AssetMark Financial Holdings, Inc.

Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. Today's call is being recorded. Now, I'd like to turn the call over to Taylor Hamilton, head of investor relations. Please go ahead, Mr. Hamilton.

Thank you, Austin. Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2021 earnings conference call. Joining me today are AssetMark's chief executive officer, Natalie Wolfson, and chief financial officer, Gary Zyla. Today, they'll discuss the results for the fourth quarter and provide an update to AssetMark's business outlook for 2022. Following our introductory remarks, we'll open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at ir.assetmark.com. Before we get started, I'd like to note that certain statements made during this conference call are forward-looking 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 earnings 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. With that, I'll turn the call over to my colleagues. Natalie, take it away.

Thank you so much, Taylor. Hello, everyone, and welcome to our fourth quarter earnings call. We are a few weeks away from my one-year anniversary as CEO, and what an amazing year it has been at AssetMark. Before we begin our prepared remarks, I would like to start by thanking our 8,600 advisors 8,600 advisors, and 850-plus teammates. 2021 was a record year, and it would not have been possible without the loyalty of our advisors and the dedication and skill of our team. I also want to thank our analysts and investors for their continued support of AskMark. Starting on slide three, platform assets ended the year at a record $93.5 billion, driven by record quarterly net flows of $2.9 billion, which included our first billion-dollar month of net flows in December. For the year, our net flows as a percentage of beginning period platform assets were 13.3%. Households and engaged advisors were both up double digits for the year and ended the year at all-time highs. We also experienced record results for both top and bottom line financial metrics. Full-year net revenue was up a little less than 28% year-over-year to $378 million. Adjusted EBITDA in 2021 was up more than 36% to $157 million, and adjusted net income was up more than 41% to $103 million. And we continue to scale the business as evidenced by our ability to expand adjusted EBITDA margin, a robust 300 basis points in 2021. Turning to slide four, our record results are a direct outcome of the value we bring to our advisors and their clients. For more than 25 years, we stood behind thousands of independent financial advisors and provided them with everything they need to serve their clients and run their businesses. By redefining the advisor experience, Asimark is also redefining what it means to be a modern TAMP. Our singular focus is bringing unmatched value to independent financial advisors and their clients. We recognize that independence is sacred, and we champion it. The independent advisors we serve are objective, unbiased, and singularly focused on helping their clients reach their financial goals. When advisors work with AssetMark, they have a trusted ally. We are an extension of their team, and they are part of a community of thousands of like-minded advisors. As we redefine what it means to be a modern TAMP, we're focused on five key areas. I'll now discuss the 2021 progress we've made in each. The first component of our growth strategy on slide five is to meet advisors where they are, catering to a variety of affiliations, new, growth-oriented, or mature advisors. In March of 2021, we launched Asimark Institutional. Since launch, Asimark Institutional has gained a lot of momentum. Just as we have done with our broker-dealer-affiliated advisors, we're building a community of like-minded RIAs who see the value in outsourcing to Asimark. Because of our efforts and the value of our offering, we saw 49 new RIA firms join AssetMark in 2021, with current platform assets averaging $34 million during the first year of transition. In addition, RIA platform assets now account for a little over $20 billion of assets on our platform, and RIA is made up 20% of total production in 2021. In 2022, we'll be focused on continuing to build out this offering. Turning to slide six, the second component of our growth strategy is to deliver a holistic, differentiated experience to advisors and their clients, providing an end-to-end, easy-to-use platform designed to create meaningful conversations between advisors and their clients, while also, and very importantly, saving advisors time and resources. In 2021, we took a huge step forward in building out our financial wellness offering with the acquisition of Voyant. We are pleased with Voyant's year one results and want to highlight three key areas of their success. First, let's focus on technology. In 2021, Voyant maintained exceptional approval ratings from users, upgraded numerous integrations, and added dozens of new features. As a result, Voyant was a five-star winner of FP Advisor Service Award and was also voted the best non-research software for paraplanners by readers of the UK's Professional Paraplanner. Second is growth and expansion. In 2021, Voyant Australia was launched, bringing Voyance financial planning tools and technology to Australia's community of 20,000 financial advisors. Voyance also began its entry into the U.S. market through its acquisition by Asimark. In August, we gave Asimark's top advisors a free trial of Voyance, and feedback has been extremely positive. In 2021, Voyance's number of advisor and paraplanner licenses increased by approximately 10% year over year. Lastly is Voyant's integration into Ask Marks. We integrated Voyant's financial planning capabilities into eWealth Manager and also built Income Planner, a retirement income planning proposal technology which is powered by Voyant. We are pleased with the advancement we have made in our financial wellness offering and our focus on continuing to build it out in 2022. And we look forward to telling you more as the year progresses. The third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum. varying stages of life and generations. Now let's turn to slide seven. In 2021, we did a tremendous job of enhancing our platform, enabling advisors to serve investors. We did this by adding new products, features and tools to our platform. And through this, we were able to capture more share wallet from our existing advisors, as well as attract new advisors. In total, new products have added 8.5 billion of assets on our platform on a rolling 36 month basis. For our advisors' wealthiest clients, we added a host of new solutions, such as alternative investments through iCapital, as well as a suite of separately managed accounts. This past quarter, we made enhancements to our tax-loss harvesting capability, which will improve the client experience. For mass affluent and emerging affluent advisors, we've expanded our Savos personal portfolios to include new sleeves. As a reminder, these portfolios offer features that are usually found in high-net-worth solutions at an accessible investment minimum. Lastly, we added pooled employer plans to help our advisors serve the retirement needs of small business owners. We are continually focused on building out our platform to enable advisors to serve more investors, and I look forward to discussing these new additions to our platform in upcoming earnings calls. The fourth component of our strategy, as seen on slide eight, is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs. Last quarter, I discussed our business consulting offer, which is a huge competitive advantage for AssetMark. In 2021, our business consulting team served over 26 billion of platform assets, a 33% increase from 2020. Additionally, they launched and supported over 20 new advisor benefits, one of which I want to discuss with you in more detail today. In the fourth quarter, we soft-launched Marketing Advantage, AssetMark's marketing outsourcing program. Having a defined and executable marketing strategy has never been more important for advisors. In fact, in a 2021 Broadridge Financial Advisor Marketing Survey, it was found that only 26% of financial advisors have a defined marketing strategy. Yet, those that did have a strategy onboarded more than twice as many clients over the last 12 months as those who didn't. Marketing Advantage, our response to this advisor need, is a suite of marketing tools and resources designed to enhance an advisor's brand, deepen client relationships, and attract new business. Over 100 advisors have used Marketing Advantage during the soft launch period alone, and we just announced a full launch two weeks ago. Turning to slide nine, the final component of our growth strategy is to pursue strategic transactions by adding capabilities and assets that improve advisors' ability to serve investors and expand their business. In 2021, our M&A growth strategy was highlighted by our acquisition of Voyant, which closed in July. As I have mentioned in previous earnings calls, we are more deliberately focused on M&A than we've ever been before. To that extent, last month we announced a new $500 million five-year credit facility. We're very excited about the opportunity to significantly increase our access to capital and reduce our ongoing borrowing rates. We remain well-positioned to execute on M&A with approximately $425 million in purchasing power, while continuing, as always, to be a disciplined buyer. Lastly, we would be remiss if we didn't provide some commentary about the current macro environment and how that impacts asset markets. Later in the call, Gary will discuss the impact of interest rates on our spread-based revenue. Right now, I'd like to take a moment to briefly provide some thoughts about talent. Talent acquisition and retention have never been more crucial. Our strategy has two components to address this need. First, and most importantly, is ensuring that Askmark is a place where talented individuals want to work. We added more than 150 new team members in 2021 and received high marks in our annual employee engagement survey related to diversity, creating high-impact work, work satisfaction, and teamwork. We need to continue to make strides against all these measures so that the best of talent wants to work at AskMark. The second component of our strategy is appropriate compensation. To that end, at the end of last year, we gave each team member a one-time year-end bonus. We funded our variable incentive compensation at a high level, and in early 2022, we will increase salaries across the board. All of these changes have been accounted for in our current plan, which Gary will go through in a few minutes. We believe that creating a workplace that embodies our values of heart, integrity, respect, and excellence, along with having a robust learning and development program and compensating team members appropriately will help us attract and retain the best talent. In closing, 2021 was a record year for AskMark. Platform assets grew to over $93 billion. We served more advisors and investor households than ever before, all while achieving the highest net promoter score in our company's history. We realized double-digit growth for top and bottom line financials and expanded margins by 300 basis points. We expanded into a new and growing channel. We completed our first capabilities acquisition, allowing us to diversify revenue, and entered 2022 with strong momentum. I will now turn the call over to Gary, who will take us through a deeper dive of our fourth quarter 2021 results and provide an updated outlook for 2022.