AssetMark Financial Holdings, Inc.

Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2020 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 the 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. Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2020 earnings conference call. Joining me remotely are AssetMark's Chief Executive Officer, Charles Goldman, and Chief Financial Officer, Gary Zyla. Today, they will discuss the results for the fourth quarter and provide an update to AssetMark's business outlook for 2021. Following our introductory remarks, we'll open up the call for questions. We also have an earnings presentation that Charles and Gary will reference during their prepared remarks. It can be accessed on our IR website at ir.assetmark.com. Before we get started, I'd like to note that certain statements made during this conference call are forward-looking statements. These forward-looking statements represent our outlook only at 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 earnings press release and SEC filings for more information on forward-looking statements, risk factors associated with our business, and required disclosure related to non-GAAP financial information. And with that, I'll turn the call over to my colleagues. Charles, take it away.

Thank you, Taylor, and good afternoon, everyone. I hope everybody's safe out there, remaining masked, and staying as productive as possible. Thank you all for joining our fourth quarter earnings call. I hope everyone is having a great start to 2021. Starting on slide three, we're going to focus on five key messages during our call today. I'll discuss messages one and two, while Gary will cover messages three through five. First, 2020 was a momentous year for Asimark, highlighted by strong operating and financial results. Second, Asimark is entering a new era of growth. Our existing growth strategy is being augmented, by attracting adjacent advisors in the RIA and hybrid RIA channels. Third, Gary will discuss our organic growth, which continues to gain momentum. In the fourth quarter, net flows were $1.5 billion, up 27% quarter over quarter. Next, Gary will walk us through our fourth quarter 2020 results, highlighted by strong top and bottom line metrics, and another record-breaking quarter for EBITDA margin. Lastly, Gary will provide some context on our financial position entering 2021 and provide an outlook for the year. So turning to slide four, our mission is to make a difference in the lives of our advisors and their clients. During last quarter's earnings call, I shared that 2020 was our best year ever in terms of living to our mission. This quarter, I would like to take that one step further. It was also the best year in terms of delivering strong operating and financial results. In 2020, we added $12.9 billion in assets, 306 engaged advisors, and over 24,000 households to our platform. We attracted 743 new producing advisors who saw the value in outsourcing to have some work. In 2020, net flows were strong and helped drive platform assets to $74.5 billion at the end of the year, the highest in our company's history. These strong operating results translate to strong financial results. We still grew despite the industry headwind of losing $15.7 million in net spread-based revenue for the full year and $6 million in asset-based revenue for due to moving all our open third-party mutual fund strategies to lower-cost share classes. Net revenue increased 3.4% year-over-year, driven by asset-based revenue, which was up 11%. Adjusted EBITDA grew 4.7% to $115 million, and adjusted net income grew 10.7% to $73.2 million. We reported adjusted EPS of $1.2 for the year, the highest in our company's history. We also had continued success driving scale in our business, evidenced by the growth in our adjusted EBITDA margin of 30 basis points. Lastly, in 2020, we also advanced our M&A strategy. In February, we closed the OBS acquisition, which remains highly accretive. The strong operating and financial results from 2020 were a testament to the strength and the resiliency of our business our advisors, and our employees. Let's discuss this in a bit more detail, starting with our business. Our platform enables advisors to outsource high-cost non-core services that would otherwise require significant investment of time and money. During the pandemic, the importance of having an outsource provider showed even greater value. Our advisors were not left alone to try and make sense of the volatile equity markets, navigate the pandemic, and figure out how to service their clients and prospect for new clients under shelter-in-place orders. Instead, they had Asimark by their side every step of the way. Prior to the pandemic, a Cerulli study found that advisors spend 51% of their time on back office, non-client-facing activities. Our comprehensive platform allows advisors to spend more of their time servicing existing clients and prospecting for new clients. Spending time with clients, albeit virtually, was and is crucial during these times. We also significantly improved the platform in 2020. Let me highlight some of these improvements. For the full year, we invested $50 million in the development of technology and our dedicated technology team with a focus on building and enhancing tools and services to help advisors. One example is our enhanced client proposal and new portfolio review tools which empower advisors to clearly demonstrate how the strategies proposed are chosen based on their clients' goals, concerns, and financial dreams. This is a crucial component of our financial wellness vision. We've also expanded the breadth of our curated investment platform. In February, we added fixed income solutions from American Funds, Dorsey Rights, and PIMCO to help advisors serve their clients' retirement needs, and enhance and diversify their fixed income portfolios. More than 2,100 advisors have invested client assets in these investment solutions, with assets quickly approaching $1 billion. In August, we introduced our Enhanced Security Backed Line of Credit, or SBLOC, program, which gives Asimark Trust Company clients faster access to low interest rate liquidity supported by digital and streamlined securities-backed lending. In less than six months, 309 lines of credit have been issued, which is well ahead of our goal. In December, we added CIBC, Private Wealth Investment Management Services and Wealth Planning Expertise, which will help provide advisors with customized solutions to meet the expanding needs of high net worth investors. In the first month, we built a robust pipeline for 2021. Continuing to invest in our platform allows our advisors to be more efficient, effective, and valuable for their clients. Speaking of our advisors, they remain highly engaged and complimentary of Asimark. I want to start by thanking our advisors for continuing to trust Asimark to help them grow their businesses. We continue to build strong relationships with our advisors, hosting over 530 webinars, and creating thought leadership materials that help inform, educate, and inspire. Through increased sales outreach and a great number of marketing initiatives, our sales activity was almost double in 2020 compared to 2019. While our increased activity allows us to serve our advisors during this challenging year, we also continued to scale our sales organization and drove unit costs lower by 7%. Finally, I would be remiss not to mention the people who make Asimark great. Our over 725 associates have been working tirelessly from home for almost a year, almost a year, and have done a fantastic job of serving our clients during this time of great need. I want to thank our associates for their dedication to our clients and how they have rallied to face up in this crisis. The improvements to our platform, doing right by our advisors, and having highly dedicated employees all contributed to our phenomenal operating and financial results in 2020. While last year shaped up to be the best in our company's history, we believe we are just beginning to scratch the surface of this immense opportunity that is right in front of us. Let's turn to slide five in our next topic. As we look ahead to 2021, we are excited about what is on deck for the new year, and we are already off to an amazing start. Our sales team just finished 18 highly successful premier advisor meetings, which were attended by over 950 advisors. In two weeks, we will host our largest annual advisor event, Gold Forum, which will be conducted, of course, virtually. We are excited to be able to spend three days engaging with our best clients who represent over $40 billion of assets on our platform. Our pipeline of projects, new products, and client experience improvements is robust, and work is already underway as our core pillars continue to define our strategy and guide our investments. We are focused on continuing to differentiate via digital experiences and expanding advisor engagement. We are addressing our advisors' evolving needs which include an emphasis on comprehensive financial planning and advice, increased reliance on technology, and the desire to outsource value added services. Our operations and services teams continue to wow our clients with their focus on customer obsession. The new business team supported a record number of new accounts applications in January. We are growing our ops and service team to support advisors and their growth while still achieving scale. Building off all the great work we are doing, we plan to start extending the reach of our platform in 2021 while continuing to deliver outstanding business results. Turning to slide six, last quarter we announced that one of our 2021 strategic pillars was to attract adjacent advisors through channel expansion and our biggest opportunity being under-resourced RIAs. Both hybrid RIAs and independent RIAs have experienced significant growth over the last 10 years, and these growth trends are expected to continue. As seen on the slide, hybrid RIAs and independent RIAs have outpaced other channels in both advisor headcount and advisor-managed asset growth. In 2020, RIAs and hybrid RIAs made up 15.8% of the production on our platform, up from 10.9% in 2018. Pure RIAs have grown their production on our platform 50% since last year and 100% since 2018. We continue to focus on enhancing our offering to better serve RIAs and their clients. This quarter, we are launching AssetMark Institutional, or AMI, to support these advisors. So let's take a look at slide seven. While Asimark Institutional will offer best-in-class service and access to Asimark's events, our advisors have come to know and value it will also provide a differentiated experience for the RIA community. AMI offers a fully assembled, holistic solution built specifically for RIAs, providing the right set of products, operational support, technology, and community resources to support their growth, efficiency, and scale. First, AMI will include a new suite of products such as advisor-managed portfolios, alternative investments, and other products to provide RIAs the products they need to be successful. Second, AMI offers a client experience that supports stronger relationships with financial planning, account reporting, and digital communication. Lastly, we plan to host specific events tailored for the RIA community and have thought leadership materials designed specifically for them. So with that, I'll now turn the call over to Gary to discuss our financial performance for the fourth quarter and share some thoughts on the outlook for 2021. Gary.