Q4 2021 AssetMark Financial Holdings Inc Earnings Call

Yeah.

Speaker 1: Good afternoon, everyone, and welcome to AssetMark fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time.

Good afternoon, everyone and welcome to asset marks fourth quarter 2021 earnings conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.

Today's call is being recorded.

Speaker 1: Today's call is being recorded. Now I'd like to turn the call over to Taylor Hamilton, head of investor relations. Please go ahead, Mr. Hamilton.

Now I'd like to turn the call over to Taylor Hamilton head of Investor Relations. Please go ahead Mr. Hamilton.

Thank you Austin and good afternoon, everyone and welcome to asset marks <unk> fourth quarter 2021 earnings conference call joining.

Speaker 2: Thank you, Austin. Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2021 earnings conference call. Joining me today are AssetMark's chief executive officer Natalie Wilson and chief financial officer Gary Zyla. Today, they'll discuss the results from the fourth quarter and provide an update to AssetMark's business outlook for 2022. Following our introductory remarks, we'll open up the call for questions.

Joining me today are Mark <unk>, Chief Executive Officer, Wilson, Chief Financial Officer, Gary Xylem today at almost got the results from the fourth quarter and provide an update to <unk> business outlook for 2022.

Following our introductory remarks, we'll open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at IR got asked Mark Dotcom.

Speaker 2: We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at IR.assetmark.com. Before we get started, I'd like to note that certain statements made during this conference call are forward-looking.

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

Speaker 2: These forward-looking statements represent our outlook only as the date of this call and actual results could differ materially. Additionally, during today's conference call, we'll be discussing net revenue, adjusted EBITDA, adjusted EBITDA margin, and adjusted net income, all of which are non-GAAP financial

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

Speaker 2: Please refer to our earnings press release and FTSE filings for more information on forward-looking statements, risks factors associated with our business, and required disclosures related to non-GAAP financial information.

Speaker 2: With that, I'll turn the call over to my colleagues. Natalie, take it away. Thank you so much, Taylor. Hello, everyone, and welcome to our fourth quarter earnings call. We are a few weeks away from my one year anniversary as CEO , and what an amazing year it has been at Aspen.

With that I'll turn the call over to my colleagues Natalie's taken away. Thank you. So much Taylor Hello, everyone and welcome to our fourth quarter earnings call. We were a few weeks away from my one year anniversary as CEO and what an amazing year. It has been and ask Mark before we begin our prepared remarks I would like to start by thanking our 8600 advise 86 8600 advice.

Speaker 3: Before we begin our prepared remarks, I would like to start by thanking our 8,600 advisors and 850 plus teammates. 2021 was a record year, and it would not have been possible without the loyalty of our advisors and the dedication and skill of our team. I also want to thank our analysts and investors for their continued support of Asterix.

There is an 850 plus T late 2021, with a record year and it would not have been possible without the loyalty of our advisors and the dedication and skill of our team I also want to thank our analysts and investors for their continued support network.

Speaker 3: Starting on slide three, platform assets ended the year at a record 93.5 billion, driven by record quarterly net flows of 2.9 billion, which included our first billion dollar month of net flows in December .

Starting on slide three platform assets ended the year at a record $93 5 billion driven by record quarterly net flows of $2 9 billion, which included our first $1 billion a month of net flows in December for the year. Our net flows as a percentage of beginning period platform assets were 13, 3%.

Speaker 3: For the year, our net flows as a percentage of beginning period platform assets were 13.3%.

Speaker 3: Households and engaged advisors were both up double digits for the year and ended the year at all time highs. We also experienced record results for both top and bottom line financial net.

Household and engaged advisers were both up double digits for the year and ended the year at all time highs. We also experienced record results for both top and bottom line financial metrics.

Speaker 3: Full year net revenue was up a little less than 28% year over year to $378 million. Adjusted EBITDA in 2021 was up more than 36% to $157 million. And adjusted net income was up more than 41% to $103 million. And we continue to scale the business as evidenced by our ability to expand adjusted EBITDA margin a robust 300 base points in 2021.

Full year net revenue was up a little less than 28% year over year to $378 million adjusted EBITDA in 2021 was up more than 36% to $157 million and adjusted net income was up more than 41% to $103 million and we continue to scale the business as evidenced by our ability to.

Expand adjusted EBITDA margin, a robust 300 basis points in 2021.

Speaker 3: Turning to slide four, our record results are a direct outcome of the value we bring to our advisors and their clients. For more than 25 years, we stood behind thousands of independent financial advisors and provided them with everything they need to serve their clients and run their business.

Turning to slide four our record results are a direct outcome of the value we bring to our advisers and their clients for more than 25 years, we stood behind thousands of independent financial advisors and provided them with everything they need to serve their clients and run their businesses.

Speaker 3: By redefining the advisor experience, Aftermark is also redefining what it means to be a modern.

Redefining the advisor experience aftermarket also redefining what it needs to be a modern pants.

Speaker 3: Our singular focus is bringing unmatched value to independent financial advisors and their clients. We recognize that independence is sacred and we champion it. The independent advisors we serve are objective, unbiased, and singularly focused on helping their clients reach their financial goals. When advisors work with AssetMark, they have a trusted ally. We are an extension of their team, and they are part of a community of thousands of like-minded advisors.

Our singular focus is bringing unmatched value to independent financial advisers and their clients.

We recognize that independence is sacred and we champion at the independent advisors, we serve our objective unbiased singularly focused on helping their clients reach their financial goals when advisors work with asset Mark. They are a trusted ally. We are an extension of their team there and they are part of a community of thousands of Likeminded advisors.

As we redefine what it means to be a modern tap we're focused on five key areas I'll now discuss the 2021 progress we've made in each of the.

Speaker 3: As we redefine what it means to be a modern TAMP, we're focused on five key areas. I'll now discuss the 2021 progress we've made in each.

Speaker 3: The first component of our growth strategy on slide five is to meet advisors where they are catering to a variety of affiliations, new growth oriented or mature advisors.

The first component of our growth strategy on slide five is to meet advisors, where they are catering to a variety of affiliation new growth oriented or mature advisors.

In March of 2021, you launched asset Mark institutional since launched as Merck institutional has gained a lot of momentum just as we have done with our broker dealer affiliate advisors. We are building a community of Likeminded, Ari, who see the value in outsourcing to ask Mark.

Speaker 3: In March of 2021, we launched Asimark Institutional. Since launch, Asimark Institutional has gained a lot of momentum. Just as we have done with our broker-dealer-affiliate advisors, we're building a community of like-minded RIAs who see the value in outsourcing to Asimark.

Speaker 3: Because of our efforts and the value of our offering, we saw 49 new RAA firms join Asimark in 2021, with current platform assets averaging $34 million during the first year of transition.

Because of our efforts in the value of our offerings, we saw 49, new or a firms joined <unk> in 2021 with current platform assets, averaging $34 million during the first year of transition.

In addition, our AI platform assets now account for a little over 20 billion of assets on our platform and made up 20% of total production in 2021.

Speaker 3: In addition, RIA platform assets now account for a little over $20 billion of assets on our platform, and RIA made up 20% of total production in 2021.

Speaker 3: In 2022, we'll be focused on continuing to build out this offering. Turning to slide six, the second component of our growth strategy is to deliver a holistic, differentiated experience to advisors and their clients, providing an end-to-end, easy-to-use platform designed to create meaningful conversations between advisors and their clients, while also, and very importantly, saving advisors time and resources.

In 2022 will be focused on continuing to build out this offering.

Turning to slide six the second component of our growth strategy is to deliver a holistic differentiated experience to advisors and their clients, providing an end to end easy to use platform designed to create meaningful conversations between advisors and their clients, while also and very importantly, saving advisors time and resources.

In 2021, we took a huge step forward in building out our financial wellness offering with the acquisition of when we are pleased with one tier one result, and want to highlight three key areas of their success.

Speaker 3: In 2021, we took a huge step forward in building out our financial wellness offering with the acquisition of Voyant. We are pleased with Voyant's year one results and want to highlight three key areas of their success.

Speaker 3: First, let's focus on technology. In 2021, Voyant maintained exceptional approval ratings from users, upgraded numerous integrations, and added dozens of new features. As a result, Voyant was a five-star winner of FT Advisor Service Award and was also voted the best non-research software for paraplaners by readers of the UK's Professional Paraplaner.

First let's focus on technology in 2021, why it maintained exceptional approval ratings from users upgraded numerous integrations and added dozens of new features as a result went with a five star winter of F. T. Adviser Service Award will also voted the best non research software for para planners by readers of the UK.

His professional per printer.

Second is growth and expansion in 2021, when Australia was launched bringing buoyant financial planning tools and technology to Australia's community of 20000 financial advisors.

Speaker 3: Second is growth and expansion. In 2021, Buoyant Australia was launched, bringing Buoyant's financial planning tools and technology to Australia's community of 20,000 financial advisors.

We have also began its entry into the U S market through its acquisition by aftermarket.

Speaker 3: Voyance also began its entry into the U.S. market through its acquisition by AFMARC.

In August we gain aftermarket top advisers, a free trial of went and feedback has been extremely positive in.

Speaker 3: In August , we gave Affirmark's top advisors a free trial of OINT, and feedback has been extremely positive.

Speaker 3: In 2021, Boynt's number of advisor and paraplanner licenses increased by approximately 10% year-over-year.

In 2021 number of advisor and pair planner licenses increased by approximately 10% year over year.

Lastly, as Wayne integration into <unk>, we integrated buoyant financial planning capabilities into your wealth manager and also Bill income planner, a retirement income planning proposal technology, which is powered by win.

Speaker 3: Lastly, is Voyant's integration into AFSCMARC. We integrated Voyant's financial planning capabilities into eWealth Manager and also built Income Planner, a retirement income planning proposal technology which is powered by Voyant. We are pleased with the advancement we have made in our financial wellness offering and our focus on continuing to build it out in 2022. And we look forward to telling you more as the year progresses.

We are pleased with the advancement, we have made in our financial wellness offering and are focused on continuing to build it out in 2022, and we look forward to telling you more as the year progresses.

Speaker 3: The third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum, varying stages of life and generation.

The third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum varying stages of life and generations.

Now, let's turn to slide seven.

Speaker 3: In 2021, we did a tremendous job of enhancing our platform, enabling advisors to serve investors.

In 2021, we did a tremendous job of enhancing our platform, enabling advisers to serve investors.

Speaker 3: We did this by adding new products, features, and tools to our platform. And through this, we were able to capture more share of Wallet from our existing advisors, as well as attract new advisors.

We did this by adding new products features and tools to our platform and through this we were able to capture more share of wallet from our existing advisors as well as attract new advisors.

Speaker 3: In total, new products have added $8.5 billion of assets on our platform on a rolling 36-month basis.

In total new products and added $8 5 billion of assets on our platform on a rolling 36 month basis.

Speaker 3: For our advisor's wealthiest clients, we added a host of new solutions, such as alternative investments through iCapital, as well as a suite of separately managed accounts. This past quarter, we made enhancements to our tax loss harvesting capability, which will improve the client experience.

For our advisors wealthiest clients, we added a host of new solutions, such as alternative investments capital as well as a suite of separately managed accounts. This past quarter, we made enhancements to our tax loss harvesting capability, which will improve the client experience.

For mass affluent and emerging affluent advisers, we've expanded our solid personal portfolio to include new sleeves. As a reminder, these portfolios offer features that are usually found in high net worth solutions at an accessible investment minimum.

Speaker 3: For mass affluent and emerging affluent advisors, we've expanded our SAVA's personal portfolios to include new sleeves. As a reminder, these portfolios offer features that are usually found in high net worth solutions at an accessible investment minimum.

Speaker 3: Lastly, we added pooled employer plans to help our advisors serve the retirement needs of small business owners.

Lastly, we added Paul employer plans to help our advisors serve their retirement needs of small business owners.

We are continually focused on building out our platform to enable advisors to serve more investors and I look forward to discussing these new additions to our platform in upcoming earnings calls.

Speaker 3: We are continually focused on building out our platform to enable advisors to serve more investors, and I look forward to discussing these new additions to our platform in upcoming earnings.

Speaker 3: The fourth component of our strategy, as seen on slide eight, is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs.

The fourth component of our strategy as seen on slide eight is to help advisors grow and scale their businesses by offering turnkey advisor solutions and program <unk>.

Speaker 3: Last quarter, I discussed our business consulting offer, which is a huge competitive advantage for Asimark. In 2021, our business consulting team served over $26 billion of platform assets, a 33% increase from 2020.

Last quarter I discussed our business consulting offer which is a huge competitive advantage for asset work in 2021, our business consultant consulting teams served over 26 billion of platform assets of 33% increase from 2020.

Additionally, they launched and supported over 20, new advisor benefits, one of which I want to discuss with you in more detail today.

Speaker 3: Additionally, they launched and supported over 20 new advisor benefits, one of which I want to discuss with you in more detail today.

Speaker 3: In the fourth quarter, we soft-launched Marketing Advantage Asset Marks Marketing Outsourcing Program.

In the fourth quarter, we soft launched marketing advantage asset Mark to marketing outsourcing program.

Speaker 3: Having a defined and executable marketing strategy has never been more important for advisors. In fact, in a 2021 Broadridge Financial Advisor Marketing Survey, it was found that only 26% of financial advisors have a defined marketing strategy. Yet, those that did have a strategy onboarded more than twice as many clients over the last 12 months as those who didn't.

Having a defined an extra executable marketing strategy has never been more important for advisors. In fact in a 2021 Broadridge financial advisor marketing survey. It was found that only 26% of financial advisors have a defined market strategy marketing strategy. Yeah. Those that did have a strategy on boarded more than twice as.

Many clients over the last 12 months as those who didn't.

Speaker 3: Marketing Advantage, our response to this advisor need, is a suite of marketing tools and resources designed to enhance an advisor's brand, deepen client relationships, and attract new business.

Marketing and manage our response to this advisor need as a suite of marketing tools and resources designed to enhance and advisers Bren deepen client relationships and attract new business.

Over 100 advisers have you're marking it advantage during the soft launch period alone and we just announced a full launch two weeks ago.

Speaker 3: Over 100 advisors have used Marketing Advantage during the soft launch period alone, and we just announced a full launch two weeks ago.

Turning to slide nine the final component of our growth strategy is to pursue strategic transactions by adding capabilities and assets that improve advisers ability to serve investors and expand their business.

Speaker 3: Turning to slide nine, the final component of our growth strategy is to pursue strategic transactions by adding capabilities and assets that improve advisors' ability to serve investors and expand their business.

Speaker 3: In 2021, our M&A growth strategy was highlighted by our acquisition of Loyant, which closed in July .

In 2021, our M&A growth strategy as highlighted by our acquisition of <unk>, which closed in July .

Speaker 3: As I have mentioned in previous earnings calls, we are more deliberately focused on M&A than we've ever been before. To that extent, last month we announced a new 500 million five-year credit facility. We're very excited about the opportunity to significantly increase our access to capital and reduce our ongoing borrowing rates.

As I have mentioned in previous earnings calls, we are more deliberately focus on M&A than we've ever been before to that extent last month, we announced a new $500 million five year credit facility. We're very excited about the opportunity to significantly increase our access to capital and reduce our ongoing borrowing rate.

Speaker 3: remain well-positioned to execute on M&A with approximately $425 million in purchasing power, while continuing, as always, to be a disciplined buyer.

We remain well positioned to execute on M&A with approximately $425 million in purchasing power, while continuing as always to be a disciplined buyer.

Lastly, we would be remiss, if we didn't provide some commentary about the current macro environment and how that impacts <unk> les.

Speaker 3: Lastly, we would be remiss if we didn't provide some commentary about the current macro environment and how that impacts AfterMark.

Speaker 3: Later in the call, Gary will discuss the impact of interest rates on our spread-based revenue.

Later in the call Gary will discuss the impact of interest rates on our spread based revenue.

Right now I would like to take a moment to briefly provide some thoughts about talent.

Speaker 3: Right now, I'd like to take a moment to briefly provide some thoughts about talent. Talent acquisition and retention have never been more crucial. Our strategy has...

Talent acquisition and retention have never been more crucial our.

Our strategy has two components to address this need.

First and most importantly is ensuring that as mark is a place where talented individuals want to work.

Speaker 3: First, and most importantly, is ensuring that AFSCMARC is a place where talented individuals want to work.

Speaker 3: We added more than 150 new team members in 2021 and received high marks in our annual employee engagement survey related to diversity, creating high impact work, work satisfaction and teamwork.

We added more than 150, new team members in 2021 and received high marks in our annual employee engagement survey related to diversity, creating high impact work work satisfaction and teamwork.

Speaker 3: We need to continue to make strides against all these measures so that the best of the talent, best of talent wants to work it out.

We need to continue to make strides against all these measures so that the best of the talent. That's the talent wants to work at ask Mark.

Speaker 3: The second component of our strategy is appropriate compensation. To that end, at the end of last year, we gave each team member a one-time year-end bonus, we funded our variable incentive compensation at a high level, and in early 2022, we will increase salaries across the board.

The second component of our strategy is appropriate compensation to that end at the end of last year. We gave each team member of onetime yearend bonus.

Funded our variable incentive.

Compensation at a high level and in early 'twenty, two we will increased salaries across the board.

Speaker 3: All of these changes have been accounted for in our current plan, which Sherry will go through in a few minutes.

All of these changes have been accounted for in our current plans, which Gary will go through in a few minutes.

Speaker 3: We believe that creating a workplace that embodies our values of heart, integrity, respect, and excellence, along with having a robust learning and development program and compensating team members appropriately will help us attract and retain the best talent.

We believe that creating a workplace that embodies our values of heart integrity respect and excellence along with having a robust learning and development program and compensating team members appropriately will help us attract and retain the best talent.

Speaker 3: In closing, 2021 was a record year for AskMark. Platform assets grew to over $93 billion. We served more advisors and investor households than ever before, all while achieving the highest net promoter score in our company's history. We realized double-digit growth for top and bottom line financials and expanded margins by 300 basis.

In closing 2021 was a record year for <unk> March platform assets grew over grew to over 93 billion. We served more advisors and investor households than ever before all while achieving the highest net promoter score in our company's history.

We realized double digit growth for top and bottom line financials and expanded margins by 300 basis points.

Speaker 3: We expanded into a new and growing channel, we completed our first capabilities acquisition, allowing us to diversify revenue and entered 2022 strong momentum.

We expanded into a new and growing channel, we completed our first capabilities acquisition, allowing us to diversify revenue and entered 2022 strong momentum.

Speaker 3: I will now turn the call over to Gary, who will take us through a deeper dive of our fourth quarter 2021 results and provide an updated outlook for 2022. Thank you, Natalie, and good afternoon to all those on the call. As Natalie discussed, 2021 was a record year for Aftermark, highlighted by an all-time high in platform assets and record numbers for net flows, revenue, adjusted EBITDA, adjusted net income, and adjusted EPS.

I will now turn the call over to Gary who will take us through a deeper dive of our fourth quarter 2021 results and provide an updated outlook for 2022.

And good afternoon to all those on the call and finally discuss 2021 with a record year for <unk> highlighted by an all time high impact form assets and record numbers for net flows revenue adjusted EBITDA adjusted net income and adjusted EPS.

Speaker 4: As usual, I will start with a discussion of our platform assets, then talk about our revenue, expenses, and then earnings. I will conclude with an update on our outlook for 2022.

As usual I will start with a discussion of our platform assets then talk about our revenue.

And earnings I will conclude with an update on our outlook for 2022.

Starting on slide 10 fourth quarter platform assets more record $93 5 billion.

Speaker 4: Starting on slide 10, fourth quarter platform assets were a record $93.5 billion, up 26% year-over-year. This growth reflects fourth quarter net flows of $2.9 billion, the highest quarterly total in the company's history, and the fourth consecutive quarter, a record-breaking flow.

26% year over year. This growth reflects fourth quarter net flows of $2 $9 million the highest quarterly total in the company's history and the fourth consecutive quarter of record breaking flows.

Speaker 4: We also realized $3.7 billion in market gain net effect.

We also realized $3 7 billion.

And market gain net of fees for the full year, we achieved net flows of almost $10 billion.

Speaker 4: For the full year, we achieved net flows of almost $10 billion. This is over 13% of our beginning-of-year platform assets, well in excess of our annual target $10 billion.

This was over 13% of our beginning of year platform assets well in excess of our annual targeted 10%.

Let's now turn our attention to the <unk>.

Speaker 4: Let's now turn our attention to the advisor metrics. In the fourth quarter, we added 215 new producing advisors, or MPAs. This marks the third consecutive quarter of MPAs north of 200 and is the highest total of MPAs since the beginning of the pandemic in first quarter 2020.

In the fourth quarter, we added 250, new producing advisers or NPA. This marks the third consecutive quarter of NPA is north of 200 and it has the highest total MTA since the beginning of the pandemic and first quarter 2020.

Speaker 4: Our total engaged advisors at the end of the fourth quarter was 2,858. We added 109 engaged advisors in the fourth quarter and 322 engaged advisors in 2021.

Our total engaged advisers at the end of the fourth quarter 2858, we added 109 engaged advisers in the fourth quarter and 320 to engage advisors in 2021.

Speaker 4: Our engaged advisors make up 92% of our platform assets. As we always point out, growing the number of engaged advisors on our platform is a key focus for management. And it is crucial to drive further growth of our business.

Our engaged advisers make up 92% of our platform assets as we always point out growing the number of engaged advisers on our platform is a key focus for management.

It is crucial to drive further growth of our business and is finished.

Now, let's turn to slide 11 to discuss this quarter's revenue, which was a record $144 million.

Speaker 4: Now let's turn to slide 11 and discuss this quarter's revenue, which was a record $144 million.

Speaker 4: As you know, we focus on revenue net of related variable percentages. In the fourth quarter of 2021, our net revenue of $103 million was up 35% year over year. This is driven by asset-based net revenue, which was up 32% to $97 million, and the addition of subscription-based revenue from VOINT, which was $3.2 million.

As you know we focus on revenue net of related related Meredith.

In the fourth quarter of 2021 are net revenue of $103 million was up 35% year over year.

This is driven by asset based net revenues, which was up 32% to $97 million and the addition of subscription based revenue from <unk>, which was $3 $2 million.

Speaker 4: spread-based revenue for the fourth quarter was $1.7 million.

<unk> revenue for the fourth quarter was $1 $7 million.

Speaker 4: Speaking of spread revenue, recent commentary from the Fed on rising rates will have a positive effect on asset-marked spread-based revenue. Turning to slide 12, based on ending cash on January 31st of about $2.9 billion at our trust fund.

Speaking of spread revenue recent commentary from the effect of rising rates will have a positive effect on asset Mark spread based revenue turning to slide 12.

Based on ending cash on January 31 about $2 $9 billion at our Trust company.

25 basis point increase in the fed funds rate would result in about $4 $5 million of spread based revenue on an annualized basis.

Speaker 4: 25 basis point increase in the Fed funds rate would result in about $4.5 million of spread-based revenue on an annualized basis.

Speaker 4: Historically, about 75% of the annual revenue falls through to our bottom line.

Historically about 75% with annual revenue falls through to our bottom line.

Speaker 4: Simply put, asset markets well positioned to benefit in a rising interest rate environment, and this may speed up our revenue diversification and earnings growth. That said, we are always cautious in our planning. You will see that our 2022 guidance, which ties to our operating plan, does not include rate hikes in 2022. We look forward to finding more color next quarter once we have greater clarity.

Simply put asset Mark is well positioned to benefit in a rising interest rate environment and this may speed up our revenue diversification and earnings growth.

Said, we are always cautious in our planning you will see that our 2022 guidance, which ties to our operating plan does not include rate hikes in 2022.

Look forward to finding more color next quarter once we have greater clarity.

Speaker 4: Slide 13 details our year-over-year net revenue walk. As the waterfall shows, net revenue was up year-over-year driven by the impact of our asset growth, which generated $21 million in additional net revenue.

Slide 13 details our year over year net revenue walk at the waterfall shows net revenue was up year over year, driven by the impact of our asset growth, which generated $21 million of additional net revenue.

Speaker 4: Also adding to our increase in net revenue is a $2.4 million reduction in our asset-based expenses.

Also adding to our increase in net revenue in the $2 $4 million reduction in our attribution expenses. As a reminder, this is ongoing savings and is primarily driven by restructuring agreements with providers that we first realized in the second quarter of 2021.

Speaker 4: reminder this is ongoing savings that is primarily driven by restructured agreements with providers that we first realized in the second quarter of 2021.

Speaker 4: On another positive note, feed compression was negligible year over year.

On another positive note fee compression was negligible year over year.

Subscription revenue from <unk>, and $3 2 million in additional revenue and volumes consulting revenue drove the increase in our other revenue line item as well.

Speaker 4: Subscription revenue from Buoyant, and it's $3.2 million in additional revenue, and Buoyant's consulting revenue drove the increase in our other revenue line item as well.

Laughing spread based revenue decreased about $300000 year over year due to the decline in our average yield from 31 basis points to 2016.

Speaker 4: Lastly, spread-based revenue decreased about $300,000 year-over-year due to the decline in our average yield from 31 basis points to 26.

Speaker 4: Now let's discuss expenses, as shown in slide 14. Total adjusted expenses increased 32% year over year to $111 million.

Now, let's discuss expenses as shown on slide 14, total adjusted expenses increased 32% year over year to $111 million.

Quarterly operating expenses were up 47% year over year to $64 $7 million, driven by an $11 $6 million increase in compensation.

Speaker 4: Quarterly operating expenses were up 47% year-over-year to $64.7 million, driven by an $11.6 million increase in compensation.

Expense and an $8 $9 million increase in SG&A.

Speaker 4: and an $8.9 million increase in SG&A.

So turning to slide 15, let me provide you some more some additional color on our operating expense increase as the graphic shows.

Speaker 4: So, turning to slide 15, let me provide you some more, some additional color on our operating expense increase. As the graphic shows.

Speaker 4: We started with fourth quarter 2021 operating expenses of $44.1 million.

We started with fourth quarter 2020, operating expenses of $44 1 million.

Speaker 4: We added $13.4 million due to increased volumes, travel, and events. This growth in expenses is commensurate.

We added $13 $4 million due to increased volumes travel and events.

This growth in expenses is commensurate.

With revenue growth.

Speaker 4: I've been practicing saying commencement all the time. It's very exciting. Secondly, we added $2.9 million to the addition of VOINT, which as a reminder, was not in our expenses in 2020.

Tax and bank commencement of my time, it's very exciting.

Secondly, we added $2 $9 million could be issued a point, which as a reminder was not in our expenses in 2020.

Speaker 4: This brings us to a core operating expense of about $60.4 million in the fourth quarter of 2021, up 37% year-over-year.

This brings us to a core operating expense of about $64 million in the fourth quarter of 2021 up 37% year over year the.

Speaker 4: The remainder of the expense increase was driven by specific investments we made in the quarter as a result of our strong year. First, we paid $3.1 million dollars related to bonuses, which Natalie alluded to, including an Excellence Award paid to all employees and an increase in our annual bonus.

The remainder of the expense increase was driven by specific investments we made in the quarter as a result of our strong year first we paid $3 $1 million related to bonuses now Lee alluded to including an excellence awards paid to all employees and an increase in our annual motorcycle.

Speaker 4: Second, we chose to spend an additional $1.2 million on a few specific strategic initiatives. The spend was not originally in our plan for 2021, but will help accelerate growth in 2022 and beyond.

Second we chose to spend an additional $1 2 million on a few specific strategic initiatives. This firm was not originally in our plan for 2021, but will help accelerate growth in 2022 and beyond.

Before wrapping up our extensive discussion let me quickly run through our adjustments for the quarter. We added back a total of $12 million pre tax which is comprised of four items.

Speaker 4: Before wrapping up our expense discussion, let me quickly run through our adjustments.

Speaker 4: We ended back a total of $12 million pre-tax, which is comprised of four items.

Speaker 4: First, $5.6 million of non-cash share-based compensation. We expect this number to decline in 2022 to an average of about $4 million.

First $5 6 million of noncash share based compensation. We expect this number to decline in 2022 to an average of about $1 million a quarter.

The second adjustment to expenses was $2 9 million of amortization expense related to prior acquisitions again, we expect this number to decline in 2022 to about $1 $5 million.

Speaker 4: second adjustment to expenses is $2.9 million of amortization expense related to prior acquisitions. Again, we've set this number to decline in 2022 to about $1.5 million.

Third $3 million related to.

Speaker 4: Third, $3 million dollars related to primarily reorganization and integration costs and one-time costs related to the pandemic.

Primarily reorganization and integration costs, and one time cost related to independents.

Speaker 4: And lastly, $400,000 in acquisition-related expenses, primarily associated with our acquisition employees. Now let's turn the slides.

And lastly, $400000 Act.

Acquisition related expenses, primarily associated with our acquisition of <unk>.

Now, let's turn to slide 16 to discuss our earnings for the quarter for.

Speaker 4: For the fourth quarter of 2021, adjusted EBITDA was $38.3 million, up 20% year-over-year. Adjusted EBITDA margin for the quarter was 26.7%, down 220 basis points year-over-year due to the increased expenses that I have previously just

For the fourth quarter 2021, adjusted EBITDA was $38 $3 million up 20% year over year adjusted EBITDA margin for the quarter was 26, 7% down 220 basis points year over year due to the increased expenses that I have previously discussed.

Speaker 4: excluding those non-repeating expenses. Fourth quarter adjusted EBITDA would have been $42.6 million with an EBITDA margin of 29.7.

And excluding those non repeating expenses fourth quarter adjusted EBITDA was four <unk>.

$42 $6 million and the EBITDA margin of 29, 7%.

On an annual basis, we have expanded our operating margins 300 basis.

Speaker 4: On an annual basis, we have expanded our operating margin 300 basis points, well above our long-term target of 50 to 75.

Well above our long term target of 50 to 75 years.

Our reported net income was $12 1 million compared to negative $9 9 million in the fourth quarter 2020. This marks a third consecutive quarter positive GAAP income and we finished 2021 positive reported net income of $25 $7 million.

Speaker 4: for reported net income was $12.4 million compared to negative 9.9 million in the fourth quarter 2020. This marks the third consecutive quarter positive gap income, and we finished 2021 with positive reported net income of 25.7 million.

Speaker 4: Our adjusted net income for the fourth quarter was $24.7 million, or $0.33 per month.

Our adjusted net income for the fourth quarter was $24 $7 million 33 per share.

Speaker 4: This is based on the fourth quarter that we share count, 74.7 million.

This is based on our fourth quarter diluted share count of $74 7 million.

Speaker 4: Our adjusted effective tax rate for the whole year is unchanged at 23 and a half percent. For the caller, please see the.

Our adjusted effective tax rate for the full year is unchanged at 23, 5%.

For the caller. Please see the adjusted net income walk on slide 12.

Turning briefly to our reported fourth quarter balance sheet, Let me update you on our cash and debt position. We ended the quarter with a little over $75 million in cash and we continue to generate cash at about 50% conversion rate from operating activities and capital investments in 2020, I'm sorry in 2022.

Speaker 4: Turning briefly to our reported fourth quarter balance sheet, let me update you on our cash and debt.

Speaker 4: the end of the quarter with a little over $75 million in cash, and we continue to generate cash at about 50% conversion rate from operating activities and capital investments.

Speaker 4: In 2020, I'm sorry, in 2022, we expect to generate about $100 million.

Expect to generate about $100 million cash.

Speaker 4: Turning to our debt position, as Naomi mentioned in January , we announced a $500 million five-year credit.

Turning to our debt position now we mentioned in January we announced a $500 million five year credit facility with an interest rate of adjusted Stouffer plus 175%.

Speaker 4: with an interest rate of adjusted SOFR plus 1.875.

We use the new $125 million term loan in this facility to retire our existing debt, which had a rate of LIBOR plus 2%.

Speaker 4: We use the new $125 million term loan in this.

Speaker 4: to retire our existing debt, which had a rate of LIBOR plus 2%.

Now he noted we're really excited about the opportunity significantly increase our access to capital and reduce our borrowing rate highlighted by the margin improvement of 12 five basis.

Speaker 4: Now you know that we're really excited about the opportunity to significantly increase our access to capital and reduce our borrowing rate, highlighted by the margin improvement of 12.5%.

Now, let's turn to slide 17.

Speaker 4: Now let's turn to slide 17 to provide an update on our 2022 estimated.

Update on our 2022 expectations as you know we bill in advance based on platform asset totals at the end of the quarter.

Speaker 4: As you know, we bill in advance based on platform asset totals at the end of the quarter. As a result, we have already collected revenue for the first quarter of the year based on ending platform assets from December 31st, 2021.

As a result, we have already collected revenue for the first quarter of the year based on any platform assets from December 31 2021.

Speaker 4: So far in 2022, we have seen increased volatility in the market, and assets in our platform are down in January from year end. However, there are still six weeks remaining in the quarter, possible upside from interest rates, and strong business momentum. As a result, we are reaffirming the guidance we presented in November and anticipate earnings growth in excess of 20%.

So far in 2022, we have seen increased volatility in the market and assets of our platform were down in January from year end. However, there is still six weeks remaining in the quarter Hospital upsides mid states and strong business momentum.

As a result, we are reaffirming the guidance we provided in November and anticipate earnings growth in excess of 20%.

Speaker 4: We are incredibly excited about 2022 and Asset Marks Ability.

Incredibly excited about 2020, Q and asset marks ability.

To continue to thrive and grow this.

Speaker 4: continue to thrive and grow. This will be highlighted by a full year of revenue from Voyant, a likely increase in spread revenue, and strong advisor and net flow.

This will be highlighted by our full year revenue buoyant, the likely increase in spread revenue and strong advisor net flow growth before.

Will lead to double digit growth revenue and adjusted EBITDA and a margin expansion in excess of 100 basis points. We will of course provide an additional update for our <unk> 22 earnings call. As we will have certainty around end of quarter at levels and perhaps more clarity on the impact of any rate movements.

Speaker 4: will lead to double-digit growth in revenue and adjusted EBITDA and a margin expansion in excess of $100 million.

Speaker 4: We will, of course, provide an additional update during our 1Q22 earnings call, as we will have certainty around end-of-quarter asset levels and perhaps more clarity on the impact of any great movements. And with that, we'll hand it over to Natalie.

I'll hand, it over to Natalie for her concluding remarks.

Thank you Gary and thanks, everyone for being on the call today I've never been more excited about our company's future I look forward to sharing future updates at upcoming conferences and on subsequent earnings call. This concludes our prepared remarks I will now turn the call back to the operator to begin question and answers.

Speaker 3: Thank you, Gary, and thanks everyone for being on the call today. I've never been more excited about our company's future. I look forward to sharing future updates at upcoming conferences and on subsequent earnings calls. This concludes our prepared remarks. I will now turn the call back to the operator to begin question and answers.

Yes.

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

Speaker 1: Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, it is star one.

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

Again to ask a question it is star one.

Speaker 1: If you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly to ask questions or register.

If youre using a speakerphone. Please remember to pick up your handset before asking your question, we will pause here briefly ask questions already.

Yeah.

Our first question is from Ryan Bailey of Goldman Sachs.

Speaker 1: Hi, Natalie, Gary, and Taylor. Natalie, a high level question for you. We often hear about the aging of the financial advisor population, and, you know, we might have a potential retirement acceleration over the coming decade. So I was wondering, could you speak to what net attrition of advisors to the industry might mean for the day-to-day impact of the businesses of the remaining advisors, and then what that might mean for asset markets?

Hi, Gary and table.

Not only a high level question, Peter we often share about the aging of the financial advisor population.

And we might have a potential retirement acceleration over the coming decades. So I was wondering.

Can you speak to what net attrition of advisors for the industry might mean for the day to day impact of the businesses of the remaining advisers and then what that might mean profit market.

Yeah. Thank you so much for the question Ryan. So you are correct in that the average age of the advisor has it is has been increasing for quite some time.

Speaker 3: Yeah, thank you so much for the question, Ryan. So you are correct in that the average age of the advisor has is has been increasing for quite some time and many advisors are reaching what you would classically call retirement age. A few things I just want to say, though, is it is.

And many advisors are reaching what you would classically call retirement age and a few things I just want to say, though is it is.

Speaker 3: very very common because advisors get so much value and satisfaction out of their work that they don't fully retire in the classic way that we would think about retirement. Instead what they do is they bring on a successor or they sell off a part of their business or they bring on a team so that they can continue to serve clients much much later in life than you would normally expect.

Very very common.

Advisors gets so much value and satisfaction out of their work that they don't fully retire and the classic way that we would think about retirement instead, what they do is they bring on a successor or they fell off a part of their business.

Or are they bring on a team so that they can continue to serve clients much much later in life than you would normally expect.

Speaker 3: Even so, as advisors age, many of them are looking to...

Even so as advisers age many of them are looking to.

Speaker 3: to retire fully and fundamentally change the aspects of their work.

To retire fully.

And fundamentally change the aspect of their work and for those advisors some of them are selling.

Speaker 3: And for those advisors, some of them are selling, some of them are becoming part of bigger practices. But many, if not all of them have succession plans where younger advisors are entering into the business in one form or another. In fact, if you look at the total number of certified financial planners, just as an example, there have never been more new certified financial planners than there were in 2021.

Some of them are becoming part of bigger practices, but many if not all of them have succession plans were younger advisers are entering into the business in one form or another in fact, if you look at the total number of certified financial planners just as an example, there have never been more new certified financial planners in there were in <unk>.

'twenty one.

Speaker 3: And those certified financial planners are a much, much younger age, much more diverse group.

And those certified financial planners are a much much younger age a much more diverse group and this group of newer emerging advisors.

Speaker 3: And this group of new or emerging advisors, they're entering the field at a rate, a replacement rate of the advisors who are leaving. And so I don't expect that there will be a huge rotation where there'll be a much, much lower amount of advisors, but instead you'll see these new financial planners, these new and emerging advisors enter the industry.

There are entering the field at a rate and a replacement rate of the advisers, who are leaving and so I don't expect that there will be a huge rotation where.

There'll be a much much lower amount of advisors, but instead, you'll see these new financial planners these new and emerging advisors entered the industry.

Speaker 3: The last thing I'll just say is that our business consulting group, which I mentioned on the call earlier, one of the things that that group focuses quite a lot on with

The last thing I'll, just say is that our business consultant group, which I mentioned on the call earlier, one of the things that that group focus is quite a lot on with the advisors that we serve is making sure that they have a robust succession plan.

Speaker 3: the advisors that we serve is making sure that they have a robust succession plan, both emergency succession plan and long term succession plan, and that they are actively grooming a younger generation to take over their business. Got it.

Both emergency succession plan and long term succession plan and that they are actively grooming a younger generation to take over their business.

Got it okay and maybe.

Maybe a separate point, maybe it's somewhat related to this.

Speaker 1: Maybe a separate point, maybe it's somewhat related to this.

Speaker 1: So, your households per advisor for AssetMark is up about 19% over the last two years. I was just wondering if you could comment on what the driver of that is. Is it that you guys are winning more sort of wallet share from the financial advisors? Are they growing organically while they work for you because what you're doing is freeing up time for them or is there anything else that we should keep in mind? Yeah, I mean, the answer to that question

So your your households per advisor for asset Mark is up about 19% over the last two years.

Just wondering if you could comment on what the driver of that is is it that you guys are winning more.

Wallet share from the financial advisors.

Growing organically, while they work for you because.

What youre doing to bring up time for them or is there anything else that we should keep in mind.

Yeah, I mean did they ask that question is really all of the above so it in fact, our advisors are absolutely growing we just completed our 2021 value of outsourcing survey and what we found is advisors that outsource.

Speaker 3: So in fact, our advisors are absolutely growing. We just completed our 2021 value of outsourcing survey. And what we found is advisors that outsource.

Speaker 3: grow at a faster rate. They attract more new clients than advisors that don't. We've also been investing in helping our advisors market more efficiently and better and our marketing outsourcing program that I mentioned on the earnings call earlier today is just the most recent example of that.

Grow at a faster rate to attract more new clients than advisors that don't we've also been investing in helping our advisors market more efficiently and better.

Our marketing outsourcing program that I mentioned on the earnings call earlier today is just the most recent example of that so increasing our advisers growth rate and ability to attract new households are advisors are highly likely to be referred.

Speaker 3: So increasing our advisors growth rate and ability to track new households, our advisors are highly likely to be referred.

Speaker 3: and specifically coming out of 2020, that the level of service that they provided to their clients.

And specifically coming out of 2020 that the level of service that they provided to their clients are really outpaced the competition and so they they saw tremendous growth in 2021 from new clients.

Speaker 3: really outpaced the competition and so they saw tremendous growth in 2021 from new clients.

Speaker 3: And then also, we're adding new products and services to our platform so that we can serve categories of investors that we haven't been able to serve before. Examples of that are our Asimark personal portfolios, where we added new sleeves and also new high net worth offerings.

And then also we're adding new products and services to our platform. So that we can serve categories of investors that we havent been able to serve the for example, the bat our swap at our aftermarket personal portfolios, where we added new sleeves and also new high net worth offering.

Speaker 3: One other thing I'll just mention is the high net worth offering that Asimark has been building for over a decade now, we've added products, services that serve the entire wallet of the high net worth individual. And that has really helped us grow our advisors businesses from much, much larger clients.

One other thing I'll just mention is the high net worth offering that aftermarket has been building for over a decade now we've added products services.

Serve the entire wallet of the high net worth individual and that has really helped us grow our advisors businesses from much much larger clients.

Speaker 1: Got it. Maybe if I can sneak one more quick one in. Gary, related to that comment about 75% of spread revenues falling through to the bottom line, is that the 25% is that a deposit beta comment or is that reinvestment into the business or is it both?

And maybe if I can sneak one more quick one and Gary related to that comment about 75% of spread revenues falling through to the bottom line is that the 25% is that a deposit beta comment or is that reinvestment into the business orders at birth.

The deposit beta.

Okay. Thank you.

Mhm.

Our next question is from Jerry O'hara from Jefferies.

Speaker 5: Our next question is from Jerry O'Hara from Jeffrey.

Yeah.

Speaker 6: Okay. Great. Thank you. Hi. How are you? So, just kind of a question around M&A and how you're thinking about it on a go-forward basis. Are there any kind of particularly identifiable opportunities or product gaps that you've kind of seen or identified, or is it sort of just more opportunistic in nature? Any sort of color or context there would be helpful.

Okay great.

Hi, how are you.

So just kind of a question around around M&A and how you're thinking.

Think about it on a go forward basis are there any kind of.

Particularly identifiable opportunities or product gaps that you've kind of seen or identified or.

Is it sort of just more opportunistic in nature or any sort of color or context, there would be it would be helpful. Thank you.

Yeah, absolutely. Thanks, so much for the question Jerry as it relates to M&A first thing I just want to say is we look at the universe of opportunities that there are to serve advisors and related to that the technology. They use the services they need.

Speaker 3: Yeah, absolutely. Thanks so much for the question, Jerry. As it relates to M&A, the first thing I just want to say is we look at the universe of opportunities that there are to serve advisors. And related to that, the technology they use, the services they need, what's powering advisory practices that are growing and thriving. And all of those areas are high opportunity areas for

What powering advisory practices that are growing and thriving and all of those areas are high opportunity areas for aftermarket sales.

Speaker 3: So buoyant financial planning obviously is a huge part of a successful advisory business and so we wanted to own that part of the advisor experience.

So it was a buoyant financial planning, obviously is a huge part of our successful advisory business and so we wanted to own that part of the advisor experience.

Speaker 3: You know, there are other aspects of technology, other aspects of asset management, other aspects of servicing that are critical to the advisor's ability to deliver quality support for their clients. And those are the areas that we'll focus on.

There are other aspects of technology other aspects of asset management other aspects of servicing that are critical to the advisers ability to deliver quality support for their clients and those are the areas that we'll focus on.

Speaker 3: In an M&A environment, like the one we're in right now, you have to be both strategic and opportunistic. We have identified the parts of the market we're most interested in acquiring, and as those opportunities become available, we are very aggressive about researching and ensuring that we're part of those conversations.

In a in an M&A environment like the one we're in right now.

It has to be both strategic and opportunistic.

We need we have identified the parts of the market. We're most interested in acquiring.

And as those opportunities become available we are very aggressive about researching and ensuring that were part of those conversations.

That said the.

Speaker 3: The environment is tough. I mentioned this on the last earnings call, and we're going to continue to be a disciplined buyer. We want to make sure that that asset, whether it's scale or capabilities, is it fit for our business and that we feel like we can deliver, in the medium term, accretive acquisition.

The environment's tough I mentioned this on the last earnings call and we're going to continue to be a disciplined buyer.

We want to make sure that that asset whether it's scale our capabilities as a fit.

For our business and that we feel like we can deliver in the media in the medium term.

Accretive accretive acquisitions and in an environment like this one that means you have to sift through quite a lot of opportunities to get to those that makes sense and Gary and I and the entire leadership team I'd ask the marker dedicated to doing that.

Speaker 3: And in an environment like this one, that means you have to sift through quite a lot of opportunities to get to those that make sense. And Gary and I and the entire leadership team at Asimark are dedicated to doing that.

Okay. That's that's helpful and then perhaps one and apologies if I missed this but.

Speaker 6: Okay, that's helpful. And then perhaps one, and apologies if I missed this, but as it relates to the strategic initiatives of 1.2 million that are not expected to recur, did you give any kind of context on what exactly that was, or can you if you didn't?

As it relates to the strategic initiatives of $1 2 million or not.

But to do it did.

Did you give any kind of context on what exactly that was or her tenure with you. If you did it.

Yeah.

Sure Gary why don't you to yes, so look maybe.

Speaker 7: Sure, Gary, why don't you do it? Yeah, so look, we've discussed. I did not, Gary, so you didn't miss anything. Happy Valentine's Day. But.

We've discussed and I did not Jerry So you didn't Miss anything happy Valentine's day.

But.

Basically we began initiatives.

Speaker 4: Basically, we began initiatives. We have an initiative for our advisor growth. We have a digital lead generation initiative. We have another initiative related to our web, our online web presence and whatnot. These are initiatives that we were planning to begin in 2022. Again, with the thought of bringing in more advisors, making it easier for them to do business and creating leads.

We have an initiative for our advisor growth, we Havent, David will lead generation initiatives, we have another initiative related to our web our online web presence and whatnot.

You know that we were planning to begin in 2022.

Again, we're not thought of bringing in more advisers, making it easier for them to do business and creating leads.

Speaker 3: And they're non-recurring in nature, because in many instances we engaged in consulting projects or worked on advertising, again, to pull forward 2022 expenditures into 2021. Okay, great.

And they are nonrecurring in nature because in many instances.

We engaged in consulting projects or work on advertising again to pull forward 2022 expenditures into 2021.

Okay, great. Thanks for taking my questions. This afternoon.

Yeah.

Thank you sure.

Yeah.

Yeah.

Our next question is with Kenneth Worthington of JP Morgan.

Speaker 5: Our next question is with Kenneth Worthington of J.P. Morgan.

Hi, Good afternoon, Hi, just following up on on that question and sort of the one time bonuses.

Speaker 8: Hi, good afternoon. Hi, you know, just following up on that question and sort of the one-time bonuses, is asthma...

He is a smart going to pay.

Speaker 8: these sort of one-time bonuses in the future, and why isn't one-time going to be sort of an ongoing tradition there? And then there was sort of the pull-forward of expenses, you know, the one-timers that aren't recurring.

Do you sort of onetime bonuses in the future and why isn't one time going to be sort of an ongoing tradition.

There and then there was sort of the pull forward of expenses you know the one timers that arent recurring.

Speaker 8: Does this sort of happen again and again, like things are going great, you've got some more money to play with, so it all makes sense, but why don't we sort of see this in the future as well? And then as we think about the 16 to 20 percent expense growth, is it inclusive? Does it incorporate these one-time expenses?

Does this sort of happened in getting me Dan like things are going great. You have got some more money to play with so it's it all it all makes sense, but.

Why don't we just sort of see this in the future as well and then as we think about the 16% to 20% expense growth.

Is it incur.

Inclusive of it does it does it incorporate these one time expenses.

And in <unk>. So we're growing off of a higher number or is it sort of exclusive of the onetime investments I'm sorry couldn't quite tough.

Speaker 8: in in four q so we're growing off the higher number or is it sort of exclusive of uh... one-time investments

Yeah. So why don't I take the first two of those questions and then let garry speak to that.

Speaker 3: Yeah, so why don't I take the first two of those questions and then let Gary speak to the modeling of the 16 to 20% expense growth.

The modeling of the 6% to 20% expense growth.

Speaker 3: So as it relates to the one-time bonuses, as Gary and I mentioned in our prepared remarks, 2021 was an extraordinary year. Best in history in terms of assets, best in history in terms of net new asset growth, best in history in terms of revenue, best in history in terms of EBITDA, best in history in terms of EBITDA expansion. And we're a team here at AssetMark and we wanted to share that success with the team.

So as it relates to the onetime bonuses as Gary and I mentioned in our prepared remarks 2021 was an extraordinary year.

Best in history in terms of assets fast in history in terms of net new asset growth fast in history in terms of revenue. That's in his history in terms of EBITDA. That's been the history in terms of EBITDA expansion and we're a team here at Aramark and we wanted to share that success with the team.

Speaker 3: You know, they had a change in leadership in 2021. It was an incredibly great year in terms of results, but also a difficult year in terms of, you know, still being in the pandemic and everyone working hard. And so, for the first time in our history, we did a one-time bonus for everyone at the firm.

They had a change in leadership in 2021 are we there was a it was that it was a incredibly great year in terms of results, but also a difficult year in terms of still being in the pandemic and everyone working hard and so for the first time in our history, we did a onetime bonus for everyone at the firm and.

Speaker 3: And I got to tell you, the team here, they earned it. It's just a wonderful, wonderful group of people dedicated to making a difference in the lives of advisors every day.

I got to tell you the team here. They earned it as just a wonderful wonderful group of people dedicated to making a difference in the lives of advisers every day, but the bonus came out of extraordinary time with an extraordinary set of results and so that's why we categorized it as onetime if we have an extraordinary year in 2022.

Speaker 3: Um, but the bonus came at an extraordinary time with an extraordinary

Speaker 3: And so that's why we categorized it as one time. If we have an extraordinary year in 2022, like we did in 2021, maybe we will deliver the same kind of bonus. If we don't, then we won't. And so it felt one time in the AK.

Like we did in 2021, maybe we will deliver the same kind of bonus if we don't.

And we want and so it felt onetime in nature to us.

Speaker 3: The second thing I just want to comment on is your very good question about is this something where we invest more in the fourth quarter, because there's there's money to be invested in something we should expect in the future. And the answer to that question is probably yes.

Second thing I just wanted to comment on is your very good question about is this something where we invest more in the fourth quarter, because there's there's money to be invested as something we should expect in the future and the answer to that question is probably yes.

Speaker 3: We always have more visibility into our overall business results in the fourth quarter because we bill in advance based on the assets at the end of the quarter before. And so by the fourth quarter, we know, give or take a very small margin, what our results will be at the end of the year. And Gary and I feel that working with the executive team, we should invest for future growth when we have the opportunity to do that. Last year, we had already expanded margin by 300 basis points.

We always have more visibility into our overall business results in the fourth quarter, because we bill in advance based on the assets at the end of the quarter before and so by the fourth quarter, we know give or take a very small margin what our results will be at the end of the year and Gary and I feel that work.

And with the executive team, we should invest for future growth. When we have the opportunity to do that last year, we had already expanded margin by 300 basis points and we wanted to make sure that we're investing appropriately in growth and that's part of how we balance the need for revenue growth and margin expansion, we tried to be clear about that in the third and fourth quarter last.

Speaker 3: And we wanted to make sure that we were investing appropriately in growth. And that's part of how we balance the need for revenue growth and margin expansion. We tried to be clear about that in the third and fourth quarter last year. And just want to reinforce that we're committed to investing in future growth where we can.

Year end I, just want to reinforce that we're committed to investing in future growth, where we can.

Speaker 3: And then Gary, I'll hand off to you to talk about the expense expectations. Yeah. And so, you know, Ken, it's a great question, right? And what whatever our goals can is make sure that, you know, we're trying to communicate to you and on the investors. So there are no real surprises in what's coming forward. Right. We try to we try to go through our outlook for the upcoming year.

And then Gary I'll hand off to you to talk about the expense expectation yes.

Ken It's a great question, Ryan and what one of our goals kind of to make sure that you were trying to communicate to you and on the investors excellent there were no real surprises and what's coming forward.

We try to we try to go through our.

Outlook for the upcoming year.

And in fact, when that is going through as we think through as we go through the year. So when you think about our 2015.

Speaker 4: and exactly what now is going through as we think through as we go through the year. So, when you think about our 2016-2010 growth next year and it's

<unk> growth next year in expenses.

Speaker 4: You know, I was talking into four categories, about a third of that is related directly to volume and salary. So that does capture that. And we always had captured back when we read the plan late last year, you know, the increase in cost for talent that Natalie was talking about.

I was walking into four categories about a third of that is related directly to volume and salaries. So that does capture and we always had cats back let me read the plan late last year.

The increase in cost for talent now and he was talking about that's about one third of our expense range next year, but one quarter is due to a full year of buoyant right you only had a half year costs, but more in 'twenty, one and so part of our sensible go up because of a full year of buoyant about order of Anchorage centers locally.

Speaker 4: That's about one-third of our expense range next year. About one-quarter is due to a full year of buoyant, right? We only had a half-year cost for buoyant in 21, and so part of our expenses will go up because of a full year of buoyant. About a quarter of our increased expenses are going to be related to what we would call a travel and events budget.

And related to what we would call a travel and events budget specifically in a week from now we're going to hold our annual gold form event, it's a $3 million to $4 million than what we have done every year for 20 years and steps last year and so.

Speaker 4: Specifically in a week from now. We're going to hold our annual gold form event

Speaker 4: to $4 million event. It's what we have done every year for 20 years except last year. And so this is this is very exciting and we're stoked about going out and seeing our top 500 advisors on our event. And then the last third of our

This is very exciting and one was stoked about going out and seeing our top 500 advisers on our events.

And then the last third of our.

Speaker 4: sense growth next year is further investments, right? So, Ken, there is a long list of investments we are excited about making and bringing to advisors all the time. The 1.2 million that I alluded to that was set in fourth quarter because we could, you know, that accelerated some stuff, and we still have a large bucket of investments that we have budgeted now for 2022. That help?

Well next year and further investments right and so Ken there is a long list of investments we are excited about making in bringing new advisors all the time.

$1 2 million that I alluded to in the fourth quarter, because we could you know that accelerated some stuff and we still have a large buckets of investments that we have a bunch of it now for 2022.

Nope.

Okay Awesome, that's excellent sort of the elephant in the room for me sort of remains.

Speaker 8: sort of the elephant in the room for me sort of remains the fundamentals

Fundamentals seem to be good.

Speaker 8: Management execution seems to be good, very good, great. The stock price is not reflecting.

Management execution seems to be good very good.

Great.

The stock price.

It's not reflecting that.

Speaker 8: How does Huatai think about the stock, if at all, if they're even communicating with you about it? I guess my question is, are they receptive to suggestions about what might...

How does what Ty think about the stock if at all if they're even communicating with you about it I guess my my question is.

Are they receptive to suggestions about what might.

Get the stock to act better or do they have suggestions about what might improve the stock price performance.

Speaker 8: get the stock to act better, or do they have suggestions?

Speaker 8: about what might improve the stock price performance.

Speaker 8: There's been a number of things floated to me, I'm sure to everybody else, I'm sure to you.

Theres been a number of things float it to me I'm sure everybody else I'm sure to you.

Speaker 8: Anyway, do they want to be part of a potential solution there, or is this not really a concern and they're a half a world away and this never even comes up with you in the

Anyway do they do they want to be part of a potential solution. There or is this not really a concern and you know there are half a world away and there's never even if it comes up with you and the management team.

Yeah. So Ken thanks, so much for asking the question and I agree with you. It is the elephant in the room and so I'm really I'm really glad you asked the question first thing I just want to say is what tie there our majority shareholder.

Speaker 3: Yeah, so Ken, thanks so much for asking the question and I agree with you. It is the elephant in the room. And so I'm really, I'm really glad you asked the question.

Speaker 3: First thing I just want to say is, Watai, they're our majority shareholder.

Speaker 3: And so they care deeply about the stock price, as any majority shareholder would. They are frustrated by the stock price, and they and the management team and the board, we talk about the stock price.

And so they care deeply about the stock price as any majority shareholder what.

And they are frustrated by the stock price and they and the management team and the board we talk about the stock price.

Speaker 3: to make sure that we're doing everything we can for our shareholders to understand their needs. At the same time, what we control is fundamental. What we control is making a difference in the lives of our advisors and their clients.

To make sure that we're doing everything we can.

For our shareholders to understand their needs at the same time, what we control is fundamental what we control is making a difference in the lives of our advisers and their clients and over the long and medium term. If you don't do that nothing else matters and so we are absolutely having conversations with what Ty as a.

Speaker 3: And over the long and medium term, if you don't do that, nothing else matters.

Speaker 3: And so we are absolutely having conversations with West High as a majority shareholder. They are absolutely focused on the stock price. But at the end of the day, all that matters, if you don't deliver fundamentals, if you don't delight your clients, if you don't have a strong and happy team, nothing else matters. And so we're focused on that.

40 shareholder, they're absolutely focused on the stock price, but at the end of the day all of that matters. If you don't deliver fundamentals. If you don't delight your clients. If you don't have a strong and.

And happy team nothing.

Nothing else matters, and so we're focused on that.

Okay. Okay, great. Thank you very much.

Thanks, Ken.

Our next question is from Michael Young of Truth Securities.

Speaker 5: Our next question is from Michael Young of Truist Security.

Speaker 8: Hey, thanks for taking the question. Hey, how are you, Natalie?

And Michael for taking the question, Hey, How're you Natalie.

Good. Thank you how are you.

Doing well doing well.

Speaker 8: Doing well, doing well. Wanted to maybe start with one for Gary just.

Wanted to maybe start with one for Gary just as we kind of think about the year and market appreciation you know that's the part that could be maybe most elusive kind of within the targets at least at this point.

Speaker 8: You know, as we kind of think about the year and market appreciation, you know, that's the part that could be, you know, maybe most elusive kind of within the target, at least at this point, with a potential offset from higher rates. But if we just think about, you know, if that 3.5% market appreciation weren't to materialize and we were just kind of flat year over year, how much of an impact is that as we think about kind of EBITDA and EBITDA margin expansion for the year, you know, again, X rate?

With a potential offset from higher rates, but if we just think about that three 5% market appreciation werent to materialize and we were just kind of flat year over year, how much of an impact of that as we think about EBITDA and EBITDA margin expansion for the year again ex rates.

So I mean, just very ballpark <unk>, if you're talking about and the revenue impact if we miss on the three 5% growth very ballpark and say $10 million to $15 million of revenue can take.

Speaker 4: So, I mean, just very ballparky, if you're talking about the revenue impact, if we miss on this three and a half percent growth.

Speaker 4: very ballparking at, say, $10 million to $15 million of revenue. It would be about $3 billion of assets or so, about 40 basis points, somewhere in that range.

It would be about.

$3 billion of assets, so about 40 basis points somewhere in that range.

Speaker 4: You know, that said, that said, Michael, we've already locked in a quarter, right? So, we already entered the year with billing first quarter. And so, in short, whatever the market does in fourth quarter of this year, that doesn't quite actually matter because that's for billing for next year.

That said.

That said, Michael we've already locked in a quarter right. So we already entered the year with.

Billing first quarter and so.

In short whenever the market does in the fourth quarter of this year.

Doesn't quite actually matter with regard that's for bill into next year and so we.

Speaker 4: And so we've already mitigated about a quarter of the market risk of any given year when we're talking to you in February , right? And so the main focus will be what the market will be doing the rest of this quarter and into next quarter. And at the same time, Natalie and myself, the executive team, we are always focused on making sure that

We've already mitigated about a quarter of the market risk of any given year. When we're talking to you in February right and so.

Is that the main focus will be what the market will redoing unrest or this quarter and into next quarter.

And at the same time, not only myself decorative team we have.

We're always focused on making sure that.

Speaker 4: We are planning our expenses and our investments appropriately, and so as the market recovers or does not, we will alter the timing of some of our investments.

We are.

Planning, our expense senses, and our investments appropriately and so.

As the market recovers or it does not we will alter the timing of some of our investments.

Speaker 8: Right. Fully appreciate that you guys have a lot of leeway and lead time on the expense side, which is great. The other piece would be higher rates. It seems like that could offset an additional 50%, 75% of kind of...

Right now for fully appreciate that you guys have a lot of leeway and lead time on the expense side, which is great.

And then the other piece would be kind of higher rates. It seems like that could offset an additional 50% to 75% of kind of lower market performance. If that were to materialize I guess the other question I did have was a follow up kind of on the rate outlook and spread revenue.

Speaker 8: lower market performance, if that were to materialize. I guess the other question I did have was a follow-up kind of on the rate outlook and spread revenue, just twofold. One, you know, the cash balances. Can you just remind us, you know, what we should expect in terms of gearing of cash balances?

Just two fold one the cash balances can you just remind us what we should expect in terms of gearing of cash balances.

Speaker 8: As rates rise, do those tend to come down as a percentage of assets, or has any makeshift occurred since the last time we were in higher rates that might impact that? And then, as well, we may see higher absolute levels of rates this cycle, so at what point do deposit betas catch up later on, maybe in the run-up?

As rates rise of those tend to come down as a percentage of assets or if there's any mix shift occurred since the last time, we were at higher rates.

It might impact that and then as well we may see higher absolute levels of rates the cycle. So at what point do you kind of deposit betas catch up.

Later on maybe in the rate hike cycle.

Speaker 3: Yeah, so a couple of things I just want to say about cash balances when interest rates go up. Cash balances, the type of cash balances that we have at Aston Mark Trust, those cash balances are cash held in a model to pay client fees.

Yeah. So a couple of things I, just want to say about cash balances when interest rates go up.

Cash balances.

The type of cash balances that we have it after mark trusts are those cash balances our cash held in a model to pay client fee.

Speaker 3: And so they're less elastic than true cash balances that you would see at a, like at a custodian. We do have position-paced cash, high-yield cash, and that tends to be a little bit more elastic, but the bulk of the cash assets we have on our platform are less so because they're held for the short term to pay for fees. In aggregate, it's about 3.5% of the assets held at the trust companies. And honestly, there are two.

And so there are less elastic than true cash balances that you would see at a.

I got a custodian.

We do have a position tastes cash high yield cash and that tends to be a little bit more elastic, but the bulk of the cash assets, we have on our platform or.

Or less so because they're held for the short term to pay for fees in aggregate. It's about three 5% of the assets held at the Trust company and honestly there too.

Speaker 3: two activities that influence cash balances and neither are related to rates.

Two activities that influence cash balances and neither are related to rates. One is if there is extreme volatility in the market. We see our cash balances go up and the cash balances go up because clients moved to cash to be more conservative or the strategies on our platform rebalance to cash to be more conservative.

Speaker 3: One is if there's extreme volatility in the market, we see our cash balances go up. And the cash balances go up because clients move to cash to be more conservative, or the strategists on our platform rebalance to cash to be more conservative.

Speaker 3: And so market volatility is one thing that really influences our rates. And then the other thing that influences our rates is when the strategists reallocate for one reason or another.

And so market volatility. It is one thing that really influences our rates and then the other thing that influences our rates as when a strategist reallocate for one reason or another.

Speaker 3: you know, they might move to cash for the short term as they reallocate their assets.

You know they might move to cash.

For the short term as they reallocate their assets.

Speaker 3: And then the third, which is not related to fees either, is the amount of assets that we're attracting to the platform will raise the overall level of cash because 3.5% of those assets go to cash. So it's a great question and something we look very closely at at Ask Mark and the nature of our cash makes the elasticity a little different.

And then the third which is not related to fees either is the amount of assets that we're tracking to the platform.

We'll raise the overall level of cash because three 5% of those assets go to cash.

So it's a great. It's a great question and something we look very closely at as Marc and the nature of our cash makes the elasticity a little different here.

Yeah.

Yeah.

Great and then Gary can kind of the last one was just on the beta as we move into maybe 200 basis points up in rates et cetera, do we see sort of diminishing returns at that point.

Speaker 8: Great. And then, you know, Gary, kind of the last one was just on the beta as we move into, you know, maybe 200 basis points up in rates, etc. Do we see sort of diminishing returns about that?

Speaker 4: Well, that'd be a champagne problem to have, but I think yes, generally speaking, right now what we said, our beta was about 75% that we would call to our bottom line, a little bit diminished as you get higher into that 200 basis point range, but not that much.

Well, although the champagne problem to have but.

Yes, it did get done.

Speaking of it right now what we would set our beta was about 75%.

Although our bottom line.

A little bit Dominion as you get higher into that 200 basis point range, but.

Not that much when there is less willingness.

Speaker 3: And obviously, as you get above the 200 basis point range, if we get there, you're returning a lot of those incremental rates to the client. So yeah, as you get above 2.4, I'm sorry, 2.5, 3%, we'll want to be returning some of that, much of that to clients.

And obviously as you get above the 200 basis point range, if if we get there.

You're you're returning a lot of those incremental rates to the client.

So yeah, you're you're as you get above 2.42 point I'm, sorry, $2 five three.

3% will Wanna be returning some of that how much of that decline.

Okay perfect. Thank you for all the info.

Sure.

Okay.

Yes.

Our last question is from Patrick O'shaughnessy from Raymond James.

Speaker 5: Our last question is from Patrick O'Shaughnessy from Raymond James.

Speaker 6: Hey, good afternoon guys question on the expense outlook for 2022 was when you guys last quarter gave your initial outlook of I think 16 to 20% growth. Did that contemplate the non repeating spend during the fourth quarter?

Hey, good afternoon guys.

Question on the expense outlook for 2022.

That was when you guys last quarter gave your initial outlook of 16% to 20% growth did that contemplate the non repeating spend during the fourth quarter.

Speaker 4: Uh, no, um.

No.

Speaker 4: So what I want to say is one of the reasons the reasons that we provide a range is so that we have flexibility at the lower end of the range to implement things that are absolutely essential, but could not be predicted.

No I'm sorry go ahead.

And then so what I want to say is one of the regions. The reason that we provide a range is so that we have flexibility at the lower end of the range.

To implement things that are are absolutely essential.

But could not be predicted and so the the the onetime bonus that we did at the end of last quarter as I thought it was an extraordinary year and we were very very happy to do that for our team and we could do it within the bounds of the range that we had given and then adjusted upward and so.

Speaker 3: And so the one-time bonus that we did at the end of last quarter, as I said, it was an extraordinary year. We were very, very happy to do that for our team. And we could do it within the bounds of the range that we had given and then adjusted up.

Speaker 3: And so, you know, we expect to stay within that range, and again, the lower end of that range is given so that we have the flexibility to make decisions that we think are important for future growth or the health of our patients.

We expect to stay within that range and again, the lower end of that range just given so that we have the flexibility to make decisions that we think are important for future growth or the health of our business.

Yeah.

Okay understood I appreciate that.

Speaker 6: Okay, understood, appreciate that. Your January net flows, 650 million, up year over year, but your lowest quarter since, or lowest month, rather, since May of last year. Is there typically seasonality in January ? Is there an Omicron factor? Obviously, just one month, don't want to read too much into it, but kind of what sort of commentary can you provide on January ?

Your January net flows $650 million.

Up year over year, but your lowest quarter since our lowest month, rather since may of last year.

They're typically seasonality in January we started Omar Khan factor.

Actually just one month don't want to read too much into it but.

Kind of what sort of commentary can you provide on January flows.

Yeah, I mean, absolutely so, yes definitely down versus fourth quarter of last year, but up 31, 6% versus January of last year, there was absolutely and omicron element to it as well as the market volatility, even so I'm really really happy with our pipeline and what.

Speaker 3: Yeah, I mean, absolutely. So, yes, definitely down versus fourth quarter of last year, but up 31.6% versus January of last year. There's absolutely an Omicron element to it, as well as the market volatility. Even so, I'm really, really happy with our pipeline and what we see in our pipeline. And, you know, one of our strongest Januaries ever.

We see in our pipeline.

And you know one of our strongest January as ever.

Speaker 3: uh in 2022. So uh you know obviously we'd love every month to be like December or better um but January can have seasonality into it. It's a it's a month where there is a lot of volatility um in flows um and we we couldn't be happier with the pipeline um and we also just couldn't be happier that it's up 31.6 percent.

In 2022, so you know obviously you'd love every months you'd be like December or better.

But January can have seasonality into it it's a it's a month, where there is a lot of volatility.

Inflows and we couldnt be happier with the pipeline.

And we also just couldn't be happier that it's up 31, 6%.

Got it.

And then last from me I know you guys pay a lot more attention to engaged advisers rather than total advisers, but.

Speaker 6: And then last for me, I know you guys pay a lot more attention to engaged advisors rather than total advisors, but you did add, I think, 97 new total advisors this quarter, which was your strongest quarter since 2018. Anything you would call out is really driving that, and would you expect to maintain that momentum going forward?

You did add I think 97.

New total advisors this quarter, which was your strongest quarter since 2018.

Anything you'd call out is really driving that and would you expect to maintain that momentum going forward.

Speaker 3: Yeah, so a couple things that we would just call out as it relates to the number of our advisors increasing, as well as the number of our engaged advisors and the number of new producing advisors, all three were high in the fourth quarter of last year and in 2020, 2021. First thing I'll just say is we have a concerted effort to make sure that we're growing the advisors that are disengaged to be engaged.

Yeah. So a couple of things that we would just call out as it relates to our the number of our advisors, increasing as well as the number of our engaged advisers and the number of new producing advisers all three were high.

In the fourth quarter of last year and in 2000 22021.

First thing I'll, just say is we have a concerted effort to make sure that were growing the advisers that are disengaged to be engaged.

We've Ah.

Speaker 3: Invested heavily in a new channel of digital digital account development. So

<unk> invested heavily in a new channel of digital.

Our digital account development so.

Raising awareness of our brand raising awareness of our offer broadly in the advisor community in ways that we haven't done before and then lastly, with our net promoter scores being as high as they've ever been advisers are referring asset mark.

Speaker 3: raising awareness of our brand, raising awareness of our offer broadly in the advisor community in ways that we haven't done before.

Speaker 3: And then lastly, with our net promoter scores being as high as they've ever been advisors are referring asset mark to their friends and

To their friends and colleagues in.

Speaker 3: In addition, we're helping them save time and money and grow faster. And so advisors, colleagues are seeing that success and wanting to take part in it.

In addition, we are helping them save time and money and grow faster and so advisors colleagues are seeing that success and wanting to take part in it. So all of those things are leading to the number of advisors in general going up and not from Pat sorry, new producing advisers I'm going up as well the last thing I'll, just say is entering new.

Speaker 3: So all of those things are leading to the number of advisors in general going up and sorry, new producing advisors.

Speaker 3: going up as well. The last thing I'll just say is entering new channels. RIA are enterprise channels where we have relationships with credit unions.

Channel.

Our enterprise channel, where we have relationships with credit unions.

Speaker 3: and bigger institutions has made an impact as well.

And bigger institution has made an impact as well we have a program we call. It leadership advantage. When we bring these types of enterprise clients together and we help them learn how to attract new advisors and for their advisors to grow and we're seeing a lot of momentum from that part of our business.

Speaker 3: We have a program, we call it Leadership Advantage, where we bring these types of enterprise clients together, and we help them learn how to attract new advisors and for their advisors to grow. We're seeing a lot of momentum from that part of our business.

Great. Thank you.

Thanks, Patrick Thanks, Patrick.

There are no further questions registered at this time, so I would like to pass the conference back to Natalie for any closing remarks.

Speaker 5: There are no further questions registered at this time. So I would like to pass the conference back to Natalie for any closing remarks.

Thank you so much for your time today, we'll look forward to talking to you again next quarter, everyone stay safe and have a great spring.

Speaker 3: Thank you so much for your time today, we'll look forward to talking to you again next quarter. Everyone stay safe and have a great spring.

Okay.

Goodbye.

Okay.

Yeah.

Uh huh.

Yes.

Uh huh.

Right.

Okay.

Okay.

Okay.