Silvercrest Asset Management Group (SAMG) Q4 2020 Earnings Call Transcript

Silvercrest Asset Management Group (SAMG 0.61%)
Q4 2020 Earnings Call
Mar 05, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to the Silvercrest Asset Management Group Inc. fourth-quarter and year-end 2020 earnings conference call. [Operator instructions] Please note this event is being recorded. Before we begin, let me remind you that during today's call, certain statements made regarding our future performance are forward-looking statements.

They are based on our current expectations and projections, which are subject to a number of risks and uncertainties, and many factors could cause actual results to differ materially from the statements that are made. Those factors are disclosed in our filings with the SEC under the caption Risk Factors. For all such forward-looking statements, we claim that the protection is provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as of the date hereof, and Silvercrest assumes no obligation to update them.

I would now like to turn the conference over to Rick Hough, chairman and CEO of Silvercrest. Please go ahead.

Rick Hough -- Chairman and Chief Executive Officer

Good morning. Thank you, and welcome to our fourth-quarter and year-end results for 2020. Silvercrest ended the fourth quarter of 2020 and the year on a high note, paving the way for a very good start to 2021, with a potential new high revenue run rate. Silvercrest's discretionary assets under management, which drive revenue, increased 15% during the fourth quarter to reach $20.6 billion due to both organic, as well as market growth.

The firm's total assets under management grew to $27.8 billion by the end of the fourth quarter. These new AUM high watermarks for the firm represent increases of 10.8% in total AUM and 9.6% in discretionary AUM year over year from the end of 2019 to the end of 2020. The firm's financial measurements all meaningfully improved for fiscal-year 2020 over 2019. Revenue increased 5.7% to $108 million from $102 million.

Firm's adjusted EBITDA increased 6% to $30 million, and adjusted diluted earnings per share increased 9.4% to $1.28 per share from $1.17 per share. The firm's full 2020 adjusted EBITDA margin was 28.1%. Our outsourced chief investment officer initiative won its first OCIO clients during the third quarter of 2019, and we ended 2019 with $300 million in OCIO AUM. That business has more than doubled during 2020 to over $700 million, and we hope to cross the important $1 billion AUM threshold during 2021.

We're proud of building our OCIO capability organically from scratch, and our team and performance track record remains strong. The OCIO new business pipeline has grown, and we expect continued success in the OCIO business during 2021. With strong relative performance, Silvercrest's institutional equity, new business opportunities are rebuilding across the product suite. We expect new sub-advisory relationships to continue adding new AUM and for search activity to pick up during 2021.

We've hired new high-net worth portfolio management professionals during 2020, and we'll continue to add new talent, both to maintain a high level of client service and to grow the business. Silvercrest has a track record of growing new talent and will continue to do so, especially with the current M&A environment for wealth management firms remaining active and expensive. We believe our brand, culture, capabilities, and technological innovation make Silvercrest a premier partner for select businesses and professionals. Regardless of the environment, Silvercrest will continue to seek to effectively deploy capital to complement our organic growth.

I'll be asking for questions after Scott Gerard's presentation, our CFO.

Scott Gerard -- Chief Financial Officer

Thanks, Rick. As disclosed in our earnings release for the fourth quarter, discretionary AUM as of December 31, 2020, was $20.6 billion, and total AUM as of the end of 2020 was $27.8 billion. Revenue for the quarter was $28.4 million and reported consolidated net income for the quarter was $3.5 million. Looking further into the quarter, again, our revenue was $20.4 million, which represented approximately a 2% increase over revenue of $27.8 million for the same period last year.

This increase was driven by net client inflows and market appreciation in discretionary AUM. Expenses for the fourth quarter were $25.1 million, representing approximately a 6% increase from expenses of $23.7 million for the same period last year. This increase was primarily attributable to an increase in compensation and benefits expense of $0.6 million and an increase in G&A of $0.8 million. Comp and benefits increased by $0.6 million or approximately 3% to $18.2 million for the three months ended December 31, 2020, from $17.6 million for the quarter ended in the prior year.

The increase was primarily attributable to increases in the accrual for bonuses, salary, and benefits expense primarily as a result of merit-based increases and newly hired staff and equity-based compensation expense due to an increase in the number of unvested restricted stock units and unvested nonqualified stock options. G&A expenses increased by $0.8 million or approximately 13% to $6.9 million for the fourth quarter of 2020 from $6.1 million for the fourth quarter of 2019. This was primarily attributable to increases in the fair value of contingent consideration related to the Cortina acquisition and occupancy and related expenses, partially offset by decreases in professional fees, travel, and entertainment expenses as a result of the pandemic and lower portfolio and systems expense. Reported consolidated net income was $3.5 million for the quarter.

This compared to $4.2 million in the same period last year. Reported net income attributable to Silvercrest or the Class A shareholders for the fourth quarter of 2020 was approximately $1.9 million or $0.20 per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and non-core, nonrecurring items, was approximately $7.3 million or 25.7% of revenue for the fourth quarter of 2020, compared to $7.3 million or 26.3% of revenue for the same period in 2019. Adjusted net income, which we define as net income without giving effect to noncore and nonrecurring items and income tax expense, assuming a corporate rate of 26%, was approximately $4.4 million for the quarter or $0.31 per adjusted basic and diluted earnings per share.

Adjusted earnings per share is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS. And to the extent dilutive, we had unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted earnings per share. Looking at the full year, revenue for 2020 was approximately $108 million, representing approximately a 6% increase over revenue of $102 million for the same period in 2019. This increase was primarily driven by net client inflows and market appreciation in discretionary assets under management, including $1.7 billion in assets under management acquired on July 1, 2019, in connection with the Cortina acquisition.

Expenses for the year ended December 31, 2020, were $85.7 million, representing approximately a 3% increase from expenses of $83.3 million in 2019. Compensation and benefits expense increased approximately $2.3 million during the year ended 2020 compared to the same period in 2019. G&A expenses increased by approximately $0.1 million during 2020 compared to 2019. Looking further into compensation and benefits, it increased by $2.3 million, or approximately 4%, to $62.4 million for 2020 from $60 million for 2019.

The increase was primarily attributable to an increase in the accrual for bonuses, salaries expense primarily as a result of merit-based increases and newly hired staff, including the addition of Cortina staff and benefits costs, partially offset by a decrease in equity-based compensation expense due to a decrease in the number of unvested restricted stock units and unvested nonqualified stock options. G&A expenses basically remained flat at $23.3 million for 2020. The increase was attributable to increases in the fair value of contingent consideration related to the Cortina, Neosho, Cappiccille acquisitions. Depreciation and amortization expense related mainly to the amortization of intangible assets related to the Cortina acquisition and to the renovation of our office space in New York City.

We saw increases in occupancy and related expenses, primarily due to additional cleaning due to the pandemic, increased portfolio and systems expenses, and insurance costs. These increases were partially offset by decreases in the fair value of contingent consideration related to the Jamison acquisition, lower travel, and entertainment expense as a result of the pandemic, in addition to lower professional fees, office expenses, and storage and moving expenses. Reported consolidated net income was approximately $17.5 million for 2020, compared to $15.4 million for 2019. Reported net income attributable to Silvercrest or, again, to Class A shareholders for 2020 was approximately $10 million or $1.05 per basic and diluted Class A share.

Adjusted EBITDA was approximately $30.3 million or 28.1% of revenue for 2020, compared to $28.6 million or 28% of revenue for 2019. Adjusted net income was approximately $18.6 million for 2020 or $1.29 and $1.28 per adjusted basic and diluted earnings per share, respectively. Looking quickly at the balance sheet. Total assets as of the end of 2020 were approximately $213.8 million as compared to $214.2 million at the end of 2019.

Cash and cash equivalents at the end of 2020 were approximately $62.5 million, which compared to $52.8 million at the end of 2019. As of December 31, 2020, total borrowings were $12.6 million. And as of the end of 2020, total Class A stockholders' equity was approximately $70.7 million. That concludes my remarks, and I'll turn it over to Rick for Q&A.

Rick Hough -- Chairman and Chief Executive Officer

Great. Thanks. We're ready to take questions at this time about the quarter and the year.

Questions & Answers:

Operator

[Operator instructions] The first question is from Sumeet Mody with Piper Sandler. Please go ahead.

Sumeet Mody -- Piper Sandler -- Analyst

Thanks. Good morning, guys.

Rick Hough -- Chairman and Chief Executive Officer

Good morning.

Scott Gerard -- Chief Financial Officer

Good morning.

Sumeet Mody -- Piper Sandler -- Analyst

I wanted to start on the institutional business. Maybe you could provide an update on the current 6-month actionable pipeline between value and growth. I know performance levels remain strong across the board. Just kind of wondering where you're seeing the demand kind of most.

Rick Hough -- Chairman and Chief Executive Officer

Yes. Right. So the pipeline is rebuilding, which is nice. Our total 6-month kind of institutional pipeline is currently at about $1.34 billion.

It should be noted those are -- that's not a dream pipeline. That is where we've been invited or in files and have pretty good prospects. So that's looking strong, and it seems to be growing. As you would expect, given the bulk of our assets in value and the fact that it has long been established in the marketplace at Silvercrest, we have more assets there than in growth, but the growth pipeline is growing, which is nice to report as is the OCIO pipeline.

In fact, the OCIO pipeline is getting close to $340 million. And as I mentioned in my opening remarks, the total OCIO AUM is now over $700 million. So we get some of those wins as that pipeline grows, and we will cross the $1 billion threshold, which we view as really important for establishing ourselves in the marketplace and growing that business. The growth strategies have absolutely incredible performance.

We are just so proud of that team. They did extremely well relative to benchmarks. As you noted, all of our strategies are doing very well. And we spent a lot of time introducing those strategies, and it can take some time, but that pipeline is building, and we're excited about the possibilities, now that they've got some performance at Silvercrest under their belts.

Sumeet Mody -- Piper Sandler -- Analyst

Great. Thanks, Rick.

Rick Hough -- Chairman and Chief Executive Officer

And that's -- I'm not exactly sure what that pipeline is, but I think it's definitely growing. It's probably closer to $1.50 billion right now.

Sumeet Mody -- Piper Sandler -- Analyst

OK. Great. Thanks for that color. I just wanted to shift focus to the kind of inorganic growth front.

I saw the commentary around prices remaining elevated for targets. But can you talk about what kind of growth you're looking for on the asset management side? Is it more scale-focused? And are there certain products you're looking for, in particular, that you're trying to diversify into? And would it be fair to assume on kind of the high-net worth side of the business to be more kind of individual hiring or team lift-outs as opposed to acquisitions?

Rick Hough -- Chairman and Chief Executive Officer

Yes. We pivoted, and I talked about this on the call, really more to looking at and potentially hiring talent to drive organic growth rather than acquire growth at the firm. We've done that successfully. We care a tremendous amount about our culture.

We know how to cultivate talent and bring them in. It's also really helpful to dealing with potential transitions, whether that's with the family or folks who have been at the firm a long time. So it's an important emphasis. And is a little harder in some respects because it affects your earnings and EBITDA right away, right? There's no tax benefits.

But it's worked for us, and we're excited about the possibilities there. On the acquisition front, I'm not really looking to add to my product suite. What we were able to do in 2019 with the growth colleagues was to balance out our value equity exposure and to grow in another direction in a way that was desirable for the clients, as well as the firm. We're not looking to be a financial supermarket.

And I think we've got enough to grow there with a lot of runway. I'm actually very excited about what we can do with the growth in institutional assets. So not really looking for much in that space. With regards to firms, it's a very expensive market, driven by a lot of factors.

I don't need to comment on it here. We're going to put a premium on not just desirable firms that have a good business, but on the professionals and how they fit into this firm, their geography, and more than one way that we can see growing them organically. We don't think it's good enough just to merge with another firm to get size. We want to be accretive as early as we can and have a vision and path for how to grow it.

We are always in different discussions with folks. And because I think this is such a desirable firm in a variety of ways, I mentioned that in my early remarks, we're going to get good looks at some of the premier properties that we're most interested in.

Sumeet Mody -- Piper Sandler -- Analyst

Great. Thanks. And then just one last one for me before I kind of hop back in the queue. But recurring cash comp ratio ended the year at 56.7%.

It's about 120 basis points above last year or the prior year. Can you talk about the drivers of that increase? And that kind of leads into the EBITDA margin a little bit. Revenues hit a record in the quarter, but you guys are sort of managing to the low end of that range on 25% EBITDA margin. So is that kind of due to the pickup in hiring in the quarter? Or if you do pick up hiring from here, where do you see that margin kind of going throughout 2021?

Rick Hough -- Chairman and Chief Executive Officer

Yes, really good question. I think it's an important one. I wouldn't look at our EBITDA margins on a quarterly basis when you're talking about the comp ratio. Yes, we did push it down.

But really, what's happening in the fourth quarter. And if you look at our history, the fourth quarter, it tends to be a little more volatile. You're getting something of a true-up with regards to comp once all the performance is in for the year and in how that affects the firm. So on an annual basis, it was just over 28%, which is in line with our high EBITDA margins.

I have often said in these calls that once we're hitting 29%, 30%, maybe even a little over, we're probably not investing in the business enough. The other thing I pointed out at previous call is that when we do aggressively grow the business, we could get down to that 25%, even 24% of EBITDA because we're investing in future growth. And when we have done that, we have successfully grown the business. The fact is we made some hires in 2020, pretty early in 2020, which means we had a full year of comp, and we came out with 28%.

So I intend to do more, we could hit that EBITDA. To what extent? Honestly, I don't know, because you have to keep in mind that the people we hire also grow the business, which grows the top line. Second thing. That ratio, that 28% is also on very substantially lower revenue that we experienced for Q2 due to the sell-off in the markets in the early part of the year.

So a lot of the year was digging out of that hole. And of course, you know where we ended up. So even though we did some hiring, a substantial effect there wasn't the hires. It was top-line revenue that we faced in the early part of the year that drove that margin down a bit.

The final point is that compensation for the growth equity team was much higher than expected, super high-class problem. We didn't mind that at all. They're very performance-oriented. They're paid on performance.

And that's a really great thing because they did so well. A bit unexpected, but kind of happy thing to happen. That's only good for our clients, the investors, as well as shareholders. So that's a bit of a complicated mix, but that's how it works out.

And I would say on a steady-state basis, we're either at or below kind of our general target of 55%. But I have to say, we've got to invest in the business to grow it. And I'm not afraid to hit it to do that.

Sumeet Mody -- Piper Sandler -- Analyst

Great. Thanks, Rick.

Operator

The next question is from Sandy Mehta with Evaluate Research. Please go ahead.

Sandy Mehta -- Evaluate Research Ltd -- Analyst

Yes. Good morning and congratulations on the strong AUM and investment performance. Just following up on the previous question, most of my questions were answered. So for modeling purposes, I mean, you explained how the comp at 64% of revenue was slightly -- I mean, similar to the 63% last year.

But for modeling purposes, the other quarters of the year, I think you said that we should still use 55% to 56% of revenues as sort of the targeted level of comp to revenues?

Rick Hough -- Chairman and Chief Executive Officer

Yes. I think -- go ahead, Scott.

Scott Gerard -- Chief Financial Officer

Yes. Hi, Sandy. Yeah. So we've talked about 55% as being somewhat of a target.

And of course, it depends on the climate. We've discussed previously, to the extent that we're making investments to the business where individuals will be hired and revenue will follow later on as they're integrating and building up their respective books of business. That may drive the compensation ratio higher. Look, in prior periods, we've also come in under as opposed to just saying, all right, let's just -- we're under, but we've talked about a 55% target.

So in addition, as Rick mentioned, with the lower revenue in Q2, that obviously put pressure on the comp ratio as a whole. So it's something that we think about. Again, the fourth quarter usually represents a true-up because certain things don't crystallize until the end of the year. And so it's something that we will continue to evaluate as the business grows and changes when the mix of compensation changes.

But like I said, we'll continue to use that somewhat of a soft tool, but it is subject to change depending on what happens. So again, we ended the year at 56.7%. The fourth-quarter ratio is artificially higher because of the true-up we made. So you really have to look at it on a full-year basis to get a fair comparison.

Rick Hough -- Chairman and Chief Executive Officer

I'm going to add one thing to this. I don't think it's productive to focus too much on a quarter, especially that last one for comp purposes. This is a business where we make investments, and we may not have growth right away. And then it catches up.

But if we don't make the investment, we could be well under 55%. It's important to look at it on a rolling basis over time. Despite the investment, it's a pretty good year.

Sandy Mehta -- Evaluate Research Ltd -- Analyst

Yes. Great. And one other question. As you mentioned, your small-cap performance was just sort of out of the ballpark, very good.

Are there any thoughts of launching some more small-cap strategies organically? And then the other thing, too, is that small-cap performance in general, the small-cap equity markets have been very strong since December. And you talked about your institutional pipeline, but are you seeing more interest in your strategies just because there's more interest and small-cap equity indices have done really well, particularly in the last few months? Thanks.

Rick Hough -- Chairman and Chief Executive Officer

Yes. The pipeline is growing for the institutional business, and we do have an expertise in small cap. I don't see us launching additional small-cap strategies. This firm has remained disciplined about where it focuses growth.

We want to be successful with the things we've started and not try to over diversify our efforts. That's a sure way to kind of tap growth and perhaps, lose our focus on what we're doing here. So we're going to stick with what we have and make what we have work. The turn toward small cap, which is helpful, indeed, only provides a bit of a tailwind for us growing that pipeline and succeeding.

So that's really how we view it.

Sandy Mehta -- Evaluate Research Ltd -- Analyst

Great. Thank you.

Rick Hough -- Chairman and Chief Executive Officer

You're welcome.

Scott Gerard -- Chief Financial Officer

Thanks.

Operator

[Operator instructions] The next question comes from Christopher Marinac with Janney Montgomery Scott. Please go ahead.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Hey, thanks. Good morning. I wanted to ask about the AUM growth excluding market appreciation. So it was about 6.5% year over year.

And I was curious, Rick or Scott, if that is a reasonable goal, in general, for this coming year or looking out in the future? And is that something that you manage too as well?

Rick Hough -- Chairman and Chief Executive Officer

Yes. We don't manage to it because on the high-net worth side, which is 75% from the business, it's really lumpy and hard to predict. And you have multiple leaks in the bucket that you're trying to overcome. One big one that we face every year, of course, are taxes.

And that can vary quite a bit. We were hit last for the third quarter of last year with very significant taxes because they were double whammies. There were people who were playing in the third quarter. But also, as you know, taxes were delayed from the normal period due to coronavirus earlier in the year.

So what we really do is try to manage the company and looking at potential growth from a very high level and make sure our professionals have the tools to grow and see where it falls out, to be honest. On the institutional side, again, I'm quite bullish, as you could tell from my commentary earlier on. I think the wealth side produced quite well in 2020. The organic growth ex markets for the year was one of our better recent years, just as an example, just on new accounts alone, before additional cash into those accounts.

But just day 1 opening, we had $614 million in new open accounts in 2020. In 2018, it was $396 million or so. In 2017, it was $360 million. It was a little higher in 2016, about the same.

So it was the best kind of new account opening, organic growth year for years, and, overall, a very good year. Once you count in some of the closed accounts and outflows. It was pretty moderate compared to past years. For example, outflows, net outflows, that is the additions minus the -- plus the subtractions of existing accounts was a negative $70 million for the year.

Well, that was $625 million in 2018. It was negative $306 million in 2019, negative $173 million in 2016, negative $245 million in 2015. So quite strong. That shows a lot of additional inflows despite the natural leak in the bucket at a firm like ours.

So pretty strong organically. And if you look at a lot of firms like ours, it's that strong. It may even be on the high side, but I think we can do that. It's just hard to assess on the high-net worth side, which is 70% of the asset.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

That's all very helpful. Thank you for the color. Just two quick follow-ups. As the OCIO business grows, is the margin on that business is going to be different than the overall firm? I'm just curious on how that will shape up over time?

Rick Hough -- Chairman and Chief Executive Officer

Yes. Too early to say. The way we run it, it's looking pretty similar. But we made investments in that team, and we've got to reach a certain level of AUM as we organize that group to make sure it's profitable.

We were talking about comp. We made the investments to grow that team over other prior years and really finished it out by 2019. And so we're set there, but our modeling shows that will be similar in profitability to the rest of the firm.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Great. Thanks, Rick. And then last one is just on G&A. Does the ratio of G&A kind of fall further over time or would scale? Or is this latest quarter kind of a good benchmark?

Rick Hough -- Chairman and Chief Executive Officer

Yes. Scott got this.

Scott Gerard -- Chief Financial Officer

Yes. On the G&A side, there's not a lot of variability within your G&A. This past year, there were some items that were, like travel and entertainment expense and office expenses, which were artificially lower because of the pandemic. Our consumption is less, and obviously, people are not traveling for business.

But yes, most of our G&A, there's not a lot of variability in it.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Got it. Thank you for the color. Appreciate it.

Rick Hough -- Chairman and Chief Executive Officer

Yes. I'm going to address one other thing on the OCIO, I should have mentioned, and why I think that could be a business that's very similar in profitability to the rest of the business. A lot of OCIO offerings in the marketplace are consultant driven and our consultants like relationships. And that's a perfectly fine way to approach the business and it's very dominant in the marketplace.

As a new entrant, what we are doing is offering our discretionary asset management capabilities in building portfolios for institutions at the OCIO. So it looks much more like one of our wealth management relationships in terms of how we are doing business and partnering with the clients we have on a discretionary basis. That tends to have different fee levels and have staffing requirements that looks more like wealth. So it's a distinguishing characteristic, but it also means that, at least so far, we see that being a business that looks similar to the rest of the business.

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Great. Thanks again, Rick. Appreciate it.

Rick Hough -- Chairman and Chief Executive Officer

Yes. You're welcome.

Operator

The next question is from Robert Maltbie with Singular Research. Please go ahead.

Rick Hough -- Chairman and Chief Executive Officer

Good morning.

Robert Maltbie -- Singular Research -- Analyst

Good morning. I want to congratulate you on executing in a very difficult environment in terms of the year of COVID and the restrictions on face-to-face types of meetings that are probably very conducive to growing relationships more quickly. So congratulations on positive, above industry average AUM growth. I wanted to commend you on that.

Regarding your dividend policy and your continued growth, do you see the prospects for increased dividends this year and next year? And secondly, on the M&A landscape, I know you have been involved with some acquisitions in the past. And I was wondering if you're finding it a fertile environment to look at targets maybe from a valuation perspective.

Rick Hough -- Chairman and Chief Executive Officer

So that's a funny phrasing, a fertile environment from a valuation perspective. I think the market is expensive. I've said that for quite some time. A lot of the firms that are selling at multiples don't have the organic growth, they should have.

The transition plans, they should have. And diversity of revenue that they should have. Capital in the business that they should have in order to justify those things. And just don't think it's great for a firm like ours for use of shareholder capital.

We always have had an organic growth strategy under what we're doing. I think you absolutely must, and we have been very successful, not just at doing a deal accretively when we do them. I think that's very important. But we have an organic growth plan underneath everything we do.

And when things change, you can't necessarily rely on acquired growth. So when that environment, if that environment changes, we'll be ready. That said, there are any number of premier type firms in geographies that we like, that we know extremely well and remain close to and have conversations with. So you never know.

But just speaking very broadly, those are my views on the market. We've got capital to put to work, we're ready and willing, but it has to be the right partner, and we have to have the right organic growth plan underneath it. And we've been successful at that. That is why we have been able to compound earnings per share even on a diluted basis for a sustained period of time and have primarily organically grown this company.

We're just looking for acquisitions to enhance that ability. Number two, you asked about dividends. Dividends are really important, especially for such a small company as ours, in order to pay shareholders and return some capital to them and have them realize a very steady yield on their investment. And as you know, we've got a pretty premier nice one.

We did not choose to raise the dividend most recently, as you probably saw. We have been doing so consistently. We think it's very important to support it. We have obviously plenty of cash to do that, generated by the business.

And we have a policy of supporting that dividend and periodically raising it on a steady basis. We chose not to, most recently, because we think the yield is high enough. And we're looking at other potential uses for our capital to enhance shareholder value and perhaps, have a more rational balance sheet. So we're taking all those options into consideration, in particular, as you noted, because we did not raise the dividend.

Robert Maltbie -- Singular Research -- Analyst

Thank you.

Rick Hough -- Chairman and Chief Executive Officer

You're welcome.

Operator

The next question is a follow-up from Sumeet Mody with Piper Sandler. Please go ahead.

Rick Hough -- Chairman and Chief Executive Officer

Hi, Sumeet.

Sumeet Mody -- Piper Sandler -- Analyst

Hi. Thanks, guys. Just a couple of quick cleanup questions here. But just a follow-up on the non-comp, maybe for Scott.

I've seen a lot of peers take some lessons learned around kind of the non-comp ratio and trying to run a leaner business post-pandemic. I know you guys back out some of the costs in the adjusted number. But do you think you'll be able to run sort of a lower run rate after the pandemic from kind of what you learn once G&A kind of normalizes?

Scott Gerard -- Chief Financial Officer

Yes. One of the things I want to highlight is, and it represents an adjustment that we disclosed is part of our G&A on a GAAP basis includes the effect of the fair value of our various earnout arrangements. So if you're looking at it on an actual reported basis, that tends to artificially impact our G&A because those valuation adjustments are non-cash. Now, there are some areas that we do a good job of trying to negotiate with a lot of our service providers where we negotiate annual fee cap increases so that we can make our G&A not only more predictable but also to align the benefits of these services with reasonable increases.

But in any situation, because a lot of our G&A is fixed in periods where revenue might be lower, your revenue is going to drop sooner than you can renegotiate some of your fixed costs. So some of our actual expenses will, and I'm really focusing more now on a cash flow basis, will go up as the pandemic ends and -- such as travel and entertainment expense and office expenses, those will normalize more. But on a cash flow basis, there are other expenses that will go down. Primarily, you referred to the adjustments for COVID, employees that normally you'd be able to hand documents to somebody on your floor or on another floor in your office, you're now FedExing between employees.

So those type of costs will go down. But in general, we've done a good job of controlling our G&A. And absent some of those unusually lower items and these extra FedEx costs or some extra equipment for individual homes, that type of stuff will adjust out. And at the end of the day, the pandemic-related costs that we have added back have not been overly compelling or significant.

Rick Hough -- Chairman and Chief Executive Officer

Sumeet, I want to add nonfinancial color to this, but I think that paints a bit of a picture that we're interested in, which is, number one, our people are just raring to get back on the road, especially our institutional marketing folks. It's still a people business. Zoom is OK. But everyone is sick of it.

So I expect T&E to go up. Will it ever be as high as it was before? I don't know, it remains to be seen. But all I know is it's important for us to be seeing our clients and getting out there. One thing I do think, and this is more of a long-term issue, but it's helpful to the company, is I do think that the need to expand into office space will be less important as we grow with personnel.

This is a people business. The culture here is extremely important. We visit offices and meet and talk on the phone, of course, but I just feel there's a lot lost in a firm like this with a completely virtual environment. However, I think there will be a lot more flexibility, in particular, with some folks who currently have a footprint, physical footprint, I think they can become a lot more flexible, which means I can hire people and grow the business and not have to expand into space as quickly, which overall, as we grow over time, lowers that expense compared to the revenue as a whole.

Sumeet Mody -- Piper Sandler -- Analyst

Great. And thanks for that color, Rick. Last one for me, just on the fee rate. I saw it kind of a little bit volatile throughout the year but ended up pretty much in line with 2019.

Are there any considerations for 2021 between kind of the expected growth of the asset management and high net worth businesses?

Rick Hough -- Chairman and Chief Executive Officer

Well, high net worth kind of fits in OCIO, really. OCIO brought in a couple of the two biggest accounts last year. And that kind of -- just in terms of its -- the way it looks sort of sits between pure equity institutional relationships and wealth relationships, given the nature of boards and the institutions you're dealing with. I don't have an expectation for one or the other, but I would suspect that institutional growth will outstrip our high-net worth growth in the coming year just because of the size of the pipeline and its growth, and what I see is the opportunity.

But there's really no way to -- it would be false precision for me to tell you what I actually expect for sure.

Sumeet Mody -- Piper Sandler -- Analyst

OK. Great. Thanks.

Rick Hough -- Chairman and Chief Executive Officer

You're welcome.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Rick Hough for any closing remarks.

Rick Hough -- Chairman and Chief Executive Officer

Great. Thank you very much. I appreciate everyone's support for taking the time to ask so many good questions today about our fourth quarter and the year 2020. It was a good year.

We saw some higher-than-industry average organic growth, saw a great surge with the markets as well that really supported us coming into 2021 at an all-time high in discretionary assets and total assets with growing pipelines in the business. So we look forward to reporting to you about that first quarter as soon as that information is available, and I appreciate you joining us. Thanks so much.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Rick Hough -- Chairman and Chief Executive Officer

Scott Gerard -- Chief Financial Officer

Sumeet Mody -- Piper Sandler -- Analyst

Sandy Mehta -- Evaluate Research Ltd -- Analyst

Christopher Marinac -- Janney Montgomery Scott -- Analyst

Robert Maltbie -- Singular Research -- Analyst

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