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Good afternoon, everyone, and welcome to AssetMark's Second Quarter 2021 Earnings Conference Call. [Operator Instructions] Please note that today's call is being recorded. Now I'd like to turn the call over to Taylor Hamilton, Head of Investor Relations. Sir, please go ahead.
Thank you. Good afternoon, everyone, and welcome to AssetMark's Second Quarter 2021 Earnings Conference Call. Joining me today are AssetMark's Chief Executive Officer, Natalie Wolfsen; and Chief Financial Officer, Gary Zyla. Today, they will discuss the results for the second quarter, provide an update to AssetMark's business outlook for the remainder of 2021. 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 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 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 good afternoon, everyone, and thank you for joining our second quarter earnings call. I hope everyone is doing well and that you all have been enjoying your fantastic summer. Starting on Slide 3. We're going to focus on 5 key messages during our earnings call today. I'll take the first 2, and then Gary will cover the final 3.
The first message we're going to cover is that AssetMark's strategy is working, as evidenced by our record results, ability to capture greater share of wallet and adviser satisfaction scores. Second, we're reframing our growth strategy around the adviser. This aligns our advisers' growth with our company's growth, both of which, over the long term, should drive value for our shareholders.
Third, Gary will discuss our organic growth, which has been a persistent and positive factor in AssetMark's strong results. Organic growth has accelerated for 4 straight quarters, and second quarter net flows of $2.2 billion are an all-time high, and year-to-date net flows are a fantastic 11.2% of beginning-period platform assets. Next, Gary will discuss recent Fed commentary around interest rates and how earlier-than-anticipated rate hikes could speed up revenue diversification and earnings growth at AssetMark. And then lastly, Gary will walk us through our financial results for the quarter, highlighted by record revenue, all-time high EBITDA, record net income and all-time high EPS. He will also update you on our expectations for the rest of the year. So now I'd like to turn to Slide 4, where you can see that our adviser-centric strategy is starting to pay off, supported by record results for the quarter, the ability to capture greater share of our advisers' assets and strong adviser satisfaction scores. Let's discuss each of these in a bit more detail.
I don't want to steal Gary's thunder, but as you may have seen when we released our June 10-K report, we had record net flows in the second quarter. We also reported all-time highs in net revenue, adjusted EBITDA, adjusted net income and adjusted EPS for the quarter. These are outstanding results and directly tied to our ability to live our mission and execute on our strategy.
The enhancements we've made to our platform and the deep relationships we've built with our clients continue to pay dividends, and we continue to remain the outsourced provider of choice for our engaged advisers. Our 2021 share of wallet study shows that we have captured more share of wallet from both our engaged and non-engaged advisers. Specifically for our engaged advisers, we have approximately 90% of their TAMP assets. Additionally, we have captured about 50% of these engaged advisers' total assets. This is up significantly from 2020 and still provides ample runway for future growth.
While our advisers are entrusting us with more of their clients' assets, it should be no surprise that our advisers are extremely pleased with their relationship with AssetMark. Based on our annual Net Promoter Score survey from June 2021, we received a Net Promoter Score of 67, an all-time record and up 3 points from 2020. So now let's turn to Slide 5 to discuss our strategy in a bit more detail. As you know, AssetMark is a mission-driven and client-focused company. Every decision we make as a company is centered around our 8,400-plus advisers and the approximately 200,000 investors they serve. With that said, and as we discussed during our recent Analyst Day, we reframed our growth strategy to put the adviser and their clients at the center of all we do. We believe that there should be alignment between helping advisers grow their business, which in turn will help advisers grow and drive -- will help AssetMark grow and drive long-term growth and value for our shareholders.
Our growth strategy is focused on 5 key components. For each area, I will define our approach today. I'll add some color about what we are currently focused on. And I hope that this will give you a good idea about why each priority is important and how our initiatives will help advisers succeed and grow. Comments and subsequent earnings calls will focus on these 5 components, current priorities and the progress we're making in each area to support our growth. We're now moving to the first component of our reframed growth strategy on Slide 6. This component is to meet advisers where they are and to serve their unique needs. To do this, we need to focus on serving advisers with different business models, at varying stages of their careers, serving diverging investor needs and across many affiliation types. Today, AssetMark serves a large community of independent fee-based investment advisers, and we serve as an outsourced partner for these independent broker-dealer affiliated advisers, hybrid RIAs and independent RIAs.
Further, based on the 2020 Cerulli Advisor Metrics Report, advisers continue to migrate to the RIA channel, which includes both RIAs and hybrid RIAs. AssetMark Institutional, an initiative we launched in March, looks to capitalize on this secular trend. It has only been a few months since we launched AssetMark Institutional, so let me provide you with an update on how it's going in the early innings. So while we're still a few quarters away from breaking out AssetMark Institutional results, I can say that AssetMark Institutional is growing at the same rate as our traditional broker-dealer affiliated advisers already in the early months. In addition, there continues to be a groundswell of activity to generate demand from current AssetMark advisers as well as new leads. For example, in May, we hosted our first AssetMark Institutional RIA Summit with over 250 advisers in attendance, and 1/3 of these attendees were entirely new lead opportunities to AssetMark. With AssetMark Institutional, we're building a community of like-minded advisers that are all RIAs or hybrid RIAs just as we have done with our other advisers over the past 25 years. So now let's turn to Slide 7. The second component of our growth strategy is to deliver a holistic differentiated experience to advisers and their clients, providing an end-to-end, easy-to-use platform designed to create meaningful conversations between advisers and their clients while also saving advisers time. A few weeks ago, we closed on our acquisition of Voyant, which will help us accelerate our financial wellness vision, which is a key component of this portion of our strategy.
I want to briefly provide you with a quick reminder of the strategic benefits of acquiring Voyant and then provide you with an update on their first half of the year. First, Voyant accelerates AssetMark's financial wellness vision and expands on our ability to attract advisers in core and adjacent channels. Second, Voyant has had great success outside the U.S. market and still has a long runway of enterprise opportunities internationally. Third, AssetMark strengthens Voyant's stand-alone growth prospects as Voyant will benefit from our know-how, U.S. brand and relationships and strong financial position. Voyant will also help AssetMark enter the enterprise space in the U.S. Lastly, Voyant provides strong financial metrics and meaningful scale. It is immediately accretive to EPS and provides earnings and geographical diversification plus a long runway for growth. Now let me give you an update on Voyant's financial results. Through the first half of the year, Voyant is on track for 2021 revenue of $20 million and adjusted EBITDA of $8 million. We expect to realize revenue of $10 million and adjusted EBITDA of $4 million in the second half of the year as we closed the Voyant acquisition on July 1. Voyant has already been integrated into eWealthManager, and we are currently building an Income Planner powered by Voyant, which will be implemented in August and used by our sales team to support income conversations between advisers and the clients. We are so excited to have Voyant as part of the AssetMark family, and I look forward to updating you on all the great things that Voyant is doing to help create more meaningful adviser-client conversations on future calls. The third component of our growth strategy is to enable advisers to serve more investors across the wealth spectrum, varying life stages and generation. So let's turn to Slide 8 to hear more about this. One of the areas that we've been aggressively building out is our high net worth offering. And this is one of many areas we're building out to serve differing investor needs.
But as it relates to high net worth, per a recent Cerulli study, high net worth households, or those with over $5 million in investable assets, account for more than 43% of the U.S. investable assets. And this is up 27% -- or 27 points since 2010. High net worth investors require a different set of solutions, including custom investments, cash management, wealth transfer and more. We have a very compelling high net worth offering and have further enhanced it.
So some recent examples. In September of 2019, we launched Savos Personal Portfolios, which provide personalization and quality service in an accessible and affordable manner for the aspiring affluent and affluent clients. In December of last year, we also added a new custom high net worth solution to our platform. This past year, we launched AssetMark Alternative Investments. And in the third quarter, we will be launching separately managed accounts and a program around separately managed accounts that will provide advisers with a comprehensive menu of core asset class exposures through a combination of recognized and boutique managers.
And this is just the beginning and a platform that we will look to continue to build on and invest in to serve high net worth investors in the future. We are excited about the enhancements we're making to enable our advisers to serve more investor needs. These enhancements will allow us to capture more share of wallet and create even stickier relationships with our existing advisers while also attracting new advisers and investors to our platform. The fourth component of our growth strategy, as seen on Slide 9, is to help advisers grow and scale their business by offering turnkey adviser solutions and programs. As discussed during our Analyst Day, advisers spend less than 50% of their time on non-client-facing activities. By outsourcing to AssetMark, advisers are provided with investment and technology solutions aimed at reducing the time spent on non-client-facing activities so that they can spend more time with clients and prospects, allowing them to build deeper relationships and also drive client acquisition.
In our 2019 Impact of Outsourcing survey, we found that 2/3 of advisers surveyed cited that outsourcing helps them create stronger client relationships, higher acquisition of new clients and increased client retention. So we'd like to do more outsourcing for our client.
And one key priority that we're working on today, and it's only one of the priorities, is marketing outsourcing, which will help advisers acquire new clients through holistic marketing efforts. This new feature will be part of AssetMark's entire offering, helping expand our value proposition, drive adviser growth and help create stickier adviser relationships. Our marketing outsourcing solution launching in the second half of the year is the first of many outsourcing solutions we look to roll out over the next few years, and I look forward to providing further color on subsequent -- further color on outsourcing solutions on subsequent earnings calls. So turning to Slide 10. The final component of our growth strategy is to pursue strategic transactions by adding capabilities and scale that improve advisers' ability to serve investors and expand their businesses. We aspire to develop an ecosystem of fast and service-based offerings that are complementary to our core TAMP platform. The ecosystem will empower advisers of all sizes with the highest-quality capabilities and services, enabling to both serve -- enabling them to both serve clients effectively and grow their practice.
I just want to note that we're focused on both midsized wealth M&A -- wealth tech M&A opportunities that are aligned with our top capability priorities and scale opportunities that are a strong fit. The cash on our balance sheet, the ability to generate cash and our low debt position us well to pursue future M&A opportunities.
As you can see, our reframed growth strategy centered around the adviser helps us grow as a company. Our strategy is built to attract new advisers, drive additional share of wallet from existing advisers and increase the number of investors our advisers serve. All of these will drive long-term growth and value for our shareholders. The result of executing on these 5 components of our growth strategy is the exceptional performance that Gary will discuss in a minute.
Before handing the call over to him, I want to emphasize how extremely pleased I am for all we have accomplished in the first half of the year. And I also want to take a moment to thank our over 800 AssetMark team members for their hard work and dedication to making a difference in the lives of our advisers and their clients. 2021 is shaping up to be the best year yet for AssetMark, and I'm excited to deliver on what we have planned for the back half of the year. So now, Gary, I'd like to turn it over to you.
Thank you, Natalie, and good afternoon to all those on the call. As Natalie discussed, our results in the second quarter were outstanding, highlighted by all-time high in platform assets and record numbers for net flows, revenue, adjusted EBITDA, adjusted net income and adjusted EPS. As usual, I will start with a discussion of our platform assets, then talk about our revenue, expenses and then earnings. I will conclude with an update on our 2021 outlook. And starting on Slide 11. Second quarter platform assets were a record $84.6 billion, up 34% year-over-year. This growth reflects second quarter net flows of $2.2 billion, the highest quarterly total in the company's history, and $3.5 billion of market gain, net of fees. The improvement in our net flows quarter-over-quarter is driven by increased production, while our redemption rates have again remained relatively stable.
In June alone, we realized net flows of $934 million, the highest month in our company's history. Strong organic growth continued in July, and we expect net flows north of $800 million for the month. Year-to-date, annualized net flows as a percentage of beginning-of-year assets is 11.2%, comfortably ahead of our 2021 guidance of 8% to 10%. Recall that this strong growth rate includes over $600 million of outflows from our recent acquisitions. As we shared last quarter, we are no longer spinning out the [ lost ] business as they have been fully integrated into our core business. Turning to Slide 12. You can see that over the last year, our organic growth has accelerated. The second quarter marks the fourth consecutive quarter of increasing net flows. We believe this means we are executing on our winning strategy that Natalie just outlined. The enhancements we have made and continue to make through our platform have led us to capture more share of wallet from our existing advisers and continually attract new advisers to our platform.
Speaking to this point, let's turn our attention to adviser metrics. We added 201 new producing advisers or NPAs in the second quarter of 2021, the highest total since the first quarter of last year. NPA serves as a source of our growth in the near and medium term. We are encouraged by the growing quantity and quality of new advisers on our platform.
Our total engaged advisers at the end of the second quarter was 2,691, an increase of 80 advisers since the first quarter of 2021. Over the last 12 months, we have added 364 engaged advisers. While our overall adviser count has remained relatively consistent, we have transitioned 4.3% of our adviser base to engaged. Our engaged advisers now make up 91% of our platform assets. Engaged advisers are a large driver of our platform asset growth, as Natalie highlighted when discussing our share of wallet results. Now let's turn to Slide 13 to discuss this quarter's revenue. Entering the second quarter, our assets were $78.9 billion, leading to record revenue of $128 million. Year-over-year, this reflects a strong increase in our asset-based revenue, offset by the decline in spread-based revenue due to the rate decreases that occurred in the first half of 2020.
We focus on our revenue net of related variable expenses. For the second quarter of 2021, our net revenue of $91.4 million was up 33% year-over-year, which is driven by asset-based net revenue, which was up 37.5% to $88.9 million. Given the current macro environment, we have received 2 questions quite consistently. First, how may inflationary pressures impact our expenses? And second, how will rising interest rates impact our spread-based revenue? We have and will continue to evaluate these, and our outlook for 2021 does not assume any material impact. But let's turn to Slide 14 to discuss further. First, regarding inflation. I will start with this. This country has not seen an extended inflation in almost 2 generations, and the general consensus is that this inflation will subside as supply meets demand and the economy opens. That said, regarding its potential impact on our expenses, inflationary environment could pressure future compensation and travel costs. As noted though, we see no near-term impact from this in our industry. And longer term, we at AssetMark intend to manage this within our budget.
Second, regarding rising interest rates. At the recent June Federal Reserve meeting, 13 of 18 officials favored at least one rate increase from the end of 2023 versus 7 at the March meeting. 11 officials saw at least 2 hikes by the end of 2023. And in addition, 7 of them saw a move as early as 2022.
An increase in interest rates will have a positive effect on AssetMark's spread-based revenue. Based on average second quarter total cash of $2.5 billion at our Trust Company, a 25 basis point increase in the Fed funds rate would amount to about $6 million of spread-based revenue annually. I would [ set that about ] 75% of this will fall through our bottom line. Simply put, earlier-than-anticipated interest rate hikes could speed up our revenue diversification and earnings growth. Now let's turn to Slide 15. And we'll fully discuss the drivers of the change in net yield year-over-year. As the waterfall graph shows, net revenue was up year-over-year, driven by the impact of our asset growth, which generated $26 million in additional net revenue. Also adding to our increase in net revenue is a $3 million reduction in asset-based expenses. This is ongoing savings primarily driven by restructured agreements with providers. We have been focused on creating more scale regarding this expense, so we're very happy to see the impact this quarter.
Continuing through the waterfall. The impact of the compression of yield reduced net revenue by $4.9 million. Of this $4.9 million impact, about $3.9 million was due to the shift to lower-cost mutual fund share classes that we completed last Q. Starting next quarter, you will no longer see this in our year-over-year wallet. The remaining $1 million was driven by fee compression due to ordinary mix shift. Note that this year-over-year compression impact is effectively 60 basis points, which is below -- I'm sorry, I'm sorry, my apologies, is 0.6 basis points, which is below the 1 basis point we plan for each year. Moving to spread revenue. It decreased $1.3 million year-over-year due to the decline in our average yield from 43 basis points to 29 basis points. Overall, net revenue as a percentage of total platform assets for the second quarter was 46.3 basis points, down a little less than 3 basis points from 2020.
The bottom of Slide 15 helps detail the year-over-year decline in yield. As it shows, 1 basis point is driven by the asset-based revenue and 1.3 basis points are due to the decline in spread-based revenue. The bigger story is that the quarter-over-quarter -- is the quarter-over-quarter change in net yield. Slide 16 shows net yield trends over the last 5 quarters. What you will notice is that the net yield of 46.3 basis points in the second quarter is up 2.2 basis points quarter-over-quarter, driven by the measures we've taken to reduce asset-based expenses that I mentioned earlier. As we have communicated historically, we still expect a 1 basis point decline in asset-based fee yield as a result of mix shift. Now let's discuss expenses, as shown on Slide 17. We continue to do an excellent job of managing our expense base so that it doesn't outpace our revenue growth. Total adjusted expenses increased 18.6% year-over-year to $93.3 million. Spread-based expenses, while small, doubled year-over-year as a result of our growing SBLOC program. Operating expenses were up 19.1% year-over-year to $51.2 million, driven by a $3.4 million increase in compensation and a $4.8 million increase in SG&A.
The increase in compensation expense is largely driven by 2 factors. First, our variable sales incentive costs increased as a result of our strong sales in the quarter as well as increased headcount. While our strong sales results increased our compensation expense, we will realize the revenue benefit from it, of course, in the upcoming quarters. Second, we added 76 employees over the last year, about 10% of our current employee count, primarily in our client-facing functions. The increase in SG&A was largely driven by a variety of incremental factors, including an increase in perpetual fees and increased costs associated with higher volume. Now let me run through our expense adjustments. In the second quarter, we added back a total of $14.7 million pretax, which is comprised of 4 items: first, $6.7 million in noncash share-based compensation, which is lower than previous quarters due to the acceleration of share-based compensation costs we realized last quarter. The run rate for the rest of the year should be about $6 million to $8 million per quarter. The second adjustment to expenses is $5.1 million of amortization expense related to our 2016 sale. As a reminder for modeling purposes, most of this expense will be fully amortized by the end of 2021. Third, $1.5 million in acquisition-related expenses associated with our acquisition of Voyant and the integration of GFPC and OBS. Lastly, $1.4 million related primarily to reorganization and integration. Now let's turn to Slide 18 to discuss our earnings for the quarter. Second quarter 2021 adjusted EBITDA was a record $40 million, up 58% year-over-year. Adjusted EBITDA margin for the quarter was 31.3%, up 570 basis points year-over-year. This improvement in margin year-over-year despite the decline in spread-based income is a result of favorable macroeconomic conditions and our management team's ability to focus on expense management while investing in future growth.
Our reported net income was $10 million as compared to a loss of $9.3 million in the second quarter of 2020 with improvement in reported net income as a result of the lower costs associated with share-based compensation as the IPO-related grants have almost fully amortized. Our adjusted net income in the second quarter was $26.6 million, or $0.30 -- or $0.36 per share, which is based on the second quarter diluted share count 73.5 million.
Our effective tax rate for the second quarter was 23.5%, lower than our effective tax rate of 26% in the second quarter of last year. The decrease is driven by tax efficiencies we created in 2020. For further color, please see the adjusted net income walk on Slide 23. Turning briefly to our reported second quarter balance sheet. Let me update you on our cash and debt position. We ended the quarter with $179.8 million in cash. This number reflects $75 million of cash that we drew down from our credit facility at the end of June to fund the close of Voyant, which occurred in July. After closing Voyant, we then used some excess cash to reduce our outstanding debt, and it stands as of today at $125 million. The remaining cash on our balance sheet, the ability to generate cash and our low debt positions us well to pursue future M&A opportunities. Now let's turn to Slide 19 and discuss our expectations for 2021. As a reminder, our long-term expectation is to grow revenue in the low double digits, expand adjusted EBITDA margins in the range of 50 to 75 points and grow earnings by 15%. Our revised expectation for 2021 reflects strong organic growth and market impact in the second quarter as well as the impact of Voyant on the second half of the year. We are increasing our net revenue growth outlook to 26% to 28% for the year compared to our previous expectation of 18% to 21%.
Our operating expenses, which consists of compensation and SG&A, are expected to increase 20% to 22% due to increased investment in 2021. It is important to note that we will maintain discipline in our expense growth was to not outpace revenue growth. As a result, we are revising our 2021 adjusted EBITDA growth estimation of 35% plus, which is above our previously guided range of 22% to 26%. This outlook reflects the strong momentum in the first half of the year, the impact of Voyant and our ability to continue to find ways to scale our business.
Based on the revised growth outlook we have laid out, we expect margin expansion for the full year of around 250 basis points, much higher than our previous expectation of 150 basis points and our ongoing 50 to 75 basis point target. We think this is phenomenal given that we are still investing significantly. With that, I'll hand it over to Natalie for concluding remarks.
Thank you, Gary, and thank you to everyone on the call today. It's a great time to be an AssetMark adviser, team member and shareholder. I look forward to sharing future updates at upcoming conferences and on subsequent earnings calls. This concludes our prepared remarks. And I will now turn the call back to the operator to begin Q&A.
[Operator Instructions] First question is from the line of Gerry O'Hara of Jefferies.
Thanks for the update around the economics on Voyant and especially into the back half of the year. I was hoping you might be able to give us a little color as to what we might be able to expect beyond that or beyond this year. It sounds as though there's some integration efforts that could leverage that platform and perhaps some -- I don't know if there'd be any investment that would be required to grow that, but what the contribution to Voyant could look like down the road beyond just the back half of this year.
Thanks so much for that question, Gerry. Really appreciate it. So I'll start, and then I'll hand off to Gary to give a few more specifics. But related to Voyant, we are planning on investing in further integration of foundational financial planning capabilities to be delivered domestically to AssetMark advisers. And we expect to cover the cost of that further integration or further development within our regular capital budget. So within the budget that we try to keep around 7% of revenue.
In addition to that, we've already started the introductions of Voyant to several of our partners in the United States, and we expect that those relationships will grow over time. And then David Kaufman, the CEO of Voyant, and I are speaking about what the next level of investment should be for Voyant outside the U.S. In fact, they're very close to launching the next generation of their investor component of Voyant, which they call [ InvestorGo ] or The Game. And that should be launching within the coming weeks. And so the investment in that has already started.
They had good traction outside the U.S. in terms of their relationships with their existing providers and new providers. We don't intend to announce what that means in terms of the number of new licenses or incremental revenue until the new seats are onboarded. We wanted to make sure that the revenue is realized before we announce that. And so Gary, I don't know if you'd like to take it from there.
Thanks, Natalie. And thanks for the question, Gerry. It's nice to talk to you again. I don't think we have any details to share with you on 2022 economics for Voyant. To make sure we're on the same page, as Natalie said earlier, we expect Voyant in 2021 to be about $20 million full year revenue, about $8 million full year of EBITDA. We are obviously hoping for upsized growth from that business, right? So in terms of thinking about how it compares to our core business. But I think what we'll do later on, maybe next quarter or into the fourth quarter, Gerry, is give a more firm update of where we think that revenue might go. I know it's not very helpful, but we just don't have any updated numbers right now.
No, that's completely reasonable. And then perhaps just one follow-up. It's, I think, perhaps a little bit more around the strategy and kind of the share of wallet capture that is clearly quite strong as it relates to the TAMP assets. But curious as to where you might see or hope the share of engaged advisers on the total assets could go, especially as you start to roll out some of these new products. That would be helpful.
Yes, absolutely. And Gerry, thanks for that question as well. So our existing share of total wallet from our engaged advisers is 50%, as I mentioned earlier in the call. And what's really limiting us in terms of capturing the remaining 50% is 2 things. The first is advisers use solutions elsewhere that they can't access at AssetMark.
And so Alternative Investments is a good example of that before we launched our Alternative Investment platform. Separately managed accounts is another example of that, but we're launching separately managed accounts in the latter part of this year. Some lending solutions would be another example of that, which we're hoping to launch in 2022. And so there's just -- there are assets that could be offered by our platform that we don't have an investment solution today. And we're methodically working our way through that potential on a size of total capture basis.
The other component of the share of wallet that is currently available is share of wallet that isn't eligible because it's not fee-based. So assets that are more commission in orientation. And we have extensive programs that we put in place and extensive projects in place to help advisers and their clients understand the benefits of moving towards fee-based, moving away from commission to fee-based.
And this has been an incredibly -- these programs have been incredibly successful in helping advisers grow thriving businesses and helping investors find their way to solutions that are better suited to their investing needs and increasing the total number of assets that are eligible on our platform. So commission -- the top 2 commission categories would be insurance-oriented assets, and the other would be mutual fund-oriented commission assets.
Next question is from the line of Alexander Blostein of Goldman Sachs.
A couple of questions around just organic growth. I guess maybe one, clearly, really nice improvement here and a very good momentum over the last couple of months. So curious if you guys can talk a little bit about the sources sort of behind this acceleration.
And then a little bit bigger picture, Natalie, probably for you. As you sort of outlined AssetMark's kind of reframed approach to the market, what kind of incremental organic growth do you think this could create for the firm over time? So is it reasonable to think this can get you guys more into a more consistent double-digit organic growth? Or are there some offsets in the business that we also should consider?
Thank you so much, Alex. So for the first part of the question, organic growth and the sources of our current acceleration, there are really 4 main sources of our current success. The first is share of wallet and the gains that we've achieved because we've expanded the universe of solutions on our platform to include those that advisers currently receive from that -- couldn't previously receive from AssetMark. The second is the move to commission to fee. The third is just the general growth of advisers on our platform, so the efficiency of advisers. And then the fourth is kind of the payback from the work that we did last year to serve our advisers and help them serve their clients and clients picking, as a result, those advisers at greater frequency. So I'm going to take them sort of in order.
As it relates to share of wallet, our sales teams are actively engaged in business planning exercises with all of our advisers to help them understand what are the best sources of their future growth and then to help us understand what pieces of their investor portfolios could be served on our platform. We rank those opportunities each year, and then we expand the solutions on our platform to tackle the areas that have the greatest potential share of wallet improvement for us and for our advisers.
And so a big portion of our organic growth is a result of those initiatives, whether it be with our Savos Personal Portfolio launch, which is already over $1 billion. Our addition of Alternative Investments was very new, and really, we haven't -- it's too early to have big results from that yet and then expansion in other areas of our platform like lending.
The second part is the general move from commission to fee regulation. Best interest or Reg BI has really opened the conversation between advisers and their clients about why moving to a more fee-based orientation is more explicit in terms of the pricing and can be in the best interest of the investor because there's more ongoing management of the investments. And so we have programs where we work with advisers who are interested in moving from commission to fees. And we help them with client communications, investment assessments, diligence, et cetera.
The third is that our advisers are growing. As I mentioned in our -- earlier in the call, one of our main initiatives is extending our outsourcing offers so that advisers can spend more time with their clients. What we know from our value of outsourcing service is that when advisers outsource investments or they outsource more to AssetMark, they grow faster. And we see that accelerated growth from new advisers on our platform, and that leads to organic growth from those advisers who are starting to outsource more and more.
And then in 2020, we spent a lot of effort making sure our advisers were well served, had great technology tools, had communications road map, materials, thought leadership, best practices to help them and their investors navigate through what was a very tough environment. And what you see is in the years -- following years where you really invest in client service that the advisers and therefore our platform, we are beneficiaries of the growth advisers receive because their investors want to do more business with them.
So those are really the 5 areas of organic growth. Do you have any more questions about that before I talk about the future?
No, that all makes sense. We can go to the next part of the question.
So in terms of the future, as Gary mentioned, we target low to mid-double-digit organic growth as part of our ongoing objectives. So all of the investments we're making now, all of the investments that we're making in our new strategy is an attempt to achieve those long-term objectives. And each of those numbers, I just want to say they're averages like over time. Some years, we'll do better than that. Other years, we'll not do as well as that. But over time, we expect to achieve the targets that Gary outlined in his earlier comments.
Got it. Great. And then, Gary, maybe one follow-up for you just around the guidance slide. I guess when we just look at the run rate of the business today in the second quarter and the asset levels exiting the quarter and then you're layering on the acquisition, as you described, it feels like you guys are there. If anything, it actually feels like you could run well ahead of the guidance you provided. So are we missing anything or -- that would sort of detract from the back half of the year? Or there is just a big plus next to the 35% plus?
No. What we're envisioning in the second half of the year is continued investment in the company. And so we do see expenses, us investing both in people and compensation costs, kind of ongoing stepping up in terms of the client-facing people that we need in the company, but also some kind of -- some more kind of onetime investments that we're going to invest [ effectively ] in other things in non-compensation base.
So what you're probably missing is sort of that step up in spend in the second half of the year. That will keep us overall where we're planning to come in. But we have, if you say -- might say, controlled some of that spend in the first half of the year to make sure we have the [ good way to spend it ].
Next question is from the line of Michael Young of Truist Securities.
Wanted to maybe just follow up on that comment, Gary. Just you guys have had very strong revenue growth and things are looking very positive again in the back half. So when you talk about that accelerated investment and spend there, is it things that you've kind of already articulated and talked about? Or are these things that are still on the drawing board that we should expect to hear about over the next 6 months or so?
Yes. Natalie, I'll start just on some of the numbers, and maybe you can talk about where we might invest on the things. Michael, part of it is what Natalie was talking about in terms of the things that we're going out to meet the advisers where they are and to bring them the tools they need. In general for the current calendar year, these are things that have been on our board and within our budget to spend during the year. But our nature is to manage our expenses. So we're cautious. And you're right, we have realized it's now built third quarter already. We feel very confident about third quarter revenue. And so we feel more confident about making even more investment.
So I'll pause there. Natalie, do you want to give a little color on where we might be investing in the next 2, 3 quarters regarding some of the topics you talked about?
Yes, absolutely. So the first thing I just want to say, Michael, is there are things that we're investing in that are in ideation phase. There are other areas that we're investing in that are in research and development. The items that I talked about here are either newly executed, nearly executed or well planned. So we have many initiatives at each stage of the product development life cycle.
And in years like this one, we like to take the opportunity to invest in more R&D initiatives and to look at how we might be able to expand our offering to advisers in ways that can help them compete and succeed. And so some examples from the presentation earlier, some of the outsourcing initiatives that I mentioned are in the earliest stages of development. And then others like marketing are much more close to launch, so we can talk to you about them in greater detail.
We're also looking at -- always looking at expanding our technology offering, making sure that our technology can scale and serve our growth and that we are meeting the needs of advisers, which are changing and emerging every day. So we didn't spend as much time today talking about that. But in future earnings calls, I really am expecting to take you through the technology road map as well.
Okay. Great. And I apologize to switch gears here a little bit. But Gary, it's good to see the net yield improvement this quarter, as you talked about. Could you just talk about if there are any other opportunities where we can see that continue and kind of offset the natural pricing pressure that we would expect to see over time via scale or any other things that could drive that going forward?
Great question, Michael, and very observant. And so if you take a step back, make sure we're on the same page, right? Those asset-based expenses, those variable expenses were payments we made to kind of 4 different groups, right? We pay our strategists who are on our platform. They earn part of the platform fees, the work they do. We pay broker-dealers. We pay advisers through marketing allowances. And we pay custodians -- third-party custodians. And that's always the [ activate season ].
For all of them, there are contracts that we have. For many of them, they are already structured with great points. So as we scale up, you're going to wind up paying less per basis -- per dollar of asset because of scale. And many others of them, we knew regularly where we go into discussions with our partners about the value we're bringing them and they're bringing us, et cetera.
And so it's a long answer there, just to make sure we're on the same page on like what all this is. And so we are continually looking at this. The majority of those costs [ and actually ] expenses are to strategists with those sort of breakpoint-type contracts. And so I don't want to highlight anything now to kind of build in because there's nothing to announce. But this is an ongoing focus, Michael, and we do hope to continue seeing improvement in that, exactly to your point, to offset the natural cost decrease to the end investor.
Next question is from the line of Kevin McVeigh of Credit Suisse.
Now just following up on your last point, I don't know if this is for you, Gary, but what type of revenue run rate can your current infrastructure support? And it's, I guess, a 2-part question because it seems pretty intriguing as you're adding on the marketing. So I wanted to understand, Natalie, what other modules can you add in terms of framing out what the potential addressable market can be? And do you expect to do that organically, inorganically, a combination of both? So just trying to get a sense of how we should be thinking about scale as it relates to current infrastructure and then what those initiatives can bring to bear?
Yes. So I'll start. And then, Gary, if you have anything to add, please feel free to follow on. As it relates to the scale that our current infrastructure can support, a couple of things I just want to say. The first is infrastructure investments and technology investments. It's an arms race. You need to be in -- we believe you need to be investing all the time.
And so the capital expenditures that we build into our budgets and that we grow in absolute terms every year but attempt to keep at around 7% of revenue inside that capital budget is the investments we need to make in infrastructure ahead of our growth. And it's a discipline that we, in our technology team and on our leadership team, we employ when we do our infrastructure investing budgets and total capital budget every quarter and every year. And so in terms of the expense side of the equation, I just want to say that we're investing in infrastructure every day. We have been for the last 8 years, and we will continue to, and we will do that in a disciplined way.
In terms of the revenue and the total addressable market, we're looking -- always looking for ways to expand our total addressable market. As we talked about when we acquired Voyant, there's a technology component to services that advisers need that AssetMark has been able to serve in the past on a stand-alone basis. And so we're investing in that not only in the U.S. but through Voyant worldwide. And that increases our total addressable market pretty significantly.
We're adding services that are geared towards RIA and the bank trust channel. And when we do that, we expand our total addressable market into those new segments. We're expanding the share of wallet that we can serve from the existing adviser segments we have. So that also increases our total addressable market and the resulting revenue. So in every way, we're always looking at ways we can serve advisers more thoroughly, different regions, different affiliation types to see how we can expand our addressable market.
And then as it relates to revenue, we have -- as Gary said, right now, we have asset-based revenue. We have spread-based revenue. And then we're adding subscription-based revenue through Voyant and other technology solutions. And so over time, as we give updates on our 5 strategic areas, what you'll see is there'll be new sources of asset-based revenue. So separately managed accounts is an example of that, Alternative Investments. There'll be new sources of spread-based revenue, so if we expand our lending solutions or as interest -- the interest rate environment changes, and then subscription-based revenue as we launch new technology services to advisers with financial planning being the first one.
Got it. So the marketing things like that, would that fall in the subscription? Or where would that fall? And then just how has been kind of the initial client reaction to Voyant in terms of -- have you seen a lot of conversion into more of the subscription model as opposed to the more basic plan that you already had in place?
Yes. So really thank you for that question. And clearly, it's early as it relates to Voyant. But I'll tackle both. First thing as it relates to the marketing outsourcing, that would fall into subscription-based revenue. Again, we expect it to be small to start, and the main benefit of marketing-based outsourcing to be the growth that the advisers on our platform achieve and how that feeds both our spread-based revenue as interest rates change and our asset-based revenue for the growth of those advisers on our platform.
As it relates to Voyant, the early feedback from our advisers about want has been fantastic. They're really interested in Voyant cash flow view of planning alongside the probability of success view of planning. They like seeing both on the same page. We only closed on July 1. So these conversations are just starting. We only just integrated Voyant into our platform about a week ago. And so we really don't have any data to share with you today as it relates to adoption or usage at this point. But the early conversations are really fantastic.
And then in terms of using basic financial planning at AssetMark versus being upsold to Voyant, those conversations haven't really started yet. It's only been about 4 weeks. And so those conversations haven't started yet. The basic introductions are where we are right now.
Thank you, everyone. I'll now turn the call back over to Natalie Wolfsen for closing remarks.
Well, thank you, everyone. We really appreciate you joining our call today, and we look forward to talking to you again next quarter.
And that concludes today's conference. Thank you all for joining. You may now disconnect.