Q4 2021 LPL Financial Holdings Inc Earnings Call

Good afternoon, and thank you for joining the fourth quarter 2021 earnings conference call for LPL Financial Holdings, Inc.

Today, our president and Chief Executive Officer, Dan Arnold and Chief Financial Officer, Matt Audette.

That will offer introductory remarks, and then the call will be opened for questions. The company would appreciate if analysts would limit themselves to one question and one follow up beach.

Posted its earnings press release, and supplementary information on the Investor Relations section of the company's website investor Dot LPL dotcom.

Today's call will include forward looking statements, including statements about LPL financial's future financial and operating results outlook business strategies and plans as well as other opportunities and potential risks and manage.

That management foresees such forward looking statements reflect management's current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or timing of events to differ materially from those expressed or implied in such forward looking statements for more information about.

Such risks and uncertainties. The company refers listeners to those yours set forth under the caption forward looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission during the call. The company will also discuss <unk>.

non-GAAP financial measures for a reconciliation of such non-GAAP financial measures to the comparable GAAP figures. Please refer to the company's earnings release, which can be found at investor Dot LPL dot com with that I'll turn the call over to Mr. Arnold.

Thank you Jonathan and thanks to everyone for joining our call today.

Over the past quarter and throughout 2021, our advisors continue to provide our clients with personalized financial guidance on the journey to help them achieve their life goals.

At the same time, we remain focused on our mission.

And care of our advisers, so they can take care of their clients.

This combination positions us to deliver another quarter and year solid results, while continuing to make progress on our strategic plan.

I'd like to review both of these areas starting with our fourth quarter business results.

In the quarter total assets reached a new high of one two trillion, which was up approximately 300 billion or 34% a year ago.

This increase was primarily driven by continued organic growth our acquisition of Waddell <unk> Reed's wealth management business and complemented by equity market.

With respect to organic growth fourth quarter net new assets were 26 billion, which translated to 9% annualized growth.

Driven by continued strength across new store sales same store sales and retention.

Over the past year organic net new assets totaled 119 billion, a 13% organic growth.

Up from 7% a year ago.

In the fourth quarter recruited assets were 17.

Bringing our full year total to 89 days.

Which is more than double a year ago.

Continued growth in recruited assets reflects our ongoing progress with enhancing the appeal of our model and expanding our addressable market.

Looking at same store sales with the backdrop of a continued strong investor engagement, our advisers remain focused on serving their clients and differentiating their solutions.

As a result advisors are both winning new clients and expanding wallet share.

The combination.

Nation that continued to drive solid same store sales.

At the same time, we further enhanced the advisor experience through the continued delivery of new capabilities and technology as well as the ongoing modernization of our service and operations.

As a result asset retention was approximately 98% in the fourth quarter and over the past.

Our fourth quarter business results led to solid financial out.

With a $1 63 of EPS prior to intangibles and the acquisition cost, which brought our full year total to $7 in Tucson.

An increase of 9% a year ago.

Let's now turn to the progress we made on our strategic.

As a reminder, our long term vision is to become the leader across the entire advisor centered market.

Which for us means being the best at empowering advisors to deliver great advice to their clients and to be great operators of the business.

Bring this vision to life, we are providing the capabilities and solutions that help our advisors deliver personalized advice and planning experiences to their clients.

At the same time through human driven technology enabled solutions and expertise.

Supporting advisers and their efforts to be extraordinary.

Doing this well gives us is available path the industry leadership across the advisor experience organic growth and market share.

Now to execute on our strategy, we have organized our work or strategic plays so I'd like to review in turn.

Our first strategic play involves meeting advisors and institutions, where they are in the evolution of their business.

Winning in our traditional markets, while also leveraging new affiliation models to expand our addressable.

In our traditional markets fourth quarter recruiting continues to be a significant source of growth.

With a new high of approximately $15 billion in assets.

Ongoing enhancements to our platform and the efficacy of our business development team continued to increase our win rates and expand the depth and breadth of our pipe.

Despite advisor movement in the industry remaining at lower levels.

With respect to our new affiliation models strategic well employ in our enhanced custody.

Custody offering we recruited approximately $2 billion in assets.

And each of these three models, we continue to see growing demand and expanding.

Which position them going forward for increased contributions to organic.

Large financial institutions, where a new source of recruiting in 2021 with the addition of BMO Harris and <unk> and will continue to contribute this year with the planned Onboarding a few.

Our insights and progress over the last 18 months.

Have led to the continued enhancement of our value proposition and consequently, our demand.

And pipeline in this market continue to build.

Given our experience and more seasoned view from this work, we see large financial institutions as a more accessible market opportunity for us and another new and distinct affiliation model that can drive sustainable organic growth over time.

Our second strategic play is focused on providing capabilities that help our advisers differentiate in the marketplace and drive efficiency in their practice.

2022, we will maintain our focus on developing capabilities and solutions in three key areas.

First is to enrich the end client experience with expanded digital solutions that increase personalization and self service and enable advisors to create customized experiences whether it business.

Second we will continue to enhance our wealth management platform to help advisors provide their clients with differentiated advice products and pricing.

Third we will continue to advance client our core operating platform.

With the digital with additional digitized workflows to help advisors operate more efficiently and increase the scale ability to serve clients all of which contributes to enhanced performance.

We believe these evolving capabilities will help drive increased advisor growth productivity and retention.

Let's next move to our third strategic play.

We're just focused on creating an industry, leading service experience that delights advisors and their clients and in turn.

Helps drive advisor recruiting and retention.

As a reminder, over the past two years, we have transformed our service model into an omnichannel client care model, including voice chat digital support.

Giving advisers flexibility for when and how they access our.

In 2022, we will continue to fine tune this model to drive additional efficiencies.

And an enhanced experience for advisers.

But this year, we will also advance to the next phase of our transformation, which is the streamlining and automation of our back office operations.

We will leverage six sigma process optimization, and robotics and machine learning to reengineer, our core clearing functions, including new account opening transfers that money.

These efforts will increase speed and accuracy for advisors and their clients.

In the future we plan to extend this transformation from the service and operations organization trading and compliance.

Doing so better positions us to create frictionless efficient processes throughout our operated.

The enhanced service levels, the light advisors and increased scalability and efficiency.

Our fourth strategic play is focused on helping advisers run the most successful businesses in the independent market.

One of the key components of this play as our portfolio of business solutions, which helps advisors more effectively operate their businesses. So they can focus on serving our clients and go into effect.

In the fourth quarter, our subscription base continued to grow more than doubling year over year to approximately 3000.

Demonstrating increasing demand and appeal.

And while working with advisors on evolving our suite of business solutions.

We identified a new category of opportunity that will help advisers more efficiently and effectively deliver comprehensive financial advice and planning centers.

But to help solve for this need we are innovating on services that provide expertise and leverage to do this planning in a scalable way across their entire client base.

Our first offering in this areas.

Which is a service that builds financial plans for advisors.

But then it turned utilize them to establishing an investment strategy to help clients achieve their goals.

Holden objective.

This service launched last month and is receiving positive early feedback and engagement in the marketplace. We're also incubating other solutions, including tax planning and high networks.

As we look ahead, we remain focused on innovating and expanding our services.

To help advisers run strawberry businesses and provide differentiated planning and advice for their clients.

And in turn drive gross profit.

Annick growth overtime.

In summary in the fourth quarter and throughout the year, we continue to invest in the value proposition for advisers and their clients, while driving growth and increasing our market.

As we look ahead, we remain focused on executing our strategy to help our advisors further differentiate and win in the marketplace and as a result drive long term shareholder value.

With that I'll turn the call over to Matt.

Alright, Thank you, Dan and I'm glad to speak with everyone on today's call.

Before I review, our fourth quarter results I'd like to highlight our progress during 2021.

Looking at the year, we are proud of what we accomplished within our framework for driving long term shareholder value.

We enter 2021 with momentum as we grew assets organically in both our traditional and new markets and.

And successfully on boarded what Ellen REIT Dino <unk>.

All while continuing to invest to provide an industry leading value proposition for our advisors to serve their clients and win in the marketplace.

This commitment to enhancing the support we provide our advisors resulted in the highest level of organic net new assets in our history.

By leveraging the investments in our platform.

And the financial strength, we built over the last several years, we again into the new year with positive momentum.

Now, let's turn to our fourth quarter business results total advisory and brokerage assets increased to a new high of one two trillion up 7% from Q3.

The key driver of this increase was organic growth, which totaled 26 billion or 9% annualized growth rate.

For the full year organic net new assets were $119 billion.

Which translates with 13% annualized growth rate up from 7% a year ago.

This was driven by strength across all three channels of growth.

Recruiting same store sales and retention.

Looking more closely at recruiting in Q4 recruited assets were $17 billion, which brought our 12 month total to a new high of $89.

Moving onto our business mix, we continue to see positive trends in Q.

Advisory net new assets were 24 billion or 16% annualized growth rate.

With this growth our advisory assets are now 53% of total assets.

We continue to deliver differentiated capability and benefit from the secular trend towards advisory.

Now, let's turn to our Q4 financial results strong organic growth combined with expense discipline led to EPS prior to intangibles and acquisition costs of $1 63.

Which brought our full year total to $7 <unk> up 9% from a year ago.

Looking at our top line growth gross profit reached a new high $643 million.

Up $12 million or 2% sequentially.

Looking at the components Commission and advisory fees net of payout were $200 million.

Down 2 million from Q3.

Primarily driven by the seasonal increase in production.

In Q4, our payout ratio was 87, 6%.

Up about 45 basis points from Q3.

Primarily due to the seasonal build in the production.

Looking ahead to Q1, a reminder, that the production bonus reset at the beginning of each year.

So we anticipate our payout ratio will decline to approximately 86, 5%.

Moving on to asset based revenues.

Sponsor revenue was $220 million in Q4 up 9 million sequentially.

This was driven by an increase in average assets due to organic growth and market appreciation as well as synergies related to what Ellen REIT assets being on our platform.

Turning to client cash revenue it was $82 million down $9 million from Q3.

As anticipated this was primarily driven by a fixed rate contract maturity at the end of the third.

Looking at overall client cash balances they were 57 billion up $7 billion from last quarter.

Looking more closely at our ICA yield it was 101 basis points in Q4 unchanged from Q3.

Within our fixed rate portfolio in Q4, we added a new 500 million three year fixed contracts.

Looking ahead to Q1, we have a fixed rate maturity of $1 billion.

I'd like to highlight that we were able to renew that contract at maturity into a new four year fixed rate contracts.

So given these factors and where interest rates client rates and cash balances are today, we expect our Q1 ICA yield to decline by a few basis.

Next I want to highlight an update we made to our income statement this quarter to provide additional insight into our financials.

We separated transaction fees into two lines servicing fee and transaction.

We hope this additional transparency allows you to more clearly see the revenue generated from predominantly recurring adviser and investor based services.

Apart from our transaction.

We have provided a summary of these changes on page 12 of our key metrics presentation.

So looking at servicing fee revenue in Q4, it was $110 million up $5 million sequentially.

This was primarily driven by continued growth in business solutions revenue.

And a seasonal increase in Iowa.

Looking more closely a business solutions, we ended the quarter with over 3000 subscriptions, which is up approximately 400 from last quarter and more than double a year ago.

These services now generate roughly $28 million of annual revenue.

While also contributing to organic growth, helping drive recruiting same store sales and retention.

Looking ahead to Q1 based on typical seasonality and the growth of the business solutions, we expect servicing fee revenue to increase by a few million dollars sequentially.

Moving onto Q4 transaction.

It was $39 million up $4 million sequentially due to higher trade.

As we look ahead to Q1, we have seen an increase in trading activity in June .

That said I would note there are two fewer trading days in the quarter, so that would likely offset that increase.

So based on what we have seen to date, we would expect transaction revenue to be relatively flat with the fourth.

Now, let's turn to expenses starting with 2014.

It was $299 million in Q3.

Bringing our full year core G&A to 1.058 billion.

As expected this was near the upper end of our outlook range.

Driven by the variable expenses associated with our strong organic growth.

Looking at the full year for 2021 and prior to the impact of Waddell <unk> Reed.

We grew core G&A by approximately 8%.

Turning to our outlook for 2022.

Our long term strategy is unchanged.

We plan to continue to invest to drive organic growth and create incremental operating.

Over the last few years, we have increased our investments to drive organic.

Those investments are yielding positive results, including the highest levels of organic growth in our history.

And so as we look ahead to 2022, we plan to continue with the same approach.

More specifically, we plan to increase our core G&A in the range of seven to nine 5%, which is a similar growth rate to 2021.

I would note that these investments will be focused in two primary areas.

First to support our core business growth, including investments in technology and capabilities as well as a full year of Waddell <unk> Reed.

And second to support growth in our expanded addressable markets and to scale, our new services.

Also to give you a sense of the near term timing of the spin as we look ahead to Q1, we would expect G&A to be in the range of 280 to 285.

We will of course remain dynamic to adjust for the pace of our growth and changes in the macro.

But based on what we see today, we are excited about our opportunities to invest.

Moving onto Q4 promotional expense was $86 million up 2 million sequentially, primarily driven.

Driven by cost to support our organic growth.

Specifically transition assistance and large financial institution.

Turning to Q1, we anticipate promotional expense will increase to the low $90 million range.

Merrily driven by transition assistance.

Large financial institution, Onboarding and conference spend as we have two of our largest conferences of the year in Q1.

Now, let's move to what <unk> read the integration work is going well and remains on track to be completed by the middle of this year.

With respect to run rate EBITDA, it was roughly $70 million in Q.

Based on current asset levels and our continued progress on the integration. We now expect the run rate EBITDA benefit to be at least $90 million by the middle of 2022 up from our prior estimate of eight 5%.

Looking at share based compensation expense it was $10 million in Q4 relatively flat to Q3.

As we look ahead Q1 tends to be our highest quarter of the year given the timing of our annual stockholder.

So we anticipate this expense will increase by a few million dollars sequentially.

Turning to depreciation and amortization.

It was $41 million in Q4 up 2 million sequentially.

Looking ahead to Q1, we expect depreciation and amortization to increase by roughly $5 million sequentially.

This is primarily driven by the deployment of technology to support the integration of Waddell <unk> Reed.

As well as core technology spend to enhance our industry leading platform.

Given the nonrecurring nature of the integration spend.

<unk> Q1, we expect a more gradual rise in depreciation and amortization for the remainder of 'twenty two.

Moving on to capital management, our balance sheet remained strong in Q4, the leverage ratio at two six times.

In corporate cash of 237.

As for capital deployment, our framework remains focused on allocating capital aligned with the returns we generate.

Investing in organic growth first and foremost.

Pursuing M&A, where appropriate and returning excess capital to shareholders.

In Q4, we allocated capital to both organic growth and share repurchases buying back $50 million of our shares to roughly offset dilution.

We anticipate a similar level of share repurchases in Q1, while remaining flexible and dynamic as our capacity and opportunities to deploy capital.

In closing, we delivered another quarter of strong business and financial results as we look forward. We remain excited about the opportunities we see to continue investing to serve our advisers grow our business and create long term shareholder value with that operator. Please open the call for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one our first question comes from the line of Alex <unk> from Goldman Sachs. Your question. Please.

Hey, good evening guys. Thanks for taking the question. So maybe we'll start with organic growth.

Wisely Super strong and through the year, obviously wrapping up a good year for you guys from an add new assays and recruiting perspective given the.

Sort of a changing macro backdrop with both more equity market volatility and obviously down equity markets year to date, but rising rate dynamics I'm curious, how you think that will impact our recruiting and sort of the broader competitive landscape. So.

Are we likely to see Fas being sort of more reluctant to move given the sharp move down in the asset values are.

Are they likely to be more competition, because again people are more profitable. So that maybe you can afford to pay a little more so hoping you can sort of flush out how that plays into your organic growth outlook into next year.

Yes.

Dan Thanks for the question.

So look.

We always look at sort of the structural opportunities first and foremost.

<unk> organic growth.

As we stated in our remarks, you've got new store sales same store sales.

Certainly retention as it relates to new.

New store sales again, I think the flexibility and optionality around our model continued investment differentiation.

And the capabilities out of our platform.

And then.

Using our.

Rate driven sort of underwriting process, we think that is a really appealing combination.

That continues to create that sort of structural differentiation out in the marketplace. As we go forward and I think that drives.

The primary sort of activity and results at the end of the day up to your point certainly you have to overlay.

Some market conditions that may influence that overall trajectory in the short run.

There are cases to where you could have.

Significant.

Market displacement.

It could occur that.

Good.

Temporarily disrupt the overall trend of opportunity out in the marketplace I advisors aren't moving as much because they are focused on.

Those market conditions, and serving and supporting their clients.

And we've certainly seen that historically in the past up to this point the volatility that we're seeing in the early part of the year I think is more aligned with sort of what we played in the last couple of years and so we're not seeing.

Thus for some outsized impact or disruption in the overall movement out in the marketplace.

Do think there is an overall as we noted in our remarks, a bit slower movement in certain parts of the industry, but again don't see necessarily thus far the macro influencing that that's always subject to change something.

Dramatic should shift as we move forward and I think with respect to interest rates youre, suggesting.

Theres greater economics built into recruiting how does that influence.

In addition assistance indoor financial incentives and again, we've seen no reflection of changing in the underwriting across the marketplace.

We continue to use a return based approach to that concept and bacterin certainly.

I think the characteristics of our overall economics factored in with the macro and so again, we haven't seen any shift at this point.

Overall.

Pricing out in the marketplace from cost of acquisition I don't know if you want to add into that.

Melissa.

Alright, thanks for that color.

A follow up for Matt maybe.

Why don't we start with Waddell.

Great to see the guide increase to $90 million plus.

From from previous can you, maybe expand a little bit of what the plus depends on again as that market related so asset levels and rates.

Or are you seeing potential for sort of incremental synergies, whether it's on the revenue side or the expense side. So just maybe a little more color of what could drive the upside there. Thanks, yeah. It does.

Absolutely I think as we move towards completing the integration by the middle of this year. The work. That's really left is really on the expense synergy side.

So as we complete that work I think the pluses that we ended up getting more synergies than expected.

So it's kind of a small part of the work is left.

And I think thats, where the upside of that.

Great. Thanks very much.

Thank you. Our next question comes from the line of Bill Katz from Citigroup. Your question. Please.

Okay. Thank you very much for taking the questions and all the added color and disclosure is super helpful.

So Tim maybe a question for you it seems like from your commentary that the momentum is accelerating across the pipeline. So one clarification was that also in that the larger size of the financial institution group that is for the group you have historically not been able to go after that 300 billion, but more broadly can you just talk about what what's resonating in the marketplace as.

Obviously, Europe organic growth accelerating thank you.

Yes, Thanks Bill.

So yes look organic growth is a key part of our strategy as we've talked about in state.

State.

Very intentional and focused on how do we deliver those results.

I think if you think about our growth going forward.

Perhaps if you look at the last couple of years as a framework for that you've got 7% growth in 2020, and 13% growth in 2021.

And those are probably pretty nice bookings as a way to think about a range of potential growth.

Over the long run or as we go forward, obviously as we've talked about in the last question macro conditions at any point in time that influence that overall opportunity set.

I think bill what we do to drive that to get specifically to the second part of your question is.

<unk> to look at investing in our traditional markets growing appeal of those markets drives.

<unk> new store sales growth.

And continues to keep retention in that 2% range, we've talked about before and we believe that investing in capabilities that help.

Those advisers differentiate and win out in the marketplace is key to that so think about that is focused number one I think second expanding and accelerating the growth in our new markets.

You said it we see continued momentum building there some of that was a go to market with new to the marketplace. We continue to iterate and refine those models to make sure.

They are well positioned and appealing as they can be and create the value that they should with those different.

Segments of the marketplace, and we're seeing that versatility and flexibility ultimately open up new opportunities and frankly, it's even helping advisors and our existing platform, who have one model and essentially we're thinking about transition to another.

Staying on our platform because we have that flexibility now and so we do see continued momentum there.

We've gotten off to a good start here in Q1 relative to.

The.

Strategic wealth solutions as an example.

<unk> continued growing contribution from those new markets and financial institutions, what I was referring to as large financial institutions as being somewhat of a new market for us it wasn't a place that we always.

Looked at for opportunity I don't think we had demonstrated being able to bring a new solution to the marketplace that resonated and was actually a different context at sort of solution for that segment of the marketplace and I think through a couple of the wins that we've had it has helped us learn and understand.

Fine and ultimately see that segment of the marketplace as a more sustainable Avenue for growth and for contribution to come. So that's the way to think about the large financial institution markets. If that's helpful. And then finally the last one is helping our existing advisors grow and they've certainly done a great.

Job of that over the last couple of years in tough markets and we continue to see opportunity to invest to help them.

Differentiate their advice expand thereby solve new problems for clients and.

And generate net new assets from that so.

Those are the primary sort of drivers underneath that growth and I think if you tried to apply all of that to 2022 as we think about this year knowing that a large financial institution is onboarding and tuna.

In the first half of the year, we believe we're in the upper half range.

Hum.

Of that 7% to 13% so hopefully that gives you some helpful.

That does thank you very much and just a follow up for Matt.

Maybe something so just play Devil's advocate for a moment if your rate guidance is correct and.

Forget rates hopefully we will.

And get a four 5% rate hikes. This year all else being equal your guidance would suggest about $2 50, a share of incremental earnings power just based on page 16 of the supplement. So if you assume that your recruitment remains solid but your organic growth is bookended here. How do you think about deploying that incremental cash and maybe you can speak to.

To the M&A pipeline versus buyback at the margins for your choices.

Yeah sure Bill I'll take that one I think when you look at our plans for the year.

You see those wells in the core G&A, specifically in the 7% to nine 5% range.

I think the primary driver of where that's going to land I think really is the level of organic growth and I think Dan just gave you some nice <unk>.

Range of outcomes and opportunity set that we see there.

But really interest rates, we don't see that driving that this year I think when you look early in a rate cycle that those increases in those benefits would typically fall to the bottom line and improve margins.

So so as we look beyond that and apply those excess funds to your question to our capital allocation.

<unk> I think that the approach that we've taken in the past is really the same framework that we have today and I think that will guide us in.

It's back first and foremost to looking at opportunities to drive more organic growth right. It could be things like new capabilities for advisors.

Things like in further enhancing the service experience.

Handing services to help advisers run their business.

As a few examples I.

I think to your question on the M&A front I think there is two categories of opportunities. There I think that's a place where you can accelerate the delivery of capabilities through M&A, we have done.

A few small acquisitions there.

And then the more call it standard of classic growth acquisitions as long as the returns are compelling, which obviously is key.

And then lastly, returning capital to shareholders, which we also see as a compelling way to deploy capital.

We're going to remain flexible.

And adjust if needed and to your point as we go through this year.

With expected rate increases incurring I think we will.

Apply those funds at that time to our framework.

Until it makes no sense at that time.

Okay. Thank you.

Thank you. Our next question comes from line of Steven <unk> from Wolfe Research. Your question. Please.

And Matt good evening.

So.

Wanted to start with a question on rate Optionality, Matt since your rate sensitivity disclosure the $310 million increase in gross profit from four hikes and is based on a static balance sheet and I was hoping to unpack some of the sources of rate upside that maybe aren't captured in that figure and in particular with money market balances running it.

Elevated levels.

Was wondering how we should be thinking about both the capacity and timing to move money fund balances back into ICA as the fed begins hiking and with signs that bank demand is also coming back for both floating and fixed rate agreements a bit sooner than we were expecting how should we be thinking about the glide path to getting back to that fixed target range of 50% to 75%.

Yeah. So great question, Steve and I think when you look at the money market balances and the money market overflow.

And I think we put it in font size that folks are my age, it's even hard to see but I think you'll see a footnote there if those balances go back into.

That would be an additional $30 million upside for a rate hike.

Overall balances. So just gives you a sense of it.

Demand does come back to the market and those overflow balances move it gives you a sense of.

Okay.

I think where that market stands and I think you started to hint at it well in your question I think where we sit today the market and therefore, the ability to do that Hasnt really changed much I'd say if anything.

It's improved a little.

I think when you look at the things that would drive that we're starting to see some positive signs right consumer spending continuing to increase.

Loan balances starting to grow off their lows at the big lenders and then the.

The biggest factor of all the fat right not only talking about raising interest rates and tapering, but actually talking about shrinking the balance sheet their balance sheet and those are the things that if all that occurs I think really removes a lot of liquidity from the system and then we're naturally in a place to be a provider of that but so it feels like the winds are blowing in the right direction.

Things haven't really moved much yet.

Would highlight some some things we were able to do in the quarter like on the floating rate side, we are seeing pricing in the fed funds plus five zone, where I think you were flat to negative when you think about more last year and then on the fixed rate side, we're able to add a new contract this quarter the half a billion that I talked about in the prepared remarks and.

And.

Maturity, that's upcoming in Q1 were able to renew that into a new four year contract at 140 basis.

We haven't had that rate I think since February pre COVID-19 .

So the.

The market I think remains challenging, but I think theres a lot of good signs.

That if those things play out it would it would improve and I think pulling that through to the last part of your question is how does that.

Fit into us getting to the 50% to 75% target range of the fixed fixed rate portfolio I.

I think I'd just emphasize that remains our target we're sitting at 25% now I think in periods of low interest rates like we are in now if demand is there we would probably want to stay shorter and closer to that 50%.

And if rates are much higher with a steep curve, we want to be closer to 75, and I think right now the limiting factor. There is more just the demand itself, which as I just commented on which is why right. So.

Hopefully that helps and I think I got I think it was a three part or Steve and I think I got them all.

It was actually a two part or Matt.

Okay.

We're looking to push with a related follow up but it will be related rest assure just on cash balance growth expectations.

You are entering the coming cycle with cash as a percentage of assets relatively close to the 4% floor that you had spoken to previously and that's before the fed has even started tightening or where we would typically expect to see some signs of cash sorting as you noted in response to my earlier question or multi part questions. So given the strong organic.

Growth that you're generating and just the need for advisers to maintain some minimum level of liquidity should we still view that 4% is a reasonable floor on cash which.

All else being equal would imply sustained growth.

And cash balances at least in the mid to high single digit range, even as the fed begins to tighten.

<unk> tightened this year.

Yes, I think the short answer is yes, I mean, I think when we look at the dynamics of this cash right, which is operational cash rate for rebalancing or waiting investment I don't think we've seen anything change in how advisors give advice the dynamics of that rebalancing and trading that would cause us to have a different view, so I think 4%.

This is a good way to think about.

Florida now that doesn't mean, three nine as a problem and the possibility, but I think when you think about it as a range I think 4% is still the percentage I think.

That's great color, Matt. Thanks, so much for taking my questions.

Yes.

Thank you. Our next question comes from the line of Michael Cyprus from Morgan Stanley . Your question. Please.

Okay, just wanted to follow up a little bit there just on those overflow balances.

So the point on the last question just in a rising rate environment I guess.

What are the prospects do you think for those overflow ICA and overflow money fund balances to come back into an ICA floating what really needs to happen and how to rising rates impact the likelihood the possibility and the timing for that to play out.

Yes sure. So Michael this is what we were just talking about I think that.

The mechanics are demand really returning to the market.

So then you put down and say what are the things that would cause that demand to return.

And it's things that removes the excess cash off of the banks that we will be placing that suite too right. So that's consumer spending going up that's loan balances on those balance sheets going up and then the big factor when you look at the fed and the cash that it's injected into the system ultimately it makes its way onto the balance sheets of those large financial institutions.

That we place our sweep width.

So it's really all connected it's as simple as that as demand returns.

The mechanics of an overflow or when there's capacity in ICA. It goes back.

Great and then just a follow up question on the expense front you guys had flagged.

A more elevated promotional expense in the first quarter here just given some of the seasonality, but I was hoping you might be able to unpack what pieces of that come out as we go into the latter half of this year, how you see that trending.

It's teeny additional conference is how do you see that trending.

Yeah, sure and maybe just to hit again.

The Q1 numbers that when you look at the Q1 promotional expense. The key thing that I would highlight is it's really a function of our conference schedule.

And then when you look at 2021, if you recall, we had our conferences entirely in the second half of the year given given the COVID-19 environment.

This year, it's going to be a more typical schedule with.

With conference expense showing up primarily in Q1 and Q3.

That's probably the main maybe Tim you can intuitively see right. The remaining drivers are all just connected to growth.

The typical ta and the related amortization that comes from that.

As well as the cost to support the large financial institutions that we've talked a bit about here <unk> and BMO and then as we begin to support <unk>.

For Qunar.

So as we get deeper into the year and maybe just to think about the full year right just giving you. The context on Q1, we think about the full year. It's really similar drivers right. The biggest driver is typically organic growth the pace of that in the ta and associated amortization that shows up.

When that recruiting happens as Dan highlighted earlier that the rates haven't really changed for that those have been quite stable. So I think that the key driver there is going to be really the level of recruiting that we have.

On the conference front for the year, we're really planning to occur.

Return to in person events right, so that would likely bring our conference spend for the year back to pre COVID-19 levels.

I would estimate that around a $20 million increase for the full year 'twenty two versus full year 'twenty one.

And then lastly, the onboarding.

Expenses associated with Q&A right similar to FMT and BMO in 'twenty. One we will have those expenses in 'twenty. Two so those are really the three biggest drivers.

Great. Thank you.

Thank you. Our next question comes from the line of Kyle Voigt from <unk>. Your question. Please.

Hi, good evening.

Maybe first just a follow up question on the cash balance.

Meaningful cash bold in December that you saw just wondering if you could share any information on whether those cash balances have been.

Sticky thus far in January .

Or are you seeing those kind of flow back into the market.

Yes, we would typically see that happen right you get it you get a normal build in the fourth quarter of each year and you start to see those balances go back into the market in the first few months of the year.

But with all the volatility we've seen this year and in this January we've actually seen our cash balances continue to build so they are up about another $1 billion.

For the month of January .

I would emphasize though I think when volatility falls and things get back to normal whatever you are still finishing a normal is I think we would expect to see that cash start to go back into the market. It's a lot of tax positioning tax planning that you see in December a lot of dividends and interest that come in so it is very natural for that to get deployed back into the market and the <unk>.

Okay.

Okay. That's helpful.

And then my second question is just one more on the D&A guidance.

Dave.

Commentary on the first quarter and being up 5 million and a gradual increase from there I think that implies something like.

Like all of our 20% increase versus 2021, I'm just trying to get a sense for if you look out over the medium term.

And maybe it's a question more for the Capex side of the business are you comfortable I guess with the level of spend on the Capex side and if you could just.

Go into a little bit more detail on the drivers of the increase this year that would be helpful.

Yes, yes, definitely I think when you look at our core technology portfolio investments, there, which is driving that increase we've been increasing that around 8% per year for a while and we plan to do the same in 2022.

I think what you are seeing the big pickup is really the technology associated with.

Integrating and Onboarding Waddell <unk> Reed and we had a big deployment in that area in the fourth quarter on that then is going to lead to that depreciation increasing in Q1, So I think the yes.

The increase that may not make intuitive sense is really connected with the acquisition we.

We factor those costs into the overall multiple which you can see in the materials. We estimate at four five times. So it's really the core portfolio growing at 8% I think is think about that is the ongoing run rate.

Got it thank you.

Thank you. Our next question comes from the line of Gerry O'hara from Jefferies. Your question. Please.

Great. Thanks.

Just one from me this evening.

Clearly some strong momentum as it relates to the business solutions side.

And apologies if I missed it but.

What can you give us a little context about what's really resonating as it relates to the 400 incremental new subscriptions or perhaps what you see kind of on the come into into 2022, and then also can.

Can you help us maybe tie together, what the with the investment and spend looks like as it relates to the growth of these business solutions.

If that's part of that kind of core G&A number or if it shows up elsewhere any sort of color or context, I think it would be helpful. Thank you.

But I think part of it.

Matt.

Hey, Thanks for the question and look with respect to business solutions.

Just as a bit of a complex will remember that was it.

An opportunity originally around the site.

How do we help advisers not only the right advisors.

Help them one private businesses.

We knew there was a significant amount of local levels spend that advisors health.

Health.

Anything.

Counting the bookkeeping.

Some sort of cash flow analysis marketing support the tech support.

All the things that you would think about running.

More.

Our entrepreneurial smaller midsized business and so that was our original hypothesis and so as we've gotten in and continue to learn and serve and support them through CFO solution, our marketing solution and our admin solution I think those fundamentally and structurally resonate.

And the needs that they have.

Associated with those types of roles resonate within what we've learned along the way, though was theres also discrete problems, we can solve that.

CFO .

And we've been able to come up with sort of second generation products, if you will across CFO and marketing landscape and expand product offerings.

Do you have different price points that make those services more and more accessible to more and more advisers and so we will continue to innovate around what I would call the business services.

And think there is a significant room for opportunity.

As you look out over.

Hi.

So those would be.

Again, I think our view.

The interesting not only in the fundamental core initial offering multiple generations.

Alright.

And I think at the same time as we've been innovating and working on those types of solutions.

And more and more about new ways.

Things that advisers, who are trying to solve for.

That's where we came up with help with succession planning around assurance. So we're.

M&A solutions.

Born out of how we think about succession planning and selling my business.

In advisory oriented buying a business and we realized those obstacles and opportunities.

Do we could come in with some expertise and leverage helped execute around that.

Possible so.

Solving specifically again around how do I grow in thinking.

Succession planning has been valuable areas of innovation.

Hi.

Okay.

I think as we go forward what we've also unlocked as a new category of opportunity, where we are focused on helping them be great business owners now we've unlocked this opportunity where they may share Hey, look I want to provide a broader base of financial planning across my entire client base.

Leverage to do that but that's time consuming or do so again this concept.

Sure.

Do the plans for them to position them than to go build the financial strategy we.

<unk>.

<unk>.

So this is unlocked this whole new category of.

Helping them expand and broaden.

With its comprehensive advice, which just makes them.

More appealing and differentiated from other options out marketplace.

I hope.

So that's.

Opportunity set as we move forward with respect to the business.

And to some degree some of the initial product and it helps us get where we are.

And I hope that helps.

Hey, Jerry on the second part of your question on the cost front I mean, the headline is that the costs are included in our core G&A included in core G&A guidance for 2022, 7% to nine 5% range.

It would include the cost of scale.

Our new services and specifically business solutions.

Correct.

Okay, Thanks, and I actually I, just had one sort of I guess small follow up.

Perhaps.

Somewhat of a small point, but the interest rate sensitivity page.

If I kind of compare this quarter over quarter. It looks like cash balances went up but the incremental benefit from the next four rate hikes went down granted it's a modest amount.

Perhaps you have already touched on it with some of the prior questions. So I apologize, but can you just maybe flush that out a little I would've maybe expected it to go the other way.

Yes, yes, I mean, I think it changed a little bit I think the key is you saw the growth in those overflow balances of money market and actually a slight decline in ICA.

So while the sensitivities that are front and center in those bar charts went down a little bit if you look at that footnote or the benefit associated with if and when those money market over close to go back and ICA that actually went up right.

It shows up in a couple of different places, but there is just a mix because we calculate those based on where we are at the end of quarter.

Got it that's helpful. Thanks, Matt Thanks, guys.

Thank you. Our next question comes from the line of Brennan Hawken from UBS. Your question. Please.

Hey, good evening, Thanks for taking my question.

Swf's wins have really been impressive you got over 20 on the board at this point.

So far what's been the feedback as you've built this.

This offering out.

From advisers that you've on boarded and are there any ways in which based on that feedback you're tweaking, the offering or making adjustments in order to make it even more compelling.

I think the question and we are encouraged by.

The offering in the marketplace.

Okay.

<unk>.

We probably when we first went to market with the solution I think we've done with research institutes insights I'll, let them.

Solid offering but its people get in and begin to use that solution. You. Obviously begin to learn opportunities are probably creating some.

Additional digital workflows that help them.

Yes.

Inside the practices, which have been good feedback and learnings for us continuing to more fully integrate some of our banking solutions.

There's another feedback that we've gotten that we've been working on to do that we think makes the solution.

We're feeling I think some of our high net worth solutions that we're working on.

We have also been they've been a good source of feedback there to help us refine.

So those are maybe some categories to think about where we both made some improvements and continue to work through an enhanced model, but I think foundation as you think about $85, 90% of the core solution and the feedback we're getting and the NPS scores that were getting from this group it would reflect.

A good solid offering delivering on what they had hoped which is to help the transition to an independent practice and the ongoing support operating model.

Festival independent so we feel good about where we are and continue to take that feedback and apply it to.

Awesome.

Alright that makes sense. Thanks, thanks for that color.

And then just one follow up Matt on promotional expense and you spoke to the.

To this to some degree so it might be embedded within the prior answer but.

When we look at the pickup in promotional from <unk> into.

$190 that you expect next quarter. It was my understanding that we had a conference. So you guys had a conference in the fourth quarter. So I would think that would be like for like so is the delta quarter over quarter really just purely the other factors the ta and maybe a bit of a step up in the in the Qunar.

On boarding.

Or is it part of that embedded $20 million increase in the in person conferences.

Coming larger and then maybe the fourth quarter was a little smaller.

Understanding some of the complexion, there would be helpful. Yes.

Yeah definitely and it's.

Where you just ended the question. So it's a combination of we've got two large two of our largest conferences in Q1.

Correct.

Large conferences in Q4 as well, but you now have more of an in person expectations you have overall, a little bit of increase in conferences.

And then all the growth items.

Subscribed, so it's a little bit about great.

Great Thanks for that.

Thank you. Our next question comes from the line of Michael Young from two Securities. Your question. Please.

Hey, Thanks for taking the question wanted to follow up on the business solutions portion of the business again.

Good to see you get up to 3000 subscriptions another year of kind of doubling that.

Is there any reason why we shouldnt expect that to continue to double or even more than double I mean are we accelerating there or just any thoughts along that kind of pace of growth, especially with the new product additions will be helpful.

Yeah, I think you should think about that is the ongoing similar momentum that you've seen over the last year.

With a bigger base requires obviously more incremental growth to create a doubling effect. If you will but I do think that we become better at offering these products. We've refined the existing version of the product new products coming out.

Contribute to subscription growth.

And and again, we continue to try to refine our approach and if we see opportunity or we have gaps to fill in in certain pivot and make those investments along the way, but I think the consistent sort of trajectory that we're on now.

Feels like the best way to describe how we think about it over.

Okay.

A follow up sorry, I apologize for switching gears here, but just on the financial institution side of the business.

BMO <unk> last year, you got kuna. This year just from a capacity standpoint, I mean would you all be able to announce additional partnerships this year.

How soon would you be prepared to actually execute fallen kuna and given kind of the splashes that you've made in that market recently with the size of the deals are you having more conversations today than maybe a year ago regarding partnerships there.

So let me go in reverse order, we are having more dialogue.

Around the possibilities.

Serving are supporting larger financial.

Institutions also.

Larger set institutions.

Categories.

So that creates more dialogue and more opportunities.

With respect to the planning around these I think we've got thoughtful and diligent around not just thinking about <unk>.

Those deals, but making sure that we execute well behind them.

And you've got to be thoughtful about your funnel and the pacing of that these are also longer sales cycles.

Theyre more complex then.

Our typical other business development efforts and activity.

So without giving you a perfect timeline I think we have to be thoughtful and factor in our ability to execute matched with that demand and opportunity.

And then and then plan those out so that we execute them well. It's also work on the other side with these institutions to work through and think through doing that and so they also have their own.

Execution limitations, if you will that we've got to collaborate and partner up with them.

And so without giving you some specific timeframe around when some next deal may come I think we have active.

Dialog going on with a broader set of prospects and then we will factor in their ability to execute our ability to execute in time those in a way that.

Makes sense.

Doing that well.

Okay. Thanks.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Dan Arnold for any further remarks.

Yes, I just wanted to thank everyone for taking the time to join US. This afternoon, and we look forward to speaking with you again next time.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

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Yes.

Yes.

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Yes.

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Good afternoon, and thank you for joining our fourth quarter 2021 earnings conference call for LPL Financial Holdings, Inc. The call today are our president and Chief Executive Officer, Dan Arnold and Chief Financial Officer, Matt Audette.

Dan will offer introductory remarks, and then the call will be opened for questions. The company would appreciate if analysts would limit themselves to one question and one follow up each.

Posted its earnings press release, and supplementary information on the Investor Relations section of the company's website Investor Dot L. P. L dotcom.

Today's call will include forward looking statements, including statements about LPL financial's future financial and operating results outlook business strategies and plans as well as other opportunities and potential risks and manage that.

That management foresees such forward looking statements reflect management's current estimates or beliefs and are subject to known and unknown risks and uncertainties that may cause actual results or the timing of events to differ materially from those expressed or implied in such forward looking statements for more information about.

Such risks and uncertainties. The company refers listeners to the measures set forth under the caption forward looking statements in the earnings press release as well as the risk factors and other disclosures contained in the company's recent filings with the Securities and Exchange Commission during the call. The company will also discuss certain.

non-GAAP financial measures for a reconciliation of such non-GAAP financial measures to the comparable GAAP figures. Please refer to the company's earnings release, which can be found at investor Dot LPL dot com with that I'll turn the call over to Mr. Arnold.

Thank you Jonathan and thanks to everyone for joining our call today.

Over the past quarter and throughout 2021, our advisors continue to provide our clients with personalized financial guidance on the journey to help them achieve their life goals and dreams.

And at the same time, we remain focused on our mission.

And care of our advisers, so they can take care of their clients.

This combination positions us to deliver another quarter and year solid results, while continuing to make progress on our strategic plan.

To review both of these areas starting with our fourth quarter business results.

In the quarter total assets reached a new high of $1, two which was up approximately 300 billion or 34% a year ago.

This increase was primarily driven by continued organic growth our acquisition of Waddell <unk> Reed's wealth management business and complemented by equity market.

With respect to organic growth fourth quarter net new assets were 26 billion, which translated to 9% annualized growth.

Driven by continued strength across new store sales same store sales and retention.

Over the past year organic net new assets totaled 119 billion or 13% organic growth.

Up from 7% a year ago.

In the fourth quarter recruited assets were 17 basis, bringing our full year total to 89.

Which is more than double a year ago.

Our continued growth and recruited assets reflects our ongoing progress with enhancing the appeal of our model and expanding our addressable market.

Looking at same store sales with the backdrop of a continued strong investor engagement, our advisers remain focused on serving their clients and differentiating their solutions.

Yes.

As a result advisors of both winning new clients and expanding wallet share with existing.

The combination that continued to drive solid same store sales.

At the same time, we further enhanced the advisor experience through the continued delivery of new capabilities and technology as well as the ongoing modernization of our service and operations.

As a result asset retention was approximately 98% in the fourth quarter and over the past year.

Our fourth quarter business results led to solid financial out.

With a $1 63 of EPS prior to intangibles and the acquisition cost, which brought our full year totaled $7 <unk>.

An increase of 9% a year ago.

Let's now turn to the progress we've made on our strategic.

As a reminder, our long term vision is to become the leader across the entire advisor centered market.

Which for us means being the best at empowering advisors to deliver great advice to their clients and to be great operators of their business.

Bring this vision to life, we are providing the capabilities and solutions that help our advisors to deliver personalized advice and planning experiences to their clients.

And at the same time through human driven technology enabled solutions and expertise, we're supporting advisers and their efforts to be extraordinary.

Doing this well gives us is available path with industry leadership across the advisor experience organic growth and market share.

Now to execute on our strategy, we have organized our work with four strategic plays which I'd like to review and term.

Our first strategic play involves meeting advisors and institutions, where they are in the evolution of their business.

Winning in our traditional markets, while also leveraging new affiliation models to expand our addressable market.

In our traditional markets fourth quarter recruiting continues to be a significant source of growth.

With a new high of approximately $15 billion in assets.

Ongoing enhancements to our platform and the efficacy of our business development team continued to increase our win rates and expand the depth and breadth of our pipe.

Despite advisor movement in the industry remaining at lower levels.

With respect to our new affiliation models strategic well employ in our enhanced custody.

Custody offering we recruited approximately $2 billion in assets.

And in each of these three models, we continue to see growing demand and expanding.

Which position them going forward for increased contributions to organic.

Large financial institutions, where a new source of recruiting in 2021 with the addition of BMO Harris and <unk> and we will continue to contribute this year with the planned Onboarding up unit.

Our insights and progress over the last 18 months.

Have led to the continued enhancement of our value proposition and consequently, our demand.

And pipeline in this market continue to bill.

Given our experience and more seasoned view from this work, we see large financial institutions as a more accessible market opportunity for us and another new and distinct affiliation model that can drive sustainable organic growth over time.

Our second strategic play is focused on providing capabilities that help our advisers differentiate in the marketplace and drive efficiency in their practice.

2022, we will maintain our focus on developing capabilities and solutions in three key areas. The first is to enrich the end client experience with expanded digital solutions that increase personalization and self service and enable advisors to create customized experiences where their business.

Second we will continue to enhance our wealth management platform to help advisors provide their clients with differentiated advice products and pricing.

We will continue to advance client works our core operating platform.

With the digital with additional digitized workflows to help advisors operate more efficiently and increase the scale ability to serve.

All of which contributes to enhanced performance.

We believe these evolving capabilities will help drive increased advisor growth productivity.

Thanks.

Let's next move to our third strategic play which.

Which is focused on creating an industry, leading service experience that delights advisors and their clients and in turn helps.

Helps drive advisor recruiting and retention.

As a reminder, over the past two years, we have transformed our service model into an omnichannel client care model.

<unk> voice chat digital support.

Giving advisers flexibility, where when and how they access our.

In 2022, we will continue to fine tune this model to drive additional efficiency.

And an enhanced experience for our advisers.

But this year, we will also advance to the next phase of our transformation, which is the streamlining and automation of our back office operations.

We will leverage six sigma process optimization, and robotics and machine learning to reengineer, our core clearing functions, including new account opening transfers with money.

These efforts will increase speed and accuracy for advisors and their clients.

In the future we plan to extend this transformation from the service and operations organization, the trading and compliance.

Doing so better positions us to create frictionless efficient processes throughout our operated.

The enhanced service levels, the light advisors and increased scalability and efficiency.

Our fourth strategic play is focused on helping advisers run the most successful businesses in the independent market.

One of the key components of display as our portfolio of business solutions, which helps advisors more effectively operate the businesses. So they can focus on serving our clients and growing their practices.

In the fourth quarter, our subscription base continued to grow more than doubling year over year to approximately 3000.

Demonstrating increasing demand and appeal.

And while working with advisors on evolving our suite of business solutions, we identified a new category of opportunity that will help advisers more efficiently and effectively deliver comprehensive financial advice and planning centers.

And to help solve for this need we are innovating on services that provide expertise and leverage to do this planning in a scalable way across their entire client base are.

And our first offering in this area era.

Which is a service that builds financial plans for advisors.

And then in turn utilize them to establish an investment strategy to help clients achieve their goals.

Holden objective.

This service launched last month and is receiving positive early feedback and engagement in the marketplace. We're also incubating other solutions, including X planning and high networks.

As we look ahead, we remain focused on innovating and expanding our services.

To help advisers run strawberry businesses and provide differentiated planning and advice for their clients.

And in turn drive gross profit.

Organic growth over time.

In summary in the fourth quarter and throughout the year, we continued to invest in the value proposition for advisers and their form.

While driving growth and increasing our market.

As we look ahead, we remain focused on executing our strategy to help our advisors further differentiate in the marketplace and as a result drive long term shareholder value.

With that I'll turn the call over to alright.

Alright, Thank you, Dan and I'm glad to speak with everyone on today's call.

Before I review, our fourth quarter results I'd like to highlight our progress during 2021.

Looking at the year, we are proud of what we accomplished within our framework for driving long term shareholder value.

We entered 2021 with momentum as we grew assets organically in both our traditional and new markets.

And successfully on boarded what Ellen Reed Dino NMC.

All while continuing to invest to provide an industry leading value proposition for our advisors to serve their clients and win in the marketplace.

This commitment to enhancing the support we provide our advisors resulted in the highest level of organic net new assets in our history.

By leveraging the investments in our platform.

And the financial strength, we built over the last several years, we again into the new year with positive momentum.

Now, let's turn to our fourth quarter business results total advisory and brokerage assets increased to a new high of $1 two trillion up 7% from Q3.

The key driver of this increase was organic growth, which totaled 26 billion or 9% annualized growth rate.

For the full year organic net new assets were $119 billion.

Which translates to a 13% annualized growth rate up from 7% a year ago.

This was driven by strength across all three channels of growth.

Recruiting same store sales and retention.

Looking more closely at recruiting in Q4 recruited assets were $17 billion, which brought our 12 month total to a new high of $89.

Moving onto our business mix, we continue to see positive trends in Q.

Advisory net new assets were $24 billion were 16% annualized growth rate.

With this growth our advisory assets are now 53% of total assets as we continue to deliver differentiated capabilities and benefit from the secular trend towards adviser.

Now, let's turn to our Q4 financial results strong organic growth combined with expense discipline led to EPS prior to intangibles and acquisition costs of $1 63.

Which brought our full year total to $7 <unk> up 9% from a year ago.

Looking at our top line growth gross profit reached a new high $643 million.

Up $12 million or 2% sequentially.

Looking at the components Commission and advisory fees net of payout were $200 million.

Down 2 million from Q3, primarily.

Primarily driven by the seasonal increase in production.

In Q4, our payout ratio was 87, 6%.

Up about 45 basis points from Q3, primarily due to the seasonal build in the production.

Looking ahead to Q1, a reminder, that the production bonus reset at the beginning of each year.

So we anticipate our payout ratio will decline to approximately 86, 5%.

Moving on to asset based revenues.

Sponsor revenue was $220 million in Q4 up 9 million sequentially.

This was driven by an increase in average assets due to organic growth and market appreciation as well as synergies related to what Ellen REIT assets being on a cloud.

Turning to client cash revenue it was $82 million down 9 million from Q3.

As anticipated this was primarily driven by a fixed rate contract maturity at the end of the third.

Looking at overall client cash balances they were 57 billion up $7 billion from last quarter.

Looking more closely at our ICA yield it was 101 basis points in Q4 unchanged from Q3.

Within our fixed rate portfolio in Q4, we added a new 500 million three year fixed contracts.

Looking ahead to Q1, we have a fixed rate maturity of $1 billion.

I'd like to highlight that we were able to renew that contract at maturity into a new four year fixed rate contract.

So given these factors and where interest rates client rates and cash balances are today, we expect our Q1 ICA yield to decline by a few basis.

Next I want to highlight an update we made to our income statement this quarter to provide additional insight into our financials.

We separated transaction fees into two lines servicing fee and transaction.

We hope this additional transparency allows you to more clearly see the revenue generated from predominantly recurring adviser and investor based services.

Apart from our transaction.

We have provided a summary of these changes on page 12 of our key metrics presentation.

So looking at servicing fee revenue in Q4, it was $110 million up $5 million sequentially.

This was primarily driven by continued growth in business solutions revenue.

And a seasonal increase in Iowa.

Looking more closely at business solutions, we ended the quarter with over 3000 subscriptions, which is up approximately 400 from last quarter and more than double a year ago.

These services now generate roughly $28 million of annual revenue.

While also contributing to organic growth by helping drive recruiting same store sales and retention.

Looking ahead to Q1 based on typical seasonality and the growth of the business solutions, we expect servicing fee revenue to increase by a few million dollars sequentially.

Moving onto Q4 transaction.

It was $39 million up 4 million sequentially due to higher trading.

As we look ahead to Q1, we have seen an increase in trading activity in June .

That said I would note there are two fewer trading days in the quarter.

That would likely offset that increase.

So based on what we've seen to date, we would expect transaction revenue to be relatively flat.

Now, let's turn to expenses starting with 2014.

It was $299 million in Q.

Bringing our full year core G&A to 1.058 billion.

As expected this was near the upper end of our outlook range drill.

Driven by the variable expenses associated with our strong organic growth.

Looking at the full year for 2021 and prior to the impact of Waddell <unk> Reed.

We grew core G&A by approximately 8%.

Turning to our outlook for 2022.

Our long term strategy is unchanged.

We plan to continue to invest to drive organic growth and create incremental operating.

Over the last few years, we have increased our investments to drive organic.

Those investments are yielding positive results, including the highest levels of organic growth in our history.

And so as we look ahead to 2022, we plan to continue with the same approach.

More specifically, we plan to increase our core G&A in the range of seven to nine 5%, which is a similar growth rate to 2021.

I would note that these investments will be focused in two primary areas.

First to support our core business growth, including investments in technology and capabilities as well as a full year of Waddell <unk> Reed.

And second to support growth in our expanded addressable market and to scale, our new services.

Also to give you a sense of the near term timing of this spend as we look ahead to Q1, we would expect G&A to be in the range of 280 to 285.

We will of course remain dynamic to adjust for the pace of our growth and changes in the macro.

But based on what we see today, we are excited about our opportunities to invest.

Moving onto Q4 promotional expense was $86 million up 2 million sequentially.

Merrily driven by cost to support our organic growth.

Specifically transition assistance and large financial institution.

Turning to Q1, we anticipate promotional expense will increase to the low $90 million range, primarily driven.

Driven by transition assistance.

Large financial institution Onboarding and conference spent as we have two of our largest conferences of the year in Q1.

Now, let's move to what <unk> read the integration work is going well and remains on track to be completed by the middle of this year.

With respect to run rate EBITDA, it was roughly $70 million in Q.

Based on current asset levels and our continued progress on the integration. We now expect the run rate EBITDA benefit to be at least $90 million by the middle of 2022 up from our prior estimate of eight 5%.

Looking at share based compensation expense it was $10 million in Q4 relatively flat to Q3.

As we look ahead Q1 tends to be our highest quarter of the year given the timing of our annual cycle.

So we anticipate this expense will increase by a few million dollars sequentially.

Turning to depreciation and amortization.

Was $41 million in Q4 up 2 million sequentially.

Looking ahead to Q1, we expect depreciation and amortization to increase by roughly $5 million sequentially.

This is primarily driven by the deployment of technology to support the integration of Waddell <unk> Reed as.

As well as core technology spend to enhance our industry leading platform.

Given the nonrecurring nature of the integration spend.

In Q1, we expect a more gradual rise in depreciation and amortization for the remainder of 2002.

Moving on to capital management, our balance sheet remained strong in Q4, the leverage ratio at two six times and.

In corporate cash of 237.

As for capital deployment, our framework remains focused on allocating capital aligned with the returns we generate.

Investing in organic growth first and foremost.

Pursuing M&A, where appropriate and returning excess capital to shareholders.

In Q4, we allocated capital to both organic growth and share repurchases buying back $50 million of our shares to roughly offset dilution.

We anticipate a similar level of share repurchases in Q1, while remaining flexible and dynamic as our capacity and opportunities to deploy capital to evolve.

In closing, we delivered another quarter of strong business and financial results as we look forward. We remain excited about the opportunities we see to continue investing to serve our advisers grow our business and create long term shareholder value with that operator. Please open the call for questions.

Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one our first question comes from the line of Alex <unk> from Goldman Sachs. Your question. Please.

Hey, good evening guys. Thanks for taking the question. So maybe we'll start with organic growth not surprisingly super strong and through the year, obviously wrapping up a good year for you guys from an add new assays and recruiting perspective given the.

Sort of a changing macro backdrop with both more equity market volatility and obviously down equity markets year to date, but rising rate dynamics curious, how you think that will impact recruiting and sort of the broader competitive landscape. So.

Are we likely to see Fas being sort of more reluctant to move given the sharp move down in the asset values are.

Are they likely to be more competition, because again people are more profitable. So they may be you can afford to pay a little more so hoping you can sort of flesh out how that plays into your organic growth outlook into next year.

Yes, Alex it's Dan So the question then.

So look I think we always look at sort of the structural opportunities first and foremost to organic growth.

As we stated in our remarks right you've got new store sales same store sales.

Certainly retention as it relates to new.

New store sales again, I think the flexibility and optionality around our model continued investment differentiation.

And the capability set of our platform.

And then.

Using our.

Rate driven sort of underwriting process, we think that is a really appealing combination.

That continues to create that sort of structural differentiation out in the marketplace as we move forward and I think that drives.

The primary sort of activity and results at the end of the day up to your point certainly you have to overlay.

Some market conditions that may influence that overall trajectory in the short run.

There are cases to where you could have.

Significant.

Market displacement.

It could occur that.

Good.

Temporarily disrupt the overall trend of opportunity out in the marketplace.

Advisors aren't moving as much because they are focused on.

Those market conditions, and serving and supporting our clients.

And we've certainly seen that historically in the past up to this point the volatility that we're seeing in the early part of the year I think is more aligned with sort of what we played in the last couple of years and so we're not seeing.

Thus for some outsized impact or disruption in the overall movement out in the marketplace.

Do think there is an overall as we noted in our remarks, a bit slower movement in certain parts of the industry, but again don't see necessarily thus far the macro influences that that's always subject to change something.

Dramatic should shift as we move forward and I think with respect to interest rates youre, suggesting.

Theres greater economics built into recruiting how does that influence.

In addition assistance indoor financial incentives and again, we've seen no reflection of changing in the underwriting across the marketplace.

We continue to use a return based approach to that concept.

Bacterin certainly.

I think the characteristics of our overall economics factored in with the macro so again, we haven't seen any shift at this point.

Overall.

Pricing out in the marketplace from cost effectiveness, although if you want to add into that.

Melissa.

Great. Thanks, Thanks for that color.

A follow up from Matt maybe.

Why don't we start with Waddell great.

Great to see the guide increase to $90 million plus.

From previous can you, maybe expand a little bit of what the plus depends on again as that market related so asset levels and rates or are you seeing potential for sort of incremental synergies, whether it's on the revenue side or the expense side. So just maybe a little more color of what could drive the upside there. Thanks.

Definitely I think as we move towards completing the integration by the middle of this year. The work. That's really left is really on the expense synergy side.

So as we complete that work I think the pluses that we ended up getting more synergies than expected.

So it's kind of a small part of the work is left.

And I think thats, where the upside would.

Great. Thanks very much.

Thank you. Our next question comes from the line of Bill Katz from Citigroup. Your question. Please.

Okay. Thank you very much for taking the questions and all the added color and disclosure is super helpful.

So Dan maybe a question for you it's sort of it seems like from your commentary that the momentum is accelerating across the pipeline. So one clarification was that also in that the larger size of the financial institution group that is sort of the group you historically not been able to go after that 300 billion, but more broadly can you just talk about what what's resonating in the marketplace as well.

Obviously your organic growth accelerating thank you.

Thanks Bill.

So yes look organic growth is a key part of our strategy as we've talked about and where we are.

State.

Very intentional and focused on how do we deliver those results.

I think if you if you think about our growth going forward.

Perhaps if you look at the last couple of years as a framework for that you've got 7% growth in 2020, and 13% growth in 2021.

And those are probably pretty nice book ins as a way to think about a range of potential growth.

Over the long run or as we go forward, obviously as we've talked about in the last question the macro conditions at any point in time that influence that overall opportunity set.

Bill what we do to drive that to get specifically to the second part of your question is we continue to look at investing in our traditional markets going to appeal of those markets and what drives.

Continued new store sales growth.

And continues to keep retention in that 2% range, we've talked about before we believe that investing in continued capabilities that help.

Those advisers differentiate and went out in the marketplace either that so think about that is focused number one I think second expanding and accelerating the growth.

And our new markets and you said it.

<unk> continued momentum building there some of that was a go to market with new to the marketplace. We continue to iterate and refine those models to make sure.

They are well positioned and appealing as they can be and create the value that they should with those different.

Segments of the marketplace, and we're seeing that versatility and flexibility ultimately open up new opportunities and frankly, it's even helping advisors and our existing platform, who have one model and essentially we're thinking about transmission to another.

Staying on our platform because we have that flexibility now and so we do see continued momentum there.

We've gotten off to a good start here in Q1 relative to.

The.

Strategic solutions as an example.

So continued growing contribution from those new markets and financial institutions.

Was referring to as large financial institutions as being somewhat of a new market for us.

Wasn't a place that we always.

Looked at for opportunity I don't think we had demonstrated being able to bring a new solution to the marketplace that resonated and was actually a different context at sort of solution for that segment of the marketplace and I think through a couple of the wins that we've had it has helped us learn understand <unk>.

Fine and ultimately see that segment of the marketplace as a more sustainable Avenue for growth and for contribution to comp. So that's the way to think about the large financial institution markets. If that's helpful. And then finally the last one is helping our existing advisors grow and they've certainly done a great.

Job of that over the last couple of years and up markets and we continue to see opportunity to invest to help them.

<unk> expand their revised solve new problems for clients and.

And generate net new assets from that so.

Those are the primary sort of drivers underneath that growth and I think if you tried to apply all of that in 2022 as we think about this year knowing that a large financial institution is onboarding in kuna.

In the first half of the year, we believe we're in the upper half range.

<unk>.

Of that 7% to 13% so hopefully that gives you some help.

That does thank you very much and just a follow up for Matt.

Well maybe stepped in so just play Devil's advocate for a moment if your rate guidance is correct.

Forget rates hopefully we will.

And you get a four 5% rate hikes. This year all else being equal your guidance would suggest about $2 50, a share of incremental earnings power just based on page 16 of the supplement.

So if you assume that your recruitment remains solid but your organic growth is bookended here. How do you think about deploying that incremental cash and maybe you could speak to the M&A pipeline versus buyback at the margins for your choices.

Yeah sure Bill I'll take that one I think when you when you look at our plans for the year.

You see those wells in the core G&A, specifically in the 7% to nine 5% range.

I think the primary driver of where that's going to land I think really is the level of organic growth and I think Dan just gave you some nice <unk>.

Range of outcome as an opportunity set that we see there.

But really interest rates, we don't see that driving that this year I think when you look early in a rate cycle that those increases in those benefits would typically fall to the bottom line and improve margins.

So so as we look beyond that and apply those excess funds to your question to our capital allocation.

Framework I think that the approach that we've taken in the past is really the same framework that we have today and I think that will guide us.

And its back first and foremost to looking at opportunities to drive more organic growth right. It could be things like new capabilities for advisors.

Things like.

Further enhancing the service experience.

Expanding services to help advisers run their business.

A few examples.

I think to your question on the M&A front I think there is two categories of opportunities there.

The place where you can accelerate the delivery of capabilities through M&A, we have done a few small acquisitions there.

And then the more call it standard of classic growth acquisitions as long as the returns are compelling, which obviously is key.

And then lastly, returning capital to shareholders, which we also see as a compelling way to deploy capital.

So I think we're going to remain flexible and.

And adjust if needed and to your point as we go through this year.

With expected rate increases incurring I think we'll apply those funds at that time to our framework.

It makes no sense at that time.

Okay. Thank you.

Thank you. Our next question comes from the line of Steven <unk> from Wolfe Research. Your question. Please.

Dan Matt Good evening.

So.

Wanted to start with a question on rate Optionality, Matt since your rate sensitivity disclosure the $310 million increase in gross profit from four hikes. It is based on a static balance sheet and I was hoping to unpack some of the sources of rate upside that maybe aren't captured in that figure and in particular with money market balances running it.

Elevated levels.

Was wondering how we should be thinking about both the capacity and timing to move money fund balances back into ICA as the fed begins hiking and with signs that bank demand is also coming back for both floating and fixed rate agreements a bit sooner than we were expecting how should we be thinking about the glide path to getting back to that fixed target range of 50% to 75%.

Yeah. So great question, Stephen I think when you look at the money market balances and the money market overflow.

And I think we put it in font size that folks are my age, it's even hard to see but I think you'll see a footnote there if those balances go back into.

And that would be an additional $30 million upside for a rate hike.

Overall balances. So just gives you a sense of if.

Demand does come back to the market and those overflow balances move it gives you a sensitive.

Yes.

I think where that market stands and I think you started to hint that it well in your question I think where we sit today the market and therefore, the ability to do that Hasnt really changed much I'd say if anything it's.

It's improved a little.

I think when you look at the things that would drive that we're starting to see some positive signs right consumer spending continuing to increase.

Loan balances starting to grow off their lows of the big lenders and then yeah. The.

The biggest factor of all the fat right not only talking about raising interest rates and tapering, but actually talking about shrinking the balance sheet their balance sheet and those are the things that if all that occurs I think really removes a lot of liquidity from the system and then we're naturally in a place to be a provider of that but so it feels like the winds are blowing in the right direction.

Things haven't really moved much yet.

Would highlight some some things we were able to do in the quarter like on the floating rate side, we are seeing pricing in the fed funds plus five zone, where I think you were flat to negative when you. When you think about more last year and then on the fixed rate side, we're able to add a new contract this quarter the half a billion that I talked about in the prepared remarks and <unk>.

Maturity, that's upcoming in Q1 were able to renew that into a new four year contract at a 140 basis right.

We haven't had that rate I think since recovered.

So.

The market I think remains challenging, but I think theres a lot of good signs that if those things play out it would it would improve and I think pulling that through to the last part of your question is how does that.

Fit into us getting to the $50 to 75% target range of the fixed fixed rate portfolio.

I think I'd just emphasize that remains our target we're sitting at 25% now.

In periods of low interest rates like we are in now if demand is there we would probably want to stay shorter and closer to that 50%.

If rates are much higher with a steep curve, we want to be closer to 75, and I think right now the limiting factor. There is more just the demand itself, which as I just commented on which is why right. So.

Hopefully that helps and I think I got I think it was a three parter Stephen I think I got them all.

It was actually a two part or Matt now al.

Okay.

Still going to push with a related follow up but it will be related rest assure just on cash balance growth expectations.

Youre entering the coming cycle with cash as a percentage of assets relatively close to the 4% floor that you had spoken to previously and that's before the fed has even started tightening or where we would typically expect to see some signs of cash sorting as you noted in response to my earlier question. Our multipart question, so given the strong organic.

Growth that youre generating and just the need for advisers to maintain some minimum level of liquidity should we still view that 4% is a reasonable floor on cash which.

All else being equal would imply sustained growth.

And cash balances at least in the mid to high single digit range, even as the fed begins to.

<unk> tightened this year.

Yeah, I think the short answer is yes, I mean, I think when we look at the dynamics of this cash right, which is operational cash rate for rebalancing or awaiting investment I don't think we've seen anything change in how advisors give advice the dynamics of that rebalancing and trading that would cause us to have a different view, so I think 4%.

This is a good way to think about.

Now that doesn't mean, three nine as a problem and a possibility, but I think when you think about it as a range I think 4% until the percent I think.

That's great color, Matt. Thanks, so much for taking my questions.

Yes.

Thank you. Our next question comes from the line of Michael Cyprus from Morgan Stanley . Your question. Please.

Okay, just wanted to follow up a little bit there just on those overflow balances.

So the point on the last question just in a rising rate environment I guess.

What are the prospects do you think for those overflow ICA and overflow money fund balances to come back into an ICA floating what really needs to happen and how to rising rates impact the likelihood the profitability and the timing for that to play out.

Yes sure. So Michael this is what we were just talking about I think that.

The mechanics are demand really returning to the market.

So then you click down and say what are the things that would cause that demand to return.

And it seems that removes the excess cash off of the banks that we will be placing that suite too right. So thats consumer spending going up that's loan balances on those balance sheets going up and then the big factor when you look at the fed and the cash that it's injected into the system ultimately it makes its way onto the balance sheets of those large financial institutions.

That we place our sweep width.

So it's really all connected it's as simple as that as demand returns.

The mechanics of an overflow or when there's capacity in ICA. It goes back.

Great and then just a follow up question on the expense front you guys had flagged.

A more elevated promotional expense in the first quarter here just given some of the seasonality, but I was hoping you might be able to unpack what pieces of that come out as we go into the latter half of this year, how you see that trending.

It's teeny additional conference is how do you see that trending.

Yeah, sure and maybe just to hit again.

The Q1 numbers that when you look at the Q1 promotional expense on the key thing that I would highlight is it's really a function of our conference schedule.

And then when you look at 2021, if you recall, we had our conferences entirely in the second half of the year given given the COVID-19 environment.

This year, it's going to be a more typical schedule with.

With conference expense showing up primarily in Q1 and Q3.

It's probably the main maybe Tim you can intuitively see the remaining drivers are all just connected to growth.

The typical ta and the related amortization that comes from that.

As well as the cost to support the large financial institutions that we've talked a bit about here <unk> and BMO and then as we begin to support <unk>.

Support Qunar.

So as we get deeper into the year and maybe just to think about the full year rate just giving you. The context on Q1, we think about the full year.

Really similar drivers right. The biggest driver is typically organic growth the pace of that in the ta and associated amortization that shows up.

When that recruiting happens as Dan highlighted earlier, the the rates haven't really changed for that those have been quite stable. So I think the key driver there is going to be really the level of recruiting that we have.

On the conference front for the year, we're really planning to occur.

Return to in person events right, so that would likely bring our conference spend for the year back to pre COVID-19 levels.

I would estimate that around a $20 million increase for the full year 'twenty two versus full year 'twenty one.

And then lastly, the on boarding.

Fences associated with Q&A similar to MMC and BMO in 'twenty. One we will have those expenses in 'twenty two from team. So those are really the three biggest drivers I'd highlight.

Great. Thank you.

Thank you. Our next question comes from the line of Kyle Voigt from K VW. Your question. Please.

Hi, good evening.

Maybe first just a follow up question on the cash balances just meaningful cash build in December that you saw just wondering if you could share any information on one of those cash balances have been sticky.

Sticky thus far in January .

Or are you seeing those kind of flow back into the market.

Yes, we would typically see that happen right you get you get a normal build in the fourth quarter of each year and you start to see those balances go back into the market in the first few months of the year.

But with all the volatility we've seen this year and in this January we've actually seen the cash balances continue to build so they are up about another $1 billion.

For the month of January .

I would emphasize though I think when volatility falls and things get back to normal whatever your definition of normal is I think we would expect to see that cash start to go back into the market.

A lot of tax positioning tax planning that you see in December a lot of dividends and interest that come in so it is very natural that to get deployed back into the market.

In the coming months.

Okay. That's helpful.

And then my second question is just one more on the <unk>.

DNA guidance I think you gave some.

Commentary on the first quarter being up 5 million and a gradual increase from there I think that implies something like like over a 20% increase versus 2021, I'm just trying to get a sense for if you look out over the medium term.

And maybe it's a question more for the Capex side of the business are you comfortable I guess with the level of spend on the Capex side and if you could just.

Go into a little bit more detail on the drivers of the increase this year that would be helpful.

Yeah, Yeah definitely I think when you look at our core technology portfolio investments, there, which is driving that increase we've been increasing that around 8% per year for a while and we plan to do the same in 2022.

I think what you are seeing the big pickup is really the technology associated with <unk>.

Integrating and Onboarding Waddell <unk> Reed and we had a big deployment in that area in the fourth quarter on that then is going to lead to that depreciation increasing in Q1, So I think the.

The increase that may not make intuitive sense is really connected with the acquisition we.

We factor those costs into the overall multiple which you can see in the materials. We estimate at four five times. So it's really the core portfolio growing at 8% I think as I think about that is the ongoing run rate.

Got it thank you.

Thank you. Our next question comes from the line of Gerry O'hara from Jefferies. Your question. Please.

Great. Thanks.

Just one from me this evening.

Clearly some strong momentum as it relates to the business solutions side.

And apologies if I missed it but.

What can you give us a little context about what's really resonating as it relates to the 400 incremental new subscriptions or perhaps what you see kind of on the come into into 2022, and then also can.

Can you help us maybe tie together just what the what the investment and spend it looks like as it relates to the growth of these business solutions.

If that's part of that kind of core G&A number or if it shows up elsewhere any sort of color or context, I think it would be helpful. Thank you.

But I think part.

Matt.

Hey, Thanks for the question and look with respect to business solutions.

Just as a bit of a complex will remember that was.

An opportunity originally around this how.

How do we help the advisers not only the right advisors.

Help them one private businesses.

We knew there was a significant amount of local well spend that advisors.

Anything.

Counting the bookkeeping.

Some sort of cash flow analysis marketing support.

Sure.

All the things that you would think about running.

More entrepreneurial smaller mid sized business. So that was our original hypothesis. So as we've gotten in and continue to learn and serve and support them through CFO solution, our marketing solution and our admin solution I think those fundamentally and structurally.

Resonate.

The needs that they have.

Associated with those types of roles resonate what we've learned along the way, though was also discrete problems we can solve that.

CFO .

And we've been able to come up with sort of second generation products, if you will across CFO and marketing landscape expand product offering.

Do you have different price points that make those services more and more accessible to more and more advisers and so we will continue to innovate around what I would call them.

Services.

I think there is a significant room for opportunity.

When you look out over.

So those.

Again, I think our view.

Really interesting not only in the fundamental for initial offering multiple generations.

Alright.

And I think at the same time as we've been innovating and working on those types of solutions.

And more and more about new ways.

Things that advisers, who are trying to solve for.

That's where we came up with help with succession planning around assurance. So we're.

M&A solutions.

Born out of how we think about succession planning and selling my business.

An advisor when buying.

We're buying a business and we realized those obstacles and obtuse.

Do we could come in with some expertise and leverage helped execute around that.

Possible so.

Solving specifically again, how do I grow in.

Think about succession planning have been valuable areas of innovation.

Okay.

They can go forward, what we've also unlocked as a new category of opportunity where we are.

On helping business owners now we've unlocked this opportunity where they may share Hey, look I want to provide a broader base of financial planning across my entire client.

Leverage to do that but that's time consuming due.

So this concept.

Sure.

Do the plans for them to position them than to go build that.

That's the strategy.

<unk>.

The associated.

So this is unlocked this whole new category of helping them expand.

The comprehensive advice, which just makes them.

More appealing and differentiated from other places.

So that's.

Opportunity set as we move forward with respect to the business.

And to some degree some of the initial products.

Yes, we are.

Okay.

Hey, Jerry on the second part of your question on the cost front I mean, the headline is that the costs are included in our core G&A included in core G&A guidance for 2022, 7% to nine 5% range.

It includes the cost of scale.

New services, and specifically business solutions.

Correct.

Okay, Thanks, and I actually I, just had one sort of I guess small follow up.

Perhaps.

Somewhat of a small point, but.

The interest rate sensitivity page.

If I kind of compare this quarter over quarter. It looks like cash balances went up but the incremental benefit from the next four rate hikes went down granted it's a modest amount and.

Perhaps you have already touched on it with some of the prior questions. So I apologize, but can you just maybe flush that out a little I would've maybe expected it to go the other way.

Yeah, Yeah, I mean, I think it changed a little bit I think the key is you saw the growth in those overflow balances in money market and actually a slight decline in ICA. So.

While the sensitivities that are front and center in those bar charts went down a little bit if you look at that footnote or the benefit associated with if and when those money market Overclothes go backend ICA that actually went up.

Shows up in a couple of different places, but there is just a mix and because we calculate those based on where we are at the end of quarter.

Got it that's helpful. Thanks, Matt Thanks, guys.

Thank you. Our next question comes from the line of Brendan <unk> from UBS. Your question. Please.

Hey, good evening, Thanks for taking my question.

Swf's wins have really been impressive you got over 20 on the board at this point.

So far what's been the feedback as you've built this this offering out.

From advisers that you've on boarded and are there any ways in which based on that feedback you're tweaking, the offering or or making adjustments in order to make it even more compelling.

I think the question and we are encouraged by.

The offering in the marketplace.

Okay.

We probably when we first went to market with the solution I think.

With research and insights I'll, let them.

A solid offering but as people get in and begin to use that solution. You. Obviously begin to learn opportunities are probably creating some.

Additional digital workflows that help them.

The CNC inside the practices, which have been good.

Feedback and learnings for us continuing to more fully integrate some of our banking solutions.

There's another feedback that we've gotten that we've been working on to do that we think makes the solution.

We're feeling I think some of our high net worth solutions that we're working on.

We have also been they've been a good source of feedback there to help us refine.

Hello.

So those are maybe some categories to think about where we both made some improvements and continue to work through an enhanced model, but I think foundation. If you think about $85, 90% of the four solution and the feedback we're getting and the NPS scores that were getting from this group it would reflect.

Good solid offering delivering on what they had hoped which is to help the transition to an independent practice and the ongoing support operate mono.

Tesla independent so we feel good about where we are and continue to take that feedback and apply it to.

Awesome.

Alright that makes sense. Thanks, thanks for that color.

And then just one follow up Matt on the promotional expense and you spoke to the.

To this to some degree so it might be embedded within the prior answer but.

When we look at the pickup in promotional from <unk> into the low.

<unk> 90 that you expect next quarter. It was my understanding that we had a conference. So you guys had a conference in the fourth quarter. So I would think that would be like for like so is the delta quarter over quarter really just purely the other factors the ta and maybe a bit of a step up in the in the kuna onboard.

<unk>.

Or is it part of that embedded $20 million increase in the in person conferences.

Becoming larger and then maybe the fourth quarter was a little smaller just understanding some of the complexion there would be helpful.

Yeah definitely and its where you just ended the question. So it's a combination of we've got two large two of our largest conferences in Q1 <unk>.

Youre correct there is a.

Large conferences in Q4 as well, but you now have more of an in person expectations you have overall, a little bit of increase in conferences.

And then all the growth items.

You just described so it's a little bit about great.

Great Thanks for that.

Thank you. Our next question comes from the line of Michael Young from two Securities. Your question. Please.

Hey, Thanks for taking the question wanted to follow up on the business solutions portion of the business again.

Good to see you get up to 3000 subscriptions another year of kind of doubling that.

Any reason why we shouldnt expect that to continue to double or even more than double I mean are we accelerating there or just any thoughts along that kind of pace of growth, especially with the new product additions will be helpful.

Yeah, I think you should think about that is the ongoing similar momentum that you've seen over the last year.

With a bigger base requires obviously more incremental growth to create a doubling effect. If you will but I do think that we've become better at offering. These products. We've refined the existing version of the product new products coming out.

Contribute to subscription growth.

And and again, we continue to try to refine our approach and if we see opportunity or perhaps the land and certain pivot and make those investments along the way, but I think the consistent sort of trajectory that we're on now.

It feels like the best way to describe how we think about it.

Okay.

A follow up sorry, I apologize for switching gears here, but just on the financial institution side of the business.

BMO <unk> last year, you got kuna. This year just from a capacity standpoint, I mean would you all be able to announce additional partnerships this year.

How soon would you be prepared to actually execute fallen qunar and given kind of the splashes that you've made in that market recently with the size of the deals are you having more conversations today than maybe a year ago regarding partnerships there.

So if you go in reverse order, we are having more dialogue.

Around the possibilities of serving your supporting larger financial institutions.

<unk> also.

Larger set of institutions.

Sort of categories.

So that creates more dialogue and more opportunities.

With respect to the planning around these I think we've got thoughtful and diligent around not just thinking about.

Winning those deals with making sure that we execute well behind them.

You've got to be thoughtful about your funnel and the pacing of that these are also longer sales cycles.

They are more complex than that.

Our typical other business development efforts and activity and so without giving you a perfect timeline I think we have to be thoughtful and factor in our ability to execute matched with that demand and opportunity.

And then and then plan those out so that we execute them well. It's also work on the other side with these institutions to work through and think through doing that and so they also have their own.

Execution limitations, if you will that we've got to collaborate and partner up with them.

And so without giving you some specific timeframe around when some next deal may come I think we have active.

Dialog going on with a broader set of prospects and then we will factor in their ability to execute our ability to execute in time those in a way that.

Makes sense.

Doing that.

Okay. Thanks.

Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Dan Arnold for any further remarks.

Yes, I just wanted to thank everyone for taking the time to join US. This afternoon, and we look forward to speaking with you again next week.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.