AssetMark Financial Holdings, Inc. (NYSE:AMK) Q3 2022 Results Conference Call November 1, 2022 5:00 PM ET
Company Participants
Taylor Hamilton – Head, IR
Natalie Wolfsen – CEO
Gary Zyla – CFO
Conference Call Participants
Ryan Bailey – Goldman Sachs
Gerald O’Hara – Jefferies
Operator
Good afternoon, everyone, and welcome to AssetMark’s Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. Today’s call is being recorded.
Now I’d like to turn the call over to Taylor Hamilton, Head of Investor Relations. Please go ahead, Mr. Hamilton.
Taylor Hamilton
Thank you, Matthew. Good afternoon, everyone, and welcome to AssetMark’s third quarter 2022 earnings conference call.
Joining me are AssetMark’s Chief Executive Officer, Natalie Wolfsen; and Chief Financial Officer, Gary Zyla. Today, they will discuss the results for the third quarter and provide an update to AssetMark’s business outlook for 2022. Following our introductory remarks, we’ll open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at ir.assetmark.com.
Before we get started, I’d like to note that certain statements made during this conference call are forward-looking statements. These forward-looking statements represent our outlook only as the date of this call, and actual results could differ materially. Additionally, during today’s conference call, we’ll be discussing net revenue, adjusted EBITDA, adjusted EBITDA margin and adjusted net income, all of which are non-GAAP financial metrics. Please refer to our press release and SEC 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.
Natalie Wolfsen
Thanks Taylor. Hello, and welcome to our third quarter earnings call. I hope everyone is doing well today. My prepared remarks today will focus on the current environment, our 2022 Share of Wallet study, and then dive into the five key components of our growth strategy. After that, I’ll turn the call over to Gary to discuss our financial and operating results for the third quarter and our outlook for the remainder of the year.
Starting on slide 3. Since the last time we spoke, we’ve continued to stay extremely close to our advisors, helping them navigate this volatile economic landscape. Our support, along with a meaningful contribution from spread revenue, enabled us to deliver another quarter of record results, including record net revenue of 160 million — I’m sorry, $116 million; record adjusted EBITDA of $52 million; record adjusted EBITDA margin of 34%; record net income of $35 million; and record adjusted EPS of $0.47.
While the third quarter was the best in AssetMark’s history, make no mistake, this is an uncertain and challenging environment for advisors and their clients. We, like the rest of the industry, continue to see pressure on our flows, given market volatility and the amount of money that continues to sit on the sidelines. Additionally, advisors are not in motion at the same rate that they were during less volatile times. Even though, we view this environment as an opportunity and we are playing offense at AssetMark, we are arming our advisors with timely value added education and have accelerated product development in areas of interest for investors, both of which I will discuss a bit later in the call.
In addition, we have increased our representation at broker dealer conferences, increased our spend on digital lead generation, and are hosting more live and community based events. Prospective advisors are very receptive to hearing new ideas and AssetMark’s comprehensive high touch offering as driving new advisor engagement. Because of this, I’m very confident about the opportunities ahead.
Speaking of opportunity, let’s turn to slide 4. We recently completed our annual Share of Wallet study with over 700 respondents that are AssetMark advisors. Expanding the share of wallet from our existing advisors is one of the many ways we can accelerate our growth. This study is valuable as it allows us to see what assets are held away from AssetMark by our current advisors. Two key points emerge from this year’s study. The first point is that AssetMark continues to be the preferred provider for advisors across multiple investor segments. Most noteworthy among these segments is the fast-growing high net worth segment and then the mass affluent segment.
Second, we have a total business opportunity of $375 billion across our advisor base. This number is up approximately $20 billion from 2021, and this is despite the market decline. So, both of this opportunity is with advisory assets and commission assets, and while we don’t support commission assets on our platform, we view this as an opportunity to grow share of wallet because we have a proven history of helping advisors move towards fee-based business model. This year’s study underscores that while we are doing a great job of capturing assets from existing advisors, we still have a long runway of growth opportunity ahead of us.
As we do every quarter, let me provide you with an update on our growth strategy. The first component on slide 5 is to meet advisors where they are. All advisors, regardless of affiliation, are facing the same market volatility challenges today. I want to dive be a bit deeper into how by supporting our advisors we have achieved record financial and operational results and have matched our all-time high net promoter score, while also positioning our company for future growth. The feedback from our market volatility toolkit underscores the value we provide to advisors during times of uncertainty, as they look to stay informed, feel confident, and help them thoughtfully serve their clients amid uncertain environment.
Since launching in June, the market volatility toolkit has had over 7,500 page views from 1,500 unique users. We continue to provide timely education to our advisors, including September’s Strategies for Surviving a Bear Market webinar, which was incidentally our highest attended webinar ever, with nearly a 1,000 advisors and clients attending. In the third quarter, we also maintained close contact with our advisors through high impact live events.
Specifically, this quarter, we hosted our top advisors for our Platinum Summit, over 200 advisors for our High Net-Worth Symposium, and over 175 advisors for our Investment Mastery series. Additionally, just last week, we finished up our Premier Advisor Meeting, which were attended by over 800 advisors in 19 different cities. In these meetings, we discussed timely topics such as business management in a challenging economy and leveraging the right strategic relationships.
We continue to get very positive feedback about the quality of our events, educational content, and the strength of the community we have created among our advisors. Our advisors are grateful to have AssetMark as a partner, as evidenced by our 2022 overall net promoter score of 67, which matches our all-time high set last year. We firmly believe our deep connectivity with our advisors enables us to continue to win in the market and set this up for future success.
Now, I’d like to turn to slide six, the second component of our growth strategy, which is to deliver a holistic, differentiated experience to advisors and their clients. As discussed during our Analyst Dinner in September, Voyant has gained significant traction recently as some of its key geographies continue to open up. Recent wins by Voyant include Barclays and PWC in the United Kingdom and a partnership with Morningstar in Canada. We have also won a deal with the global accounting firm RSM, working with them in five countries to start with the goal to expand to several more in the future. We are extremely excited about Voyant’s future growth prospects and the diversification of revenue it brings to AssetMark.
Moving to the third component of our growth strategy, which is to enable advisors to serve more investors across the wealth spectrum, varying life stages and generations.
Let’s turn to slide 7. Today’s investors face challenging market conditions with record high inflation, rising interest rates and geopolitical conflicts. Advisors are reacting to these turbulent markets by reallocating to strategies that can help mitigate these recent market challenges.
Last month as the AssetMark launched three new strategies for advisors to leverage during these uncertain times. The first, which can be used to enhance portfolio income and reduce overall volatility through high quality dividend equity approach that has historically generated low beta relative to the S&P 500 index. The second two of these new strategies are alternative investment strategies that can be used to enhance the stock on portfolio diversification by incorporating non-correlated asset classes. While turbulent markets can be overwhelming, they also offer opportunities for advisors to lean in, connect, and deepen relationships with clients. Given this, it’s no surprise that the early reaction to our new investment choices from our advisors and their clients has been extremely positive.
Now, I’d like to move to the fourth component of our growth as seen on slide eight. This component is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs. This quarter I’d like to talk about our Advisor Acceleration Academy, an immersive four-month program designed to help advisors boost their business, boost their growth by establishing foundational business methods. The program focuses on five key pillars of business success. First, the benefits of outsourcing; second, a robust business assessment with benchmarking; third, client segmentation and servicing; fourth, developing a strong marketing plan; and finally fifth, creating and executing a business growth strategy.
We hosted three classes with an average of a 100 advisors in each class. Advisor feedback so far has been great, and we are already starting to see tangible benefits. In fact, advisors who participated in the first two sessions, which are already complete, have exhibited platform asset growth of more than 20% since graduation. Also encouraging a good number of advisors have already reached engaged status post-graduation.
This level of partnership is unmatched in the industry. Our ability to help our advisors grow in scale is a key reason why our advisors win, and it’s also a key reason why we win. We win because of their success.
Now turning to slide 9, the final component of our growth strategy. This is to pursue strategic transactions by adding capabilities and assets that improve our advisors’ ability to serve investors and expand their businesses. First, I’d like to give a quick update on Adhesion. We continue to work through regulatory approvals and have spent a good deal of time at Adhesion headquarters so that we can hit the ground running when the deal closes.
Second, we feel the current market environment is unlocking a lot of potential opportunities and we are actively looking at each one of these opportunities while ensuring we remain disciplined to only buy capabilities that would be a strong fit for our platform.
I will now turn the call over to Gary, who’ll take us through a deeper dive into our third quarter 2022 results, and also provide an updated outlook for full year 2022.
Gary Zyla
Thank you, Natalie, and good afternoon to all those on the call. As Natalie mentioned, despite market volatility impacting our billable asset levels, the diversification of our revenue and our focus on expense management has resulted in another record quarter among many of our key top and bottom line financial metrics. During my remarks today, I will highlight some of those record results as well as provide some commentary on how the current environment is impacting our operational and financial metrics.
Starting on slide 10, third quarter platform assets were $79.4 billion, impacted by $4 billion in market loss net of fees. Net flows in the quarter were $1.2 billion and up $4.7 billion for the year. Year to date our annualized net flows as a percentage of beginning of period assets was 6.7%.
As you know, net flows are comprised of production or money onto the platform, less redemptions or money off the platform. Net flows in the third quarter have been impacted by lower production levels relative to last year as money continues to sit on the sidelines due to market volatility. And those assets that are coming onto the platform are coming on at depreciated levels. Redemption rates though are still lower than expected. A strong sign of our advisor satisfaction. This trend is continued in October with early indications that net flows in the month will be approximately $280 million.
Turning our attention to slide 11, we added 159 new producing advisors or NPAs for the quarter. Like assets, advisors are not as quick to move as they would be during less volatile times. As Natalie mentioned, we are focused on two key items to improve our organic growth and MPA count. First, we continue to stay close to our advisors through high impact engagements; second, we are diligently focused on doubling down our efforts on our in-person marketing events and digital advisor acquisition strategies. We believe focusing on these two areas position us well to win new advisors and share of wallet from existing advisors, both of which can positively impact future flows.
Let’s turn our attention to our engaged advisor path, which has added some recent noise to the market dynamics. Our engaged advisors make up 91% of our platform assets. Growing the number of engaged advisors for those with over $5 million in assets on our platform remains the key focus for management and is crucial to drive further growth of our business and its financials. Total engaged advisors at the end of the third quarter were 2,601. This reflects 84 new engaged advisors for the quarter offset by 132 advisors who dropped below $5 million just due to market — depreciation. 31 of the new engaged advisors are from recent NPAs, while the remaining 53 are more tenured advisors, we have helped transition from disengage to engage. For further context on our growth, we can look at the number of households invested on our platform, which is a key metric we regularly disclose and is not AUM based. The number of households are up 10% year-over-year to 223,000.
Now let’s turn the slide 12 to discuss this quarter’s revenue, which was a record $155 million. As you know, we focus on our revenue net of related variable expenses. For the third quarter of 2022, our net revenue was a record $116 million, up 14% year-over-year. This is driven primarily by spread based revenue, which is up $17 million from a year ago. This offset the decline in asset based revenue, which was impacted by market depreciation.
Slide 13 details our year-over-year net revenue walk. As the waterfall shows, net revenue is up year-over-year, driven mainly by spread income, which we just discussed. Year-over-year yield on spread, improved from 27 basis points to 209 basis points. Also contributing to our increase in net revenue is a $900,000 reduction in asset based expenses.
As a reminder, this is ongoing savings that is primarily driven by restructured agreements with providers. Asset based revenue is down $3.8 million year-over-year, primarily driven by $2.5 billion decline in billable assets. Year-over-year fee compression was approximately 0.5 basis-point, better than our stated expectations of 1 basis-point.
Subscription revenue from Voyant was flat year-over-year, primarily driven by foreign exchange pressure. Excluding the impact of FX, subscription revenue was up approximately 7% year-over-year. As Natalie mentioned, we are encouraged by Voyant’s growth prospects as key geographies have just started to reopen post pandemic.
Lastly, other income increased $1 million year-over-year, driven largely by higher interest income earned on our corporate cash.
Now let’s talk about expenses, turning to slide 14. Total adjusted expenses increased 8.3% year-over-year to $109 million, and were flat quarter-over-quarter. Quarterly operating expenses were up 10% year-over-year to $62.5 million, driven by a $2.4 million increase in compensation expense and a $3.4 million increase in SG&A. Even during these turbulent times, we have been able to make valuable investments that will set us up for future success. We have increased our head count by 7% this year with an increased focus on scaling operations. We have made meaningful investments in our sales department, which we believe will pay dividends not only now, but as the market recovers. Lastly, we have expanded our IT budget almost 8% year-over-year.
Let me quickly run through our adjustments for the quarter. We added back a total of $8.3 million pre-tax, which is comprised of three items: first, $3.9 million in non-cash share-based compensation, and as discussed last quarter, we anticipate a quarterly run rate of just under $4 million moving forward; second, adjustment to expenses is $1.7 million of amortization expense related to prior acquisitions, we have set this to be the same in the fourth quarter; lastly, $2.7 million related primarily to reorganization and integration costs.
Now let’s turn to slide 15 to discuss the earnings for the quarter. Third quarter 2022 adjusted EBITDA was $52.7 million, up 18% year-over-year and highest quarterly adjusted EBITDA in our Company’s history. We are extremely pleased with our adjusted EBITDA this quarter, which is a testament to our growing revenue diversification and the flexibility and the disciplined management of our expense base. Adjusted EBITDA margin for the quarter was also another record, up a robust 200 basis points year-over-year to 34%.
Our reported net income for the quarter was a record $30.1 million, $5 million more than a total reported income for the full year of 2021, while adjusted net income for the third quarter was a record $35 million or $0.47 per share. This is based on a third quarter diluted share count of 73.8 million. Adjusted effective tax rate for the full year is unchanged to 23.5%. For the color, please see the adjusted net income’s walk on slide 20.
Now, let’s look at the reported third quarter balance sheet. I would highlight two items. First, we do a great job — we continue to do a great job of generating cash, adding $20.7 million to our cash position quarter-over-quarter, and ending the third quarter with $137.2 million in cash. Additionally, we still have a $375 million in our credit facility that is available to the Company. Our cash balance, our strong ability to generate cash and our credit facility give us a lot of dry powder for future M&A deals, which remains an important focus as a key component of our growth strategy.
Second, capital expenditures primarily reflect our long-term investments in technology to create new capabilities, increase scale, and improve service. For the third quarter, our capital spend was $9 million or 5.8% of total revenue. For the full year 2022, we are expecting our capital expenditures to be between 6.5% and 7% of total revenue, as we continue to invest in the future of the business.
Turning to slide 16, I would like to provide some commentary on the meaningful impact that spread continues to make on our financial results and how we look to maintain that. Our ability to earn spreads is a direct result of owning our own custodian AssetMark Trust Company or ATC. As you know, spread-based revenue is a function of the amount of cash held by investors at ATC and interest rates. First, let’s discuss the cash balances.
Total cash as a percentage of assets ATC continues to remain elevated around 5% to 6%. This is driven primarily by an increase in our insured cash deposits due to strategists allocating more to cash. At the end of 2023 we expect cash to return to a more normalized level of 3.5% total assets to ATC.
Turning to interest rates, we target Fed funds rate by the end of the year is expected to be north of 4.25%, higher than the 3.75% we spoke of at our Analyst Dinner in September and the 3.25% we spoke of during the second quarter earnings call in August. We are seeing strong demand from depository institutions for both variable and fixed term deposits and plan to use this opportunity to start deploying a portion of our insured cash deposits to fixed term agreements. We have started deploying about approximately 20% of cash ATC to fixed term rates. This will be laddered in over three years with the target rate of about 4.35%. We have the optionality of placing up to 40% of cash at ATC into fixed term rates.
Moving part of the cash balance to fixed term has two key benefits: first, it mitigates the sudden collapse of spread revenue if interest rates were to fall; and second, it gives us more time to respond to any large future macroeconomic shocks that could result in lower demand for deposits from banks. We’ll continue to update the Street on the deployment of cash into fixed term rate on future earnings calls.
Finally, let’s turn to slide 17. I am pleased to announce that we are increasing our top and bottom line 2022 outlook as a result of stronger than expected spread revenue. Let me share some perspective.
While declining markets have greatly impacted asset based revenue, spread revenue has contributed more than originally forecast. This is a result of the increase in interest rates and higher than normal cash balances at ATC, which we just discussed. We are increasing our revenue growth expectations from 16% to 18% to 18 to 20%. Turning to expenses, we are reaffirming our expense growth outlook for the year of 14% to 16%. This level of expense growth allows us to continue to meaningfully invest in the future of business while maintaining discipline so that the expense growth will not outpace revenue growth. As a result of increasing our revenue growth outlook and maintaining our expense growth outlook, we are increasing our adjusted EBITDA outlook from 20% to 23 plus per percent. Based on the growth outlook I just laid out, we feel confident in our ability to expand adjusted EBITDA margins by 200 basis points this year.
We are extremely pleased about our financial results this year and our in or on track for the best year in our company’s 25-year history. With that I’ll hand over to Natalie for her concluding remarks.
Natalie Wolfsen
Thanks so much, Gary. This concludes our prepared remarks today. I’ll now turn the call back to the operator to begin our question and answers.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question is from the line of Ryan Bailey with Goldman Sachs. Your line is now open.
Ryan Bailey
Hi. Good afternoon, everyone.
Natalie Wolfsen
Hi, Ryan.
Ryan Bailey
Hi. How is it going? I was wondering if we can go back to page four. Clearly, you’re the preferred provider for a lot of your advisors based on the wallet share survey. But this isn’t the actual wallet share for those advisors, is it? So first question, where does that stand? Has it changed a lot since the last survey? And is there anything you can do to facilitate better wallet share dynamics from your existing advisors?
Natalie Wolfsen
Absolutely. So, first, the answer to your question is, in this survey, what we do is we interview, in this case about 700 of our advisors. And we extrapolate from those 700 conversations what share of wallet is likely to mean — the share of wallet percentage is likely to mean for groups of advisors like them. So, the numbers come from the 700, and then we extrapolate that to the rest of the advisor population using the personas and the business model and the size of the advisors that have responded to the survey. And 700 is definitely statistically significant. And so, we believe that the 375 in total business opportunity is directionally correct. So, that’s sort of the answer to the first question.
The second question in terms of how this has changed over time, a few things. The first, and I mentioned this in my prepared comments is the total amount of business opportunity outstanding has increased year-on-year. And there’s a couple of reasons for that. One is we’ve added new solutions to our platforms like ESG, SMAs, and more alternatives that unlock share of wallet opportunity for AssetMark. So, in essence, what it does is it expands the eligible share of wallet that we have at AssetMark.
The second thing I’ll say is our advisors, some of them are acquiring new businesses or hiring new advisors to join their practice, which expands the size of the advisor practice, which expands the opportunity for us. And so, it’s great that our advisors are growing and they’re growing through acquisition or becoming recipients of succession plans, which create more opportunity for AssetMark.
And then the last part of your question, which is what are we doing to capture this share of wallet in a meaningful way? The answer to that question is we’re investing pretty substantially in organic growth. And we have been for quite some time and we continue to. So as it relates to the share of wallet component of organic growth, we invest in new in investment vehicles or investment options for advisors and their clients to not only respond to market conditions, but also respond to new financial planning needs or goal based needs that they have given their stage of life.
In addition, we are expanding our sales team and the support that we provide to our advisors. In fact, in 2022, we’ve added a new territory, which will come on in 2023. We’ve added two new regional directors to focus on new sales teams and getting those new sales teams to be successful more quickly. In addition, we’ve also added new — four new business consultants, so that the support that we’re providing financial advisors as it relates to their business growth and share of wallet that could come to us is also supported by these new teams.
And then the last thing I’ll just say is we’ve also added enterprise sales directors to our sales team, about five of them, and that’s because we have different levels of share of wallet depending on the business model of the firm on average. And we wanted to make sure for these enterprise firms that we had specialists that focus on their growth. And so, examples of this would be leaders of OSJ, leaders of nationwide RAA firms, and other large enterprises.
Ryan Bailey
Got it. Okay. And maybe sort of diving into one of the — what seems like a new solution that you’ve added to AssetMark Retirement. So, obviously I don’t think I’ve seen that before. I was wondering if you could expand on what you’re doing there. Retirement is obviously a complicated market. There’s large incumbents. How is AssetMark going to sort of compete, and what’s the competitive edge a service provider to the incumbents or to the client sponsors directly?
Natalie Wolfsen
Yes. So for AssetMark Retirement Services, you’re exactly right. For the large plan market, for the mega plan market, it’s really dominated by a couple of very large-scale providers. What we do at AssetMark is we support our clients, meaning our advisors’ clients who are entrepreneurs or small business owners that are either trying to start up their retirement plan for the first time or grow retirement plan that — as their business grow. And so what we do through our AssetMark Retirement Services offering is we help advisors, we train advisors so that they can serve these entrepreneurs and serve these small plans. So, similar to what we do with other business consulting support, we do it a lot of training, a lot of education, a lot of information management. So, these advisors can learn what it means to be a retirement oriented advisor.
The second thing that we do at AssetMark Retirement Services is we work with a record keeper to smooth out the client experience for the advisors and their clients. And then we also provide fiduciary support as it relates to the investment selection that’s made in the plan by the plan sponsor. And so, that is core to what AssetMark does, due diligence. And we’re extending that due diligence capability into the qualified space.
And so, when you think about AssetMark and what we can offer in AMRS and why we are a good choice for financial advisors, it’s because we can educate those advisors, we can provide support for the plan and the plan participants on behalf of the advisors, and we can provide the fiduciary support as it relates to the selection of the plan, and then we can smooth out the operations between the record keeper, the third-party administrator and AssetMark as the advisor to the investments in the plan. But truly this is for small business owners and for entrepreneurs who require plan support from their advisors, and for advisors who require that from us. It’s not for the entire universe of plans in the U.S.
Ryan Bailey
Got it. And did you have any assets on the AMRS already?
Natalie Wolfsen
I’m sorry. Can you repeat that? Do we have any what for AMRS?
Ryan Bailey
Sorry. I was just wondering what the asset base is.
Natalie Wolfsen
So, the asset base is just a little south of $2 billion right now. And that’s clearly been impacted by market conditions. I think it’s about $1.6 billion, so maybe a little more south of $2 billion than it was at the end of last year.
Operator
Thank you for your question. The next question is from the line of Gerald O’Hara with Jefferies. Your line is now open.
Gerald O’Hara
Great. Thanks. Good afternoon, folks. Good to see, the Voyant kind of geographies opening up a little bit. I know in the past, Gary, you’ve given a little bit of I guess forecast or potential outlook for what that could mean from a revenue contribution perspective. Not sure if you’re quite in position to revisit that, but would be kind of curious to hear what your outlook would be or any color or context you could provide.
Gary Zyla
I think the way we look at Voyant, they’ve had good growth on their individual advisor licenses, particularly — overseas, particularly in the English market. What we are waiting for, like we said, is geographies open up in Canada and England for the more enterprise deals. The way we look at this, last year we talked about, once we got to a full year, we talked about that $20 million revenue run rate. We look at it in the later year, Gerry. So, we’re going to be looking for that next year. And, year-over-year right now Voyant’s revenue is about 7% excluding FX, which is great. But we do expect it to pick up a little more next year and get to the run rate we are looking for this year. So we’re just kind of looking as a year delayed.
Gerald O’Hara
Okay, fair enough. And then, Natalie, I know you kind of just addressed or I suppose hinted at, potential M&A opportunities as the dislocated, I suppose backdrop opens up, I guess some chances to either add adjacencies or capabilities. But is there anything that you can sort of point to that might be a little bit more specific or from a capability or technology standpoint where there might be kind of near term needs or opportunities?
Natalie Wolfsen
So, a couple things I just want to mention about that. And by the way, thanks for the question. At AssetMark what we’ve done is we’ve taken a strategic view on the, broadly speaking, advisor servicing space. And servicing includes the technology that advisors use to serve their clients, the resources they need to serve their clients and grow their business, the investments they make on behalf of their clients, how they trade and transact those investments, and then, the reporting and communications that they use to communicate with their clients, and then last but certainly not least, the planning and risk management that’s germane to an advisor’s, conversation with their clients. And so, we’ve done a math of kind of all of these potential capabilities that advisors rely on and use to serve their clients and to build their businesses.
And we have identified the areas in those — that advisor landscape that we think are best suited for AssetMark. And what we mean by best suited for AssetMark is the Company that we’re acquiring can accelerate its growth because of the access it has to advisors or the access it has to the capabilities or the relationships we have inside the U.S. and/or that capability will enhance the services that we provide to advisors. In other words, it’ll make the service that we provide to advisors and their clients more holistic. And so, Voyant is a good example of the second point where we are now able to fully integrate financial planning into AssetMark’s delivery. And because AssetMark has relationships with broker dealers and other industry participants in the U.S., we can accelerate Voyant’s adoption in the U.S.
Among all of those areas, there are some that we think are more attractive than others. We’ve mentioned financial wellness in the past and that we think financial wellness has three main components. The first is the planning and the goal management, which Voyant does. The second is access to fairly diligent investments that we support. And then last but not least is a robust view on risk, how investors view their capacity to withstand different declines in the risk environment.
So clearly because we’re committed to financial wellness and we view risk management of — and risk management from the investor point of view versus from the portfolio point of view as a key component of that that would be an area of the market that we would be really interested in. We’ve also mentioned that we’re committed to saving advisors’ time and effort as well as help them drive scale. And there are certain technologies in the industry that either save them time and effort through automating reporting, automating communication, automating marketing, or smoothing out how investors and advisors stay current on the financial plan. That would be another area that we would be interested in.
I could go through several more. I’m going to stop there though, because there are two things that I think are really important about M&A. One is that the properties that you’re interested in are available, which is a little serendipitous. And then the second is you can come to an agreement with the firm about the right price, so that there’s good outcomes for shareholders and clients. And at AssetMark, we’re really disciplined about both. And so that means that periods of time can go by where there’s no M&A, and then other periods of time could happen where there’s more than historically speaking. But it all comes down to is it a fit for us and is it at the right price, and does AssetMark represent a good future opportunity for the firm?
And then, one last thing before I leave this, and I know this answer has been very long, and so I apologize. I guess I’m rambling today. The second part of this I just want to say is we’re also very committed to scale M&A, which wasn’t the question you asked. But we absolutely believe that we can grow advisors who join our platform because of the service offering we provide. And so, in an environment like this, sometimes there’s opportunity to acquire sub-scale TAM, and of course we would do that.
Operator
Thank you for your question. There are currently no further questions registered. [Operator Instructions] The next question is from the line of Ryan Bailey with Goldman Sachs. Your line is now open.
Ryan Bailey
Hi. I just thought I’d sneak one in. The 40% as sort of the optionality on increasing the fixed component of cash, is that something that you expect you will move towards? And why is 40% the high end?
Natalie Wolfsen
So, Ryan, it’s — thank you for the question. So, a couple of things to keep in mind as it relates to the range of the fixed term deposits that we’re willing to include in our ICD and high yield cash program, so basically the total cash balance. The first is, remember that our cash balances are high relative to history. And over time as market conditions approve, historically speaking, cash balances will come down as strategists allocate into other investment options. And so, we want to make sure that we’re allocating the appropriate percentage to cash given where not only we are today in terms of our total balances, but where we may be in a future where the investment returns are a little more attractive and our strategists and managers make different decisions. And so, that’s a risk management choice that we’re making, because obviously the most important thing about our cash program is that it delivers to clients the liquidity they need at an attractive rate.
And then the second thing I just want to say as it relates to the 20% to 40% is we want to make sure that we manage to liquidity first. And so, we feel that a 20% to 40% range is the right place to start, especially given where balances are today and where our program — how our program is behaved historically speaking.
Operator
Thank you for your question. There are no additional questions waiting at this time. So, I’ll pass the conference over to the management team for any closing remarks.
Natalie Wolfsen
All right. I want to thank everyone on the call today. We look forward to seeing you in person at upcoming investor conferences. Have a great day.
Operator
That concludes the conference call. Thank you for your participation. You may now disconnect.
Be the first to comment