Q3 2022 AssetMark Financial Holdings Inc Earnings Call
Good afternoon, everyone and welcome to S. M March 3rd quarter 2022 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 now I'd like to turn the call over to Taylor Hamilton head of Investor Relations. Please go ahead Mr. Hamilton.
Thank you Matthew good afternoon, everyone and welcome to <unk> third quarter 2022 earnings Conference call.
Joining me are asset marks Chief Executive Officer, Natalie Wilson, and Chief Financial Officer, Gary Xylem today, They will discuss the results for the third quarter and provide an update to <unk> business outlook for 2022.
Following our introductory remarks, we will open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during the prepared remarks. It can be accessed on our IR website at IR dot asset Mark Dot com.
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.
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 metrics. Please refer to our press release and SEC filings for more information on forward looking statements risk factors associated with our business and required disclosures related to non-GAAP financial information.
And with that I'll turn the call over to my colleagues Natalie take it away.
Thanks, Taylor, Hello, and welcome to our third quarter earnings call I Hope everyone is doing well today my prepared remarks today will focus on the current environment. Our 2022 share of wallet study and then dive into the five key components of our growth strategy.
After that I will turn the call over to Gary to discuss our financial and operating results for the third quarter and our outlook for the remainder of the year.
Starting on slide three.
The last time, we spoke we've continued to say extremely close to our advisors, helping them navigate this volatile economic landscape.
Our support along with a meaningful contribution from spread revenue enabled us to deliver another quarter of record results, including record net revenue of $160 million I'm, sorry, 116 million record adjusted EBITDA of 52 million record adjusted EBITDA margin of 34.
<unk> record net income of $35 million and record adjusted EPS of <unk> 47 cents.
While the third quarter was the best in <unk> history make no mistake. This is an uncertain and challenging environment for advisors and their clients.
We like the rest of the industry continue to see pressure on our flows given market volatility and the amount of money that continues to sit on the sidelines additions.
Additionally, advisors are not in motion at the same rate that they were during less volatile time.
Even so we view this environment as an opportunity and we are playing offense it off the mark.
We are arming our advisers with timely value added education and have accelerated product development in areas of interest for investors.
Both of which I will discuss a bit later in the call.
In addition, we have increased our representation that broker dealer conferences increased our spend on digital lead generation and are hosting more live in community based events.
Prospective advisors are very receptive to hearing new ideas and asset marks comprehensive high touch offering is driving new advisor engagement.
This I'm very confident about the opportunities ahead.
Speaking of opportunity, let's turn to slide four.
We recently completed are completed our annual share of wallet study with over 700 responded better aftermarket visors.
Expanding the share of wallet from our existing advisors is one of the many ways, we can accelerate our growth.
This study is valuable as it allows us to see what assets are held away from asset Mark by our current advisors.
Two key points emerge from this year study.
The first point is that aftermarket continues to be the preferred provider for advisors across multiple investor segments.
Most noteworthy among these segments is the fast growing high net worth segment and then the mass affluent segment.
Second we have a total business opportunity of 375 billion across our advisor base.
This number is up approximately $20 billion from 2021 and this is despite the market decline.
Both of this opportunity is with advisory assets and commission assets.
And while we don't support commission assets on our platform. We view this as an opportunity to grow share of wallet, because we have a proven history of helping advisors move towards fee based business model.
This your study underscores why we are doing a great job of capturing assets from existing advisers, we still have a long runway of growth opportunity ahead of us.
As we do every quarter, let me provide you with an update on our growth strategy.
The first component on slide five is to meet advisors, where they are.
All advisors, regardless of affiliation are facing the same market volatility challenges today.
I wanted to dive a beat a bit deeper into how by supporting our advisers, we have achieved record financial and operational results and have matched our all time high net promoter score while also positioning our company for future growth.
The feedback from our market volatility toolkit underscore underscores the value we provide to advisors during times of uncertainty.
As they look to stay informed feel confident and help them thoughtfully serve their clients amid uncertain environment.
Since launching in June the market volatility toolkit has had over 7500 page views from 1500 unique users.
We continue to provide timely education to our advisors, including septembers strategies for surviving a bear market webinar, which was incidentally, our highest attended webinar ever with nearly 1000 advisors and clients attending.
In the third quarter, we also maintain close contact with our advisors through high impact live events.
Typically this quarter, we hosted our top advisers for our platinum summit.
Over 200 advisors for high net worth symposiums and over 175 advisors for investment Masters series.
Additionally, just last week, we finished up our premier advisor meetings, which were attended by over 800 advisors in 19 different cities in.
In these meetings, we discuss timely topics such as business management in a challenging economy and leveraging the right strategic relationships.
We continue to get very positive feedback about the quality of our events educational content and the strength of the community we have created among our advisors.
Our advisors are grateful to have aftermarket as a partner as evidenced by our 2022 overall net promoter score of 67.
Matches, our all time high set last year.
We firmly believe our deep connectivity with our advisors enables us to continue to win in the market and set us up for future success.
Now I'd like to turn to slide six the second component of our growth strategy, which is to deliver a holistic differentiated experience to advisors and their clients.
As discussed during our analyst dinner in September why it has gained significant traction recently as some of its key geographies continue to open up.
Recent win by buoyant include Barclays and Pwc in the United Kingdom, and a partnership with Morningstar in Canada.
We have also won a deal with the global accounting firm RSM working with them in five countries to start with the goal to expand to several more in the future.
We're extremely excited about <unk> future growth prospects and the diversification of revenue it brings to ask Mark.
Moving to the third component of our growth strategy, which is to enable advisors to serve more investors across the wealth spectrum varying life stages and generation.
Let's turn to slide seven.
Today's investors faced challenging market conditions with record high inflation rising interest rates and geopolitical conflicts.
Advisors are reacting to these turbulent markets by reallocating to strategies that can help mitigate these recent market challenges.
Last month, <unk> launched three new strategies for advisors to leverage during these uncertain times.
The first which can be used to enhance portfolio income and reduced overall volatility through high quality dividend equity approach that has historically generated low beta relative to the S&P 500 index.
The second two of these new strategies or alternative investment strategies that can be used to enhance the stock bond portfolio diversification by incorporating non correlated asset classes.
While turbulent markets can be overwhelming they also offer opportunities for advisers to lean in connect and deepen relationships with clients.
Given this it's no surprise that the early reaction to our new investment choices from our advisers and their clients has been extremely positive.
Now I'd like to move to the fourth component of our growth strategy as seen on slide eight.
This component is to help advisors grow and scale their businesses by offering turnkey advisor solutions and program.
This quarter I'd like to talk about our advisor acceleration Academy and immersive four month program designed to help advisers boost their business.
Their growth and by establishing foundational business method.
The program focuses on five key pillars of business success first the benefits about sourcing.
Second a robust business assessment with benchmarking there.
Third client segmentation and servicing.
Fourth developing a strong marketing plan.
And finally fifth creating and executing our business growth strategy.
We hosted three classes with an average of 100 advisers in each class.
Adviser feedback so far has been great and we are already starting to see tangible benefits in fact advisers, who participated in the first two sessions, which are already complete have exhibited platform asset growth of more than 20% since graduation.
Also encouraging a good number of advisers have already reached engaged status post graduation.
This level of partnership is unmatched in the industry, our ability to help our advisors grow and scale is a key reason why our advisors win.
And it's also a key reason why we win we win because of their success.
Now turning to slide nine the final component of our growth strategy. This is to pursue strategic transactions by adding capabilities and assets that improve our advisers ability to serve investors and expand their businesses.
First I'd like to give a quick update on adhesion. We continue to work through regulatory approvals and have spent a good deal of time at adhesion headquarters. So that we can hit the ground running when the deal Covid.
Second we feel the current market environment is unlocking a lot of potential opportunity and we are actively looking at each one of these opportunities while ensuring we remain disciplined to only buy capabilities that would be a strong fit for our platform.
I will now turn the call over to Gary who will take us through a deeper dive into our third quarter 2022 results and also provide an updated outlook for full year 2022.
Thank you Natalie and good afternoon to all those on the call.
Now he mentioned despite market volatility impacting our billable asset level.
First vacation of our revenue and our focus on expense management has resulted in another record quarter. Among many of our key top and bottom line financial metrics.
During my remarks today I will highlight some of the.
Record result, and well provide some commentary on how the current environment is impacting our operational and financial metrics.
Turning to slide 10 third quarter platform assets were $79 4 billion.
Pat.
$4 billion in market loss net of fees.
Net flows for the quarter were $1 2 billion and a $4 $7 billion for the year.
Year to date, our annualized net flows as a percentage of beginning of period assets was six 7%.
As you know net flows of comprise.
<unk> or money onto the platform less redemptions or money off the platform.
Net flows in the third quarter had been impacted by lower production levels relative to last year as money continues to sit on the sidelines due to market volatility and those assets that are coming on to the platform are coming on at depreciation levels.
Redemption rates, though are still lower than expected a strong sign of our advisor satisfaction.
This trend has continued in October with early indications that net flows for the month will be approximately $280 million.
Turning our attention to slide 11, we added 159, new producing advisers or MPA for the quarter.
Asset advisors are not as quick to move as they would be hearing less volatile times as now. He mentioned we are focused on two key items to improve our organic growth and NPA count.
We continue to stay close to our advisors through high impact engagements.
We are diligently focused on doubling down our efforts on our in person marketing events and digital adviser acquisition strategies, we believe focusing on these two areas position us well to win new advisors and share of wallet from existing advisers, both of which can positively impact.
Future flows.
Let's turn our attention to our engaged adviser count we have had some recent noise due to the market dynamics are engaged advisers make up 91% of our platform assets growing the number of engaged advisers, we've always with over $5 million in assets on our platform remains a key focus for management and it is crucial to drive.
Further growth of our business and its financials.
Although engaged advisers at the end of the third quarter of 2000 and 601.
This reflects 84, new engaged advisers for the quarter offset by 132 advisors, who dropped below $5 million just due to market depreciation.
31 of the new engaged advisers.
From recent MPAA is while the remaining 53 are more tenured advisors, we have helped transition from disengaged dwindling.
For further context for our growth we can look at the number of households are vast and on our platform, which is a key metric we regularly disclose and not AUM base. The number of households are up 10% year over year to 223000.
Now, let's turn to slide 12 to discuss this quarter's revenue, which was a record $155 million.
No we focus on our revenue net of related variable expenses for the third quarter of 2022 on net revenue was a record $116 million up 14% year over year.
This is driven primarily by spread based revenue, which was up $17 million from a year ago.
This offset the decline in asset based revenue, which was impacted by market depreciation.
Slide 13 details our year over year net revenue walk at the waterfall shows net revenue was up year over year, driven mainly by spread income, which we just discussed year over year yield on spread improved from 27 basis points to 209 basis points.
Also contributing to our increase in net revenue and a $900000 reduction in asset based expenses.
<unk>. This is ongoing savings is primarily driven by restructuring agreements providers.
Asset based revenue was down $3 $8 million year over year, primarily driven by $2 5 billion decline in billable assets.
Year over year fee compression with approximately half of a basis point better than our stated expectations of one basis point.
Subscription revenue from <unk> was flat year over year, primarily driven by foreign exchange pressure.
Losing the impact of FX subscription revenue was up approximately 7% year over year as Natalie mentioned, we are encouraged by <unk> growth prospects and key geographies have just started to reopen post pandemic.
Lastly, other income increased $1 million year over year, driven largely by higher interest income earned on our corporate cash.
Now, let's talk about expenses turning.
Turning to slide 14, total adjusted expenses increased eight 3% year over year to $109 million and were flat quarter over quarter.
Operating expenses were up 10% year over year to $62 $5 million, driven by a $2 $4 million increase in compensation expense and a $3 $4 million increase in SG&A.
Even during these turbulent times, we have been able to make valuable investments that will set us up for future success, we have increased our head count by 7%. This year with an increased focus on scaling operations. We have made meaningful investments in our sales department, which we believe which we believe will pay dividends not only now but as the market recovers.
Lastly, we have expanded our IP by almost 8% year over year.
Let me quickly run through our adjustments for the quarter, we added back a total of $8 $3 million pre tax which is comprised of three items.
First $3 $9 million noncash share based compensation and as discussed last quarter, we anticipate a quarterly run rate of just under $4 million moving forward.
Second adjusted to incentives is $1 7 million of amortization expense related to prior acquisitions.
This will be the same in the fourth quarter.
Lastly, $2 $7 million related primarily to reorganization and integration cost.
Now, let's turn to slide 15 to discuss the earnings for the quarter.
Third quarter 2000, <unk> third quarter 2022, adjusted EBITDA was $52 7 million up.
About 18% year over year, and our highest quarterly adjusted EBITDA in our company's history. We are extremely pleased with our adjusted EBITDA. This quarter, which is a testament to our growing revenue diversification and the flexibility and the disciplined management of our expense base.
Adjusted EBITDA margin for the quarter was also another record up a robust 200 basis points year over year to 34%.
Our reported net income for the quarter was a record $30 1 million $5 million more than the total reported income for the full year 2021, while adjusted net income for the third quarter was a record $35 million 47 per share.
This is based on a third quarter diluted share count of $73 8 million.
Adjusted effective tax rate for the full year is unchanged at 23, 5%.
Color. Please see the adjusted net income walk on slide 20.
Now, let's look at the reported third quarter balance sheet I would highlight two items first we do a great job. We continue to do a great job of generating cash, adding $27 million to our cash position quarter over quarter and ending the third quarter with $137 $2 million in cash. Additionally, we still have a $375 million and our credit.
Facility is available to the company.
Our cash balance our strong ability to generate cash and our credit facility, giving us a lot of dry powder for future M&A deals, which remains an important focus is a key component of our growth strategy.
Second capital expenditures, primarily reflect our long term investments in technology to create new capabilities increase scale and improve service for the third quarter, our capital spend with $9 million or five 8% total revenue in 2022 for the full year 2022, we are expecting our capital expenditures, which we.
<unk> to be between six and 7% total revenue and we continue to invest in the future of the business.
Turning to slide 16, I would like to tie some commentary on the meaningful impact that spread continues to make on our financial results and how we look to maintain.
Our ability to earn spread as a direct result of owning our own custodian asset Mark Trust company or ATC.
As you know spread based revenue is a function of the amount of cash held at an investor the ATC and interest rates.
First let's discuss the cash balances total cash as a percentage of assets ATC continues to remain elevated around 5% to 6%.
This is driven primarily by an increase in our insured cash deposits due to strategist allocating.
More cash on.
On the end of 2023, we expect cash to return to a more normalized level of three 5% of total assets at ATC.
Turning to interest rates the target fed funds rate by the end of the year is expected to be north of four 5% higher than the $3 seven 5%. We spoke about at our analyst dinner in September and the $3 two 5% we spoke of during the second quarter earnings call in August .
We are seeing strong demand in depository institutions, who both variable and fixed term deposits.
Plan to use this opportunity to start deploying a portion of our insured cash deposits to fixed term agreements we have started deploying about.
<unk>, 20% of cash ATC to fixed term rate.
This will be landed in over three years with a target rate of about $4 three 5%.
We have the optionality of placing over 40% of cash at ATC into fixed term rates.
Point part of the cash balance of fixed term has two key benefits first it mitigates the sunglass spread revenue if interest rates were to fall and second it gives us more time to respond to any large future macroeconomic shocks that can result in lower demand for deposits from banks.
We will continue to update the street on the deployment of cash into fixed term rate on future earnings calls.
Finally, let's turn to slide 17, I am pleased to announce that we are increasing our top and bottom line 2022 outlook as a result of stronger than expected spread revenue, let me share some perspective.
While declining markets have greatly impact asset based revenue spread revenue has contributed more than originally forecast. This is rich.
Turning to expenses, we are reaffirming our expense growth outlook for the year of 14% to 16%. This level of expense growth allows us to continue to meaningfully invest in the future of business, while maintaining disciplined so there'd be a sense gross growth.
We will not outpace revenue growth as a result of increase in our revenue growth outlook and maintaining our expense growth outlook, we are increasing our adjusted EBITDA outlook of 20% to 23.
Loss per cent.
Based on the growth outlook I, just laid out we feel confident in our ability to expand adjusted EBITDA margins by 200 basis points. This year.
We're extremely pleased about our financial results this year and our and are on track with the best year.
Company has 25 year history.
That I'll handle over Natalie for her concluding remarks. Thanks.
Thanks, So much Gary This concludes our prepared remarks today I'll now turn the call back to the operator to begin our question and answers.
Thank you.
To ask a question. Please press star followed by one on your telephone keypad.
If for any reason you would like to remove a question. Please press star followed by two again to ask a question press Star one as a reminder, if youre using a speakerphone. Please pick up your handset before asking your question. We will pause you briefly as questions are registered.
The first question is from the line of Ryan Bailey with Goldman Sachs. Your line is now.
<unk>.
Hi, good afternoon, everyone.
Hey, How's it going.
I was wondering if we could go back to page four.
Really you are the preferred provider for a lot of your advisors based on the wallet share.
But this isn't the actual wallet share for those advisors is it sort.
The first question.
Where does that stand hasnt changed a lot from philosophy.
And is there anything you can do to facilitate better wallet share dynamics from your existing advisors.
Absolutely. So first first the answer to your question is.
In this survey what we do is we interview in this case about 700 of our advisors.
And we extrapolate from those 700 conversation what share of wallet.
Is likely to mean the share of wallet percentage is likely to mean for groups of advisers like them. So that the numbers come from the 700, and then we extrapolate that to the rest of the advisor population using the personas in the business model and.
And the size of the advisors that have responded to the survey.
700 is definitely statistically significant and so we believe that the 375 in total business opportunity is directionally.
Directionally correct. So that's sort of the answer to that to the first question. The second question in terms of.
How this has changed over time.
A few things the first and I mentioned this in my prepared my prepared comments is the total amount of business opportunity outstanding has increased year on year and Theres. A couple of reasons for that one is we've added new solutions to our platforms like ESG SMA.
And at more alternatives that unlock share of wallet opportunity for asset Mark. So in essence, what it does is it expands the eligible eligible share of wallet that we have at <unk>.
The second thing I'll say is our advisors some of them are acquiring new businesses or hiring new advisors to join their practice.
<unk> expanded the size of the advisor practice, which expands the opportunity for us.
And so it's great that our advisors are growing and they're growing through acquisition or becoming recipients of succession plan, which create more opportunity for asset Mark.
And then the last part of your question, which is what are we doing to.
To capture this share of wallet in a meaningful way.
Answer that question is we're investing pretty substantially in organic growth.
And we have been for quite some time and we continue to so as it relates to the share of wallet component of organic growth.
We invest in new investment vehicles or investment options for advisers and their clients to not only respond to market conditions, but also respond to new financial planning needs or goal base needs that they have given their stage of life in.
In addition, we are expanding our sales team and the support that we provide to our advisors.
In fact in 2022, we've added them.
A new territory, which will come on in 2023, we've added two new regional directors.
To focus on new sales teams and getting those new sales teams to be successful.
More quickly.
In addition, we've also added new for new business consultants.
So that the support that we're providing financial advisors as it relates to their business growth and our share of wallet. They can come to US is also.
It's also supported by these new teams and then the last thing I'll. Just say is we've also added enterprise sales directors to our sales team about five of them and that's because we have different levels of share of wallet, depending on the business model of the firm on average.
And we wanted to make sure for these enterprise firms that we had as a specialist.
That focus on their growth and so examples of best would be leaders of OS Jays leaders of name.
Nationwide, our AA firms.
And other large enterprises.
Got it okay, and maybe just sort of diving into one of the what seems like a new solution that you've added the asset market because I don't think I've seen that before I was wondering if you could expand on what youre doing the retirement, it's obviously a complicated market those large incumbents.
How is the asset mark going to sort of compete and what's the competitive edge of service provided to the incumbents or to the platform from directly.
Yeah, so far as Mark retirement services, you're exactly right for the for the large plan market for the Mega plan market. It's really dominated by a couple of very large scale providers, what what we do at asset Mark as we support our clients, meaning there are advisors clients.
Who are entrepreneurs are small business owners.
That are either trying to start up their retirement plan for the first time or grow retirement plans that as their business growth and so what what we do through our asset Mark retirement service.
Offering is we help advisors, we trained advisors so that they can serve.
Serve these entrepreneurs and serve the small plans.
Or to what we do with other business consulting support we do without a lot of training a lot of education a lot of information management. So these advisors can learn what it means to be a retirement oriented adviser.
The second thing that we do at aftermarket retirement services is we work with a record keeper.
Mood out the client experience for the advisors and their clients and then we also provide fiduciary support as it relates to the investment selection. That's made in the plan by the the plan sponsor.
And so that that is core to what after mark does due diligence and we're extending that due diligence capability into the qualified ERISA space.
And so when you when you think about aftermarket and and what we can offer an M. R. S.
Why where a good chunk.
Choice for financial advisors, because they can educate those advisers, we can provide support for the plan and the plan participants on behalf of the advisors and we can provide the fiduciary support as it relates to the selection of the plant and then we can smooth out the operations between the record keeper of the third party administrator and asset Mark.
As the advisor to the investments in the plant.
But truly this is for small business owners and for our entrepreneur.
Entrepreneur to require plans support from their adviser and for advisors, who require that from us not for the entire universe of plans in the U S.
Got it and did you have any alpha one for.
A M R S already.
I'm sorry can you repeat that do we have any what for emera.
Sorry, I was just wondering what the asset bases.
So the asset base is just a little south of 2 billion right now.
And that's clearly been impacted by market conditions, I think it's about $1 6 billion. So maybe a little a little more south of 2 billion than it was at the end of last year.
Got it okay. Thank you so much.
Youre welcome Thanks, Brian .
Thank you for your question.
The next question is from the line of Gerald O'hara with Jefferies. Your line is now open.
Great Thanks, and good afternoon folks.
Good to see the buoyant.
Kind of geographies opening up a little bit.
So in the past, Gary you'd given a little bit of.
I guess forecast or potential outlook for what that could mean from a revenue contribution perspective I'm not sure. If you are quite in position too to revisit that but it would be kind of curious to hear what are what your outlook would be or any color or context, you could provide.
Thanks Terry.
Craig I don't know them well.
No I think the way we look at what point May have had.
Good growth on their individual.
Pfizer.
Licenses.
In overseas, particularly in EMEA.
English market.
What we are waiting for like we've said in the geographies open up in Canada, and England for the more enterprise deals the way we look at last year, we talked about.
Once we got to a full year, we talked about about $20 million revenue run rate. If we look at it it's been delayed a year, Jerry and some of it will be looking for that next year.
Year over year right now voyage revenue is.
<unk> is up 7%, excluding FX, which was great but.
But we do expect it to pick up a little more next year and get to the run rate. We were looking for this year. So I'm just kind of looking at a year delayed.
Okay fair enough.
And then not only I know you kind of.
I, just addressed or I suppose.
Some potential M&A opportunities as a.
The dislocated I suppose backdrop.
Things up.
Yes, I guess, some some chance to either add adjacencies or or.
Our capabilities, but is there anything that you can sort of point.
0.2 that might be a little bit more specific or.
You know from a capability or technology standpoint, we're where there might be kind of a near term needs or opportunities.
So a couple of things I, just want to mention about that and by the way. Thanks for the question and.
I'd ask the bark what we've done is we've taken a strategic view on be broadly speaking adviser servicing space and servicing includes the technology that advisors use to serve their clients the resources they need to serve their clients and grow their business the investments they make on behalf of their clients how they.
<unk> and transact.
Those investments and then the reporting and communications that they use to communicate with our clients and then last but certainly not least the planning and risk management that's.
Germane to an advisors advisors conversation with our clients and.
And so we've done a map of kind of all of these potential capabilities that advisors rely on and use them to serve their clients and to build their businesses and we have identified the areas and those that adviser landscape that we think are best suited for <unk> and what we mean.
By best suited for asset Mark is that the company that we're acquiring can accelerate its growth because of the access it has two advisers or the access it has to the capabilities or the relationships, we have inside the U S and or that capability will enhance the serve.
This is that we provide to advisors in other words.
It'll it'll make the service that we provide to advisors and their clients a more holistic and so <unk> is a good example of the second point, where we are now able to fully integrate financial planning into aftermarket delivery and because after mark has relationships with broker dealers and other industry.
Participants in the U S. We can accelerate <unk> adoption in the U S. Among all of those areas. There are some that we think are more attractive than others.
We've mentioned financial wellness in the past and that we think financial wellness has three main components.
The first is the planning and the Golar management, which one does the second is access to thoroughly diligence investments that we support and then last but not least is a robust view on risk.
How investors view their capacity to withstand different deep declines and the risk environment. So clearly because we're committed to financial wellness and we view risk management of and risk management from the Investor point of view versus from the portfolio point of view as a key component of that that would be an area of the market.
We would be we'd be really interested in we've also mentioned that we're committed to saving advisors time and effort as.
As well as help them drive scale and there are certain technologies in the industry that are either save them time and effort through automating reporting automating communication automating marketing or smoothing out how investors and advisors are stay current on the financial plan that would be another area that we would be <unk>.
Misted and I could go through several more I'm not I'm going to I'm going to stop there, though because there are two things that I think are really important about M&A. One is that the properties that you're interested in are available, which you know is a little serendipitous and then the second is you can come to an agreement with the firm about the right price.
So that there's good outcomes for shareholders and clients.
<unk>.
I'd ask Mark we're really disciplined about both and so that means that.
There is a time can go by where there's no M&A and then other periods of time could happen, where there's there's more than historically speaking, but it all comes down to is it a fit for us and is it at the right price and a good aftermarket represent a good future opportunity for the firm.
And then one last thing before I leave this and I know this answer has been very long and so I apologize I guess I'm rambling today.
The second part of this I just want to say is we're also very committed to scale M&A.
Which wasn't the question you asked but we absolutely believe that we can grow advisors.
Who joined our platform because of the service offering we provide and so in an environment like this sometimes theres opportunities to acquire subscale Tamps then of course, we would do that.
Great. Thanks, Thanks for the thorough thorough response in color I appreciate it.
Thank you and thank you for bearing with me.
Thank you for your question. There are currently no further questions registered so as a reminder, it is star one on your telephone keypad.
The next question is from the line of Ryan Bailey with Goldman Sachs or no.
Hi, I just thought I'd sneak one in.
The 40% as sort of the Optionality.
Increasing the fixed component of cash.
Is that something that you expect you will move towards and why is 40% the high end.
So Ryan it's thank you for the question. So a couple of things to keep in mind as it relates to the range of the fixed term deposits that were willing to include in our in our ICD and high yield cash program. So basically the total cash balance. The first is remember that our cash balances are high relative to history.
And over time as market conditions approve.
Historically speaking cash balances will come down as strategists allocate.
Two other other investment options and so we want to make sure that we're allocating.
The appropriate percentage to cash given where not only we are today in terms of our total balances, but where we may be in a future where the investment returns are a little more attractive at our strategists managers make different decisions and so that's a risk management are choices that we're making because obviously the most important thing about our cash.
<unk> program is that it deliver.
It delivers to clients the liquidity they need at an attractive rate.
And then the second thing I, just want to say as it relates to the 20% to 40% is we want to make sure that we manage to liquidity first and so we feel that a $20 to 40% range is the right place to start, especially given where balances are today and where our progress how our program has behaved historically speaking.
Okay that makes a lot of sense. Thank you.
Thank you for your question.
There are no additional questions waiting at this time, so I'll pass the conference over to the management team for any closing remarks.
Alright, I want to thank everyone on the call today, and we look forward to seeing you in person at upcoming Investor conferences and have a great day.
That concludes our conference call. Thank you for your participation you may now disconnect your lines.