Q3 2023 AllianceBernstein Holding LP Earnings Call
Thank you for standing by and welcome to the Alliance Bernstein at third quarter 2023 earnings review at this time all participants are in a listen only mode. After the remarks, there will be a question and answer session and I will give you instructions on how to ask questions at that time as a reminder, this conference is being recorded and will.
I'll be available for replay on our website. Shortly after the conclusion of this call I would now like to turn the conference over to the host for this call head of Investor Relations for a b Mr. Marc Griffin. Please go ahead.
Thank you operator, good morning, everyone and welcome to our third quarter 2023 earnings review this.
This conference call is being webcast and accompanied by a slide presentation. That's posted in the Investor Relations section of our website Www Dot Alliance Bernstein Dot com with us today to discuss the company's results for the quarter are Seth Bernstein, our president and CEO and Bill Seamers interim CFO.
Carl Sproles, Chief operating officer, and owners on head of global client group and private wealth will join us for questions. After our prepared remarks.
Some of the information we'll present today is forward looking and subject to certain SEC rules and regulations regarding disclosure so I'd like to point out the safe Harbor language on slide two of our presentation. You can also find our safe Harbor language in the MD&A of our 10-Q, which we filed yesterday.
Under regulation FD management may only address questions of a material nature from the investment community in a public forum. So please ask all such questions. During this call.
Now I'll turn it over to Seth.
Good morning, and thank you for joining us today.
In the third quarter equity and fixed income markets pulled back from gains earlier in the year as yields remained volatile moving higher throughout the quarter on reaching levels last seen pre global financial crisis, while retail investors continued to sit on the sidelines favoring cash assets offering more than 5%. We believe that flows will eventually.
Great back to bonds to supplement equity allocations as investors take advantage of higher yields and precision portfolios to beat inflation.
Despite these industry wide headwinds a be posted organic growth in several key services as we executed on our strategic initiatives.
We continued to gain market share in retail driven by organic growth in both taxable and muni bonds.
Municipal SMA platform reached 20 billion in.
AUM growing organically in 12 of the last 13 quarters and having more than doubled over the last five years.
Active equity grew 7% annualized institutional our active ETF platform celebrated its one year anniversary now of just under $1 billion in assets under management and we saw net inflows into private markets led by a B Corp valves clean energy platform.
Let's get into the specifics starting with a firm wide overview on slide four.
Gross sales were $25 $2 billion up $5 4 billion or 27% from the year ago period, and up $2 8 billion or 13% sequentially.
Firm wide active net flows were almost flat down $100 million.
What are your end assets under management of 669 billion increased by 9% year over year, but were down 3% sequentially.
Assets under management of 690 billion was up 5% year over year and up 2% sequentially.
Slide five shows our quarterly flow trend by channel.
Firm wide third quarter net outflows were $1.9 billion retail gross sales of $16 9 billion increased 22% year over year and 3% sequentially.
Net inflows were $1 6 billion, reflecting continued strong demand for taxable municipal fixed income up 7% and 14% annualized organically respectively.
Our institutional channel had gross sales of $4 3 billion improved from both prior quarters net.
Net outflows were $3 5 billion as taxable fixed income and passive equity outflows more than offset 1 billion of net inflows from active equity in private wealth gross sales were healthy at $4 billion driven by money market funds net flows were flat as redemptions normalized as compared with bladder redemptions in the third quarter of last.
Year on.
On a year to date basis, two of our three channels are flowing positive with retail and private wealth generated net inflows of $2 5 billion and $1 7 billion, respectively investment performance as shown on slide six starting with fixed income during the quarter developed market government bond yields rose an overall return sterling.
All major markets longer maturity government bond yields spiked in late September after the fed released its updated quarterly dot plot that showed U S interest rates will likely be higher for longer than anticipated.
High yield bonds and positive returns of 85 basis points materially outperforming government bonds in the Euro zone and the U S.
In the face of this rate volatility a these fixed income performance remained strong with 73% of our assets outperforming over the one year period, 74% over the three year and 62% over the five year.
Despite investors remaining cautious in adding duration, we experienced $900 million of net inflows into our American income fund now totaling 4 billion year to date, we celebrated our 30th anniversary of American income in July with campaigns around the world.
Turning to equities as bond yields rose global equity settled off following a rally in the first half of 2023 the S&P 500 declined three 3%, bringing year to date returns to 13, 1% in U S dollar terms.
Gross stock sold off most as the focus turned back to macroeconomic uncertainties from the excitement over the potential for artificial intelligence early in the year with value of minimum volatility stocks falling less our equity performance continued to lag mega cap tilted benchmarks with 32% of equity assets outperformed.
Over the one year period.
Our three year and five year performance remained stable at 49, and 50% of assets outperforming respectively.
Importantly, we continue to outperform the Morningstar peer group was 64% and 69% of our equity assets outperforming over the three and five year periods respectively.
Now I'll review, our client channels, beginning with retail on slide seven.
<unk> sales increased versus both prior periods, while the redemption rate improved at 23% versus 27% last quarter and 30% a year ago contributing to net inflows of $1 6 billion.
For the 12 time in the last 14th quarters, we saw strong organic growth rates in U S retail up 12% annualized for both the third quarter and year to date.
And taxable we saw strong growth in money funds and continued inflows in American income Muni.
You need sales and flows also continued to be robust with net inflows once again of $1 billion or 14% annualized organic growth Brett.
The breadth of our Muni SMA platform is more expansive than ever and reflects the success of multiple customized strategy wins at major brokerage firms as well as turnkey asset management programs Onboarding more a b SMA products, we expect to roll out additional duration customization on a major brokerage platform before year end.
Our active positioning enhanced customization features lower fees and technology edge, which contributes to generating alpha are the main selling points of our muni SMA strategies today.
Our new Muni Sma's service Center is designed to enhance our overall SMA service model in U S retail by providing our sales staff and financial advisor partners with easy access to important client deliverables.
As shown on the bottom right, we posted top flow rankings across asset classes ranking the top 5% of U S. Retail flows in equities and munis and top 3% for cross border flows for fixed income.
Finally, one year into our active ETF program. We're pleased to be just $20 million shy of 1 billion a level only one in five active ETF sponsors attained in their first year. We have additional fixed income launches scheduled later this year following equity launches earlier in 2023.
Turning to institutional on slide eight.
Third quarter gross sales were $4 3 billion up 2.4 billion from last year and up 2.8 billion sequentially.
Net outflows were $3 5 billion concentrated in fixed income and passive equities higher interest rates drove repositioning by several clients exemplified by a large insurance client for whom rising interest rates created hedge volatility requiring them to post collateral and reduce their gross positioning our pie.
<unk> was $12 $5 billion at quarter end down 1.9 billion sequentially, we experienced fundings of 2.5 billion, including $1 3 billion U S large cap growth mandate and over 200 million in a be carve outs clean energy fund, we added $300 million mandates for both tax aware of fixed income.
And low volatility high yield complemented by active equity wins and sustainable global thematic in China a shares value.
Equitable's initial 10 billion dollar private markets program announced in mid 'twenty 'twenty. One is now 80% deployed and we are progressing on discussions for future opportunities, including for example, NAV landing.
Reflecting the success of our growing insurance focus I'm pleased to share that we recently won two 2023 insurance asset risk Americas Awards alternative manager of the year and asset manager investment team of the year.
While conditions for private alternatives fund raising remained more challenging we're executing on three focus areas.
The first close for European Cred secured income funds secured income fund plus targeting overall fund raise of $500 million focused especially on investors in Europe in select Asian markets, a be carve outs credit value fund six fundraise in all global regions targeted at 2.5 billion and <unk>.
Continuing to raise capital or direct lending evergreen funds with particular focus on our a b private credit investors business.
Moving to private wealth on slide nine.
We continued to experience strong sales in money market funds municipals and proprietary passive equity tax harvesting strategy, which grew to 3.1 billion posting strong annualized organic growth of 31%.
Third quarter net flows were flat they were up on a year to date basis, 2.2% annualized organically and on track for a third straight year of organic growth.
Over the last 12 months.
AUM growth from business sales has outpaced the industry as measured by M&A volumes and pre transaction planning pipeline remains solid.
Year to date alternative capital raises were 1.6 billion with third quarter sales focused on private credit and secondaries.
I'll finish our business overview with the sell side on slide 10.
Third quarter Bernstein research revenues of $94 million increased 3% year over year, and 2% sequentially, we experienced modest growth in research payments versus the prior period's industrywide global institutional equity trading volumes remain constrained with the exception of improvement in Japan equities.
We launched coverage of two new sectors, this past quarter, and our 20th annual Pan European Strategic decisions Conference was a resounding success with over 400 clients attending.
Our joint venture with Societe Generale remains on track to close in the first half of 2024.
Anticipate disclosing further financial details closer to that time.
I'll conclude by reviewing the status of our strategic initiatives on slide 11.
Performance in fixed income remained strong while equities continued to lag versus concentrated capitalization weighted benchmarks.
Active net inflows in the third quarter were nearly flat despite a challenging backdrop.
Third quarter results were led by retail, which posted 10% annualized organic growth in fixed income with growth in both taxable and municipals.
Institutional active equity annualized growth of 7% more than offset by fixed income net outflows, reflecting a higher yield environment.
Year to date to about three channels retail and private wealth of posted organic growth or.
Our Muni SMA platform reach $20 billion in assets under management, having more than doubled over the last five years and a 9% annualized organically in the quarter.
Adjusted financial comparisons improved over the prior year period with operating income up 13% operating margin of 28% up 220 basis points and earnings and unit holder distributions of 65 cents per unit up 2%.
Lastly, we've made progress in our CFO search, which is in its final phase and should be concluded in the near term.
Now I'll turn the call over to Bill seamless discuss financials Bill.
Thanks, Seth let's start with the GAAP income statement on slide 13.
Third quarter GAAP net revenues of 1 billion increased 5% from the prior year period operating income of $175 million increased 3% and the operating margin of 17, 2% decreased by 110 basis points.
Included in GAAP operating expenses was a $13 million adjustment, reflecting a change in estimate of a contingent payment arrangement as compared with the prior year period.
GAAP P. P. You are 50 cents in the quarter decreased by 11% year over year.
I'll focus my remarks from here on our adjusted results, which remove the effect of certain items that are not considered part of our core operating business we.
We base our distribution to unit holders on our adjusted results, which we provide in addition to and not as a substitute for our GAAP results.
Our standard GAAP reporting and a reconciliation of GAAP to adjusted results are in our presentation Appendix press release and 10-Q.
Our adjusted financial highlights are shown on slide 14, which I'll touch on as we talked through the P&L shown on slide 15.
On slide 15, beginning with revenues.
Net revenues of $846 million increased 4% versus the prior year period and were up 3% sequentially.
Base fees increased by 1% versus the prior year period, as 5% higher average AUM was offset by a lower fee rate.
The third quarter fee rate of 39.9 basis points decreased 4% year over year.
Driven primarily by mix, reflecting organic growth and to lower fee rate fixed income products, including money markets.
Third quarter performance fees of $28 million increased by $18 million from the prior year period, mainly due to higher fees on private credit services.
Given current market conditions, we now see full year 2023 performance fees in line to slightly above the prior year level.
Dividend and interest revenue of $46 million, the vast majority of which is derived from our broker dealer increased by $19 million year over year, reflecting the higher interest rate environment, partially offset by lower average balances netting against this is broker dealer related interest expense associated with our private wealth brokerage clients interest expense of $28 million.
<unk> by $7 million year over year due to higher interest rates and was up $2 million sequentially.
Moving to adjusted expenses all in our total third quarter operating expenses of $609 million were up 1% both year over year and sequentially.
Total compensation and benefit expense was essentially flat with prior year period as a 4% increase in revenues was offset by a lower compensation ratio of 49.5% of adjusted net revenues as compared to 51% in the prior year period.
As you know we have accrued for compensation at 49.5% of net revenues through the first three quarters of the year.
Given current market conditions, we believe that our fourth quarter 2023 compensation to revenue ratio will remain at 49.5% subject to crystallize Asian of full year revenues promotion and servicing costs increased by 6% from the prior year period, driven by higher <unk> expenses.
Promotion and servicing costs decreased 5% sequentially due to seasonally lower for meetings and T N a.
G&A expenses were essentially flat in the third quarter versus the prior year period and declined 1% sequentially due to lower portfolio services fees.
For the full year, we continue to target promotion and servicing and G&A growth below inflation levels up low single digits.
Third quarter adjusted operating income of 237 million increased by 13% versus the prior year period and was up 7% sequentially.
Third quarter, adjusted operating margin of 28% increased 220 basis points year on year.
As a reminder, last quarter, we moved interest expense below the adjusted operating income line in order to facilitate comparability with peers.
As shown in footnote two on this slide interest expense increased by $8 million from the prior year period, reflecting higher interest rates and higher borrowings and decreased $1 million sequentially, reflecting lower average borrowings.
As outlined in the appendix of our presentation third quarter earnings exclude certain items, which are not part of our core business operations in the third quarter. Adjusted operating earnings were $62 million above GAAP operating earnings due to acquisition related expenses and interest expense.
non-GAAP <unk> was 15 cents above GAAP, <unk>, primarily reflecting acquisition related expenses, the third quarter effective tax rate for a b L. P was 5.7% our.
Our guidance for effective tax rate in 'twenty twenty-three remains approximately five 5% to 6%.
Each year, we typically repurchase a b holding units in the open market to help offset units issued through our annual incentive compensation process.
During the third quarter, we repurchased 1.8 million units for $56 $9 million, we completed the program in the first week of October.
We continue to expect the Nashville relocation will be accretive for the full year 'twenty twenty-three with compensation related savings more than offsetting increased occupancy costs and we will provide you with an annual update at year end.
With that we are pleased to answer your questions operator.
At this time, if you'd like to ask a question simply press star followed by the number one on your telephone keypad. We ask that you. Please limit your initial questions to two in order to provide all callers an opportunity to ask questions. You are welcome to return to the queue to ask a follow up question. Your first question will come from the line of Craig Siegenthaler with Bank of America.
Please go ahead.
Thanks, Good morning, Seth.
Good morning.
So your Muni business continues to demonstrate organic growth strength in the quarter.
And I think the SMA wrap at Rapids, really probably one of the bigger factors there.
But do you expect Muni bond flows to Reaccelerate further once the markets get confidence that interest rates have peak because while your flows are really good industry flows haven't really got into it yet.
Thanks, Craig and good morning.
Look I think that the St Jude.
Generally was.
Two quick to call the turn in rates. So we've seen we've seen fixed income continued to trail year to date is that as rates have continued to back up.
And so it's certainly understandable to me why we havent seen industry.
Industry flows immune needs or taxable frankly more broadly.
Ground much larger because for the first time since the financial crisis, our holders actually have yield to supplement the diversification.
My own way of thinking Craig to hit your point square on is I actually think we should see broader industry part to the flows in munis.
As rates stay elevated at inflation gets more under control because frankly demographically we have.
Incredible demand from clients for income in their portfolios. They take great comfort in frankly Muni credit quality is so high in Muni.
Got it.
The K is so slow.
I think it's going to be a winning area when that exactly happens when.
You know the fed is actually pause, we'll see we think there could be a couple of quarters here or or or more where the fed is on hold.
After their next meeting next.
Next month, so I think where we're nearer, but we're not there yet I hope that answers your question.
Thanks Seth.
And just for my follow up on one of your peers. This morning disclosed that theyre going to have large sub advisory redemption.
Zimbra December in addition to it sounds like some negative seasonality.
At this point when you look at your pipeline and think about your conversations are you seeing any pick up on the redemption side across the business towards year end.
Let me actually why don't I, just turn that over to own or to answer.
Sure. Thanks, the short answer is no. We don't expect any major sub advisory termination that is we are not aware of any major ones.
Obviously hard to predict.
That's where we stand right now I mean, if you look at the redemptions to date.
Avoid that massive large.
Mandates terminations in the institutional more broadly, particularly in the higher fee categories.
Thanks, Andrew.
Your next question will come from the line of Alex Blaustein with Goldman Sachs. Please go ahead.
Hi, good morning, everyone. Thanks for the question.
So I was wondering if we could start maybe with your outlook on the alternatives business.
<unk> been putting up nice flows there for it for a number of different reasons, but as you look forward, maybe help us frame what the dry powder in the businesses that will turn on fees upon deployment.
And just zooming out a little bit what is the trajectory for some of the new initiatives that you guys are unfolding over the next 12 months.
Alex Thanks, so much and I will start, but I'm going to ask owner to jump in and just add to it.
But we continue to see improving opportunities to deploy just given deteriorating credit market conditions, we see that in our commercial real estate debt business, where we continue to have significant dry powder, we see that in PCI, our middle market lending business.
Where we're seeing new and different opportunities arising and in car bow.
As I think you may know, we're beginning to.
Start the process for for C. B assets carve out value six which is their flagship fine we're targeting two and a half billion. That's the same as what we did last time, we're trying to be cautious just given the headwinds in the fundraising market.
But.
We have considerable dry powder through our three a major private credit businesses, but owner why don't I, let you provide a bit more color.
That's great summary.
If I were to add a few minor things.
Number one we are on track to launch our first interval fund auto car, while the opportunistic credit and trouble fund.
We expect.
Debt to help us both in our own private wealth channel as well as in third party channels. So that's going to be a nice addition to our lineup as you know we haven't done.
Non traded BDC and REIT structures in our private wealth before but this is the first time, we are launching an interval funds both for our internal and external clients. So excited about that.
And then as Scott mentioned, our private I'll say, you AUM continued to grow and we have significant amount of dry powder and in this environment as the M&A activity accelerates as the price discovery.
In real estate comes to an end I think we will have plenty of good opportunities in attractive vintages that should help our deployment returns as well as in certain cases, where we have performance fees and carry also those aspects of our revenue structure.
Got you I am sorry, what was that dry powder number again.
That that will turn on upon deployment.
Yeah, sure or dry powder. If I include all the channels would be around the $14 billion.
Got it okay, great for my follow up I wanted to dig into your active ETF offering I know it's small.
About $1 billion in the context of the firm, it's not huge but but it's been an important driver near term flows for you guys. So as you sort of think about the forward strategy side. I think you mentioned a couple of new launches as Youll accounted to 2024, what's the vision for the active ETF business and where are you finding the most success is that largely distributed.
And through the private wealth business within alliance Bernstein, or Youre seeing success with third party channels as well.
Actually I'm going to pass it to Carl I'm, sorry castle to owner, because I think he's he's he's closer but.
I'm more interested in what you have to say on her.
Yes sure. Thanks.
Thanks, again said, yeah, we're excited about that.
The progress to date of our active ETF business, we had our first anniversary in September and we hit the almost $1 billion of AUM, which is very good.
A launch which puts us I think one out of five in total successful launches in this space.
There are multiple paths to success in our view, it's not only our proprietary channel private wealth.
It actually got a lot of good wins and third party channels in terms of the vision I think division is three parts one.
Complement our vehicle agnostic strategy with active Etfs, where that vehicle.
Gnostics strategy helps clients. So we've touched on Muni area in the previous question for instance, so we are complementing our muni SMA with Etfs. So that definitely is an additive strategy helps with our momentum.
So definitely that vehicle extension is one part of the strategy second part of the strategy is opening new doors, obviously space is a heavy user of Etfs historically, they were passive ETF users, but we are seeing more and more interest in the active ETF wrapper from those channels. So that helps us open new doors.
And then finally, there is still a broader set of opportunities and institutional including insurance clients. When you achieved certain thresholds in terms of AUR et cetera, given the liquidity of fixed income Etfs for instance, we are quite optimistic about the long term prospects as well so thats our goal.
Forward strategy, and you will see us add products across equities fixed income and multi asset such as buffer.
And I would just add Alex that while private wealth will increasingly be an important user I think given their needs. The real driver isn't is in private wealth at the moment. It really is third party who are looking at it as building blocks.
For portfolios, they're managing.
Awesome, that's great. Thanks for all the color I appreciate it.
Okay.
Your next question comes from the line of Dan Fannon with Jefferies. Please go ahead.
Thanks, Good morning was hoping to get a bit of a progress report on carve out.
16 months or so post deal you mentioned your fundraising environment being a bit difficult, but just in terms of how you had modeled and thought about this business to date, where it's been versus kind of those expectations and maybe a little bit more of a look forward over the next kind of 12 months and what we should be anticipating.
Thanks, Dan let me start and.
Carl made owner May jump in as well I keep saying Carl just to keep them awake, but.
Look I think as we have mentioned while the market. The fundraising market is more challenging as rates have risen. It's certainly also the case that the opportunity set at least from our vantage point has improved and improved meaningfully and so we are seeing areas to deploy.
And sort of beyond.
I'll focus on cotton valley, but there are also topics that I would like to focus on beyond that in addition to Carr bows Cvs six carvel values fun, six which I as I mentioned, we target for two to two and a half million, we completed their clean energy to find that was <unk>.
Tripled the size of the first fund they were already on the road with that when we closed the acquisition in July of last year.
But we're very pleased despite the markets to have gotten to $1 5 billion and we're in process of deploying there as well. We also are working with carb alloys as owner alluded to in on an interval fund are that we think has real application both within our private wealth channel, but also beyond that.
Which is a more opportunistic kind of strategy and car Val as well along and its mandate with equitable on resi mortgage mandate, which is I think it was $750 million in total size. So on balance I think from a new business perspective, it's moving as well this week.
Could expect.
But we are mindful of challenges and in in the fundraising market, hence our desire to be conservative in our estimates on Cvs six as we go out of the blocks there.
But we're also seeing opportunities in our euro crab secured income secured income fund plus target, which is at $500 million fundraise really targeted a European and Asian investors. We're also seeing a focus on our private credit investors business and our direct lending evergreen funds.
Where we're seeing appetite.
Culturally moving over to the other side, Dan because you asked about how the acquisition is going I I don't know that I could be more.
Satisfied by the cultural alignment, we've seen not just what the leadership of a carve out but also I think more importantly in the different functions, whether it's in our distribution their capital raising group and our technology operations across the investment teams.
Are they being greeted and welcomed as as partners and colleagues and I think they've taken a remarkably open stance and looking upon the firm as a resource.
To help them enhance their their their potential as well as to help us see what we can do better there are best practices, there that we need to adopt more broadly and Conversely elsewhere from the firm to carve out. So we wanted to be slow and methodical. This was not intended to be an expense saving exercise the acquisition of carve out.
We're obviously mindful of that in tougher markets we are a.
We're pretty pleased so far the turnover has been below where we had an AD forecast it to date.
And unbalanced.
We're pretty pleased and with the progress I don't know wonder if you have anything you want to add there.
I mean on the commercial side the pipeline remains diversified we had a significant pipeline.
And again the extensions is very important here right. Obviously the flagship funds are always important for the economics of the platform, but we're seeing a lot of nice extension. So for instance insurance, we started with equitable, but we are getting a lot of interest from other insurance clients as well.
So those kind of extensions are quite additive to our strategy and then Furthermore, obviously you could argue.
Some of the dislocations in the market with the banking crisis earlier in the year, which happened after we close the transaction creates a lot of interesting opportunities for deployment as the banks are looking for partners.
To create more capital efficiency and deal with some of the upcoming new capital requirements from Basel and other regulatory bodies. So we see that as being another momentum.
Two hopefully, we'll accelerate our deployment in the coming quarters.
I just just to finish it up because the pipeline is $3 7 billion for carve out.
To put that in context, and so hopefully that answers your question.
Okay, Great. That's very helpful and I guess also just thinking about the fee rate at a consolidated level.
Mix in beta at some of the things that put a little bit more pressure on it to date the backlog seems like that's additive. So I guess just thinking about the fee rate and what your outlook is over the next 12 months and how you think that can trend based upon business trends demand trends in the asset flows.
Hey, Dan It's bill.
I mean, we continue to expect the fee rate to be mixed dependent.
We've had experienced organic growth in lower fee products such as <unk>.
Money markets <unk> private placements, while seeing outflows in higher fee active equities.
I mean, so we're definitely going to be dependent on market interest rates.
The risk and return appetite.
I mean, but we do have as we've mentioned a few times you know the institutional.
<unk> is supported by higher private also exposure with the pipeline fee rate three times the channel average.
So that's encouraging there.
But no specific guidance.
Alright, thank you.
Your next question will come from the line of John Dunn with Evercore ISI. Please go ahead.
Thank you you guys talked about potentially a third a positive year for private wealth management, maybe just looking out over the next year.
Can you frame.
What strategies, you think theyre going to be in demand that could potentially set up for a positive year.
Sure, Yes, as you pointed out.
John year to date, we have healthy organic growth.
As the general risk off environment. That's played out obviously some of the flows have concentrated in shorter duration or lower risk strategies money market funds direct indexing and alike.
But if you think about.
The longer term, we continue to be.
Optimistic about our ability to deploy <unk>.
Credit in the channel as you know we have around $10 billion of alternatives in our private wealth platform. We have done it for many years and as we launch new products as I mentioned earlier with carve out with others. It will help with.
Growth.
Then.
From a broader perspective, despite all the.
Kind of uncertainty with the economy and everything else. We stayed the course in terms of adding financial advisors to our platform. So year to date, our financial advisor head count is up by 4%. So we are taking a through the cycle mindset in terms of investing in.
Client facing resources, and our private wealth business, so that should hopefully help us as a catalyst as well.
Got you and then we don't really have to talk about pass it but.
No.
Can you remind us like what the dynamics of that side or is it more tactical for investors.
Is there a potential for that money to come back relatively quickly.
Ah.
So on passive.
Particularly in the.
Our core client segment lower complex at the lower valley clients. We have some model portfolios that takes advantage of active passive model portfolios, which is quite common in the industry I would say that is much more <unk>.
Structural and cyclical.
So that I would highlight as nothing new in that regard I think the real.
I think fee acceleration to expect would be money market funds cash and some of the direct indexing type money going into a higher risk higher return strategies with higher fees I think that's how I would characterize the major migration, that's what we expected.
When rates stabilize and when the risk appetite is further back.
But just to give a bit more color, we do have institutional clients who turned to us.
Whether it's an accommodation or as part of a broader set of actions, we're taking on their behalf to provide passive and it's episodic so I wouldn't.
Suggest there's something imminent there, it's just that it does come and go.
Right, Thanks very much.
Okay.
And there are no further questions at this time, Mr. Griffin and I will turn the call back over to you.
Perfect. Thanks, everyone for joining our call. We appreciate your time today. If you have any additional questions. Please feel free to reach out to Investor relations have a great day.
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Okay.
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