussed in detail during our first quarter earnings call earlier. This year are total addressable market asset perspective cause about 6.3 trillion dollars.

To convert this to net revenue can we assume the average rate assetmark earth. Each at the category added to this is William non asset based revenue Tam what about $500 million.

This results in a $22 billion total revenue Tam.

That's what Mark has approximately two per cent of this overall revenue Tam with a long runway for future growth.

Sliced Turkey detailed a year over year net revenue walk at the waterfall shows net revenue was up year over your money in Petra ask the growth <unk> January 20 $317 million in additional revenue also adding to our increased net revenue is a 2.8 million dollar reduction asset base.

<unk>.

As a reminder, this is an ongoing savings primarily driven by restructure the payments to providers that'd be first realized last quarter.

You also realize see compression do ordinary midship of $1.4 million for approximately.

Six five basis points. This is below the one basis point you plan for each year.

As previously discussed subscription revenue from <unk> added $3.2 million in additional revenue and boy. It drove me to increase in our other revenue category as well.

Lastly, spread based revenue decreased zero point $5 million a year over year due to the decline error average yield 33 basis points to 2074.

July 14th show, an asset based net yield trends over the last five callers. Please note <unk> revenue is not as it dependent we will start discussing como meal and only focus on acid based you'll moving forward.

Third quarter 21 AD space yield 45.1 basis Lynch is off 0.6 basis points year over year, driven by 1.3 basic points latest in the measures. We have taken can reduce or add to basic senses offset by six five basis points from fee compression, which we have premium.

See discussed.

Now, let's discuss the status is shown a slide 15, you continue to manager has been faithful does not outpaced by revenue growth.

Although adjusted expenses increased 22% year over year $100.6 million.

Operating expenses were up 29% year over year 250, $617 million driven by a 6 million dollar increase in compensation and a 6.8 million increase S. T N N.

The increase in compensation a status is largely driven by two factors first start variable sales incentive cost increase as a result of our strong sales in the water.

Important to note that while a strong sales results increased our compensation of sense. This quarter, we will realize the revenue benefit from it and upcoming works second.

Second we had in 153 employees over the last year for about 17% of room current employee count approximately a third of Miss increase the ambition of our <unk> team members.

The increase in ice tea and a large root beer my variety of incremental factors, including an increase in person events travel professional fees and increased costs associated with higher volume.

<unk> does not reflect any material impact the macro inflationary environment. So we are sending a modest impact from that in 2022.

Before I run for our expensive Justin I do want to point out. The addition, this quarter of an adjusted P&L and our earnings release, which will hopefully provide provide for the clarity on or adjust the numbers you have gotten feedback and just to be helpful and of course, we're here to serve.

And the third quarter, we add it back a total of $17.3 million pretax which is comprised four items.

First $7.9 million in non-cash sure based compensation, we upset none.

Sure based compensation in the fourth quarter to be approximately 6 million.

And a 2020th quarterly run rate between three and $4 million.

Seven adjustment to expenses is $5.9 million amortization expense of which $5.1 million is related to our 20th 16 sale. While the additional point 8 million can be attributed to recent that condition.

As a reminder for modeling purposes, most of the extent 2016 sale will be fully amortized by year end.

Third.

0.9 million acquisition latest senses, primarily associated with our acquisition avoid nope, yes, and lastly, $2.3 million related primarily to Reorganisation and integration.

I was trying to slide 16 discuss our earnings for the fourth.

<unk>, 20th 21 that just to even though with a record $44.8 million up 53% year over year adjusted EBITDA margin for the quarter was 32% up 460 basis points you're over you.

Approximately two thirds of my Morgan improvement. This year is the result of favorable macroeconomic conditions would be additional one third as a result of our ability to scale of business focusing on expense management will still investing in future growth.

A recorded net income was $12.3 million compared to $8.6 million in the third quarter of 2020.

<unk> the second consecutive quarter positive caffeine.

Or just in net income for the third quarter was $29.9 million.40 per share.

This is based on third quarter that will you share count of $74.7 million.

Or just it affected passe smoke third quarter was 23.5% lower than the 26% used in the third quarter of last year.

Decreased driven like tax efficiency, we created in 2020.

Or for the color. Please see the adjusted and income walk on slide 21.

Turning briefly to a reporter is the reporter balance sheet, let me update you on our cash the definition and.

And do the corner with a little over $50 million in cash and 135 million available on a revolving line of credit.

Natalie discuss the cash on our balance sheet the ability the ability to generate cash enter a low get cause issues as well as the suit future M&A up here.

Now, let's go to slide 17, and discuss our expectations for 2021.

We're raising our guidance based on a strong organic growth in the third quarter. Just a few months left in a year. We expect net revenue for the full year, but to me between $377 million $379 million, representing 27% year over year growth, we have set to adjusted EBITDA for the year can fall between 100 <unk>.

$7 million and $158 million a growth rate of 37% are adjusted EBITDA margin will spend about 300 basis points in the whole year.

We are extremely pleased with the year over year growth in 2021.

Now, let's discuss our early tape in 2022, please turn the slide eight.

Our financial model Oh, Scott S birth, we have set in our organic growth would be 10% and 2022.

Assuming a modest market myth, 3.5%, we set our access to grow between 13 and 15.5%.

Driven by the strong woman from 2021, we have set our net revenue growth to be in the high teens to low 20th. This is suzie at the growth is slightly offset by about one basis point of fee compression, which was a regular expectation.

We expect our operating expenses, which consists of compensation to SG&A increase in the high teens for the clarity we anticipate this year over year increase to be driven by four items first about a third of the increases due to volume second about 25% increases due to the full your impact.

<unk> <unk>.

<unk> about 15% expected to be driven by your return to travel in person events and finally, the last one third is driven by increased investment specifically into new products and talent acquisition.

As a reminder, a disciplined <unk> will not outpaced our revenue growth as always we are focused on realizing improved margin on a revenue and growing earnings we expect our adjusted EBITDA up 20% year over year, and we used Morgan expansion of around 100 basis points for the year.

With that will handle with the Natalie firm, including remarks. Thank.

Thank you Gary and thanks to everyone again for being on the call today, we are well positioned to empty your strong and enter 2022 with a lot of momentum I look forward to sharing future updates an upcoming conferences and on subsequent earning call. This concludes our prepared remarks today I'd like to now turn the call back to the operator to begin question and answers.

Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.

If for any reason you would like to remove that question. Please press star followed by two.

Again to ask a question press star one.

As a reminder, if you're using a speaker phone. Please remember to pick up your handset before asking your question. We will policy briefly to allow questions to register.

So the first question is from Patrick Osha Nasty wait Raymond James You May proceed.

[noise] a good morning, or good afternoon. So you mentioned in your prepared remarks that you're more deliberately focused on them and I had to I had never before how would you characterize the deal pipeline right now.

Thanks, so much Patrick so the deal pipelines pretty good right now uhm, but you know that's better than than anyone I'm sure that Ah valuations are incredibly high right now and there's a lot of competition for any any acquisition opportunities that come across as I mentioned in my remarks were uhm aggressive but.

Also a very disciplined fire and we have parts of the market that we think are attractive and would add to our value proposition two advisers and in those cases, we are attempting to bid as aggressively as needed to win but at the same time not overstep, we want to make sure that our acquisitions, our our accretive <unk>.

For the short to medium term.

Got it I appreciate that and then.

It seems like maybe the lightest worst annoyed N O tunnel here in terms of the interest rate environment in the market is now starting to expect one or two hikes. In 2022. How are you guys thinking about asset marks sensitivity to interest rate increases at this point.

Yeah, absolutely. Thanks, so much for the question Patrick I'm going to have that one off to Gary He can take to the details of what we've modeled into 2022, what we haven't been what our thoughts are in terms of our our sensitivity.

Hey, Patrick How're you doing yeah. So just enter in my outlook for 2022, we're assuming no interest rate increases in the numbers, we shared with you.

You know our view of the Dot heart is sort of that if something does happen and will happen later in the year Uhm until there is upside that we would be very excited for taken let me think about rate increase you know most of our cash offering Patrick because that nondiscretionary cash and so asked Mark will generally uhm.

Realize about 80 per cent of of the rate increases with about the other 20 or 25% going to the M client in terms of crediting rates, we do offer and high yield cash account and which is a subset of her overall cash uhm and noticed okay.

The client or in a lot more let me more like a 50 50 split but that that is a smaller subset of your overall cash. So overall I'd say about three quarters <unk>, we would partaken about three quarters whenever the right school.

Alright terrific. Thank you.

[noise]. Thank you the.

The next question is from Brian Bailey with Goldman Sachs. You May proceed.

Hi, everyone. Thank you for taking our questions now I I was wondering if we could come back to slides calls and the potential revenue opportunities you're seeing it was hoping you could sort of walk us through the interplay between the gross and the art market relative to IBD <unk>.

How about <unk> revenue opportunities sportswear with time, then I think rella to that what are you sort of medium to masquerading M. I like what the offers me the functionality and how do you think you would you would fit into the the competitive landscape and alrighty link.

Yeah, absolutely you said the first thing you know I'm sure you're aware of is that the R. I a segment or a hybrid N D. Independent segments visited three segments of advice that are growing most quickly uhm and they're growing to or a segment, specifically or a hybrid or going I think it's four points faster then the next fastest.

Growing segment, and so clearly mm that's being driven by a wide variety of things uhm investor demand for independent fee based advice and that should have never been more aware of the need for an advisor that's a fiduciary than ever before this is driven by regulatory changes in the media that.

But generated by regulatory changes with Uhm the department of Labor fiduciary role in rugby I. In addition advisors practices advisers businesses, our valued uhm much much higher if they're independent and see based in recurring then they are in more of a commission orientation. So.

<unk> many advisers for business reasons are choosing that channel.

And then last but not least advisers and they are a channels. They they have a lot of potential partners or resources to use to help them run effective businesses and so it's it's really important that here at <unk> Mark we have services that are geared towards our a an independent advisers uhm, it's part of.

<unk> the first part of our growth strategy, making sure we meet advisers, where they're at and for us to have a complete solution for our as we need to have the ability for them to trade in manager O model, which we launched with the Assetmark managed portfolios offering in March they need to have a community of our eighth so that advisers Ken.

Sure best practices build relationships among other R. As in we we launched that in May of this year with a first ask Mark institutional summit and then much much more frequently much much more frequent interactions between the community we have to make sure that we have the products and services that are a need as it relates to investments.

And that's at a journey, you're always on them, but we begin that journey with the launch of asked Mark institutional we're looking into other a high priority products four or eight and then b outsourcing solutions that are as need at a smaller size. So that they can scaling compete uhm and we talked about that earlier in our earnings call.

What differentiates us from other providers is that we can provide an incredibly high level of service and support fries to help them grow at that relatively small sizes and so when you look at us relative to the custodians. The custodians have much much higher minimum for the same level of service and the same level support we can.

Provided assetmark when you look at the broker dealers offering to our I E. Those are as are typically affiliated with them in some way or using their hold onto platforms. When it. We're completely open architecture, we don't ask our advisers to use our proprietary solutions in any way uhm. So we also benefit from from being open architecture.

Last but not least our advisers are very completely independent from us, they're our clients and so we fight to serve them at the highest level every single day and you compare us to the aggregators in the in the in the market. They clearly have an ownership position and those are a as in so I have to make a decision about their own capital.

<unk> sure to join his first uhm. So that's how we differentiators from differentiate ourselves from the three largest competitors and market.

That was incredibly helpful. Thank you Sally for providing that context uhm.

Follow up Vagary Uhm, I'm Gonna media annoying crossing once again on this <unk> just the guidance to the four year of 21 imply that EBITDA net income and it's going to be down for four two relative to three too and then maybe some twenty-two can you help us think about how much of the growth your b, if revenues and EBITDA coming from <unk>.

Sure. So I guess in the first question actually hit you you're reading it correctly you know in fourth quarter, you believe revenue will be.

From the prior quarter's revenue is falling as it should what we are investing more in fourth quarter, you know as we've come through the year. We have held off on some investments we want to make you want to make sure that we are again measuring our sin, but we anticipate significant compensation costs and.

Fourth quarter as well as investments in some of our <unk> initiatives heading into 2022 is the right time make you know those investments. So so you you should it fit.

Let's see that next quarter was why were the total your number let me show you are and what we have targeted all year long, while we're we're we're satisfied with that.

You know we we are <unk>, we are a coffee our current status in the right way. We are focused on the 300 basis points Morgan expansion that we're providing year over year or generate a year over year.

But yeah quarter to four inches long.

Brian This is Natalie I, just want to add something to like Gary said, there, which is have you may recall assetmark bills in advance and so as the year progressive we get more and more certain about with the revenue total will be at your N and so part of our discipline. The reason we can expand our margins year. After year is that we invest more.

As our is there a certainty rises and say should always expect later in the year for our investment in future growth to go up.

Oh got it thank you I'm telling me.

I forgot what you asked about Twenty-twenty July my apologies.

I I was just asking revenue and EBITDA contributions from <unk> sort of like <unk>, roughly what percentage increases we're getting from from that.

Oh right right. So.

[laughter] I had been boy in numbers in my head and high it's gonna make them sent increases so I would say, let let let me do the math real quick on that right and I'll I'll come back to you because I do have the numbers in my head, but I don't know how the percent how it affects them cent increase on top of my head.

Okay. Thank you thanks.

Thank you.

The next question is from Gerry O'hara with Jeffrey you May proceed.

Mmm great. Thanks for taking my question is <unk> I think you've made a couple of references to increased investment around new product and perhaps initiatives I was hoping you might be able to kind of flushed out a little bit and either talk about somatic Lee or or if there's any additional context, you might be I prefer provide that'd be helpful.

Yeah, absolutely. Thanks, so much for the question. So I mean, clearly our our investments and new initiatives fall in the categories of the five elements of our growth strategy. So as it relates to meeting advisers, where they are we're gonna be investing in new channels exploring new channels and deepening our penetration and the channels that we're all.

Ardian uhm and to do that we need to add to the services that we offer for example, with are are a offering uhm, we want to make sure that we add to our Assetmark managed uhm Mister advisor managed portfolio offering add new security types add new capabilities et cetera, as it relates to delivering a holistic differentiated.

Experience, we're investing deeply in financial wellness and the future of E wealth manager, which is our advisor in industrial report I'll make sure that we're saving advisers time, increasing their effectiveness and delivering a great experience for investors and.

And then as it relates to enabling investors to serve I'm, sorry, enabling advisers to serve more investors. We're expanding our our are offering to include high high priority share of wallet area. So we'll expand into more more separately managed accounts will expand into.

Two more customized solutions direct indexing S. R. I the high growth areas in the market as it relates to helping advisers grow in scale their businesses, we're investing in the outdoor solutions that we've talked about in the past whether it be administrative services out, forcing tax transition outsourcing uhm expanding on our market.

<unk> outsourcing uhm, we're investing in those areas uhm. So those are the key areas of investment for us.

Okay. That's that's helpful. In the press one for Gary could you mentioned prepared remarks can you remind us what what sort of the steps you can take them to reduce acid based expenses are and what you know how we might be able to sort of see that flow through next year's got it.

Sure so.

Let me, let me discuss I'm gonna just be discusses little bit last four as well.

We are asked to be sensitive we have a university providers for their their strategists broker dealers university providers that that we pay activate see through so I won't get into media, which contact from whatnot or renegotiate it but.

Through that process as we keep rolling we continue to find scale breakpoints in contracts et cetera, and so the changes that went into place last four to reset our.

Basic point, some assets and you probably should use that Molly.

Walmart.

[noise] [laughter] and yes, ma'am I was just gonna say when you're finished you might want to get to the point.

[laughter], Oh, sorry, [laughter] I got Ah I'm very unknown. So did not ask that question there another of yesterday's incentive yeah.

Yeah, that's helpful second.

No words, and deride question I'm, sorry, I did the math is between both revenue and EBITDA growth number that we were showing there from 2022 about three to four points of both meat revenue and EBITDA growth are due to your boy a full year contribution next year.

[noise] I think we can go on to the next question in the queue. If there are any operator. Thank you.

Thank you.

The next question is from Michael <unk> Choice you May proceed.

Hey, Thanks for taking the question I appreciate the the numbers on <unk> contribution for 2022 as well I was gonna follow up on that and just kind of see if there's any other further ways to kind of break down the growth year over year, because it looks to be pretty pretty strong edited the 2022 coming off of your strong market, but.

Four months and and tougher comps.

I'm from 2021. So so just you know trying to think about sort of the new initiatives contributions in particular, you know any should we expect a more sizeable contribution from pet in 2022 or is that more of a 2023 initiatives.

Yeah, so as it relates to the pull the employer plans. We're in the very early innings of that offer so while we're really happy with your early growth I wouldn't expect it to be material until 2023 at the earliest and then as it relates to <unk>.

You know as as as it relates to white and black gross but we're really pleased that their growth has been a balance of growth outside the U S and the enterprise market.

Growth outside the U S and the independent market in in the U K and Canada and Australia.

And then the beginnings of growth inside the U S. Because of relationships that were helping blanche form either with independent affiliated broker dealer advisors, who use assetmark R. A to use assetmark and then broker dealers too after mark has relationships.

So I'm really really excited about the balance of the growth with <unk> and we continue to monitor and make sure that we're investing is needed them to help that part of our business D. As successful as it can possibly be inside the U S. N S. I D S.

And then I think to just related to growth and growth in 2022, you know, where we're getting a lot more experienced as it relates to ask mark institutional Uhm and we've expanded that team and scale that team will be returning to the road, which while we've been incredibly effective and <unk>.

Growing assetmark, while we've been in a remote workforce environment for new producing advisors for those clients, who are looking to make a wholesale decision to use a new platform to partner with a new platform meeting face to face is important you know obviously, you mentioned buoyant growth and how excited we are about that.

And we're also investing in other sources of new producing advisors in 2022, and so that there's just some other areas of 20 growth in 2022 that we're very excited about.

Okay, Great and then you know just as we looked at 2022, there's there's some potential tailwinds like was mentioned earlier interest rates are stronger market performance, we're already off to a good start this quarter, which could effect next year et cetera should we think about you know additional upside from from other opportunities.

As being spent on you know continued kind of platform improvements in technology upgrades next year or would some of those dropped to the bottom line just kind of general thoughts on how you would kind of manage stop throughout the year.

Yeah, So I'll start with the general thoughts and then I'll leave it to Gary to add some specifics, but every corner when the bill in advance we look at opportunities to do both.

So we look at opportunities to invest in our infrastructure so investments for future scale.

Unity to invest for future growth, if we'd like to accelerate that investment that's already underway a refill there's an opportunity we'd like to add to our to our mix or if you feel like it's more appropriate to drop the the <unk> the improves revenue to the bottom line to expand our margins and also provide more cap.

<unk> for future M&A. So every quarter were very disciplined about having conversations where that next dollar should go and that's part of how we make sure we're growing revenue over the medium or long term, one Ross extending margins every year and Gary I don't know if there's any specific suit my thought I would just add micromet you know.

And we see tailwind from the market right, let's help our revenue profile.

Okay.

Now is right at the business, we're making that decision regularly in 2021, you know our margins increased enormously cause we let some of that hold them online, but we did take some of that to the best and I don't know exactly 50, 50 or something but there's some will make them as in along the way, but we'll go to let some hole in the bottom line and the Penguins cause we should.

But we're gonna take the opportunity to invest in the future. So uhm the upsides of the market or interest rates will will be both invested in as well as help improve our earnings.

Okay, great and if I could just sneak one last fall open on on the emanate from you know you're you're rolling out into a lot of new tans, new markets with a lot of new opportunities. So should we think about some of the bias in terms of M&A unlimited dollar spent towards.

Strategic you know product expansion opportunities versus consolidation opportunities as there have been in the past or any other color kind of just in terms of direction of emanate that you guys are pursuing.

Yeah. It's a really good question I mean, as you know we have a two pronged strategy uhm capabilities, M&A, which allows us allow us to pull forward delivery of essential products and services to our advisor clients and then scale.

And we love scale lemonade, because it allows us to invest more in our client relationships. It allows us to invest more in building overtime and we we like both.

And we like to invest in both our <unk> potentially a little more focused on capabilities and that their scale acquisitions that also give you capabilities.

And right now uhm advisers have never needed more support from their partner then you know ever in the past and as a result, we need to make sure that our platform is expanding to serve these new and evolving elsewhere sheets.

Either we feel really really strongly about either because they both at the end result, they both allow us to deliver more for our clients over the long term.

Okay, great. Thank you.

Sure. Thank you.

We have a follow up question from Patrick O'shaughnessy, Raymond James You May proceed.

Hey, Patrick.

Sorry about that I was all I needed. Thanks for taking my follow up so you're not engaged advisers in the quarter was 58, which is still reasonably healthy but it was your slows quarter I think of the past six uhm.

I'm trying to figure out what do we make of a little bit slower quarter in terms of adding engaged advisors versus the really strong growth that we saw on your flows in the period.

Yes.

It's an interesting observation N N pardon the engaged advisor growth has a market town when honestly it just on the edges, but the market was down in the corner and so that does cause a little yellow headwinds in terms of that number right on the edges, but it certainly does come into play that.

Mark was down in total for the floor.

So I.

Yeah, I <unk>, we can we look longer term because he can't look at the quarter periods like that and so you know what are we talking about a year over year. The 350 over four quarters I think that's a better way divide that by four and say on average you're gonna get somewhere 92, 100 order or something to that effect I think that's how we will look at it Patrick and then.

That view is supported by the fact that net flows are really strong right and so you really are making a lot of progress that are of age wise.

Okay I appreciate it.

Oh thanks.

Thank you.

There are no additional questions waiting at this time, so I will pass the conference over to Natalie for closing remarks.

Thank you so much for joining us today, we really appreciate you taking the time to learn more about author Mark and we look forward to talking to you again in January 4th.

February I guess.

Thank you.

Goodbye.

That concludes the Assetmark third quarter 2021 earnings conference call. Thank.

Thank you for your participation you may disconnect your lines.

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