AssetMark Financial Holdings, Inc.

Good afternoon, everyone, and welcome to AssetMark's first quarter 2022 earnings conference call. At this time, all participants are in listen-only mode. Later, we will be conducting a question and answer session, and instructions will be given at that time. Today's call will be 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 first quarter 2022 earnings conference call. Joining me are AssetMark's chief executive officer, Natalie Wolfson, and chief financial officer, Gary Zyla. Today, they'll discuss the results for the first 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 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, Taylor, and hello and welcome to our first quarter earnings call. I hope everyone is doing well. Since the last time we spoke, our team members have returned to the office in a hybrid schedule, and we've held our largest advisor event, Gold Forum, in person. which was attended by close to 500 advisors representing about a third of our platform assets. Our entire company is energized by seeing colleagues, advisors, and partners in person. Additionally, I'm excited about our strong first quarter results highlighted by record quarterly revenue of $148 million and an adjusted EBITDA of $44.5 million, the second highest quarter in our company's history. We ended the first quarter with an adjusted EBITDA margin of 30%, up 140 basis points year over year. Gary will provide more color on our financial and operating results for the first quarter, as well as provide an update on our 2022 outlook later in the call. Today, I'll start with the findings of our latest impact of outsourcing study, and then get into the five key components of our growth strategy. Starting on slide three of the earnings presentation, A recently released impacted outsourcing study furthers initial research conducted in 2019 to uncover how the role of outsourcing has changed and what direction trends are heading in for financial advisors. Advisors are outsourced by a range of advantages, greater access to investment solutions, better relationships with clients, notable improvements in their businesses, and personal benefits. In fact, according to our most recent study, About 83% of advisors surveyed agreed that investment management outsourcing has better enabled them to strengthen client relationships, up from 68% in 2019, while 82% of advisors cited increased client retention, up from 65% in 2019. Advisors also state that delegating investment management results in a tangible financial value. In fact, 91% of advisors in the study which, by the way, was a mix of advisors who work with AssetMark, don't work with AssetMark, outsource, and don't outsource, reported growth in total assets as a result of outsourcing, while 84% reported higher business valuation and 83% reported higher personal outcome. The bottom line for us is that outsourcing works, and AssetMark is built for advisors to make the decision to outsource. It's no surprise that 93% of advisors who use AssetMark as their primary outsourcing provider are highly likely to recommend outsourcing to other advisors. This is compared to 81% of advisors who outsource with another provider. We're focused on continuing to enhance our outsource offering as well as expand the channels we impact. With that said, let's turn our attention to the five key components of our growth strategy. The first component of our growth strategy, highlighted on slide four, is to meet advisors where they are, catering to a variety of affiliations and new growth-oriented or mature advisors. As more and more advisors embrace the RAA model, asset market institutional, or AMI, is well-positioned to support their growth, efficiency, and scale. I will split my update on AMI this quarter between a sales update and a features update. Let's start with sales. We continue to see strong growth within our RAA segment with the fee-only RAA leading the way. First quarter AMI production list was 19%. In the first quarter, we also signed agreements with 18 new RAA firms. And in the second quarter, we will host our second annual RAA summit. And we're really excited to have one-on-one interactions with RAAs we serve and those we prospect. On the feature side, we continue to enhance our offering. We are actively upgrading the advisor-managed platform focused on bettering the advisor experience. In addition, later this year, we will begin to offer the start of a model marketplace. With this, advisors have more flexibility in terms of the models they choose to implement. Turning to slide five, 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 saving advisors a significant amount of time. The global market for planning and wellness has grown significantly, and Voyant's strategy focuses on expansion by geographic opportunity. In the UK, where Voyant derives more than 50% of their revenue and is the market leader in the enterprise and independent space, The team is focusing on Client Go, that part of the Voient platform, to accelerate new business. Financial wellness is a group endeavor in the UK between the advisor and the client, and Client Go allows end clients the ability to customize their plans on their own time before, after, and in between meetings with advisors. In Canada, financial wellness and planning is the focal point of client engagement in all lines of business. Buoyant is continuing to grow their enterprise banking market share and further enhance relationships with credit unions and independents. Lastly, in the US and Australia, both new markets for Buoyant, the focus is to grow by individual advisors, key intermediaries, and investment solutions providers. Feedback from our advisors using Buoyant continues to be positive, and Buoyant is showing strong end user growth, having added nearly 10,000 enterprise consumer licenses since we acquired them in July of 2021. We're excited about Voyant's future growth opportunities across multiple geographies. The third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum, varying life stages and generation. For more, let's turn to slide six. This month, we launched our values-driven investing program, which includes four new ESG strategies, In addition to the four strategies, advisors will also have access to a suite of tools to help them facilitate values-driven investing conversations with their clients. The new resources include an investor questionnaire, client discovery tools, due diligence resources, ESG and impact reporting, and educational materials. This new program is in response to rapidly increasing demand for ESG solutions from both advisors and their investors. We look forward to continuing to provide our advisors and their investors with a wide range of personalized investment options that allow them to reflect their preferences and values in their portfolios. More on this in quarters to come. In addition to launching our values-driven investing program, AssetMark also launched our inaugural ESG report this month, another sign of our commitment to values-driven investing and diversity and inclusion. The fourth component of our growth strategy, as seen on slide seven, is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs. In the first quarter, we launched Wealth Builder Prospecting, a new tool designed to streamline prospecting for financial advisors and help them with insights to drive lead conversion. Broadridge's third annual financial advisor marketing study found that there was a huge disconnect between advisor prospecting and what investors want. Historically, prospecting takes a large investment of an advisor's time and money in a very inefficient process. Investors want a process that is easy and flexible, and they want to avoid setting up usernames, passwords, and sharing personal and sensitive data. With wealth builder prospecting, it allows advisors to invite leads into the planning process and effectively kickstart a warm client engagement in a time-efficient way that increases the chance of earning new business. While WealthCenter prospecting launched in late January, early feedback from our advisors has been extremely positive. In the two months post-launch, advisors have already generated hundreds of leads. Turning to slide eight, 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 businesses. As I have mentioned on previous calls, we are more deliberately focused on M&A than we have ever been before. will remain a very disciplined buyer looking only to buy capabilities that we feel could be a strong fit for our platform i will now turn the call over to gary who will take us through a deeper dive of our first quarter 2022 results and provide an updated outlook for 2022. thank you natalie and good afternoon all those on the call it's so great to be talking to so many of you