AMK (2021 - Q1)

Good afternoon, everyone, and welcome to the AssetMark's First Quarter of 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Today’s call is being recorded. Now, I would like to turn the call over to Taylor Hamilton, Head of Investor Relations. Please go ahead, Mr. Hamilton. Taylor H

Thank you, Celine. Good afternoon, everyone, and welcome to AssetMark's first quarter 2021 earnings conference call. Joining me remotely are AssetMark's Chief Executive Officer, Natalie Wolfsen, and Chief Financial Officer, Gary Zyla. They will discuss the results for the first quarter and provide an update to AssetMark's business outlook for the remainder of 2021. Following our introductory remarks, we'll open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at ir.assetmark.com.

Thank you so much, Taylor, and good afternoon, everyone, and thank you for joining our first quarter earnings call, and my very first as CEO. I'm excited and honored to talk with you all today. I met many of you during the IPO roadshow back in July of 2019, but for those of you who I have not had a chance to meet, let me briefly introduce myself and provide some perspective about why the Board has selected me to lead AssetMark into the future. I've been at AssetMark for about seven years now, and I've spent two-plus decades in the financial services industry helping financial advisors and their clients. I have a deep understanding of how advisors and their clients think and what solutions, tools, and technology they need to be successful. Prior to taking over as CEO in March, I was AssetMark's Chief Solutions Officer, responsible for building and executing AssetMark's current strategy. Our mission and our strategy remain unchanged. As a result, the leadership transition has been seamless for our associates, our advisors, and their clients. I'm very excited to continue to set the strategic vision for the firm and to create continued value for our advisors, their clients, and our shareholders. The Board and I have a shared vision on growing our technology capabilities with Voyant, our recent announced acquisition being a prime example. I will look to leverage my expertise in technology, investment solutions, and financial wellness to further expand our entire offering. Lastly, I'm deeply committed to ESG and diversity inclusion, not only at AssetMark, but industry-wide. And I'm excited to work with the leadership team here at AssetMark to expand our focus in this area. In the coming months, I look forward to re-engaging with those of you I met during the road show and building relationships with those of you who I haven't met yet.

Thank you, Natalie, and good afternoon to all those on the call. As Natalie discussed, our results in the first quarter are outstanding, highlighted by an all-time high in platform assets and a record number of net flows, revenue, and adjusted EBITDA. As usual, I will start with a discussion of our platform assets and talk about our revenue, our expenses, and then our earnings. I will conclude with an update on our 2021 outlook. So, starting with Slide 9, first quarter platform assets were a record, $78.9 billion, up 41% year-over-year. This growth reflects first quarter net flows of $1.9 billion, the highest quarterly total in our company's history, and $2.4 billion in market gain, net of fees. The improvement in our net flows quarter-over-quarter is driven by increased production, while redemption rates have again remained relatively stable. In March alone, we realized net flows of $901 million, the highest month in our company's history. Annualized net flows as a percentage of our beginning period assets 10.3%, ahead of our 2021 guidance of 8% to 10%. Our net flows now have increased by at least 20% each quarter since the second quarter of 2020 and they're now back to pre-COVID levels. Turning to Slide 10, we continue to see excellent growth in our business. As we have broken out the past few quarters, our core growth, excluding recent acquisitions, is even stronger. The first quarter of 2021, core business net flows as a percentage of beginning period assets were 11.6%, ahead of our 2020 annualized core growth rates of 10.3%. In the spirit of transparency, we do expect one or two more large advisors GFPC with a total about $450 million of assets on our platform to leave in the second or third quarter this year and we will update you as such. We expect organic growth to continue to be strong in the second quarter based on advisor activity metrics and our April net flows of approximately $750 million, which will be disclosed next week in our monthly AMK report. Turning to advisor metrics, we added 194 new producing advisors or NPAs, in the first quarter of 2021. This is the highest total since the first quarter of last year. NPAs serve as a source of our growth in the near and medium-term, while still leveraging a remote business model we are encouraged by the growing number of new advisors on our platform. First, March was one of our best months ever in the number of NPAs and the best month ever for NPA production. Second, year to-date-production from this year's cohort is up more than 25%, compared to last year's cohort. We were also excited about our recently launched digital lead generation capabilities, our upcoming RIA summit and our return to in-person engagement with our advisors. All of these will allow us to attract new advisors and deepen relationships with our existing advisors. Our total engaged advisors at the end of the first quarter was 2,611. Engaged advisors were up 22% year-over-year and now account for 91% of the total assets on our platform. Since the beginning of 2020, that is, over the five quarters, our total number of engaged advisors is up 381. Now, let's turn to Slide 11 to discuss this quarter's revenue. Entering the first quarter, our assets were at $74.5 billion, leading to a reported revenue $119 million. This reflects a strong increase in our asset base revenue, offset by the decline in spread-based revenue due to last year's rate decline. We focus on our revenue net of related variable expenses. For the first quarter of 2021, our net revenue of $82.2 million was up 4.6% year-over-year. Asset based net revenue was up 12.9% to $79.7 million. Recall, this reflects our mid-2020 shift to lower cost mutual fund share classes, which resulted in a revenue reduction of $3.5 million per quarter. After that one-time product shift, our asset based revenue growth would have been about 17%. Spread based revenue is down, of course, materially at 71% year-over-year, due to the aforementioned decline in interest rates. Now let's turn to Slide 12 and more fully discuss the drivers of the change in net yield year-over-year. As the waterfall shows, revenue was up year-over-year with the increase in asset based revenue outpacing the decline in spread based revenue. Our waterfall splits the impact of our asset growth, which generated $14.2 million in additional revenue, and the impact of the compression of net revenue yield, which reduced revenue by $5.2 million. Of this $5.2 million, again about $3.5 million was due to the shift to lower cost mutual fund share classes, with the remaining impact due to fee compression. It's important to note that the year-over-year fee compression impact was in-line with the 1 basis point we had set this year. Moving to spread based revenue, it decreased $4.7 million year-over-year due to the yield decline from 1.36% to 0.31%. Lastly, our other income decreased $700,000 or about 0.5 basis points, driven primarily by interest-related income on our corporate assets. Overall, net revenue as a percentage of total platform assets for the first quarter 2021 was 44 basis points, down 1 basis point quarter-over-quarter and down 7 basis points in 2020. The bottom of Slide 12 helps detail the year-over-year decline in yield as it shows 3.1 basis driven by the asset based revenue, and of this, about 2 basis points is due to the shift to lower cost mutual funds. The decline in spread based revenue resulted in a decline of 3.3 basis points on our total yield. For clarity and transparency, the calculation of our annualized revenue yield net of variable expenses is shown on Slide 17 in the appendix of our earnings presentation. The takeaways from this slide is two-fold. First and most importantly, our strong organic growth and market gains have mitigated the revenue loss and the move to lower cost mutual fund share classes and the declined interest rates. Second, yield compression from lower interest rates is stabilizing, down only 1 basis point quarter-over-quarter. Now, let's discuss expenses. As shown in Slide 13, we continue to do an excellent job of maintaining our even as we have grown our company significantly over the past year. Total adjusted expenses decreased 1% year-over-year to $90 million. Operating expenses were down 3.2% year-over-year to $48.1 million, driven by a $2 million increase in compensation expense, offset by a $3.6 million decrease in SG&A. The increase in compensation expense is largely driven by our variable sales incentive comp as a result of our strong sales in the quarter. Our strong sales results increased our compensation expense and we, of course, will realize the revenue benefit from it in the upcoming quarters. Also driving the increased year-over-year compensation was the fact that our head count increased 2.2%. The decrease in SG&A is largely driven by our new business environment, driven by lower event costs and travel costs. We successfully held our annual client event, Gold Forum, entirely online in February, generating material savings in 2020. As discussed previously, we are eager to get back on the road and meet clients in person. That said, there are permanent changes we've made to our business model and we have always expected to absorb the increased spend related to travel in our operating expenses. We have learned to become a much more efficient and effective in a virtual environment and will not lose that competitive advantage. Let me run through our expense adjustments, which were unusually large due to the acceleration of share-based compensation cost as a result of our February vesting and the CEO change. In the first quarter, we added back a total of $46 million pre-tax and this is comprised of four items. First, $33.4 million of non-cash share-based compensation, due again to the acceleration and amortization of the pre-IPO grants. Of our total equity charge of $33.4 million in the first quarter, $30.6 million was related to the pre-IPO restricted stock awards and $2.9 million was due to our ongoing equity incentive program, the largest related to the pre-IPO , was driven in part due to the large vesting event in February, as well as the accelerating recognition of costs as a result of the CEO change. As a result, the remainder of year will see far less expense related to this fixed block of grants. To set expectations for you, you should expect to see equity cost drop for the rest of the year, between $5 million to $8 million per quarter. Looking ahead to 2022, our quarterly equity costs will reflect only the ongoing programs and settle into the $4 million to $5 million per quarter range we've previously discussed. The second adjustment to our expenses is $5.1 million of amortization expense related to the 2016 sale. Like the equity charges, this expense will be fully amortized also by the end of 2021. Third, $4.7 million related primarily to reorganization and integration costs, the majority of this cost related to the CEO transition. Lastly, $2.8 million in acquisition related expenses associated with our announced acquisition of Voyant and the integration of GFPC and OBS. For additional color and adjusted expense reconciliation table for income statement line item can be found on Slide 18 in the appendix in our earnings presentation. Now, let's turn to Slide 14 to discuss the earnings for the quarter. We view adjusted EBITDA as an important measure of our company's health. Our first quarter 2021 adjusted EBITDA was a record $34.1 million, up 20.2% year-over-year. Adjusted EBITDA margin for the quarter was 28.6%, up 390 basis points year-over-year. This improvement in margin year-over-year despite the decline of spread-based income is a testament to our management team's ability to focus on expense management while investing in future growth. Our adjusted net income for the quarter was $22.2 million or $0.30 per share. This is based on a first quarter diluted share account of 72.9 million. Now, let's look at the reported first quarter balance sheet, I would highlight two items. First, we ended the quarter with $86.8 million in cash. As Natalie mentioned in her prepared remarks, our cash position, the ability to generate cash and low debt positions us well to pursue opportunistic M&A. Our expectation is that we will use about of our corporate cash, plus $70 million from our revolving credit facility, when we close our acquisition of Voyant later this year. Second, capital expenditures primarily reflect our long-term investments and technology to create new capabilities, increase scale, and improve service. For the first quarter, our capital spend was $8.2 million or 6.9% of total revenue. Now, as Natalie previously mentioned, we are expecting our capital expenditures to be about 7% 2021 total revenues as we continue to invest in the future of this business. Now, let me update you on our expectations for 2021. Before I get into those numbers, I want to be clear that these expectations do not include the impact of Voyant, given the unknown timing of the close. Let's turn to Slide 15. We're increasing our net revenue growth outlook to 18% to 21% for the year, compared to a previous expectation of 16% to 19%, driven by strong momentum for the first quarter net flows and market gains. We continue to expect our operating expenses, which consists of compensation and SG&A, to increase mid-teens due to increased investment in 2021. It is important to note that we will maintain discipline in our expense growth so as to not outpace revenue growth. As noted earlier and on previous calls, this expense outlook assumes business fully re-opens by mid-year. As a result, we are revising our 2021 adjusted EBITDA growth expectation range to 22% to 26%, which is above our previously guided range of 15% to 25%. This outlook reflects the strong momentum from the first quarter, our confidence in top-line growth, and our ability to find ways to scale our business. Based on the revised growth outlook we have laid out, we have set margin expansion of about 150 basis points in the year, much higher than our previous expectation of 100 basis points and the 50 basis points to 75 basis points goal we had targeted in previous years. This is phenomenal given we are still investing significantly in our business. With that, I'll hand it over to Natalie for her concluding remarks.

Thank you. Thank you, Gary and thank you everyone, on the call today. I'm extremely pleased with all we've accomplished and feel we're well-positioned to create further value for advisors and their clients, as well as our shareholders. We look forward to sharing future updates at upcoming conferences and on subsequent earnings calls. And this concludes our prepared remarks. I will turn the call back to the operator to begin the Q&A.

Thank you. We have our first question coming from the line of Ryan Bailey with Goldman Sachs. Your line is open.

Hi, good afternoon. I was just wondering if we can get a quick update on the advisor managed portfolios. I know you said, you'll start breaking out the assets once it becomes a bit more meaningful, but if you can give us an indication of maybe how many advisors sit on the platform now or how many are using it, whether you've seen any wallet share gains from those advisors, and then how you're thinking about pricing and how those conversations are going?

Thanks, Ryan. Appreciate the question about AssetMark Managed Portfolios. AssetMark Managed Portfolios, as you know, they're a subset of the offering that we've put in place for RIAs, so a subset of the AssetMark Institutional offering. And as I said in my prepared remarks, we're really happy with how the AssetMark Institutional offering is going and are tracking 14 points ahead of plan, which is fantastic. What we're focused on is, we're focused on attracting RIAs to our platform and providing the services that those RIAs need from AssetMark, and a piece of that is AssetMark Managed Portfolios, the ability to trade their own sleeve of a portfolio on our platform, but by no means is it the only piece. The community, the access to investment solutions, the ability to participate in our growth programs, all of those things are important to RIAs and specifically subscale RIAs. Even so, within AssetMark Institutional, we have seen adoption of our AssetMark Managed Portfolios, particularly from the larger RIAs that are on our platform. And the conversations are going well as it relates to pricing. Our approach to pricing isn't specific pricing for the technology itself, but to look at the whole relationship and make sure the whole relationship price works for us and our margins and then also for the advisor and what they're trying to achieve. And so I would say that the pricing conversations and pricing negotiations are going well, because what attracts RIAs to our platform isn't just AssetMark Managed Portfolios, but the entirety of the solutions we can offer. How much we can help them outsource their business and then refocus that time on growth. And so while I didn't give you, Ryan, any specific numbers on the number of advisors using AssetMark Managed Portfolios, I know that the top-line metric we use, which is the growth of the number of advisors and how many are attracted to our platform, is growing quite nicely right now in the first two months.

Got it. Okay. Thank you. And then maybe you mentioned that you have an alternative investments offering that's coming through AMI as well. Was just wondering, maybe specifically for that, is there a way we should think about revenue contribution from that over time?

Yes. As it relates to AssetMark Institutional Alternative Investments platform, we announced a partnership with iCapital to provide our advisors with access to an array of alternative investments offerings that have been diligenced and that are easier for them to administer than it would be if they go direct. Because we are partnering for that offering, it does contribute revenue, but it's immaterial. What's really more important is the holistic relationship with the RIA advisor.

Got it. Thank you. I’ll jump back in the queue.

Sure. Thanks Ryan.

We have our next question coming from the line of Bryan Wynn with Credit Suisse. Your line is open.

Hey, it's here with Bryan. Congratulations Natalie and Gary. Quick question Gary and Natalie, I wonder, can you give us a sense of how we should think about the revenue impact from the stepped up investment? I mean the over performance gave an opportunity to step up some of the investment, but how are you thinking about that from a revenue perspective as it relates to 2021 into 2022?

Thanks so much for the question, Kevin. Gary, do you want to take that one?

Sure, Hey Kevin, How are you doing?

Hi Gary.

So, look, we are – I'm trying to think of the right way to put it in context for you, Kevin, right. So, we are focused on the investment resulting in that double-digit top-line growth with margin expansion creating the double-digit, mid-teens EBITDA growth that we target every year. What we're trying to do with our investment is broaden our offering, both for existing advisors so they can grab share of wallet, as well as to bring in new advisors. So, we're not going to be able to give you an IRR on the investment that we're bringing in. All the investments we're making are designed to attract assets from existing advisors, as well as bring in new advisors, particularly RIAs. Is there a way I can – go ahead.

Yes. No. That's helpful, Gary. I was thinking more, is there any way to think about how much revenue was associated with the incremental investment, whether it's a percentage associated with it? Because obviously what's nice is you've been able to step up the investment, but also – or rather, maintain the investment, but then also drive some incremental adjusted EBITDA, which is a nice outcome for you folks.

Yes. I mean, you're absolutely right. That's exactly the right way to think about it. The way we characterize it is, the new assets coming in, particularly on our managed platform, is a very high, what you would call, incremental margin, right. And so, we view it more as, we have the investment to bring in the asset so that we can recognize that revenue at a much better margin in our overall book. That's how you create that margin expansion.

That's helpful. And then just real quick, Gary, is it too early to start thinking about impact of interest rates as it relates to maybe 2022 or just any shifts in thinking around rates, just given some of the recent activity?

You mean like Janet Yellen saying today that rates might go up? That was exciting. So, I do think it's a little early to talk about it. We always disclose our cash and what we're earning. We earned 31 basis points on the cash right now. So, we're not baking it into a near-term outlook for ourselves. So, the numbers we talk about for 2021 do not assume any interest rate improvement, but one can hope that in 2022 or by 2023 we’d see some movement. Natalie, do you have anything to add on that?

No. Other than to say that, as we've disclosed in the past, for every 25-ish increase in rates, we capture just shy of 20 basis points of it, or at least that's what we've done in the past. Clearly, past isn't exactly equal to what will happen in the future, but for modeling purposes, that might be a way to handle it.

That’s awesome. Thank you all.

We have our next question coming from the line of Patrick O'Shaughnessy with Raymond James. Your line is open.

Hey, good afternoon guys. In light of your proxy being filed last week, I want to touch base on AssetMark's Board composition and ownership. I believe that five of your directors are affiliated with Huatai, which still owns around 70% of your shares. Can you provide an update on how close AssetMark's relationship with Huatai is and whether there's any update on Huatai's ownership plans?

Yes. I'll take that one. So Patrick, thanks so much for the question. You are correct that five of our Board members are employed by Huatai, one in the U.S. and the others outside of the U.S. A couple of things to note on that. The first is that they are our majority shareholder, as you mentioned. They own about 70%, a little over 70% of us. And they believe in AssetMark for the long-term and remain very pleased with the phenomenal results that AssetMark has delivered for them. And as our top shareholder, they are excited about the results that we just shared with you and our strategy and our mission and our strong operating and financial performance. With that said, both Huatai and I agree that our strong fundamentals are not really reflected in our stock price right now, and the underlying drivers of this involves improving investor demand and improving the relatively low trading volume, and fixing these issues is one of the Board's, including Huatai's, top priorities, as well as mine and Gary's for this year. And then finally, I'm having great dialogue with the Board and our controlling shareholder right now about their ownership plans and the status of the shelf offering. And we know we need to provide incremental clarity to you and to our shareholders. That's something we're working on right now. So, I guess a summary of that is, we understand the question and given where AssetMark is right now in terms of its fundamentals, we're incredibly excited about the company and know that we need to provide clarity as it relates to the shelf filing and are working on that.

Got you. Really appreciate that detail. Thank you. And then a question on your share of wallet for your engaged advisors, where would you guys estimate that stands today? Maybe where was it a year ago? And where do you realistically think that it can go over time?

So, why don't I start that one, Gary, and then you can provide more details?

Sure.

So, our share of wallet for our engaged advisors, it varies depending on the level of engagement. It ranges, you know, we have the lowest level of engagement, which is over $5 million, and then the highest level of engagement, which is above $75 million. We actually have many clients on our platform that are well above that. At the higher tiers, our share of wallet ranges from 80% to 100%, and at the lower tiers, it can be much smaller. The great news about that is there's potential relationship share of wallet growth potential from our advisors. And it's one of the main reasons that we look to add new types of solutions to our platform, like Alternative Investments so that formerly unaddressable share of wallet becomes addressable. We did that with our AssetMark Managed Portfolios offering. We've done it with Alternative Investments by adding some fixed income solutions to our offering. All of that expands the addressable wallet. But know that the share of wallet ranges are quite wide depending on the level of engagement. And Gary, maybe I'll hand off to you if you have more specifics.

Sure. So, I would say, we reiterate what Natalie was saying about, at the high-end. Those advisors who have a large amount with us, naturally they have a higher share of wallet with us. I would say, generally speaking though, if you look at the 2,600 engaged advisors, their share of wallet with us on average, probably somewhere in that, sort of 40% to 50% level, but because it's almost a self-fulfilling thing. We are focused on, let's say – let’s use those 2,600; we focus on the share of wallet, how can you help those advisors bring more assets to our platform? At the same time, you're having the new producing advisors coming on and the new class of engaged advisors starting out in the lower end. And so, our overall percentage has moved along in that, let's call it, 30%, 40%, 50% range. But what you're seeing, when we talk to you about the growth of engaged advisors and their percent on our platform, is the evidence that the existing advisors are moving up the ladder and we're replacing them with new advisors who give us more runway for growth in the future as well.

That’s very helpful. Thank you.

We have our next question coming from the line of Kenneth Worthington with JPMorgan. Your line is open.

Hi, good afternoon. So, net sales recovered to above your target organic growth rate. I wanted to dig into a bit more of the factors that might influence the growth over the next few quarters. So, I guess, number one, you went over this fast. You mentioned another handful of departures and maybe $450 million of outflows that might take place and I thought it might be 2Q as a result. Just a little more flavor there. I'm curious to see if you thought that either stimulus checks or tax refunds might have had any noticeable, positive impact on net sales in 1Q. Then, when you talk about the migration back to face-to-face meetings, it seems like AssetMark and your advisors have both adapted well to the remote work environment. Maybe, to what extent is face-to-face – might that just be a positive or does it have the likelihood of being more significant? So, thanks.

Sure. Thank you so much, Ken. I appreciate those questions. Gary, why don't you take the question about outflows and more detail on outflows, and then I'll take the question on stimulus checks and refunds and the impact on 1Q results. Then as it relates to the return to the road and the sales impact, we'll share that one.

Yes, that sounds great. How are you doing, Ken, I hope you're doing well? What we said was there's two advisors. We two advisor offices. They have about $450 million of assets. We do believe most of that will go in 2Q. It could bleed over to 3Q. We mentioned that, Ken, because back a quarter ago, we actually thought those were going to happen in first quarter, but it was delayed as things often are and whatnot. So, we will break those out if they do happen in 2Q. We do feel that's a one-time thing and certainly is part of our core numbers, but a part of our numbers, but not part of our core. And so hopefully that gives you the color. Again, we believe that will be the last time we talk about these one-offs and the acquisitions, because it's basically a closed story, but again, we thought it was going to happen in the first quarter. It's been delayed.

Got it. Thank you.

And then as it relates to stimulus checks and tax refunds in the first quarter and their impact on the first quarter results, while I can't say specifically how much of the first quarter results are related to either one of those two things, what I can say is that typically the assets on our platforms are transferred in. They're transfers of other assets rather than cash. We didn't see any unusual increase in new accounts opened with cash. In fact, we saw instead broad improvement or broad increases in contributions from accounts of all size, from advisors who are engaged with us, from various different places, meaning various different former suppliers or providers of our advisors – I mean, of our clients. So, growth in contributions from existing clients of advisors, cash, non-cash at the same rate that there has always been, a growth of advisors, them attracting more clients to the platform and then transferring assets to us, and then growth from new advisors, and specifically attracting new advisors that are larger than the advisors that we've attracted in the past. Then, Gary, I didn't know if there's anything you wanted to add to that before I get to the sales impact of returning to the road.

No, you got it.

As far as the sales impact of returning to the road goes, a few things, we are returning to the road in a very careful and measured way because obviously the safety of our associates, as well as their clients is the most important thing to us. And so, you'll be seeing a waved approach to the return to the road as each of these associates completes their second vaccine and schedule meetings with their clients. In the second quarter, the return to the road is gradual, and then we expect it to accelerate in the third quarter as vaccinations progress and we gain experience. Our sales teams and our clients are incredibly excited to see each other and to work together on initiatives that are more complex. And then also to reengage with new advisors who were a little hesitant to completely change their outsource provider without meeting members of the team in person. We're very hopeful that this will have a positive impact, but we clearly can't say anything because we don't know what the exact rate of vaccinations will be, both for our associates, as well as our clients.

Great. Thank you so much.

Thanks Ken, nice hearing from you.

We have our next question coming from the line of Gerald O'Hara with Jefferies. Your line is open.

Great, thanks. Maybe just a quick one from me. I'm curious to kind of hear your thoughts on the bank trust channel highlighted here in your kind of addressable market slide, but, you know you kind of highlight talking about a low risk entry into this channel and presumably through OBS, but if you could talk a little bit more about how you see that kind of playing out and perhaps what resources you might put behind it to accelerate some of that wallet share? Thank you.

Thanks so much for the question. You are correct. The reason we talk about that as a low risk entry is because bank trust was a channel that OBS served and one that, at AssetMark, we want to serve. And so, what we have done in the transition process is, we've learned a lot about bank trust clients, existing bank trust clients, and potential bank trust clients, and the technologies they use and how – the services that they’d like to see from an outsource provider like AssetMark. We successfully transitioned several of the bank trust clients from OBS over onto our platform. And we’re learning from those relationships. In addition, we've hired a sales specialist to work on the bank trust channel and to help us attract new bank trust opportunities to AssetMark. As we are with AssetMark Institutional, we're in the early innings of our bank trust offering, and very much learning and determining what types of incremental investments we'll need to make. And so no real specifics at this time, other than to say that many of the transitions have, many of the transitions have completed and we're happy with where we are.

I suppose the follow-up, staying on the same slide for a moment, do you anticipate, sort of as you kind of get more advisors out on the road or more associates out on the road meeting with advisors, there's an expectation for kind of an uptick in assets in motion, or have advisors gotten comfortable with the current work from home environment or what have you over the past six months, and then it'll just be more incremental growth opportunity for you all?

I'm sorry. Would you mind repeating that? I didn't quite understand what you're asking.

Sure. I think there's sort of a thesis whereby, as you're out in front of advisors a little bit more, there's an opportunity to do a little bit more recruiting of RIAs, broker dealers, otherwise, blocks of business might be willing to move, or on the flip side of that, what was going to move has already moved and it'll just be regular way type of recruiting.

Yes. So, we think it's a combination of those that we absolutely know of and can see in our , opportunities that have stalled because the RIA or broker dealer affiliated advisor would like to meet the team in person before they make a big decision to outsource. In addition, we've gotten very effective in our remote recruiting. And so, we've seen success. The larger the business transition, it feels the more important it is to meet in person. And so, I know I speak for our entire sales team when I say how excited they are to begin meeting folks in person. They believe that that will help them attract new advisors in the medium-term.

Okay, great. Thanks for taking my questions.

We have our next question coming from the line of Michael Young with Truist Securities. Your line is open.

Hey, thanks for taking my questions. I wanted to start with the growth outlook for the year, Gary that you laid out. It sounds like there's a good market share gain opportunity ahead of you from the reopening, but does the guidance contemplate some macro impacts from maybe lower savings rates, lower stimulus, those sorts of things as well? Could you maybe just talk about that qualitatively?

Yes, so I think the quick answer is no, Mike. The outlook just contemplates a kind of average market growth of about 3.5%, right? And so, it's kind of unknown what's going to happen with these stimulus, like if the government gets another $2 billion – $2 trillion with a T, right? Into the economy, what that's going to do for savings and whatnot. So, our outlook is, I think, a little more on the conservative side. We just assume a steady 3.5% annualized growth rate in the market, starting – we lock in first quarter and we're forecasting going forward. We feel good about our outlook because we built it in the beginning of the quarter, right? As we're standing right now today, we've already recognized almost half, collected actually, half of our revenue for the year because we did that in April, right? And so when you have market appreciation or other appreciation to assets for the second half of the year, that's going to give you a great tailwind for the following year, opposed to the current year.

Right. That makes sense. I guess, maybe another bigger picture question, We've heard potentially a higher tax rate, higher capital gains tax rate; have you all done any sort of review or thought process around that, whether it be new products or impacts to your current business, et cetera, that you would look to take advantage of if something like that changed?

Yes. So, clearly, as we think about the solutions that our advisors will need from their clients, understanding macro trends like that is incredibly important. Already on our roadmap for 2021, to begin working on in 2021, is enhanced tax services, so expanding to offer separately managed accounts where there can be individual tax services provided with the account at the advisor's direct direction. In addition to that, tax transition services will become even more important as and if taxes increase. And so we're working on expanding our services to include tax outsourcing. And then clearly, we and our compliance and regulatory department are keeping our eye on any emerging trends or any emerging themes to make sure that we're delivering thought leadership, we’re delivering consulting support and services to our advisors so they can answer their client's questions and they feel well prepared for whatever changes might come.

Okay, great. Thank you.

And there are no further questions at this time. I will now turn the call back over to Natalie.

Thank you so much. And I just wanted to say thank you to all of you for joining the call today. And I'm looking forward to getting to know all of you in the coming months and talking to you again in the third quarter. Thanks.

This concludes today's conference call. Thank you for participating. You may now disconnect.