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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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 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. 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 as the date of this call, and actual results could differ materially. Additionally, during today's conference call will 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 and so similar business and require 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 safe out there remaining masked in strain is 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 3, 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 AssetMark highlighted by strong operating and financial results. Second AssetMark 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 4, our mission is to make 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 quarter, I'm sorry, the best year in terms of delivering strong operating and financial results.
In 2020, we added $12.9 billion dollars in assets, 306 engaged advisors and over 24,000 households to our platform. We attracted 743 new producing advisors, who saw the value outsourcing to have some more. In 2020 net flows were strong and help drive platform assets to $74.5 billion at the end of the year, the highest in our company's history.
These strong operating results translated to strong financial results. We still grew despite the industry headwind of losing $15.7 million and net spread-based revenue for the full year and $6 million and asset-based revenue due to moving all our opening third-party mutual fund strategies to lower cost share class.
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 $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, we're 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 advisers 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 through now look to loan to try and make sense of the volatile equity markets, navigate the pandemic and figure out how to service their clients and prospects for new clients under shelter-in-place orders. Instead they had to AssetMark by their side, every step of the way.
Prior to the pandemic us to really study found that advisor spent 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 Wright 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 back line of credit or as block program which gives AssetMark Trust Company clients faster access to low interest rate liquidity supported by digital and streamlined securities-back lending. And 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've 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 complementary of AssetMark. I want to start by thanking our advisors for continuing to trust AssetMark to help them grow their businesses. We continued 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 continue to scale our sales organization and drove unit cost lower by 10%.
Finally, I would be remiss not to mention the people who make AssetMark great. Over 725 associate 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 rally to face 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 Page 5 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 events Gold Forum, which will be conducted of course, virtually. We are excited to be able to spend three days engaging with our best clients to 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 the 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 while our clients with their focus and customer obsession. The new business seems 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 6. 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 our RIAs and hybrid RIAs made a 15.8% of the production on our platform, up from 10.9% in 2018. 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 our AMI to support these advisors.
So let's take a look at Slide 7. While AssetMark Institutional will offer best-in-class service and access to AssetMark'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, the 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.
Thank you, Charles, and good afternoon to all those on the call.
As Charles discussed, we are very pleased with our results for the fourth quarter and full year highlighted by a great organic growth, strong earnings and our best margin and revenue since going public. As usual, I will start with a discussion of our platform assets and then talk about our revenue, our expenses and then our earnings.
Starting on Slide 8. Fourth quarter platform assets were a record $74.5 billion up 21% year-over-year. This growth was driven by fourth quarter net flows of $1.5 billion, $5.7 billion from the market gain net of fees. The improvement in our net flows quarter-over-quarter is driven by increase production while redemption rates have remained relatively stable. In December we realize the highest monthly production in our Company's history.
For the full year, net flows of $5.5 million or 8.9% of our beginning of year platform assets in line in our target of 8% to 10%. Our net flows and increase each in the past three quarters as a result of our ability to efficiently and effectively transition from in-person events to virtual event while continuing to provide high level of service and our advisors of - in AssetMark.
Turning to Slide 9. As we discussed last quarter, we continue to see excellent growth in our business excluding recent acquisitions. This trend continued in the fourth quarter to the full year 2020 these core net flows as a percentage of our beginning in period assets were 10.3% above our stated target of 8% to 10%.
Strong net flows in the fourth quarter from strong market in December resulting in record platform assets to $74.5 billion. It gives us great momentum as we enter the New Year. We expect our first quarter revenue to be up about 8% quarter-over-quarter. Additionally, we expect organic growth to continue to be strong in the first quarter based on advisor activity metrics and our January net flows of approximately $500 million as disclosed yesterday in our January AMK report.
While our core business growth is strong, we may continue to see outflows in first quarter from our acquisition of GFPC and OBS. As previously discussed, these outflows from advisors who have not engaged with AssetMark. Both deals continue to remain highly accretive to AssetMark and these outflows do not have a material impact on our economics. As you know in the past, we will be shared, disclose these items in our monthly AMK report to give investors an understanding of our core business is performing.
Turning to our Advisor metrics for our entire business we added 177 NPAs in the fourth quarter 2020. Our total advisor base at the end of the fourth quarter with a little more than 8,450 advisors of which 2,536 were defined as engaged advisors. Engaged advisors are up 13.7% year-over-year and now account for 90% of the total asset on our platform.
Now let's turn to Slide 10 to discuss this quarter's revenue. Entering the fourth quarter, our assets were at $67.3 billion meaning to reported revenue of $110.9 million. This reflects a strong increase in our asset-based revenue offset by the decline in spread-based revenue due to last year's rate decline. These both comes on our revenue, net of related variable expenses, the fourth quarter of 2020, our net revenues, $76.2 million was down 0.9% year-over-year. Asset-based net revenue was up 7.7% or $5.3 million year-over-year to $73.7 million.
We call this reflects our mid 2020 shift to lower cost mutual funds, which resulted in a reduction of revenue, one out $3 million a quarter. So absent that one time product share, our asset base revenue growth - little bit about 12%. Spread-based revenues down of course materially at 73% year-over-year due to the aforementioned decline in interest rate.
Now let's turn to Slide 11 to more fully discuss the drivers of the change in net yield year-over-year. As the waterfall shows revenue was relatively flat year-over-year with the increase in asset-based revenue offset by the decline in spread-based revenue.
Our waterfall switch the impact on our asset growth, which generate $8.9 million in additional revenue and the impact of the compression of net revenue yield, which reduced revenue by $3.7 million. On this $3.7 million impact, about $3 million was due to the shift to lower cost mutual funds with the remaining impact due to fee compression and fee waivers. It is important to note that year-over-year fee compression impact was about a half of a basis point marginally better than the 1 basis point we expect each year.
Moving to spread-based revenue it decreased $5.3 million year-over-year driven by yield decline from 1.65% to 0.31%. Lastly, other income decreased $700,000 or 4.5 basis point driven by interest related income, overall net revenue as a percentage on total platform assets in the fourth quarter with 45 basis points, down 1 basis point quarter-over-quarter and down 8 basis points in 2019.
The bottom of Slide 11 - the year-over-year decline in yield as it shows 3.5 basis points driven by the asset-based revenue. Now this about 3 basis points during the shift to lower cost mutual funds. The decline in spread-revenue resulted in a decline of 3.8 basis points on our total yield. Clarity and transparency the calculation of our annualized revenue yield net variable expenses, they show on Slide 16 in the appendix of our earnings presentation.
Now let's discuss expenses is shown on Slide 12, total adjusted expenses decreased 2.5% year-over-year to $84.2 million. Our operating expenses, which include compensation, SG&A declined 6.8% for the year. This is driven by a 6.9% year-over-year decline in employee compensation and a 6.5% decline in SG&A.
We feel great about our efforts to hold the line on our operating costs in 2020. Let me run through our expense adjustments now. In the fourth quarter, we added back a total $25.7 million pretax, which is comprised of five items. First $13.8 million of non-cash share-based compensation. Second $5.1 million of amortization expense related to our 2016 sales, third $2.3 million in acquisition-related expenses associated with our acquisition of GFPC and OBS.
Fourth $2.8 million related primarily to internal reorganization and integration costs. And lastly $1.7 million in write-off costs associated with our year-end debt refinancing, we shall discuss more in a moment. For additional color an adjusted expense reconciliation table, our income statement line item can be found on Slide 17 in the appendix in our earnings presentation.
Now let's turn to Slide 13 to discuss our earnings for the quarter. We view adjusted EBITDA as an important measure of our company. Our fourth quarter of 2020 adjusted EBITDA was $32 million, up 9.2% year-over-year. Adjusted EBITDA margin in the quarter was 28.9%, our best quarter we have reported.
The full year, our adjusted EBITDA margin was up almost 26.6% up from 26.3% in 2019. This improvement in margin year-over-year despite the decline in spread-based income is a testament to our management fee and management teams ability to focus on expense management are still investing in future growth.
Our adjusted net income for the quarter was I'm sorry $22.2 million or $0.31 per share. This is based on our fourth quarter diluted share count of $72.3 million. The margin year-over-year increase for the result of the high adjusted EBITDA of $2.7 million, lower taxes of $0.4 million and lower interest expense of $0.4 million, offset by higher depreciation of $1 million. Our marginal tax rate is 25% for the year and 25.2% for the quarter.
We have worked hard for the year to create cash efficiency and our adjusted net income now reflects the benefit of our current year recognized research and development tax credits of about $800,000. This translates into an adjusted effective tax rate of 23.5% we applied this adjusted effective tax rate of 23.5% to our adjusted net income reflecting the gain in the fourth quarter of $2.4 million of which $1.7 million is a catch-up from the first three quarters of the year. We plan to use this rate of 23.5% in 2021 and will true up to the actual rate at year-end as always. For additional color please see Slide 18 in the appendix.
Now let's look at reported fourth quarter balance sheet. Our balance sheet strength and flexibility, position us well to support our strategic objective to grow at scale. This prior to year-end on December 30, we secured a new $250 million revolving credit facility.
At that time we drew down $75 million on the new credit facility and - done plus cash on our balance sheet to retire our $124 million existing term loan. In addition to expanding our available cash by $100 million, interest cost on the new facility will be LIBOR plus 2%, which is one percentage point less in our all facilities. On a run rate basis this will save us $1.6 million pretax annually in total interest costs.
Following the refinancing, we ended the year with $70.6 million of cash on our balance sheet, compared to $109.3 million at the end of the third quarter '20. Let's discuss our capital expenditures in our business. For the fourth quarter, our capital spend of $8 million or 7.2% of total revenue, as discussed last quarter in 2021. We are expecting our capital expenditures to be about 7% of our total revenue as we continued to invest in the future of our business. Now I will discuss our expectations for 2021.
Let's turn to Slide 14. Our growth expectations for the year reflect the positive momentum that we have been talking about on this call, still, we are cautious. There are a lot of variables. I think the pandemic, the market new administration that could impact our results. Our financial model starts in the asset growth and reiterating our past comments we have set our organic growth to be 8% to 10%, certainly modest market lift, we expect our assets to grow between 11.5% and 13.5% for 2021.
We then step down net revenue growth to be in the mid to high-teen, this is driven by entering the year with strong asset level while assuming about 1 basis point of fee compression that we often mention as our regular expectation. For this forecast is our expectation, the interest rates will not increase in 2021 and we will see a modest growth in spread-based revenue due to higher cash levels as platform assets increased. We expect our operating expenses, which consist of compensation and SG&A to increase mid teens during due to increased investment in 2021.
Now we break down this initial investment in three rough buckets, volume growth, near-term investments and longer-term investment. Understanding these three types of expense growth help give context from the flexibility we have to adjust this spend increase, if circumstances warrant. First, approximately 3% to 4% of our operating expense growth is volume related. As we grow, we need to add more staff and capabilities in our operations and services business to support this growth.
Second, our near-term investments, which contribute 45% of the growth. Here we're spending on our new AssetMark Institutional initiative, some new product development and productivity investment. And third is additional lessons for even longer-term growth, which makes up about 45% of the expense growth. These investments into digital lead generation, transitioning services and outsourcing will help prepare AssetMark for growth in 2022 and beyond.
And always will be focused on realizing improved margin on our revenue. So we expect our adjusted EBITDA to be up about 15% to 25% year-over-year. Based on the growth outlook we have laid out, we expect margin expansion of around 100 basis for the year much higher than the - in the 75 basis point goal, we have target in previous year.
With that, I'll hand it over to Charles for his concluding remarks.
Thank you, Gary. And thanks to everybody on the call today.
As Gary and I described, we believe 2020 was a great year for AssetMark, our advisors especially and delivered by our associate. I have never had mean I have never been more excited about our company's future. I look forward to sharing our progress in subsequent earning calls and future conferences.
So with that, those are - the conclusion of our prepared remarks, I'll turn it back to the operator for Q&A.
[Operator Instructions] Presenters, we have our first question from the line of Alex Blostein from Goldman Sachs. Your line is open. You may ask your question.
This is actually Ryan on behalf Alex. First one, if you could talk a little bit about AMP and I guess only adoption and the trends that you're seeing there and then how you're thinking about competition in the space, I think probably seen other tend to start to open up and just how you're thinking about that?
Ryan, Happy New Year, hope you're doing well. So AMP is Advisor-Managed Portfolios for those of you who don't know that's a product name where we're going to be providing a trading capability to allow advisors to build and manage their own sleeves. This is key for RIAs and hybrid RIAs who want to manage part of the portfolios themselves, see value in that, have sold at value but also and very importantly, understand the value of outsourcing overtime.
The key there is those advisors that are overwhelmed with technology or overwhelmed - or trying to grow their business and really help their clients plan for the future. Those are the types of advisors that we're looking for. And we believe that through the folks that we've had in the product that first of all, the product works really well.
We've had folks in beta test for some time and we're thrilled with the results there. But we believe through our research and through our early discussions out in the marketplace that we're going to see good growth, good growth, and we're excited about that launch.
The AMI launch, the brand wrapper that I just talked about there is being more formally launched in a couple of weeks at our Gold Forum event. We're going to talk more publicly about the brand and the experience and some of the other products that are going to go along with it.
In terms of competition, Ryan it's interesting if you think about where advisors are today, RIAs are buy and large, I mean the vast majority close to probably 99% managing money themselves. The core RIA approach has always been to do the due-diligence, to construct portfolios, to buy portfolio accounting, trading, CRM and planning software to gobble all that stuff together and to really do everything for their advisors.
The sea change that we're seeing in the industry is that starting with the investor, the investors looking, not for those things but they're looking for planning and deep relationships. And so all that work on the back office and all that work of trying to do due diligence and everything else on everything is really not value added from the investors perspective.
So our belief in our bet is that advisors are going to say, hey, I want to outsource more and I want transition using the amp capability. When we look at competition, I'm not quite sure how to think of it right there is no one doing what we're doing keeping the exact same approach but there is lots of ways that advisors can manage their own sleeves, every custodian has that offer, every portfolio accounting system does that trade over management does that.
So really what the opportunity here is to move toward outsourcing and the move towards partnering and getting an integrated experience and back office and getting much more capability, much more community and that's where we think the opportunity is going to be for AssetMark.
Maybe kind of sticking with the RIA discussion, I think you had said that pure RIAs on passing on platform and growing to 100% in OpEx since 2018. I guess, is that kind of they had grown that platform - I guess the question is, have they grown assets on the platform or they had grown that books, because they were previously under resourced and being part of the AssetMark platform and sort of taken or beliefs a lot of the processes that they had to go through and giving them more time.
So it's a function of the way we grow. So the existing advisors on our platform are growing because they are bringing more assets to AssetMark. Some of that is a function of them using our high net worth capabilities, rather capabilities to gather new clients. Some of it is share of wallet growth and then of course new RIAs, new producing advisors, we call them joining the platform. So it's all of the above.
Got it.
Ryan, this is Gary. Just to be clear, it was production that has doubled over the two-year period, not AUM and doesn't change and all that the Charles is saying - the same reasons why it's growing, I just want to make sure you have current metric.
Thank you, sir. We do have another question from the line of Michael Young from Truist Securities. Your line is open. You may ask your question.
Wanted to maybe drill in a little more into the growth outlook for 2021, I know obviously the macro overlay is a bit challenging, but just as you look at sort of disaggregating that, how much are you expecting to comp from kind of the RIA and RIA adjacency versus kind of the core legacy business?
Gary, you want to do that one,
Sure. I think - so first Michael, congratulations, I understand a baby is quite imminent. So the best of luck with that and sounds very exciting. So to your question, I'm trying to figure how to how to put it. So I'm trying to convert gross stake in the production here what I'm saying. I would say in general, a growing percentage of our growth if you will, growing percentage of that 8% to 9% organic growth is coming from the RIA block now.
The majority of our growth still comes from IBD rent that's our core constituency and who we serve. I don't have a breakout for you in terms of how to fit it, other than to say we are focused on growing and as we talk more in detail in the upcoming quarters about AMI, when Charles is talking about we will start talking in more, some more metrics about what's coming from that group which is RIA subset versus what you might call that the larger IBD metric.
Gary, I would just add to that a little bit that, when we talk about the RIA segment, the hybrid segment, the IBD segment, everyone uses those terms because there some differences I guess that are important to think about and certainly the language and the communities are different, segments has some different growth dynamics.
But what we would expect to see is fluidity as more people go more toward independent as people join producer groups or OSJ groups that are hybrid. We'd expect to see fluidity by registration. Today, our assets are about 15% hybrid or RIA - wholly RIAs that combination. The production numbers I gave a few minutes ago. What I would expect to see as we launch into this endeavor with amp, which is an AMI, which is new for us, allowing advisers to do that work on their own, on our platform.
We'll see what that growth rate looks like and how quickly that growth rate is. I think right now, when we look at our 8% to 10%. It's really looking at the base of our advisors. It's looking across registration. It's looking at kind of the history that we've had, how big the beginning year it's obviously ratio rates at the beginning of year number is, it's how long does COVID last I mean there are so many dimensions in there that are going to drive that performance way more than registration.
So there is not some hockey stick, RIA growth in that number. It's really based on the kind of history that we've been able to deliver. And what we've been able to deliver in this tough macro environment.
Yes understood. So the core message is just more optimism kind of on a year-over-year basis organically and we'll see if we look at the high end, low end of that range based on macro and various adoption characteristics?
Totally right. So we're not, we're not forecasting some kind of weird number right, we did 8.9% in 2020 to a 10 If you just look at the core business without some of the M&A stuff noise in there. And this year 2021 obviously with a fantastic fourth quarter in December, market resulted and December was toward market environment, the beginning period asset number is really high at $74.5 billion because of market return. So to get that 10%. The higher end, it's somewhat a function of that. Right.
So to get to the higher end what we're going to have is outstanding performance within our core market, you saw our January results, very strong. And then what we're doing in new markets RIA and hybrid and then of course, new products and new capabilities being added all to support to get to that 8 to 10 number and we think that's a very good result.
Okay. And just maybe as a second question just on the EBITDA outlook, I mean I think that's very strong and looks very positive. I'm just curious if there is some maybe lessons learned or new business implementation strategies that you've kind of discovered through the pandemic and operating in a work from home environment domestic that's helping support some of that?
Yes, it's a great, great question. I think every executive. I want to say, every industry, but I'll certainly see Financial Services has learned a lot about operating in different environment. So first of all, we've all figured out that we can travel less and be much more productive. Now that doesn't mean we want to travel. Not at all. Right. We want to be back out in the field, we will live events, but we've learned that we can be much more productive than we thought, by not having to drive around and all the rest of it as much and that's going to stick forever.
I think another thing that we've learned is that in events and we are a very event in contact based company clients like getting certain kinds of content remotely. So if it's investment content or things that they are trying to digest, but don't really require community engagement - discussion with other advisors kind of closer work. It's a much better way to deliver it we assume it just works really well. So I mentioned earlier, our premier advisor meetings the - meetings that we had in the first quarter here. We can do that content in much shorter time and if you live in - from Los Angeles can grew up.
If you have to drive 30 miles from Los Angeles, you're talking about an hour and half probably in the car each way. And so for delivering investment return content that kind of thing. It's really easy to digest this way. And so one of the things that will stick is will deliver much more content that way we will do a much more regular smaller group content and community that way. And then when we're out of the field, it will be much more about interaction and I think that will stick. And that, by the way is much lower cost.
The other thing I want to just mention one more but that we've learned is that we can recruit attract and recruit and hire people that are remote and that are happy living where their living have great experience or great cultural fit. I mean, that also is a big productivity enhancer may not be a cost per person in enhancer, but you get highly trained great people.
I mean you're not constrained by the geographies in which we live, so there is a lot of changes that are occurring because of COVID, COVID obviously a disaster or a nightmare but there is a lot of learning there that I think it's going to make our business better and as well as many others.
Our next question comes from the line of Christopher Shutler from William Blair. Your line is open.
Charles, looking out over the medium term, what are the main technology items that you want to invest in, especially as you move more into the RIA world?
Thanks Chris. Good to talk to you, sir. So you mean advisor facing not back office and all that subject?
Exactly, yes.
Yes, so the theme the thematic approach is financial wellness and I know we've talked about it, but our view of financial wellness is really three elements to it, one element is planning and the visualization of planning. We've launched partnerships with some of the major planning firms. We believe that incorporating planning whether it's Monte Carlo deep cash flow planning, a scenario planning, or more importantly the visualization on to one page a simple visual view of the investors like their goals, the risk, the likelihood of meeting that success integrating that experience into e-wealth manager and into the entire advisor compensation is job number one.
Job number two, which is somewhat broader, it's more complicated than the other. But the way we deal with risk in our industry as we basically ask people what your risk tolerance. Can you take a 20% drawdown of what period of time? You know the story six-eight questions, but that's not the way human beings think about risk and about portfolio, there's really three concepts that we need to think about.
One is that your risk tolerance. The other two are risk needed and risk capacity. So tying back to that visualization of planning of that sort of one-page, here's my life or what's my risk need. How much risk to a need to take? Maybe I need to take a lot less or maybe I need to take a lot more and then of course there's capacity, if I'm 20 years old Google employee making $200,000 a year, my capacity to take risk may be huge, my need maybe large, because I want to have an airplane. But my tolerance may be low.
And if you think about the way that interaction works in the visualization of that dialog and then of course the compliance issues, integrating that experience into e-wealth manager to make that conversation automated is the second part of wellness for us.
And then the third part is portfolio construction and proposal and you've heard me and us talk a lot about portfolio engine, our portfolio construction tools and you've heard about our new proposals and integrated other elements of proposals and visualization of income and all these other things. So if you think about financial wellness in the individual tools in there, that's where we're investing from an advisor facing technology perspective and it's going to be a multiyear investment.
Got it. Okay, super helpful. And then can you give us an update on capital allocation, how actively you are looking at M&A right now. And let me just remind us what's most interesting to you, is it more capability types of deals or consolidating deals.
Yes, happy to do that. So we remain very focused on M&A, we connect me personally, some of our key team members are ahead of Corporate Development. We are connected across the industry and we love seeing deal flow, I think we have great relationships and get to see a lot of deal flow. Our strategy is pretty straightforward it has two - strategy, number one. By the way number one is not more important than number two but just saying in that order. Number one is consolidation, the deals that we've done have all been consolidation deals, those deals aren't as prevalent as they once were.
There is still quite a few smaller players out there, if we think will move the needle. If we think they can be accretive, if you look at the ones we've done recently, we were able to buy them for very, very attractive multiples for our investors. And on the other side of it there is relatively small and the relatively complicated deals.
And so, we'll keep looking at those is always a trade-off between what do you have to pay and how complicated is it to get it done and does it move the needle. But that's consolidation on the capabilities side, we are spending a lot of time and effort there, if you heard my description and you do Chris financial wellness. You can imagine the suite of tools that are out there - that are either tools are businesses that do some of those things and how they might integrated into our platform.
We look at all that thing across the entire kind of wealth landscape. And as you know, deals are sooner difference to get them done, they're all competitive and multiples are nose bleed on the capabilities side. So will be disciplined, but we will look at a lot of things on that capability side and hopefully get something done.
Thank you, sir. We do have another question from the line of Patrick O'Shaughnessy from Raymond James. Your line is open.
So we continue to see a lot of consolidation in the independent broker-dealer and RIA space and it seems like it's even picking up of late. Can you talk about what that means for AssetMark and does it make things harder for you to increase opportunity or is it kind of irrelevant.
Patrick, good to hear your voice, so consolidation and is one of the major trends we I'm pretty sure one of the calls, we talked about investor trends, advisor trends, industry trends and regulatory trends. Those four big trends are the ones we're watching and consolidation across financial services either a fine growth or to drive lower cost scale our major, major competitive environmental issues that we're paying attention to.
On the RIA side it doesn't matter, the number of deals that are actually happening are low. So if you RIA consolidator obviously matters a lot to. But for us there, there is 300,000 advisors, there is 16,000, 18,000 RIAs something like that. There's just a lot and there is a lot of sub-scale RIAs out there, there is a lot of these groups of hybrids that we call producer groups some people on OSJ groups, but these produce groups is a lot of those are there form, and those are big opportunities for us.
And so we're excited about what we see there. On the broker-dealer side, it's interesting, it's both opportunity and threat, like I guess many things in life. On the opportunity side as these broker dealers get larger and larger the community, the connective tissue for many advisors isn't there anymore. And they seek that connective tissue and we are able to provide that very high level like - experience that is just hard to do, hard to do a scale and most others don't do it.
And so that's an opportunity for us. In addition, as some of these broker-dealers come together, we're actually quite excited about partnering and helping those broker-dealers find ways to help - move advisors from commission to fee from managing their own money to outsourcing and while most broker dealers on the larger side, the consolidated ones would prefer them on their own platform. They also recognize that there independent advisors for a reason. And having a scaled provider that does really good work and supports and wants to be a partner is very helpful. So those are all real opportunities for us.
On the threat side with anything else as these folks get larger and larger there of course investing in capabilities, because they want to grow and they want to find revenue sources in a world where they've got killed on spread, they've gotten killed on product internal revenue sharing the grid is tougher and tougher.
So adding capabilities TAMP type capabilities is something a larger firm might like to do and so that makes them better makes and more competitive in that, of course, I am a last three quarters full guy, believes to make us better because we've got to get better to win, and so that threat of investment is there.
The other opportunity, I would say, related to that is, you're seeing this bifurcation or multi-model set of broker-dealers out there were many don't have the money to invest to build their own platform to bring in outside technology to do that and we see a real opportunity, particularly, we're adding things like and - other capabilities to be that provider for some of these other broker dealers, we think that's a real opportunity. So, Patrick, like all things, right. We see the world is full of opportunity big TAMP, great growth dynamics, but increasingly competitive to make us better as well.
Yes, appreciate that insight. And then, as we're thinking about your portion two or RIA space with a little bit more gusto here, can you talk a little bit more about how the need to RIAs differ from the needs of independent broker-dealers and what different functionality, that's going to require from your platform.
Yes. So when you say independent broker deal, assuming that the advisor. Right?
Correct.
Independent broker revenue. So at the highest level the difference is or not, are not much, right, so most IBD reps that are advisors right that are there, is there are not on commission. Right. So let's say, okay, there's many that are still on commission has many that are still selling the life insurance. That's a big difference. Right? But for those advisors that are fee-based and are really thinking about advisory, managing their own [indiscernible] in the IBD world, RIA in the - world construction mutual fund portfolios. There's not really much difference.
The RIA has much less support then the IBD because the IBD itself, the broker-dealer is providing many more platform services and compliance, where the RIAs do everything. And so while at the highest level, that the sort of I'm helping client - time a plan or I'm doing it with fee-based approach, those are the same, the RIA has very little support and help.
And so we believe that the opportunity to bring that support and help to bring more outsourcing tools, more practice management, more community. All those things are going to create real opportunity. We actually think the needy greater there. Although the history of who is outsourcing, who has not as been different, so that's the biggest difference.
The other thing I would just add is that for an IBD Wrap they can use their own platform at the broker-dealer to trade staff if they want to do it and then outsource to us for our capabilities of the share of all discussion. For most RIAs, they are trading custodian and using their own tools, to sell or buying, trade order management and we don't - for most of them to say, hey, start using a platform like ours for your high net worth, it's just not in their mindset to do that.
Their mindset is much more about how do I bring my book there, how do I make my life easier completely and so amp is what we believe the Advisor-Managed Portfolio allowing them to manage the fleet is really critical, really critical time for the way that advisor thinks about value added.
Thank you, sir. We do have another question from the line of [indiscernible] from JPMorgan. Your line is open. You may ask your question.
Often times financial services can have a number of conflicts of interest and these conflicts of interest can vary pretty significantly depending on the firm as an example. It seems like an advisor solution using products affiliated asset management arm could create a comfort that would file disclosure. Can you help us understand the most significant conflicts of interest at AssetMark and how do you think about the framework to address and mitigate these conflicts of interest.
So let me give a little bit of structure in that answer first, and then try to dig in a little bit. So at AssetMark our relationship with the advisor is one of them - we're a service provider, so we don't supervise the advisor, we're not - the advisors not affiliated with us in any way. The advisor is choosing us hiring and firing us based on the competency of our solutions and the quality of our work.
So there is not a, like a natural conflict of interest, like if I'm affiliate with a broker-dealer and the broker-dealer making money in the products and therefore somehow I'm making money on the product even if I'm not getting that trail, that's a conflict of interest that you're describing. For us, we don't have that right, because the advisors charging their fee, we're charging our fee and there are fully disclosed the client, and they are completely different. We're not paying or doing anything like that.
So, there isn't that conflict of interest. Where we see conflict starts it with our field force. What we would hate to have is a field force that is incented by product revenues. So we pay our field force as our consultants in the field as a percent to goal. And so they have asset base goals and they don't care if it's something we make money on, lose money on, make a lot of money, they don't care. They are focused on the advisor and they are on the advisor side of the table.
So we try to avoid any conflict there. Obviously in our mutual fund family and all that stuff there all the mutual fund rules and everything, and we do I think a very good job of avoiding that conflict as well. So, Gary, I don't know if you'd add anything to that but I think. I think the very fundamental structure of our relationships are very helpful in that.
Yes, I just echo your point that our position in the value chain and our structured being the outsource provider does eliminate a lot of the things you would hear about because again we, I guess a service provider and also you're absolutely right Charles, we pay our sales folks percent the goal, regardless of the assets are coming, and we do learn, customers does earn different amount based on different types of products, some of them, we make some new our third party vehicles and whatnot. So that's a reality. But we're not directing anything there, since we feel great about that center.
And then Charles, I want to go back to a comment you made, I think in response to Patrick's question about selling the AssetMark platform to broker dealers that are potentially sub-scale. Is that initiative that's currently underway and we could see the fruits of that near term or is that a longer term potential options for your business.
I'd say, more of the latter, will - we have a strategic accounts team that we've had for many years that are very focused on broker dealers that their full job, full time job. We've brought in a new leader of that group say six months ago - could have been three, could have been nine months ago, and he has got a great history in this space and if he is thinking through the strategy there and as we're thinking through opportunities what we're seeing with this consolidation back to that question about the IBDs is kind of a - as I said a bimodal or at least, at least two maybe four different kinds of broker-dealers out there, the big ones certainly can afford to invest, the small ones certainly cannot.
And so the question really is, what's the value proposition of those smaller ones do they need more closer partnerships or can they kind of go on the way they have been going on just kind of offering, a lot of different things and we think that that's changing and that they're going to need more value added, and they're going to need to partner to do it. And while we don't sell instances of AssetMark like competitors that are selling to the broker-dealers and instance going technology it would still be AssetMark as AssetMark is but it would be a closer alignment.
And so we're not at a place where I would say you're going to see some kind of big hockey stick return this year, but we do think that trend and when I was answering that to Patrick's point, it was really more about trending in the industry and sort of what's going to, we see that as an opportunity.
[Operator Instructions] There are no further questions from the line presenters. You may continue.
Great, so thanks, great questions as usual, hope everybody got what they need from the call today. We really appreciate your time, your engagement, and we're excited to spend this time. So we'll talk to you all soon. Thank you.
Bye-bye.
Thank you, presenters. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you for participating. You have a good day.