© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
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 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. Today's call is being recorded. Now I'd like to turn the call over to Taylor Hamilton, Head of Investor Relations. Please go ahead Mr. Hamilton.
Thank you, Austin. Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2021 earnings conference call. Joining me today are AssetMark's Chief Executive Officer, Natalie Wolfsen; and Chief Financial Officer, Gary Zyla. Today they will discuss the results for the fourth quarter to provide an update to AssetMark's business outlook for 2022. Following our introductory remarks, we'll open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at ir.assetmark.com. Before we get started, I'd like to note that certain statements made during this conference call are forward-looking statements. These forward-looking statements represent our outlook only as of the date of this call and actual results could differ materially. Additionally, during today's conference call we'll be discussing net revenue, adjusted EBITDA, adjusted EBITDA margin and adjusted net income, all of which are non-GAAP financial metrics. Please refer to our earnings press release and SEC filings for more information on forward-looking statements, risk factors associated with our business and required disclosures related to non-GAAP financial information. With that, I'll turn the call over to my colleagues. Natalie, take it away.
Thank you so much, Taylor. Hello, everyone, and welcome to our fourth quarter earnings call. We are a few weeks away from my one-year anniversary as CEO and what an amazing year it has been at AssetMark. Before we begin our prepared remarks, I would like to start by thanking our 8,600 advisers and 850-plus teammates. 2021 was a record year and it would not have been possible without the loyalty of our advisers and the dedication and skill of our team. I also want to thank our analysts and investors for their continued support of AssetMark. Starting on slide three, platform assets ended the year at a record $93.5 billion, driven by record quarterly net flows of $2.9 billion, which included our first $1 billion month of net flows in December. For the year, our net flows as a percentage of beginning period platform assets were 13.3%. Households and engaged advisers were both up double digits for the year and ended the year at all-time highs. We also experienced record results for both top and bottom line financial metrics. Full year net revenue was up a little less than 28% year-over-year to $378 million. Adjusted EBITDA in 2021 was up more than 36% to $157 million and adjusted net income was up more than 41% to $103 million. And we continue to scale the business as evidenced by our ability to expand adjusted EBITDA margin a robust 300 basis points in 2021. Turning to slide four. Our record results are a direct outcome of the value we bring to our advisers and their clients. For more than 25 years, we stood behind thousands of independent financial advisers and provided them with everything they need to serve their clients and run their businesses. By redefining the adviser experience, AssetMark is also redefining what it means to be a modern TAMP. Our singular focus is bringing unmatched value to independent financial advisers and their clients. We recognize that independence is sacred and we champion it. The independent advisers we serve are objective, unbiased and singularly focused on helping their clients reach their financial goals. When advisers work with AssetMark they have a trusted ally. We are an extension of their team and they are part of the community of thousands of like-minded advisers. As we redefine what it means to be a modern TAMP, we're focused on five key areas. I'll now discuss the 2021 progress we've made in each. The first component of our growth strategy on slide 5 is to meet advisers where they are, catering to a variety of affiliations, new growth-oriented or mature advisers. In March of 2021, we launched AssetMark Institutional. Since launched, AssetMark Institutional has gained a lot of momentum. Just as we have done with our broker-dealer affiliated advisers, we're building a community of like-minded RIAs, who see the value in outsourcing to AssetMark, because of our efforts and the value of our offering, we saw 49 new RIA firms join AssetMark in 2021 with current platform assets averaging $34 million during the first year of transition. In addition RIA platform assets now account for a little over $20 billion of assets on our platform and RIAs made up 20% of total production in 2021. In 2022, we'll be focused on continuing to build out this offering. Turning to slide 6. 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 and very importantly saving advisers' time and resources. In 2021, we took a huge step forward in building out our financial wellness offering, with the acquisition of Voyant. We are pleased with Voyant's year one results, and want to highlight three key areas of their success. First, let's focus on technology. In 2021 Voyant maintained exceptional approval ratings from users upgraded numerous integrations and added dozens of new features. As a result, Voyant was a 5-star winner of FTAdviser's Service Award and was also voted the Best Non-Research Software for Paraplanners by readers of the UK's Professional Paraplanner. Second is growth and expansion. In 2021, Voyant Australia was launched bringing Voyant financial planning tools and technology to Australia's community of 20,000 financial advisers. Voyant also began its entry into the US market through its acquisition by AssetMark. In August, we gave AssetMark's top advisers a free trial of Voyant and feedback has been extremely positive. In 2021, Voyant's number of adviser and paraplanner licenses increased by approximately 10% year-over-year. Lastly, is Voyant's integration into AssetMark. We integrated Voyant's financial planning capabilities into eWealthManager and also built Income Planner, a retirement income planning proposal technology, which is powered by Voyant. We are pleased with the advancement we have made in our financial wellness offering and are focused on continuing to build it out in 2022, and we look forward to telling you more as the year progresses. The third component of our growth strategy is to enable advisers to serve more investors across the wealth spectrum, varying stages of life and generation. Now, let's turn to slide 7. In 2021, we did a tremendous job of enhancing our platform, enabling advisers to serve investors. We did this by adding new products features and tools to our platform. And through this, we were able to capture more share of wallet from our existing advisers as well as attract new advisers. In total, new products have added $8.5 billion of assets on our platform on a rolling 36-month basis. For our advisers' wealthiest clients we added a host of new solutions such as alternative investments through iCapital, as well as a suite of separately managed accounts. This past quarter, we made enhancements to our tax loss harvesting capability, which will improve the client experience. For mass affluent and emerging affluent advisers, we've expanded our Savos Personal Portfolios to include new suites. As a reminder, these portfolios offer features that are usually found in high-net-worth solutions at an accessible investment minimum. Lastly, we added pooled employer plans to help our advisers serve the retirement needs of small business owners. We are continually focused on building out our platform to enable advisers to serve more investors, and I look forward to discussing these new additions to our platform in upcoming earnings calls. The fourth component of our strategy as seen on slide 8 is to help advisers grow and scale their businesses by offering turnkey adviser solutions and programs. Last quarter I discussed our business consulting offer, which is a huge competitive advantage for AssetMark. In 2021, our business consulting team served over $26 billion of platform assets, a 33% increase in 2020. Additionally they launched and supported over 20 new adviser benefits, one of which I want to discuss with you in more detail today. In the fourth quarter, we soft launched Marketing Advantage, Assetmark's marketing outsourcing program. Having a defined and executable marketing strategy has never been more important for advisers. In fact in a 2021 Broadridge Financial Advisor marketing survey, it was found that only 26% of financial advisers have a defined market strategy -- marketing strategy, yet those that did have a strategy onboarded more than twice as many clients over the last 12 months as those who didn't. Marketing Advantage our response to this adviser need is a suite of marketing tools and resources designed to enhance an adviser's brand, deepen client relationships and attract new business. Over 100 advisers have used Marketing Advantage during the soft launch period alone and we just announced a full launch two weeks ago. Turning to slide 9. The final component of our growth strategy is to pursue strategic transactions by adding capabilities and assets that improve advisers' ability to serve investors and expand their business. In 2021, our M&A growth strategy was highlighted by our acquisition of Voyant, which closed in July. As I have mentioned in previous earnings calls, we are more deliberately focused on M&A than we've ever been before. To that extent, last month we announced a new $500 million five-year credit facility. We're very excited about the opportunity to significantly increase our access to capital and reduce our ongoing borrowing rate. We remain well-positioned to execute on M&A with approximately $425 million in purchasing power while continuing as always to be a disciplined buyer. Lastly, we would be remiss if we didn't provide some commentary about the current macro environment and how that impacts AssetMark. Later in the call Gary will discuss the impact of interest rates on our spread-based revenue. Right now, I’d like to take a moment to briefly provide some thoughts about talent. Talent acquisition and retention have never been more crucial. Our strategy has two components to address this need. First and most importantly is ensuring that AssetMark is a place where talented individuals want to work. We added more than 150 new team members in 2021 and received high marks in our annual employee engagement survey related to diversity, creating high impact work, work satisfaction and teamwork. We need to continue to make strides against all these measures so that the best of the talent -- the best of talent wants to work at AssetMark. The second component of our strategy is appropriate compensation. To that end, at the end of last year we gave each team member a onetime year-end bonus. We funded our variable incentive compensation at a high level. And in early 2022 we will increase salaries across the board. All of these changes have been accounted for in our current plan, which Gary will go through in a few minutes. We believe that creating a workplace that embodies our values of heart integrity respect and excellence along with having a robust learning and development program and compensating team members appropriately will help us attract and retain the best talent. In closing, 2021 was a record year for AssetMark. Platform assets grew to over $93 billion. We serve more advisers and investor households than ever before all while achieving the highest Net Promoter Score in our company's history. We realized double-digit growth for top and bottom line financials and expanded margins by 300 basis points. We expanded into a new and growing channel. We completed our first capabilities acquisition allowing us to diversify revenue and entered 2022 with strong momentum. I will now turn the call over to Gary, who will take us through a deeper dive of our fourth quarter 2021 results and provide an updated outlook for 2022.
Thank you, Natalie and good afternoon to all those on the call. As Natalie discussed, 2021 was a record year for AssetMark, highlighted by an 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 outlook for 2022. Starting on Slide 10. Fourth quarter platform assets were a record $93.5 billion, up 26% year-over-year. This growth reflects fourth quarter net flows of $2.9 billion, the highest quarterly total in the company's history and the fourth consecutive quarter of record-breaking flows. We also realized $3.7 billion in market gain net of fees. For the full year, we achieved net flows of almost $10 billion. This is over 13% of our beginning of year platform assets, well in excess of our annual target of 10%. Let's now turn our attention to the adviser metric. In the fourth quarter, we added 215 new producing advisers or NPAs. This marks the third consecutive quarter of NPAs north of 200 and is the highest total NPAs since the beginning of the pandemic in first quarter 2020. Our total engaged advisers at the end of the fourth quarter, is 2,858. We added 109 engaged advisers in the fourth quarter and 322 engaged advisers in 2021. Our engaged advisers make up 92% of our platform assets. As we always point out growing the number of engaged advisers on our platform is a key focus for management and it is crucial to drive further growth of our business and its financials. Now, let's turn to Slide 11 to discuss this quarter's revenue, which was a record $144 million. As you know, we focus on revenue net of related variable expenses. In the fourth quarter of 2021, our net revenue of $103 million was up 35% year-over-year. This is driven by asset-based net revenue, which was up 32% to $97 million and the addition of subscription-based revenue from Voyant, which was $3.2 million. Spread-based revenue for the fourth quarter was $1.7 million. Speaking of spread revenue, recent commentary from the Fed of rising rates will have a positive effect on asset spread-based revenue. Turning to Slide 12, based on ending cash on January 31 of about $2.9 billion at our Trust Company, a 25 basis point increase in the Fed funds rate would result in about $4.5 million of spread-based revenue on an annualized basis. Historically, about 75% of annual revenue fall through to our bottom line. Simply put, AssetMark is well positioned to benefit in a rising interest rate environment and this may speed up our revenue diversification and earnings growth. That said, we are always cautious in our planning. You will see that our 2022 guidance which ties to our operating plan does not include rate hikes in 2022. We look forward to providing more color next quarter once we have greater clarity. Slide 13 details our year-over-year net revenue walk. As the waterfall shows, net revenue was up year-over-year driven by the impact of our asset growth which generated $21 million in additional net revenue. Also adding to our increase in net revenue is a $2.4 million reduction in our asset-based expenses. As a reminder, this ongoing savings that is primarily driven by restructuring agreements with providers that we first realized in the second quarter of 2021. On another positive note, fee compression was negligible year-over-year. Subscription revenue from Voyant added $3.2 million in additional revenue and Voyant consulting revenue drove the increase in our other revenue line item as well. Last, spread-based revenue decreased about $300,000 year-over-year due to the decline in our average yield from 31 basis points to 26 basis points. Now, let's discuss expenses as shown on slide 14. Total adjusted expenses increased 32% year-over-year to $111 million. Quarterly operating expenses were up 47% year-over-year to $64.7 million, driven by an $11.6 million increase in compensation expense and an $8.9 million increase in SG&A. So, turning to slide 15. Let me provide you some more -- some additional color on our operating expense increase. As the graphic shows, we started with fourth quarter 2020 operating expenses of $44.1 million. We added $13.4 million due to increased volumes travel and events. This growth in expenses is commensurate with revenue growth. I mean -- commencement of my time. It's very exciting. Secondly, we added $2.9 million to the addition of Voyant which as a reminder was not in our expenses in 2020. This brings us to a core operating expense of about $60.4 million in the fourth quarter of 2021, up 37% year-over-year. The remainder of the expense increase was driven by specific investments we made in the quarter as a result of our strong year. First, we paid $3.1 million related to bonuses which Natalie alluded to including an excellence award paid to all employees and an increase in our annual bonus accrual. Second, we chose to spend an additional $1.2 million on a few specific strategic initiatives. This step was not originally in our plan for 2021 but will help accelerate growth in 2022 and beyond. Before wrapping up our expense discussion let me quickly run through our adjustments for the quarter. We added back a total of $12 million pretax which is comprised of four items; first, $5.6 million of noncash share-based compensation. We expect this number to decline in 2022 to an average of about $4 million a quarter. Second adjustment to expenses is $2.9 million of amortization expense related to prior acquisitions. Again, we have set this number to decline in 2022 to about $1.5 million a quarter. Third, $3 million related to primarily reorganization and integration costs and one-time costs related to the pandemic. And lastly, $400,000 in acquisition-related expenses primarily associated with our acquisition of Voyant. Now, let's turn to slide 16 to discuss our earnings for the quarter. For the fourth quarter 2021, adjusted EBITDA was $38.3 million, up 20% year-over-year. Adjusted EBITDA margin for the quarter was 26.7%, down 220 basis points year-over-year due to the increased expenses that I have previously just discussed. Excluding those non-repeating expenses, fourth quarter adjusted EBITDA would have been $42.6 million with an EBITDA margin of 29.7%. On an annual basis, we have expanded our operating margin 300 basis points, well above our long-term target of 50 to 75 basis points. Our reported net income was $12.4 million compared to negative $9.9 million in the fourth quarter 2020. This marks the third consecutive quarter of positive GAAP income and we finished 2021 with positive reported net income of $25.7 million. Our adjusted net income for the fourth quarter was $24.7 million or $0.33 per share. This is based on the fourth quarter diluted share count of 74.7 million. Our adjusted effective tax rate for the whole year is unchanged at 23.5%. Further color please, see the adjusted net income walk son slide 20. Turning briefly to our reported fourth quarter balance sheet. Let me update you on our cash and debt position. We ended the quarter with a little over $75 million in cash and we continue to generate cash at about 50% conversion rate from operating activities and capital investments. In 2020 -- I'm sorry in 2022, we expect to generate about $100 million of cash. Turning to our debt position. As Natalie mentioned, in January, we announced a $500 million five-year credit facility with an interest rate of adjusted sell-through of plus 1.875%. We used the new $125 million term loan in this facility to retire our existing debt. We've had a rate of LIBOR plus 2%. As Natalie noted we're really excited about the opportunity to significantly increase our access to capital and reduce our borrowing rate highlighted on the margin improvement of 12.5 basis points. Now let's turn to Slide 17 to provide an update on our 2022 expectations. As you know we built an advanced platform asset totals at the end of the quarter. As a result we have already collected revenue for the first quarter of the year based on ending platform assets from December 31 2021. So far in 2022, we have seen increased volatility in the market and assets in our platform are down in January from year-end. However, there is still six weeks remaining in the quarter possible, upside mid streets and strong business momentum. As a result, we are reaffirming the guidance we presented in November and anticipate earnings growth in excess of 20%. We are incredibly excited about 2022 and AssetMark's ability to continue to thrive and grow. This will be highlighted by our full year of revenue from Voyant, a likely increase in spread revenue and strong adviser net flow growth. This will lead to double-digit growth in revenue and adjusted EBITDA and a margin expansion in excess of 100 basis points. We will of course provide an additional update during our 1Q '22 earnings call, as we will have certainty around end of quarter asset levels and perhaps more clarity on the impact of any rate movements. So with that, I'll hand it over to Natalie for her concluding remarks.
Thank you, Gary and thanks everyone for being on the call today. I've never been more excited about our company's future. I look forward to sharing future updates at upcoming conferences and on subsequent earnings calls. This concludes our prepared remarks. I will now turn the call back to the operator to begin question- and-answers.
Thank you. [Operator Instructions] Our first question is from Ryan Bailey of Goldman Sachs.
Hi, Natalie, Gary and Taylor. Natalie, a high-level question for you. We often hear about the aging of the financial adviser population and we might have a potential over time an acceleration over the coming decades. So I was wondering could you speak to what net attrition of advisers or the industry might mean for the day-to-day impact of the businesses of the remaining advisers and then what that might mean for AssetMark?
Yes. Thank you so much for the question Ryan. So you are correct in that the average age of the adviser has been increasing for quite some time. And many advisers are reaching, what you would classically call retirement age. A few things I just want to say though is, it is very, very common, because advisers get so much value and satisfaction out of their work that they don't fully retire in the classic way that we would think about retirement. Instead what they do is they bring on a successor or they sell off a part of their business or they bring on a team, so that they can continue to serve clients much, much later in life than you would normally expect. Even so, as advisers age, many of them are looking to retire fully and fundamentally change the aspects of their work. And for those advisers, some of them are selling. Some of them are becoming part of bigger practices. But many if not all of them have succession plans where younger advisers are entering into the business in one form or another. In fact, if you look at the total number of certified financial planners, just as an example, there have never been more new certified financial planners than there were in 2021. And those certified financial planners are a much, much younger age, a much more diverse group. And this group of new or emerging advisers, they're entering the field at a rate and replacement rate of the advisers who are leaving. And so I don't expect that there will be a huge rotation where there will be a much, much lower amount of advisers. But instead, you'll see these new financial planners, these new and emerging advisers entered the industry. The last thing I'll just say is that our business consulting group, which I mentioned on the call earlier one of the things that that group focuses quite a lot on with the advisers that we serve is making sure that they have a robust succession plan both emergency succession plan and long-term succession plan and that they are actively grooming a younger generation to take over their business.
Got it. Okay. And maybe a separate point, maybe it's somewhat related to this. So your households per adviser for AssetMark is up about 19% over the last two years. I was just wondering if you could comment on what the driver of that is. Is it that you guys are winning more sort of wallet share from the financial advisers? Are they growing organically while they work for you, because what you're doing is freeing up time for them, or is there anything else that we should keep in mind?
Yes. I mean, the answer to that question is really all of the above. So in fact our advisers are absolutely growing. We just completed our 2021 value of outsourcing survey. And what we found is advisers that outsource grow at a faster rate. They attract more new clients than advisers that don't. We've also been investing in helping our advisers market more efficiently and better, in our marketing outsourcing program that I mentioned on the earnings call earlier today. is just the most recent example of that. So increasing our advisers' growth rate and ability to track new households. Our advisers are highly likely to be referred and specifically coming out of 2020 that the level of service that they provided to their clients, really outpaced the competition. And so they saw tremendous growth in 2021 from new clients. And then also we're adding new products and services to our platform, so that we can serve categories of investors that we haven't been able to serve before. The example of that are our AssetMark Personal Portfolios where we added new sleeves and also new high-net-worth offering. One other thing I'll just mention is, the high-net-worth offering that AssetMark has been building for over a decade now we've added products services that serve the entire wallet, of the high-net-worth individual. And that has really helped us grow our advisers' businesses from much larger clients.
And maybe if I can sneak one more quick one in. Gary related to that comment about 75% of spread revenues falling through to the bottom line, is that the 25%? Is that a deposit beta comment, or is that reinvestment into the business, or is it both?
The – I would probably say, yes
Okay. Thank you.
Our next question is from Gerry O'Hara from Jefferies.
Okay. Great. Thanks. Hi, how are you. So just kind of a question around M&A and how you're thinking about it on a go-forward basis. Are there any kind of particular identifiable opportunities or product gaps that you've kind of seen or identified, or is it sort of just more opportunistic in nature? Any sort of color or context there would be helpful. Thank you.
Yes, absolutely. Thanks so much for the question Gerry. As it relates to M&A first thing I just want to say is, we look at the universe of opportunities that there are to serve advisers. And related to that the technology they use, the services they need, what's powering advisory practices that are growing and thriving. And all of those areas are high-opportunity areas for AssetMark. So Voyant Financial Planning obviously, is a huge part of a successful advisory business. And so we wanted to own that part of the adviser experience. There are other aspects of technology, other aspects of asset management, other aspects of servicing that are critical to the adviser's ability to deliver quality support for their clients and those are the areas that we'll focus on. In an M&A environment, like the one we're in right now, you have to be both strategic and opportunistic. We need to -- we have identified the parts of the market we're most interested in acquiring. And as those opportunities become available, we are very aggressive about researching and ensuring that we're part of those conversations. That said, the environment is tough. I mentioned this on the last earnings call, and we're going to continue to be a disciplined buyer. We want to make sure that that asset whether it's scale or capabilities, does it fit for our business and that we feel like we can deliver in the medium term accretive acquisitions. And in an environment like this one that means you have to sift through quite a lot of opportunities to get to those that make sense. And Gary and I and the entire leadership team at AssetMark are dedicated to doing that.
Okay. That's helpful. And then perhaps one -- and apologies if I missed this, but as it relates to the strategic initiatives of $1.2 million that are not expected to recur did you give any kind of context on what exactly that was or can you if you did that?
Yes. Sure. Gary why don't you do it?
Yes. So look we've discussed -- I did not Gerry so you didn't miss anything. Happy Valentine's Day. But basically we began initiatives -- we have an initiative for our adviser growth. We have a digital lead-generation initiative. We have another initiative related to our online web presence and whatnot. These are initiatives that we were planning to begin in 2022, again with the thought of bringing in more advisers making easier for them to do business and creating leads.
And they're nonrecurring in nature. Because in many instances we engage in consulting projects or work on advertising again to pull forward 2022 expenditures into 2021.
Okay. Great. Thanks for taking my questions this afternoon.
Thank you.
Our next question is with Kenneth Worthington of JPMorgan.
Hi good afternoon. Hi, just following up on that question and sort of the onetime bonuses. Is AssetMark going to pay these sort of onetime bonuses in the future? And why isn't onetime going to be sort of an ongoing tradition there? And then there was sort of the pull forward of expenses the one-timers that aren't recurring. Does this sort of happen again and again? Like things are going great you've got some more money to play with so it all makes sense. But why don't we sort of see this in the future as well? And then as we think about the 16% to 20% expense growth is it inclusive? Does it incorporate these onetime expenses in 4Q so we're growing off the higher number, or is it sort of exclusive of the onetime investments? Sorry I couldn't quite tell.
Yes. So why don't I take the first two of those questions and then let Gary speak to the modeling of the 16% to 20% expense growth? So as it relates to the onetime bonuses as Gary and I mentioned in our prepared remarks, 2021 was an extraordinary year best in history in terms of assets. best in history in terms of net new asset growth, best in history in terms of revenue, best in history in terms of EBITDA, best in history in terms of EBITDA expansion. And we're a team here at AssetMark and we wanted to share that success with the team. They had a change in leadership in 2021. It was an incredibly great year in terms of results but also a difficult year in terms of still being in the pandemic and everyone working hard. And so, for the first time in our history we did a onetime bonus for everyone at the firm. And I got to tell you the team here they earned it. It's just a wonderful, wonderful group of people dedicated to making a difference in the lives of advisers every day. But the bonus came at an extraordinary time with an extraordinary set of results. And so that's why we categorized it as onetime. If we have an extraordinary year in 2022 like we did in 2021 maybe we will deliver the same kind of bonus. If we don't then we won't. And so it felt onetime in nature to us. The second thing I just want to comment on is your very good question about is this something where we invest more in the fourth quarter because there's money to be invested is something we should expect in the future. And the answer to that question is probably, yes. We always have more visibility into our overall business results in the fourth quarter, because we bill in advance, based on the assets at the end of the quarter before. And so by the fourth quarter, we know give or take a very small margin what our results will be at the end of the year. And Gary and I feel that working with the executive team we should invest for future growth when we have the opportunity to do that. Last year we had already expanded margin by 300 basis points. And we wanted to make sure that we are investing appropriately in growth. And that's part of how we balance the need for revenue growth and margin expansion. We tried to be clear about that in the third and fourth quarter last year. And I just want to reinforce that we're committed to investing in future growth where we can. And then Gary I'll hand off to you to talk about the expense expectations.
Yeah. And so Ken, it's a great question, right? And one of our goals Ken is make sure that we're trying to communicate to you and on the investors like so there are no real surprises in what's coming forward, right? We try to be -- try to go through our outlook for the upcoming year. And in fact Natalie was going through as we think through, as it goes through the year. So when you think about our 2016, 20% growth next year in expenses, I would bucket them into four categories. About 1/3 of that is related directly to volume and salaries. So that does capture -- we always had attractive action when we ran the plan late last year the increase in cost for talent that Natalie was talking about. That's about one-third of our expense rates next year. About one quarter is due to a full year of Voyant, right? We only had a half year cost for Voyant in 2021 and so part of our expenses will be up because of a full year of Voyant. About fourth of our increased expenses are going to be related to what we would call a travel and events budget. Specifically in a week from now we're going to hold our Annual Gold Forum Event. It's a $3 million to $4 million event. It's what we have done every year for 20 years except last year. And so this is very exciting. And we're stoked about going out and seeing our top 500 advisers on our event. And then the last third of our expense growth next year is further investments right? And so Ken there is a long list of investments we are excited about making and bringing to advisers all the time the $1.2 million that I alluded to that in the fourth quarter because we could that accelerated some stuff. And we still have a large bucket of investments that we have budgeted now for 2022. That helped?
Okay. Awesome. That's excellent. Sort of the elephant in the room for me sort of remains the fundamentals seem to be good. Management execution seems to be good, very good and a great. The stock price is not reflecting that. How does Huatai think about the stock, if at all, if they're even communicating with you about it? I guess my question is, are they receptive to suggestions about what might get the stock to act better or do they have suggestions about what might improve the stock price performance? There's been a number of things floated to me. I'm sure everybody else. I'm sure to you. Anyway, do they want to be part of a potential solution there, or is this not really a concern? And they're half a world away and this never even comes up with you and the management team? Thanks.
Yeah. So Ken thanks so much for asking the question. And I agree with you. It is the elephant in the room. And so I'm really glad you asked the question. First thing I just want to say is, Huatai they're a majority shareholder. And so they care deeply about the stock price as any majority shareholder would. They are frustrated by the stock price. And they and the management team and the Board we talk about the stock price to make sure that we're doing everything we can for our shareholders to understand their needs. At the same time what we control is fundamental. What we control is making a difference in the lives of our advisers and their clients. And over the long and medium-term if you don't do that, nothing else matters. And so we are absolutely having conversations with Huatai. As a majority shareholder they are absolutely focused on the stock price. And at the end of the day, all that matters if you don't deliver fundamentals, if you don't delight your clients, if you don't have a strong and happy team, nothing else matters. And so we're focused on that.
Okay, great. Thank you very much.
Thanks Ken.
Our next question is from Michael Young of Truist Securities.
Hi Michael.
Thanks for taking the question. Hi, how are you Natalie?
Good. Thank you. How are you?
Doing well. I wanted to maybe start with one for Gary. Just as we, kind of, think about the year and market appreciation that's the part that could be maybe most elusive within the target at least at this point with the potential offset from higher rates. But if we just think about that 3.5% market appreciation weren't to materialize and we were just flat year-over-year how much of an impact is that as we think about EBITDA and EBITDA margin expansion for the year again ex rates?
So, I mean, this is very ballparky. If you're talking about the revenue impact if you missed on the 3.5% growth very ballparky I'd say $10 million to $15 million of revenue to take -- it would be about $3 billion of assets to sell about 40 basis points somewhere in that range. That said Michael, we've already locked in a quarter, right? So we already entered the year with billing first quarter. And so in short, whatever the market does in the fourth quarter of this year that doesn't quite actually matter because that's for going to next year. And so we've already mitigated about quarter of the market risk of any given year when we're talking to you in February, right? And so the main focus will be what the market will be doing the rest of this quarter and into next quarter. And at the same time Natalie, myself, the executive team we are always focused on making sure that we are planning our expenses and our investments appropriately. And so as the market recovers or does not, we will alter the timing of some of our investments.
Right. I fully appreciate that you guys have a lot of leeway and lead time on the expense side, which is great. And then the other piece would be higher rates. It seems like that could offset an additional 50%, 75% of lower market performance if that were to materialize. I guess, the other question I did have was a follow-up on the rate outlook and spread revenue. Just twofold; one, the cash balances, can you just remind us what we should expect in terms of gearing of cash balances as rates rise? Do those tend to come down as a percentage of assets, or has any mix shift occurred since the last time we were in higher rates that that might impact that. And then as well we may see higher absolute levels of rates this cycle. So at what point do you kind of deposit betas catch up later on maybe in the rate hike cycle?
Yeah. So a couple of things I just want to say about cash balances when interest rates go up, cash balances the type of cash balances that we have at AssetMark Trust those cash balances are cash held in a model to pay client fees. And so they are less elastic than true cash balances that you would see like at a custodian. We do have position-based cash, high-yield cash and that tends to be a little bit more elastic, but the bulk of the cash assets we have on our platform are less so because they're held for the short term to pay for fees. In aggregate, it's about 3.5% of the assets held at the trust company. And honestly, there are two activities that influence cash balances and neither are related to rates. One is if there's extreme volatility in the market, we see our cash balances go up. And the cash balances go up because clients need cash to be more conservative or the strategists on our platform rebalance to cash to be more conservative. And so market volatility is one thing that really influences our rates. And then the other thing that influences our rates is when the strategist reallocate for one reason or another. They might move to cash for the short term, as they reallocate their assets. And then the third, which is not related to fees either is the amount of assets that we're attracting to the platform will raise the overall level of cash because 3.5% of those assets go to cash. So it's a great question. It's something we look very closely at. And AssetMark and the nature of our cash makes the elasticity a little different here.
Great. And then, Gary kind of the last one was just on the beta as we move into maybe 200 basis points up in rates et cetera. Do we see sort of diminishing returns at that point?
Another champagne problem to have, but I think, yes. Generally speaking, right now what we would say our beta was about 75% that we would call our bottom line a little bit diminished as you get higher into that 200 basis point range, but not that much it will be less -- moving less.
And obviously as you get above the 200 basis point range, if we get there, you're returning a lot of those incremental rates to the client. So yeah, you're -- as you get above 2.4 -- I'm sorry 2.5%, 3% we'll want to be returning some of that -- much of that to clients.
Okay. Perfect. Thank you for all the info.
Sure.
Our last question is from Patrick O'Shaughnessy from Raymond James.
Hey. Good afternoon, guys. Question on the expense outlook for 2022. Was -- when you guys last quarter gave your initial outlook of I think 16% to 20% growth, did that contemplate the non-repeating spend during the fourth quarter?
No. Sorry. Go ahead.
So, what I want to say is one of the reasons that we provide a range is so that we have flexibility at the lower end of the range to implement things that are absolutely essential, but could not be predicted. And so the one-time bonus that we did at the end of last quarter, as I said, it was an extraordinary year. We were very, very happy to do that for our team, and we could do it within the bounds of the range that we had given and then adjusted upwards. And so we expect to stay within that range. And again, the lower end of that range is given, so that we have the flexibility to make decisions that we think are important for future growth or the health of our business.
Okay. Understood. Appreciate that. Your January net flows $650 million up year-over-year, but your lowest quarter since – or lowest month rather since May of last year is there typically seasonality in January? Is there an Omicron factor? Obviously, just one month, I don't want to read too much into it but kind of what sort of commentary can you provide on January flows?
Yeah. I mean, absolutely. So yeah, definitely down versus fourth quarter of last year, but up 31.6% versus January of last year. There is absolutely an Omicron element to it as well as the market volatility. Even so I'm really, really happy with our pipeline and what we see in our pipeline and one of our strongest Januaries ever in 2022. So obviously, we'd love every month to be like December or better, but January can have seasonality into it, it's a month where there is a lot of volatility in flows. And we couldn't be happier with the pipeline. And we also just couldn't be happier that it's up 31.6% year-on-year.
Got it. And then last for me, I know you guys pay a lot more attention to engaged advisers rather than total advisers, but you did add, I think 97 new total advisers this quarter, which was your strongest quarter since 2018. Anything, you would call out is really driving that? And would you expect to maintain that momentum going forward?
Yeah. So a couple of things that we would just call out as it relates to our – the number of our advisers increasing, as well as the number of our engaged advisers and the number of new producing advisers all three were high in the fourth quarter of last year and in 2021. First thing, I'll just say is we have a concerted effort to make sure that we're growing the advisers that are disengaged to be engaged. We've invested heavily in a new channel of digital account development. So raising awareness of our brand, raising awareness of our offer broadly in the adviser community in ways that we haven't done before. And then lastly, with our Net Promoter Scores being as high as they've ever been advisers are referring AssetMark to their friends and colleagues. In addition, we are helping them save time and money and grow faster. And so advisers' colleagues are seeing that success and wanting to take part in it. So all of those things are leading to the number of advisers in general going up and that – sorry, new producing advisers going up as well. The last thing, I'll just say is, entering new channels RIA, our enterprise channels where we have relationships with credit unions and bigger institutions has made an impact as well. We have a program we call it leadership advantage where we bring these types of enterprise clients together and we help them learn how to attract new advisers and for their advisers to grow, and we're seeing a lot of momentum from that part of our business.
Great. Thank you.
Thanks, Patrick.
Thanks, Patrick.
There are no further questions registered at this time, so I would like to pass the conference back to Nathalie for any closing remarks.
Thank you so much for your time today. We look forward to talking to you again next quarter. Everyone stay safe and have a great spring.