Q4 2022 Wisdomtree Inc Earnings Call
Greetings and welcome to the wisdom trees fourth quarter 2022 earnings call.
At this time, all participants will be in listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
At this time I'll turn the conference over to Jessica <unk> head of corporate Communications, Jessica you May now begin.
Good morning, before we begin I would like to reference our legal disclaimer available in todays presentation.
Presentation may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
A number of factors could cause actual results to differ materially from the results discussed in forward looking statements, including but not limited to the risks set forth in this presentation and in the risk factors section of Wisdom tree annual report on Form 10-K for the year ended December 31st one.
'twenty, one as amended and quarterly report on Form 10-Q for the quarter ended June 30th 2022 with them.
Sure assumes no duty and does not undertake to update any forward looking statements now it is my pleasure to turn the call over to wisdom tree CFO , Brian Anderson.
Thank you Jessica and welcome everyone.
I'll begin by reviewing the results of the fourth quarter and will then turn the call over to Jarrett and genre for additional updates on our business.
Fourth quarter caps, what's been a very successful year for wisdom tree.
We generated net flows totaling $5 3 billion.
With positive flows in both our U S listed in European listed products.
This was our strongest flowing quarters since 2015, and we closed out the year with 82 billion of AUN.
Our highest quarter end on record.
Flows of $3 4 billion into our floating rate treasury product use so far was the primary contributor.
That was followed by flows across most other product categories.
Our U S equity products with about 1 billion of flows as well as our commodity suite.
Having turned the corner with 800 million of flows mostly into oil.
We have overcome an incredibly challenging market backdrop with negative market movement impacting our AUM by almost $8 billion for the year.
Notwithstanding the market declines our revenues were essentially flat year over year as we generated over $12 billion of net flows are strong it's flowing year since 2015.
Representing annualized organic flow growth of 16%.
You watch that far was the shining star, but not the only story.
Our U S equity product flows have been consistently strong with positive net flows for 30 of the last 31 months and over 3 billion of flows during the year and annualized organic slow growth rate of 14%.
We ended the year with sustained momentum as evidenced by nine consecutive positive quarters.
Our AUM currently stands at a record level 87.2 billion, an increase of 6% from the end of December .
As our momentum continues having generated almost $1 7 billion of flows in January and having benefited from positive market movement.
Next slide.
Revenues were $73 3 million essentially unchanged from the third quarter as our higher average AUM was offset by a two basis point decline in our average advisory fees due to changes in our AUM mix.
Adjusted net income was 7 million or four cents a share.
Our non-GAAP results exclude a noncash after tax loss of $35 million for our future gold commitment payment due to an update to the discount rate used to compute the present value of the annual payment obligations.
Next slide.
Our operating expenses were up 7% for the quarter.
This increase was largely due to higher incentive compensation accruals.
Well as higher seasonal marketing and sales related expenses.
We ended the year with compensation expense of about 98 million.
For the middle of our previously disclosed guidance and with discretionary spending at $49 4 million.
The low end of our guidance range.
Next slide.
Now a few comments on our 2023 expense guidance.
This upcoming year will include a reinvestment into future growth initiatives, taking into consideration our anticipated national launch of wisdom tree Prime and.
And continued focus on organic growth.
We are forecasting our compensation expense to range from $96 million to $106 million.
This guidance includes hires both in sales and digital assets as well as year end compensation adjustments and annualize eastern of hires made in 2022.
The range considers variability in incentive compensation.
Drivers, including the magnitude of our flows.
Our share price performance in relation to our peers as well as revenue operating income and operating margin performance.
Also just a reminder, that we experience elevated seasonality and the amount of compensation. We report in the first quarter as we recognized payroll taxes benefits and the other items in connection with the payment of year end compensation.
We estimate first quarter compensation expense to be approximately $27 million to $28 million.
Discretionary spending ranges from $56 million to $59 million.
As compared to the $49 4 million recognized in 2022.
This guidance includes a modest uplift for wisdom tree prime marketing and other related costs.
Our gross margin is anticipated to be 78% at current AUM levels.
We would anticipate margin expansion, assuming continued organic flow growth.
Our contractual gold payment expense is forecasted to be 18 million, assuming gold prices remain flat at current levels.
As a reminder, this expenses based on us paying 9500 ounces of gold on an annual basis and is measured based upon monthly average gold prices.
Third party distribution expense is forecasted to be approximately $8 million to $9 million and it's dependent upon AUM growth on our respective platforms.
Our adjusted tax rate is expected to be about 23%.
Taking into consideration the change in the U K corporate income tax rate from 19% to 25%, which is effective in 2023.
As a reminder, the U K rate increase is something that will impact all companies with a footprint in the United Kingdom.
And in June of this year $175 million of our convertible notes are coming due.
Well not set in stone, we're currently planning to reduce our debt by approximately $50 million and refinancing the remainder.
Our interest cost is estimated to temporarily rise in 2023, so about $16 million as any debt reduction will occur midway through the year.
Coupled with a higher interest rate associated with our refinancing.
Our normalized interest expense exiting 2023 is estimated to be about $14 million.
Or 1 million lower versus what was recognized this past year.
That's all I have I'll now turn the call over to Jarrett.
Thanks, Brian and good morning, everyone.
While many other asset managers struggled with the challenging markets wisdom tree delivered its best year of net inflows since 2015 and exited 2022 with record AUN.
Our 16% organic growth rate was best in class versus our publicly traded peers. Our product performance was and is outstanding with over 80% of our USA AUM, beating benchmarks.
Our managed models business continues to grow in significance with platform partners, such as Merrill Lynch and Morgan Stanley .
But there are a a an independent broker dealer partners through our wisdom tree portfolio and growth solutions offering we continue to increase our efficiency and scalability in our global E. T. P. M models business now delivers incremental margins well north of 50%.
And we have staked out a first mover advantage in digital assets and blockchain enabled finance now with a suite of 10 blockchain enabled funds effective with the S. E. T. In addition to our gold and dollar tokens.
And this all sums up a highly successful 2022, but it also highlights why 2023 and beyond we will continue to be strong.
We have the products and solutions, we have the fun positioning and performance we have the first mover positioning in digital assets and blockchain enabled finance and we have multiple years of momentum with global need in inflows for the past nine consecutive quarters 30 of them.
Past 31 months in the U S and in seven of eight of our major product categories over the past year.
All in all 2022 was another successful year and we are confident and excited about 2023 and beyond and with that let me now turn it over to Jonathan.
Thank you Jarrett.
The momentum in our ETF franchise is incredible.
Dimitri was one of the only asset managers with net inflows in 2022.
As Jared said best in class, 16% organic growth.
We exited the year with over 5 billion of inflows in the fourth quarter, our best quarter in nearly seven years.
We expect our momentum to continue in 2023, and we are off to a strong start with year to date inflows of almost $1 7 billion.
We expect strong and steady organic growth based on our strong fund performance a shift in sentiment to value and our ever expanding model franchise.
Once you're twenty-three looks to be even more exciting.
In digital assets and.
And blockchain enabled banana the pace of our progress has sped up.
After years of engagement with the FCC around our process and protections are first blockchain enabled fund was declared effective in late September and roughly two and a half months later nine additional blockchain enabled funds went effective with the FTC.
We now have a broad investment suite of digital funds that span, both fixed income and equities plus our gold and dollar tokens.
These are the building blocks investors for consumers need to build holistic portfolios or to facilitate financial services inside wisdom tree prime.
As we refine our launch plans our goal now is to launch wisdom tree prime in the App stores in Q2.
This significant go live events investors and consumers should be looking forward to.
We are on the precipice.
A major shift in financial services into digital blockchain realm, and wisdom tree is well positioned to meet that opportunity.
The beauty of our digital wallet is that it can be many things to various types of users and with a nimble blockchain based tech backbone wisdom tree Prime has the ability to evolve quickly to meet future use cases.
I'm excited for all of you to try our platform later this year and we look forward to sharing our successes in product development and feature enhancements with you throughout the year.
And finally.
The operations and strategy Committee concluded at the end of last year.
The committee dug deep into wisdom tree and generated a report for the board.
I'm pleased to report that.
The board unanimously voted in support of both the executive management team and with the strategy of the firm.
Wisdom tree remains on track with incredible momentum and a tremendous opportunity ahead in Etfs model solutions digital assets and blockchain enabled finance I look forward to sharing our ongoing profit our progress with you in coming quarters.
With that operator can you turn the call over to our head of Investor Relations, Jeremy Campbell to take some questions from our shareholders.
Hello, and good morning, everybody.
The prior quarters, we're going to do some Q&A from the retail shareholders via the <unk> platform.
The first question goes to you will pack head of digital assets for wisdom tree and the question is who do you view as the major competitors to wisdom tree Prime and what is the go to market strategy and competitive dynamics and digital assets given all the messy news flow over the past year.
Thanks, a lot Jeremy and good morning, everyone I'll start to answer this question a bit more broadly digital asset that wisdom tree is about a one term could be real world asset to organizations that certainly been a more topical term for a lot of people.
And bringing the benefits of blockchain technology to traditional real world assets right and in that space I would highlight two firms just kind of competitors are peer firms or whatever you'd want to call them that would be circle and taxes. She was kind of a world gold token issuer in the space and engaging other aspects here specifically you know within digital assets, obviously wisdom tree Prime is a huge key.
Component of it.
Wisdom tree Prime like John said, it's an app that allows you to save spend invest using this new digital asset technology aspirational Lee I'd highlight someone like revolute as a competitor here they've done a good job kind of combining those pieces together I think for us it'll take some time to kind of build out the full functionality of that whereas initially we're going to have a very curated and.
User friendly investor experience combined with good cash management functionality is what we're striving for.
And that kind of leads into the second part of the question in terms of our go to market strategy, it's really going to be articulating those areas, where we're adding value for customers.
Laser focus on acquiring them in a heart and a high or a walk away.
Cost effective acquisition, where we have a hook.
And in terms of the last part of the question.
Well, it's only a positive for wisdom tree, we think.
Our different how we can be a good counterparty for people both on the retail and institutional side. So.
Sarah at all and ultimately our strategy is going to be about.
So it's not it's on blockchain, so no concerns there whatsoever.
Alright, well move on to the next question this one's going to be to Jeremy Schwartz, Our Chief investment Officer, We had a few questions kind of along the same lines, but just kind of combining them here into this one. The question is what do you think will be the biggest driver of flow growth in 2023 for both the ETF industry overall and her wisdom tree <unk>.
And will the rotation from growth to value hold up.
Well thanks for those questions everyone for the industry at large we continue to see Etfs, taking market share from legacy structures.
You'll have active managers who'd like to equip that Etfs and index, you can do well riding bull markets, but fair markets, where their nimbleness and Actavis can add alpha.
Close really showed the reverse investors.
Always bear market to liquidate their legacy positions and that's basically exactly what happened across the globe last year, you saw Etfs gaining market share really in most asset classes. We continue to see the long term trend and structural advantages of Etfs remaining firmly in place for as far as we can see.
To innovate as well as just talking about infrastructure things that we're doing both continuing with Etfs for a long time to an end and investing in the future now for us in particular in flows for wisdom tree.
Honestly, there's so many places we're excited about in both the U S and Europe due to just such broad strength, we have within the product set.
I think on the on the major theme, we're talking is that Theres income back in fixed income.
We're having so many more consultations with clients about how they're managing cash and short duration exposures certainly that floating rate treasury product. We've talked about continues to remain attractive.
Essentially the highest yielding treasuries in the market because of the shape of the yield curve that looks continue to be the case for some time and we're going to continue to expand the scope of those discussions, but we're broadening fixed income discussion to high yield bonds core bonds are fixed income model portfolios and even digital fun.
Are those models that are income base to capitalize on the yields we see at the short end of the curve. So all of that has the potential to expand our fixed income and U N momentum this year, all very exciting trends.
Within equities.
A number of different styles, but I'd emphasize as a firm.
We have more diversification globally across varying styles than we've ever had before.
You took Europe , we have a very robust thematic lineup for the gross style and that's complemented of course by our quality dividend value approaches, but what's exciting is we're seeing traction on all of those sides in and they use it range across the style box. There are of course, we believe in value and dividends over the long run that was our original.
No launch, but we think.
Theres, some really compelling opportunities in high didn't stocks globally and that strong performance from last year with dividend funds with 15 year track records that should be a variance for catalysts going forward.
2022 was the best year for many of our U S didn't etfs in their history for frozen and even performance. So we expect that to continue catalyst ERP flows for this year.
The flagship equity with quality getting brokers now our largest ETF, it's coming up on 10 year history.
In a few months and had a great long term track record of Great 2022 that is traveling globally to the European business and clients, there and we see that driving existing in future innovation for for Europe , as well and finally I have to talk about commodities and it's benefiting cyclically from China's reopening you can see that in Q4 and <unk>.
<unk> with a very strong January that market leadership position, we have with now the world's largest oil ETP as well as five of the six largest inflows to industrial metals, which are part of the energy transition story coming to our product set I mean, we're very excited about the single commodities, but also broad based commodities, we think there.
Opportunities to gain market share both for that asset class and within that asset class with our recent innovation I'm guessing short.
Here, we believe our asset mix. It is very well positioned for this current macro and then you can add model portfolios that are packaging all of these solutions together gaining more traction. We believe that's all stackable on top of the current product set which is more stickier more recurring.
We're very excited about that managed models franchise growing in proportion to the business.
Helping slow growth pick up in and being more resilient than it was in the past.
Great. Thanks, Jeremy and then the final question or taken from a safe, but far from shareholders is going to go to our Chief Financial Officer, Brian I understand.
Is wasn't fees revenues have been remarkably stable between 72 and $78 million over the last four quarters why haven't you achieve consistent profitability.
Hey, Thanks, Jeremy Yeah, I would agree with the characterization that our revenues have been remarkably stable, especially taking into consideration the market environment. This past year.
Our our AUM was negatively impacted by about 8 billion from market move this year, but we were able to overcome this headwind on strong and steady flows.
And as mentioned in our prepared remarks, we generated over 12 billion of flows this year, a 16% annualized organic growth rate best in class amongst our traditional asset manager peer group.
And this is the strongest flowing year since 2015 and the momentum has continued into 2023.
Flows are the reason why our revenues are flat versus last year not down we estimate that negative market move impacted our revenue by over $20 million this past year.
As it relates to the question of consistent profitability I think this is referring to the fluctuations in our GAAP net income.
The primary reason for the fluctuation is due to the deferred consideration, we're carrying on our balance sheet and it relates to our contractual gold payments.
When we acquired a European business back in 2018, we inherited this obligation and it requires that we make annual payments of 9500 ounces of gold through the year 2058 and.
And two thirds of this amount almost 6400 ounces into perpetuity.
So for accounting purposes, we have a large liability on our balance sheet, representing an obligation to make these payments essentially forever.
As gold prices change this impacts the value of this liability.
Changes in the discount rate, we used to present value. This obligation will also change the value of this liability.
That change in value reported in our income statement as a gain loss on revaluation of deferred consideration and it's a noncash item.
Over the last four quarters, we've had gains and losses, ranging from 2 million to $78 million due to changes in value of this obligation.
The main reason for the volatility observed in our P&L.
It's essentially accounting noise and we exclude this from our results when reporting our earnings per share on a non-GAAP basis.
Yeah.
Great. Thanks, Brian and operator, I'll turn it over to you to field some questions from the sell side community that are dialed them.
Thank you our first question will be coming from the line of Dan Fannon with Jefferies. Please proceed with your question.
Hi, Thanks, Good morning, I guess I wanted to follow up a bit on that last point around profitability you talked about record a U M. Even on an adjusted basis Youre, putting up a four cent EPS numbers. So as we think about and understanding that there is some seasonality in your exit rate is going to be higher given the averaging effect with AUR, but broadly speaking as you.
About profitability going forward.
Are there things in the expense base that or how we should think about incremental margin that can really gets you to frankly, where you were even a few years ago as we think about the margin and the you know kind of ongoing earnings profile.
Hey, Dan Thanks for the question, let's let's let's let's focus on our expenses generally for 2023.
This upcoming year includes the reinvestment into our future growth initiatives, taking into consideration our launch for wisdom tree Prime and continued focus on our organic growth.
Coming off a year again, where we had 16% annualized slow growth and we want to build on that momentum.
So when we're thinking about expenses for 2023, we are earmarking spend for planned hires in sales and distribution.
We have a number of product launches in the pipeline.
<unk> and.
In marketing dollars that we're allocating towards entry prime.
But when you look through it our discretionary spending guidance reflects a modest uplift versus where we finished the year and the primary reason for that is is from a wisdom tree prime marketing spend.
Our compensation has a wide range to account for variability in incentive compensation.
What we've shared is our current guidance and we'll either reinforced reinforce it or refresh it every quarter.
Came in towards the low end of our range. This past year on discretionary spending as we took steps to control our spend given the volatility in the markets.
We think of ourselves as being disciplined when it comes to spend and we have various levers to pull where necessary.
And we also have incremental margins north of 50%, so any meaningful margin expansion as our business continues to scale whether through continued organic growth.
For a more favorable market environment will result in margin expansion.
We're controlling costs, where we can't we're not looking to sacrifice growth.
Our spending is targeted towards maintaining and accelerating our momentum off the back of what we achieved in this past year.
Yeah.
Okay. That's helpful.
Go ahead, if there's more coming.
No no go ahead Dan.
So just just a follow up thinking about mix and you know kind of the growth youre seeing fixed income.
Being somewhat lower fee and so generally wanted to get a sense of your outlook for fees within the product sets, where you're growing and.
You you generally have a lead with price you've been a premium product. So I assume that still continues but as you think about demand trends and where youre seeing the most interest.
The overall fee rate just given what mixes we should it still seems like it's skewed lower but wanted to get some some color there.
Thank you Dan So I'll take it this is Jonathan.
You know the into.
Entirety of R. A T.
The rate decline last year really came from just a mix in shift we haven't been cutting fees. So the growth in floating rate treasuries, which went from 2 billion in AUM to 13 billion of AUM.
10 basis points had an effect on our revenue capture but that's still a big win for growth and revenue. Although it is a drag on the fee rate.
I just would say that you know the way it's been going it's just really a very successful outlook.
And we're not undercutting with U S F bar it's.
In line with the other participants so.
Market sentiment will shift yeah, so more equity is higher fee rates.
We have other things that would have higher fee rates as well we will just have to see how it is we don't really predict.
Were you how it will the fee rates will play out or what market segments will how they'll be affected but we do do though on a daily basis, the update or a U M and give you our daily revenue capture so you can track this in real time, but really we consider these.
These to be one of our strengths actually it wisdom tree.
And if I could just add a couple of things this is jarrett.
You know U S set far as Janice said.
Because it was such a great flowing fun it did drag down the average.
Capture rate, but what is what a success and you really have to look at U S. F. R. For some clients. It was the best fixed income.
Holding in their portfolios.
For others. It was the best cash holding you could have in your portfolio and what's great about it for US is not only did it bring us revenue in great flows.
But it puts us right there for great conversations with our clients says the environment change changes to possibly other fixed income.
Our product score as Gerry said earlier, you know, there's there's there's income back not only in fixed income, but we've got our dividend paying funds with fantastic yields. So there can also be pivots as the environment changes to our other equity products.
And also as people put cash to work it puts us in line for great discussion. So U S. F bar was a was a great success for 2022, and we expect it to lead to greater successes in 'twenty three as well.
Great. Thank you.
The next question is from the line of Michael Cyprus with Morgan Stanley . Please proceed with your question.
Hey, good morning, Thanks for taking the question I wanted to circle back on wisdom tree Prime it sounds like the launch may have been pushed out maybe a month or two just curious where in second quarter. You guys are looking for that to launch kind of what's led to a little bit of an extension I think previously you guys were thinking about March and then just on the wisdom tree.
Product itself on the Prime side. When you launched that can maybe you can expand upon what the product set and functionality will have at the time of launch and how you see that extending expanding over the next 12 months.
Well why don't you take a first shot at that.
Yeah, I and hopefully everyone can hear me all right. Thanks for the question Yeah, I think a slight extension in terms of the date of going into the App store. Some of that is just in terms of you know our beta testing process technology build so just a slight extension there no kind of significant changes by any mean the other thing I'd add is this is a regular.
Weighted product, we're dealing with a state by state money transmitter regulators and they've certainly had their hands full with some of the new slow last year.
Which may just caused a slight delay in terms of their ability to grant us licenses and things like that so that's the answer on the slight delay side in terms of the functionality side. So we've got a nice funds launched a digital fund launch today as well as the dollar and gold token.
And we've also filed for some other funds that you can check on the prospectuses that had been filed with the SEC, which should hopefully give you a sense of kind of the breadth of this curated invested experience that where we're going to be offering through the app. So very curated user friendly investing experience covering all asset classes, whether thats U S equities.
Whether that commodities like gold or whether thats crypto as well and certainly a strength in fixed income which gets into the second point of where we think we're really adding value, which especially with rates are where they are today, our cash management being something that people can really use this for and using this investment funds style invest.
Okay great.
Sorry for the background noise in sort of wanted to get a great cash management experience. So that's where we're adding value and it's something that we're quite excited for it.
Great and just a follow up on that if I could on wisdom tree Prime could you maybe just expand on how much of the expenses in 'twenty, two where the run rate.
How much of that was coming from our relating to with some cheap prime and when you think about your outlook for expenses and 23, how much of that or the growth is related to wisdom tree Prime just trying to get a sense of how much if it's adding to the expense base.
Michael I'll take that one it's Brian Yeah look our digital spend it's embedded in our comp and discretionary spending guidance.
From recollection, our guidance last year was about $11 million to $12 million.
We'd say, it's high teens this year and the primary reason for that difference is just the planned uplift in spend for marketing.
We've been disciplined in our spending and if we were to see a significant uptick in the future. It should be because of success that we're seeing on the platform.
Great. Thank you.
Okay.
Our next question's from the line of Brennan Hawken with UBS. Please proceed with your question.
Good morning, Thanks for taking my question.
I know theres a lot of focus on prime understandably, but I'd actually like to jump in the delorean and go back to the future today, we've seen Japanese and European markets really performed well into year end and then so far year to date and that's been coupled with some weakness emerging in U S and the U S dollar.
So.
Is it just a better market for your.
Currency hedged products, the international ones hedge in Dx Jay.
And it seems like the flows.
Our negative and had been negative but have you considered ramping marketing to those products are you beginning to see more interest and there are a lot of firms that are advocating for the continued outperformance of those international markets. So is there an opportunity maybe to partner with some of those firms.
Hey, Jeremy why don't you take the market related question.
Last year was a very strong performance for all of those international strategy you talked about Europe , we've seen some interest in Japan. This year. The U S. Investor base has interestingly pivoting to this view of a weak dollar now so much for the last 90 days was the Dod was rolling over.
Rates were dropping today you have this big move back into dollar because of very strong employer reports. So the currencies move around we continue to talk about solutions for managing risk, whether it's fully hedged solutions are dynamically hedged solution, they're smaller funds in the dynamically hedged space, but we did see some nice growth in those last year.
And so we you know we continue to be well positioned for both sides of that trade, whether it's a weaker dollar.
Or a stronger dollar and we continue to have that opportunity and what you're seeing year to date is if you look at the ingesting January our flows have actually been coming from some of the other funds that you've probably talked about in the past emerging markets high dividends, our leading international high dividends are doing incredibly well this year to start the year. So we.
We're talking a lot more about the valuation opportunities Ive mentioned that in my first comments that we're excited about high dividends globally, we see them as as compelling opportunities for asset allocation and we have a robust line up whether it's hedged or not hedged.
And then just adding that to end up.
Back to the future comment.
You know if you went back to the sort of gogo years with hedge in Dx Jay.
The company was much different.
Much smaller number of funds and we were much more concentrated so.
<unk> for this market and we have any number of funds that can take inflows. So.
It's a much much stronger story than it was back in those days.
Sure and thanks for humor, and my bad joke.
I switched [laughter].
Switching to prime.
You've been beta testing for a while.
What would have been the big lessons learned from the beta testing process and how has that informed your plans for the rollout.
Well.
Yeah, I mean, no huge lessons learned it's really just a matter of making sure that our operations and processes are working right, whether that's ECH onboarding connectivity through Plaid you know customers CIP customer identification customer service things like that so it's really just making sure that as we've designed it it's working out as expected and that.
They are inevitably comes up things you need to tweak or fix that we're able to do that and kind of a controlled beta testing environment. So in terms of the experience I think it's confirmed everything we hypothesize about it and it's really just a matter of us kind of making sure that we're trying out all the operations and doing it with life money.
Excellent thanks for taking my questions.
As a reminder to ask a question today you May press star one from your telephone keypad.
The next question is a follow up from Michael Cyprus with Morgan Stanley . Please proceed with your question.
Oh, Hey, thanks for taking the follow up just on wisdom tree Prime what's the marketing strategy and approach. This year, maybe you could expand upon what we can expect to see from wisdom tree with respect to marketing advertising. How do you think about the strategy. There. It seems like that's a meaningful component of the expense uplift and then as you think about wisdom tree prime looking out over there.
12 months, what does success look like for you.
Again, I think maybe you should take this.
Hum.
Got it.
Marketing.
Just trying to embrace lean marketing principles, so making sure like I said, we've got a high ROI on the channels that we're using so that could be things like digital marketing certainly.
He has also had success with TV advertising in the past.
And that's something that hopefully.
Hopefully you'll be seeing a social presence for sure as well that will allow us to you know really tap into the users that were identified.
Directed investors bold bugs as another category of people, who were certainly resonating with so far so.
That's in terms of the.
The strategy and sorry can you remind me of the second part of the question was in terms of success six to 12 months down the road I mean, it's really just about acquiring this initial phase of users and then really having great product sets and features so we're not disclosing any kpis or metrics today on that.
But it's certainly something.
We're confident we can achieve the marketing spend we have today and the product build that we've got right now.
And last.
Alaska.
Wanted to get metrics.
Attrition as well and that's something that you know we can certainly look to refine our assumptions on make sure that those are being born out and get more data on later this year.
And Michael This is John the only other thing I would just add.
Add to Will's answer is and it ties to your first question about being in beta.
When we launched in the App store will start getting reviews and it's important that it's a that we still get good reviews. So that there's a potential for sort of a viral campaign that's possible that from the the App store. So that's really why we have been testing it and making sure that it works so well for when we do.
Launch it initially, but those reviews will be an important piece of our story going forward.
Great. Thanks, and just one more if I could just on the model franchise, you guys were alluding to that supporting some of the strengths are in terms of flows maybe you could just update us on some of the initiatives and if you're able to quantify what the contribution is a across the models.
Sure John why don't you start there.
Sure it's mean well.
The initiatives are pretty simple. It's you know again, it's a it's you know.
It's a two pronged approach we're going after the large platforms, such as Merrill and Morgan Stanley and we'll look to add other large platforms, and then and I hope, we'll be able to announce those shortly with existing platforms like we've seen with Merrell, it's about further penetration both.
And getting to more advisers, which we've been successful in doing but also in getting more models on the platform, which we've been successful in doing it.
And then on the R. A a an IBD side.
You know there it's it's models again, but it's a slightly different approach there. It's it's replicating the wire houses click to implement.
Billety or that sort of easy button, we're providing that for or as an a b DS and that's going quite well with a really nice pipeline, where we're adding new.
It groups to that pipeline weekly.
And bringing on more AUO them there.
Definitely the models business is growing but so is the rest of the business and the mottos businesses is generally keeping.
Keeping that same pace about 12% of flows.
Going into the models and I'd add another really good thing where it makes sense, but you know I've mentioned a couple of times today about the performance in our product suite. It's also as you'd imagine it's showing up in our models suite as well and that just adds to the momentum.
So it is at this point you know the foundation is there and now it's just focus blocking and tackling and execution.
Continuing the momentum that we've got in the in the business.
Great. Thank you.
Thank you.
<unk> reached the end of the question and answer session I will now turn the call over to Jonathan Steinberg for closing remarks.
Just wanted to thank all of you for your time today and for your interest in wisdom tree and we'll speak to you next quarter. Thank you everybody.
This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.