AssetMark Financial Holdings, Inc.

Good afternoon, everyone, and welcome to AssetMark's third quarter 2022 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, Matthew. Good afternoon, everyone, and welcome to AssetMark's third 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 third 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 press release and SEC filing 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.

Thanks, Taylor. Hello, and welcome to our third quarter earnings call. I hope everyone is doing well today. My prepared remarks today will focus on the current environment, our 2022 share of wallet study, and then dive into the five key components of our growth strategy. After that, I'll turn the call over to Gary to discuss our financial and operating results for the third quarter and our outlook for the remainder of the year. Starting on slide three, since the last time we spoke, we've continued to stay extremely close to our advisors, helping them navigate this volatile economic landscape. Our support, along with a meaningful contribution from spread revenue, enabled us to deliver another quarter of record results. including record net revenue of $116 million, record adjusted EBITDA of $52 million, record adjusted EBITDA margin of 34%, record net income of $35 million, and record adjusted ETFs of $0.47. While the third quarter was the best in asset market history, make no mistake, this is an uncertain and challenging environment for advisors and their clients. We, like the rest of the industry, continue to see pressure on our flows given market volatility and the amount of money that continues to sit on the sidelines. Additionally, advisors are not in motion at the same rate that they were during less volatile times. Even so, we view this environment as an opportunity and we are playing offense at Asimark. We are arming our advisors with timely value-added education and have accelerated product development in areas of interest for investors. both of which I will discuss a bit later in the call. In addition, we have increased our representation at broker-dealer conferences, increased our spend on digital lead generation, and are hosting more live and community-based events. Prospective advisors are very receptive to hearing new ideas, and AssetMark's comprehensive, high-touch offering is driving new advisor engagement. Because of this, I'm very confident about the opportunities ahead. Speaking of opportunity, let's turn to slide four. We recently completed our annual share of wallet study with over 700 respondents that are AssetMark advisors. Expanding the share of wallet from our existing advisors is one of the many ways we can accelerate our growth. This study is valuable as it allows us to see what assets are held away from AssetMark by our current advisors. Two key points emerged from this year's study. The first point is that Athermark continues to be the preferred provider for advisors across multiple investor segments. Most noteworthy among these segments is the fast-growing high net worth segment and then the mass affluent segment. Second, we have a total business opportunity of $375 billion across our advisor base. This number is up approximately $20 billion from 2021, and this is despite the market decline. The bulk of this opportunity is with advisory assets and commission assets. And while we don't support commission assets on our platform, we view this as an opportunity to grow ShareWallet because we have a proven history of helping advisors move towards fee-based business models. This year's study underscores that while we are doing a great job of capturing assets from existing advisors, we still have a long runway of growth opportunity ahead of us. As we do every quarter, Let me provide you with an update on our growth strategy. The first component on slide five is to meet advisors where they are. All advisors, regardless of affiliation, are facing the same market volatility challenges today. I want to dive a bit deeper into how, by supporting our advisors, we have achieved record financial and operational results and have matched our all-time high net promoter score while also positioning our company for future growth. The feedback from our Market Volatility Toolkit underscores the value we provide to advisors during times of uncertainty as they look to stay informed, feel confident, and help them thoughtfully serve their clients amid uncertain environments. Since launching in June, the Market Volatility Toolkit has had over 7,500 page views from 1,500 unique users. We continue to provide timely education to our advisors, including September's strategies for surviving a bear market webinar, which was incidentally our highest attended webinar ever with nearly a thousand advisors and clients attending. In the third quarter, we also maintain close contact with our advisors through high impact live events. Specifically this quarter, we hosted our top advisors for our platinum summit, over 200 advisors for our high net worth symposiums, and over 175 advisors for our investment mastery series. Additionally, just last week, we finished up our premier advisor meetings, which were attended by over 800 advisors in 19 different cities. In these meetings, we discussed timely topics such as business management in a challenging economy and leveraging the right strategic relationships. We continue to get very positive feedback about the quality of our events, educational content, and the strength of the community we have created among our advisors. Our advisors are grateful to have Asimark as a partner as evidenced by our 2022 overall Net Promoter Score of 67, which matches our all-time high set last year. We firmly believe our deep connectivity with our advisors enables us to continue to win in the market and sets us up for future success. Now I'd like to turn to slide six, the second component of our growth strategy, which is to deliver a holistic, differentiated experience to advisors and their clients. As discussed during our analyst dinner in September, Voyant has gained significant traction recently as some of its key geographies continue to open up. Recent wins by Voyant include Barclays and PwC in the United Kingdom and a partnership with Morningstar in Canada. We have also want to deal with the global accounting firm RSM, working with them in five countries to start, with the goal to expand to several more in the future. We are extremely excited about Buoyant's future growth prospects and the diversification of revenue it brings to Asimark. Moving to the third component of our growth strategy, which is to enable advisors to serve more investors across the wealth spectrum, varying life stages and generations. Let's turn to slide seven. Today's investors face challenging market conditions with record high inflation, rising interest rates, and geopolitical conflict. Advisors are reacting to these turbulent markets by reallocating to strategies that can help mitigate these recent market challenges. Last month, Asimard launched three new strategies for advisors to leverage during these uncertain times. The first, which can be used to enhance portfolio income and reduce overall volatility through high-quality dividend equity approach, that has historically generated low data relative to the S&P 500 index. The second two of these new strategies are alternative investment strategies that can be used to enhance the stock bond portfolio diversification by incorporating non-correlated asset classes. While turbulent markets can be overwhelming, they also offer opportunities for advisors to lean in, connect, and deepen relationships with clients. Given this, it's no surprise that the early reaction to our new investment choices from our advisors and their clients has been extremely positive. Now I'd like to move to the fourth component of our growth strategy as seen on slide eight. This component is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs. This quarter, I'd like to talk about our Advisor Acceleration Academy. an immersive four-month program designed to help advisors boost their business, boost their growth by establishing foundational business methods. The program focuses on five key pillars of business success. First, the benefits of outsourcing. Second, a robust business assessment with benchmarking. Third, client segmentation and servicing. Fourth, developing a strong marketing plan And finally, fifth, creating and executing a business growth strategy. We hosted three classes with an average of 100 advisors in each class. Advisor feedback so far has been great. And we are already starting to see tangible benefits. In fact, advisors who participated in the first two sessions, which are already complete, have exhibited platform asset growth of more than 20% since graduation. Also encouraging, a good number of advisors have already reached engaged status post-graduation. This level of partnership is unmatched in the industry. Our ability to help our advisors grow and scale is a key reason why our advisors win. And it's also a key reason why we win. We win because of their success. Now turning to slide nine, the final component of our growth strategy. This is to pursue strategic transactions by adding capabilities and assets that improve our advisors' ability to serve investors and expand their businesses. First, I'd like to give a quick update on adhesion. We continue to work through regulatory approvals and have spent a good deal of time at adhesion headquarters so that we can hit the ground running when the deal closes. Second, we feel the current market environment is unlocking a lot of potential opportunity, and we are actively looking at each one of these opportunities while ensuring we remain disciplined to only buy capabilities that would be a strong fit for our platform. I will now turn the call over to Gary, who will take us through a deeper dive into our third quarter 2022 results and also provide an updated outlook for full year 2022.