AssetMark Financial Holdings Inc (AMK) Q3 2021 Earnings Call Transcript

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AssetMark Financial Holdings Inc (AMK -2.89%)
Q3 2021 Earnings Call
Nov 9, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, everyone, and welcome to the AssetMark's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] 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 John Hamilton -- Head of Investor Relations

Thank you. Good afternoon, everyone, and welcome to AssetMark's Third Quarter 2021 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 the remainder of 2021 and 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 the prepared remarks. It can be accessed by our IR website at ir.assetmark.com. Before we get started, I'd like to note that certain statements made during this conference call are forward-looking statements.

These forward-looking statements represent our outlook only as of the date of this call, and actual results could differ materially. Additionally, during today's conference call, we'll be discussing net revenue, adjusted EBITDA, adjusted EBITDA margin and adjusted net income, all of which are non-GAAP financial metrics. Please refer to our earnings press release and SEC filings for more information on forward-looking statements, risk factors associated with our business and required disclosures related to non-GAAP financial information.

With that, I'll turn the call over to my colleague, Natalie, take it away.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Thanks so much, Taylor, and good afternoon, everyone, and thank you for joining our third quarter earnings call. I hope everyone is doing well today. Starting on slide three, I just wanted to highlight that AssetMark continues to make a difference in the lives of our advisors and their clients, which has positioned us to deliver record results in the third quarter while also continuing to advance our strategy. Platform assets ended the third quarter at a record $86.8 billion, driven by an all-time high in net flows of $2.8 billion. This marks the third consecutive quarter of record-setting organic growth. Households and engaged advisors ended the third quarter at all-time highs.

The growth of our households and engaged advisors points to the value of our platform as well as our expanded total addressable market, which we discussed on previous call. We've also experienced record results for both top and bottom line financial metrics. Our net revenue was up a little less than 40% year-over-year to $101.5 million, making the first quarter net revenue -- making this the first quarter that net revenue has exceeded $100 million. Adjusted EBITDA was up more than 50% year-over-year to $44.8 million, and adjusted net income was up more than 60% to $29.9 million. Through the third quarter, year-to-date adjusted EBITDA and adjusted net income are more than those for the full year in 2020. Turning to slide four. Our ecosystem empowers growth-oriented, independent fee-based advisors of all sizes with the highest quality capabilities and services. We deliver a fully integrated technology platform, personalized and scalable service and curated investment solutions. We provide everything an advisor needs to run a successful and growing business.

While our value proposition seems simple, we are the only participant of providing a comprehensive, open-architecture outsourced solution for IBD-affiliated advisors, RIA and hybrid advisors. This alone separates us from other providers in the industry. In order to execute on our strategy, we are focused on five key components as we talked about last time. Similar to last quarter, I will discuss each of the five key areas of our growth and our strategy and detailed progress -- detail the progress we're making in each. The first component of our refrained growth strategy on slide five is to meet advisors where they are catering to varying affiliations and new and growth-oriented or lifestyle advisors. Last quarter, we discussed how advisors continue to migrate to the RIA channel and how AssetMark Institutional or AMI, looks to capitalize on the secular trend.

Today, I want to discuss our target demographic and provide some color around how AssetMark Institutional is designed to help these advisors grow. Data firms generally shows that smaller RIA firms or those with less than $500 million in assets are growing at a much slower rate than larger RIA firms. As both business owners and practitioners, these smaller RIAs face many competing priorities and demands on their time. Therefore, they need to strategically outsource core parts of their operation in order to remain productive and profitable. In fact, findings from our 2019 impacted outsourcing study shows that advisors who outsource benefit from stronger client relationships, higher acquisition of new clients, increased client retention and stronger asset under management growth. AssetMark Institutional offers these smaller RIAs and outsourced solutions help them grow. While still in the early innings, I do want to provide an update on Aftermarket Institutional.

We are building a strong pipeline of qualified leads. And in this past quarter, we've expanded our AssetMark Institutional leadership team to increase our focus on growing our RIA offering. Lastly, AssetMark Institutional was officially approved to participate in a leading custodians RIA referral program. Now turning to slide six. The second component of our growth strategy is to deliver a holistic, differentiated experience to advisors and their clients, providing an end-to-end, easy-to-use platform designed to create meaningful conversations between advisors and their clients while also saving advisors' time. As we discussed in the past few quarters, we are building a financial wellness program with solutions to support meaningful wellness conversations between the advisor and the client.

We've greatly advanced our financial wellness vision this quarter by closing Voyant and beginning our initial integration. One of the strategic rationales for the acquisition was to accelerate our financial well decision and expand our ability to attract advantages in core and adjacent channels. We are making progress in realizing this rationale. We've added a single sign-on from eWealthManager, which is our advisor portal, allowing advisors to sign up for a free trial. We've been hosting live demonstrations of Voyant for all of our advisors, and our sales team is actively using Income Planner, a tool powered by Voyant aiding income planning conversations between advisors and their clients. And lastly, we started discussing Voyant with several large broker dealer partners. The early reaction from our advisors to Voyant has been fantastic. At our Platinum Summit in August, advisors mentioned wanting an alternative to current financial planning options and felt that Voyant was the perfect solution as the only financial planning tool that shows advisors both goal based and cash flow-based planning side by side and allows them to show the trade-offs between the two.

We are excited about our advisors' initial reaction to Voyant and plan to complete the integration of Voyant's financial planning capabilities in the fourth quarter. The third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum, varying life stages and across generation. Let's turn to slide seven, where I want to share two exciting additions to our platform. First, this quarter, we launched the AssetMark PEP or Pooled Employer Plan. According to our annual share of wallet study, retirement is one of the largest areas where advisors are doing business away from AssetMark.

We've been diligently focused on enhancing our retirement offering, which accounts for about $1.6 billion in platform assets at the end of the third quarter. The PEP allows us to provide a more complete retirement solution for our clients. According to Cerulli, 51% of employers with 50 workers or fewer do not have access to a retirement plan, while more than half of Americans either own or work for a small business. The PEP helps to close its retirement plan coverage gap to smaller employers by allowing employers of any size, industry or location to band together in a single 401K plan. By doing so, smaller employers benefit from economies of scale and lower cost while also gaining access to diversified investments and enhanced fiduciary support normally reserved for larger plans. The PEP, while still very new, further enhances our retirement offering and we are already seeing proposals from our advisors. Second, we launched a suite of separately managed accounts last quarter.

This launch included 12 SMAs from 10 best-in-class investment managers, many of whom are new to the AssetMark platform. They include large cap growth, value and core dividend equity and thematic growth strategies, among others. As investors preferences continue to evolve, separately managed accounts enable advisors to personalize clients' portfolios with targeted asset class exposure and manage their tax efficiency as well as offering increased transparency through direct ownership of securities. This new suite of SMAs complements the wide range of investment solutions on the AssetMark platform and can be combined in a single account with other eligible solutions. Since launched in early September, our guidance has submitted over 1,500 SMA proposals in the amount of about 130 -- sorry, $375 million The fourth component of our growth strategy as seen on slide eight is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs.

This quarter, I want to talk a bit more about one of our established programs, business consulting, an offering, which we believe is a huge competitive advantage for AssetMark. A mission of our business consulting team is to help advisors build a business that is sustainable and successful so that they can help their clients achieve their financial dream. Our business consultants support our advisors and their businesses at every stage of growth through scalable guidance and by identifying opportunities to increase value, drive growth and boost their firm's performance. In the simplest terms, our business consulting team helps drive advisor's growth in business health, which in turn helps drive our company's growth. Over 500 advisors representing one four of our total platform assets are taking advantage of our business consulting services right now.

These advisors exhibit higher engagement and lower overall redemption rates. Currently, our business consultants are actively reaching out to advisors to help them through their advisor growth plan, which basically means our consultants are helping advisors take a look at their goals for 2022 and consulting with them on how to achieve these goals. Turning to slide nine. The final component of our growth strategy is to pursue strategic transactions by adding capabilities and assets that improve our advisors' ability to serve their investors and expand their businesses. We are more deliberately focused on M&A than we have ever been before. We continue to look at every opportunity that comes across our desk and are in active dialogue with companies that we feel will be a strong fit for our platform. In addition, we continue to be a very disciplined buyer. And while M&A is serendipitous, we remain well positioned to execute on M&A as evidenced by our $50.4 million of cash on our balance sheet and $135 million remaining on our credit facility. In summary, the third quarter was the best in our company's history. We posted record results and have advanced our strategy of empowering our advisors to continue to grow while attracting new advisors to the AssetMark platform. I'm now going to turn over the call to Gary to take us through a deeper dive in our quarterly results and to provide some color on our outlook for the remainder of 2021 and 2022.

Gary Zyla -- Chief Financial Officer, Executive Vice President

Thank you, Natalie, and good afternoon to all those on the call. I'll let you all know we're in our office today, sitting together for the first time in 1.5 years since is claiming. And now we discuss third quarter results were outstanding, highlighted by an all-time high in platform assets and record numbers for net flows, revenue, adjusted EBITDA, adjusted net income and adjusted EPS. As usual, I will start with a discussion of our platform assets, then talk about our revenue, expenses and then earnings. I will conclude on the update our 2021 outlook and introduce in our outlook for 2022. Turning on slide 10. Third quarter platform assets were a record $86.8 billion, up 29% year-over-year. This growth reflects record net flow in the $2.8 billion, partially offset by a negative $0.6 billion market impact net fees.

While the market has rebounded in October and so far in November, we remain, as always, cautious with our market outlook, given macro clinical and economic uncertainties. Year-to-date, annualized net flows as a percentage of beginning of year assets, 12.5%. Strong organic growth has continued in October as we will announce net flows of $890 million and platform assets north of $90 billion in our AMK Report, which will be released tomorrow. Let's now turn our attention to our advisor metrics. In third quarter, we added 201 new producing advisors or NPAs for the second consecutive quarter. We are encouraged by the growing quantity and quality of new advisors on our platform. Our total engaged advisors at the end of the third quarter was 2,729, an increase of 351 advisors since the third quarter of 2020. Our engaged advisors now make up 92% of our platform assets. Growing the number of engaged advisors on our platform is crucial to driving further growth of our business and its financials. Now let's turn to Slide 11 to discuss this quarter's revenue.

Entering the third quarter, our assets were $84.6 billion, leading to record revenue of approximately $140 million. As you know, we focus our revenue net of related variable expenses. In the third quarter of 2021, our net revenue of $101.5 million was up 38% year-over-year. This is driven by asset-based net revenue, which was up 36% to $95.5 million and the introduction of revenue from Voyant, which won in total, $3.5 million. Voyant's revenue falls into two categories on our income statement. First, Voyant contributed $3.2 million of subscription-based revenue, which represents revenue from Voyant's financial planning and wealth management software solution; second, Voyant's consulting and training revenue was $0.3 million for the third quarter.

This revenue falls into the other income statement line -- the other, I'm sorry -- the other income line on our income statement. As an aside, we are so excited to welcome the awesome Voyant team to the AssetMark family. Turning to Slide 12. I want to combine some perspective along the revenue opportunity in front of us. As discussed in detail during our first quarter earnings call earlier the year, our total addressable market from an asset perspective is about $6.3 trillion. To convert this to net revenue TAM, we assume the average rate AssetMark earns in each asset category. And to this is the Voyant's non-asset-based revenue TAM of about $500 million. This results in a $22 billion total revenue TAM. AssetMark has approximately 2% of this overall revenue TAM with a long runway for future growth. Slide 13 details our year-over-year net revenue walk. As the waterfall shows, net revenue was up year-over-year, driven by the impact of our asset growth, which generated $23.7 million in additional net revenue.

Also adding to our increase in net revenue is a $2.8 million reduction in asset-based expenses. As a reminder, this is an ongoing savings, primarily driven by restructured agreements with providers that we first realized last quarter. We also realized fee compression due to ordinary mix shift of $1.4 million or approximately 0.65 basis points. This is below the one basis point we plan for each year. As previously discussed, subscription revenue from Voyant added $3.2 million in additional revenue and volume drove the increase in our other revenue category as well. Lastly, spread-based revenue decreased $0.5 million year-over-year due to the decline in our average yield from 33 basis points to 27 basis points. Slide 14 shows asset-based net yield trends over the last five quarters. Please note, because lanes revenue is not asset dependent, we will stop discussing total net yield and only focus on asset-based yield moving forward.

Our third quarter '21 asset-based yield was 45.1 basis points is up 0.6 basis points year-over-year, driven by 1.3 basis points late into the measures we have taken to reduce our asset-based expenses, offset by 0.65 basis points in fee compression, which we have previously discussed. Now let's discuss expenses as shown on Slide 15. We continue to manage our expense based, so it does not outpace our revenue growth. Total adjusted expenses increased 22% year-over-year to $100.6 million. Operating expenses were up 29% year-over-year to $56.7 million, driven by a $6 million increase in compensation and a $6.8 million increase in SG&A. The increase in compensation expense is largely driven by two factors. First, our variable sales incentive costs increased as a result of our strong sales in the quarter. It's important to note that while our strong sales results increased our compensation expense this quarter, we will realize the revenue benefit from it in upcoming quarters. Second, we added 153 employees over the last year or about 17% of our current employee count. Approximately 1/3 of this increase is the addition of our Voyant team members.

The increase in SG&A is largely driven by a variety of incremental factors, including an increase in in-person events and travel, perpetual fees and increased costs associated with higher volume. Hence, growth does not reflect any material impact from the macro inflationary environment, but we are expecting a modest impact from that in 2022. Before I run through our expense adjustments, I do want to point out, the addition this quarter of an adjusted P&L in our earnings release, which will hopefully provide further clarity on our adjusted numbers. We have gotten feedback and this will be helpful. And of course, we are here to serve. In the third quarter, we added back a total of $17.3 million pre-tax, which is comprised of four items: First, $7.9 million in noncash share-based compensation. We have set noncash share-based compensation in the fourth quarter to be approximately $6 million and a 2020 quarterly run rate between $3 million and $4 million. The second adjustment to expenses is $5.9 million of amortization expense, of which $5.1 million is related to our 2016 sale, while the additional $0.8 million can be attributed to recent acquisitions.

As a reminder for modeling purposes, most of the expense in 2016 sales will be fully amortized by year-end. Third, $0.9 million acquisition-related expenses, primarily associated with our acquisition of Voyant and OBS. And lastly, $2.3 million related primarily to reorganization and integration. Now let's turn to Slide 16 to discuss our earnings for the quarter. Third quarter 2021 adjusted EBITDA was a record $44.8 million, up 53% year-over-year. Adjusted EBITDA margin for the quarter was 32%, up 460 basis points year-over-year. Now approximately 2/3 in the margin improvement this year is the result of favorable macroeconomic conditions, with the additional 1/3 as a result of our ability to scale our business and focusing on expense management while still investing in future growth. Our reported net income was $12.3 million compared to $8.6 million in the third quarter of 2020. This marks the second consecutive quarter of positive GAAP income. Our adjusted net income for the third quarter was $29.9 million, or $0.40 per share.

This was based on the third quarter diluted share count of $74.7 million. Our adjusted effective tax rate for the third quarter was 23.5%, lower than 26% used in the third quarter of last year. This decrease was driven by tax efficiencies we created in 2020. For further color, please see the adjusted net income walk on Slide 21. Turning briefly to our recorded third quarter balance sheet. Let me update you on our cash and debt position. We ended the quarter with a little over $50 million in cash and $135 million available on our revolving line of credit. Now as we discuss the cash on our balance sheet, the ability to generate cash and our low debt positions us well to suit future M&A opportunities. Now let's turn to Slide 17 and discuss our expectations for 2021. We are raising our guidance based on our strong organic growth in the third quarter. In just a few months and less than a year, we expect net revenue for the full year to be between $377 million and $379 million, representing 27% year-over-year growth.

We expect adjusted EBITDA for the year to fall between $157 million and $158 million, a growth rate of 37%. Our adjusted EBITDA margin will expand about 300 basis points for the full year. We are extremely great with the year-over-year growth in 2021. Now let's discuss our early take on 2022. Please turn to Slide 18. Our financial model always starts with asset purchase. We expect our organic growth to be 10-plus percent in 2022. Assuming a modest market list of 3.5%, we expect our assets to grow between 13.5% and 15.5%. Driven by the strong momentums in 2021, we expect our net revenue growth to be in the high teens to low 20.

This assumes the asset growth was slightly offset by about one basis point of fee compression, which is not regular expectation. We expect our operating expenses, which consist of compensation in SG&A to increase in the high teens. For the clarity, we anticipate this year-over-year increase to be driven by four items. First, about 1/3 of the increase is due to volume. Second, about 25% of the increase is due to the full year impact from volume. Third, about 15% is expected to be driven by a return to travel and in-person events. And finally, the last 1/3 is driven by increased investments, specifically into new products and talent acquisition. As a reminder, our disciplined expense growth will not outpace our revenue growth. As always, we are focused on realizing improved margin on our revenue and growing earnings. We expect our adjusted EBITDA to be up 20-plus percent year-over-year, and we have set margin expansion of around 100 basis points for the year.

With that, I'll hand it over to Natalie for concluding remarks.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Thank you, Gary, and thanks to everyone again for being on the call today. We are well positioned to envy our strong and enter 2022 with a lot of momentum. I look forward to sharing future updates at upcoming conferences and on subsequent earnings calls. This concludes our prepared remarks today. I'd like to now turn the call back to the operator to begin question and answers.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Patrick O'Shaughnessy for Raymond James. You may proceed.

Patrick Joseph O'Shaughnessy -- Raymond James -- Analyst

So you mentioned in your prepared marks that you are more deliberately focused on M&A today as never before. How would you characterize the deal pipeline right now?

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Thanks so much, Patrick. So the deal pipeline is pretty good right now, but you know this better than anyone. I'm sure that valuations are incredibly high right now, and there's a lot of competition for any acquisition opportunities that come across. As I mentioned in my remarks, we're aggressive but also a very disciplined buyer. And we have parts of the market that we think are attractive and would add to our value proposition to advisors. And in those cases, we are attempting to bid as aggressively as needed to win, but at the same time, not over step. We want to make sure that our acquisitions are accretive over the short to medium term.

Patrick Joseph O'Shaughnessy -- Raymond James -- Analyst

Got it. Appreciate that. And then -- it seems like maybe the light has worsened at the end of the tunnel here in terms of the interest rate environment, and the market is now starting to expect one or two hikes in 2022. How are you guys thinking about asset marks sensitivity to interest rate increases at this point?

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Yes, absolutely. Thanks so much for the question, Patrick. I'm going to hand that one off to Gary. He can take you through the details of what we've modeled into 2022, what we haven't and what our thoughts are in terms of our sensitivity.

Gary Zyla -- Chief Financial Officer, Executive Vice President

So just in terms of the outlook for 2022, we are assuming no interest rate increases in the numbers we shared with you. Our view of the dot spot is sort of that if something does happen, it will happen later in the year. And so there is upside that we will be very excited to partake in. When we think about rate increase, most of our cash offering at that nondiscretionary cash. And so AssetMark will generally realize about 80% of the rate increases with an about the other 20% or 25% going to the end client in terms of crediting rates. We do offer a high-yield cash account, which is a subset of our overall cash. In those accounts, the client earns a lot more, maybe more like a 50-50 split, but that is a smaller subset of the overall cash. And so overall, I'd say about 3/4, we were partaking about 3/4 of when the rates go up.

Patrick Joseph O'Shaughnessy -- Raymond James -- Analyst

Thank you.

Gary Zyla -- Chief Financial Officer, Executive Vice President

Thank you.

Operator

The next question is from Ryan Bailey with Goldman Sachs. You may proceed.

Ryan Peter Bailey -- Goldman Sachs -- Analyst

Natalie, I was wondering if we could come back to Slide 12 and the potential revenue opportunities you're seeing. Is you could sort of walk us through the interplay between the growth in the RIA market relative to IBD and sort of that bill amount revenue opportunities both over time? And then I think relative to that, what are your sort of medium-term aspirations to AMI? Like what do the offer me the functionality and how do you think you would fit into the competitive landscape in RIA end?

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Yes, absolutely. So the first thing I'm sure you're aware of is that the RIA segment, the RIA, the hybrid and the independent segments. Those are the three segments of advice that are growing most quickly. And they're growing the RIA segment, specifically RIA and hybrid are going, I think it's four points faster than the next fastest-growing segment. And so I mean, clearly, that's being driven by a wide variety of things, investor demand for independent fee-based advice. Investors have never been more aware of the need for an advisor that's a fiduciary than ever before. This is driven by regulatory changes and the media that's generated by regulatory changes with Department of Labor's fiduciary rule and Reg BI. In addition, advisors, practices advisors' businesses are valued much, much higher if they're independent and fee-based and recurring than they are in more of a commission orientation.

So many advisors for business reasons are choosing that channel. And then last but not least, advisors in the RIA channel, they have a lot of potential partners or resources to use to help them run effective businesses. And so it's really important that here at AssetMark, we have services that are geared toward RIAs and independent advisors as part of our -- the first part of our growth strategy, making sure we meet advisors where they're at. And for us to have a complete solution for RIAs, we need to have the ability for them to trade and manage their own model, which we launched with the AssetMark managed portfolios offering in March. We need to have a community of RIA so that advisors can share best practices, build relationships among other RIAs. And we launched that in May of this year with the first AssetMark Institutional Summit and then much, much more frequently -- much, much more frequent interactions between the community. We have to make sure that we have the products and services that are a need that relates to investments. And that's a journey you're always on. But we began that journey with the launch of AssetMark Institutional.

We're looking into other high-priority products for RIAs. And then the outsourcing solutions that RIA need at a smaller size so that they can scale and compete. And we talked about that earlier in our earnings call. What differentiates us from other providers is that we can provide an incredibly high level of service and support for RIAs to help them grow at a relatively small sizes. And so when you look at us relative to the custodians, the custodians have much, much higher minimums for the same level of service and the same level of support we would provide at AssetMark. When you look at the broker-dealers offering to RIA, those RIAs are typically affiliated with them in some way or using their home office platforms. We're completely open architecture. We don't ask our advisors to use our proprietary solutions in any way. So we also benefit from being open architecture. Last but not least, our advisors are very completely independent from us. They are our clients. And so we fight to serve them at the highest level every single day. And you compare us to the aggregators in the market, they clearly have an ownership position in those RIAs. And so they already have to make a decision about their own capital structure to join those firms. So that's how we differentiate ourselves from the three largest competitors in the market.

Ryan Peter Bailey -- Goldman Sachs -- Analyst

That was incredibly helpful for providing that context. Follow-up with Gary. I'm going to be via non-crossing once again on this quarter. Does the guidance for the full year of '21 imply that EBITDA and net income is going to be down for 4Q relative to 3Q? And then maybe for '22, can you help us think about how much of the growth year-over-year for revenues and EBITDA are coming from Voyant?

Gary Zyla -- Chief Financial Officer, Executive Vice President

Sure. So I guess in the first question, absolutely, yes, you're reading it correctly. In fourth quarter, we do believe revenues will be up from the prior quarters of revenue is falling as it should. But we are investing more in fourth quarter. As we come through the year, we have held off on some investments we want to make because we want to make sure that we are again measuring our spend. But we anticipate significant compensation costs in fourth quarter as well as investments in some of our key product initiatives heading into 2022. It's the right time to make those investments.

So you should expect -- see that next quarter is why we're -- the total year number that we showed you are what we have targeted all year long, while we're satisfied with that. We are confident -- we are, I say this in the right way, we are focused on the 300 basis points in margin expansion that we're providing year-over-year or generating year-over-year. But quarter-to-quarter, it is long.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

I think, Ryan, this is Natalie. I just want to add something to what Gary said there, which is, as you may recall, AssetMark builds in advance. And so as the year progresses, we get more and more certain about what the revenue total will be at year-end. And so part of our discipline, the reason we can expand our margins year after year is that we invest more as our certainty rises. And so you should always expect later in the year for our investments in future growth to go up.

Gary Zyla -- Chief Financial Officer, Executive Vice President

Ryan, if you may -- I forgot what you asked about 2022, Ryan. My apologies.

Ryan Peter Bailey -- Goldman Sachs -- Analyst

Yes. I was just talking, revenue and EBITDA contributions from Voyant. Sort of like roughly what percentage increase is we're getting from that?

Gary Zyla -- Chief Financial Officer, Executive Vice President

Right, right. So I have the growing numbers in my head, I'm trying to translate them to the percent increases. So I would say -- let me do the math real quick on that, Ryan, and I'll come back to you because I do have the numbers in my head, but I don't know on the percent and how it affects the percent increase off the top of my head.

Operator

The next question is from Gerry O'Hara with Jefferies. You may proceed.

Gerald Edward -- Jefferies -- Analyst

I think you've made a couple of references to increased investment around new product and perhaps the initiatives. I was hoping you might be able to kind of flush that out a little bit and either talk about it thematically or if there's any additional context you might be able to provide, that'd be helpful.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Yes, absolutely. Thanks so much for the question. So I mean clearly, our investments in new initiatives fall in the categories of the five elements of our growth strategy. So as it relates to meeting advisors where they are, we're going to be investing in new channels, exploring new channels and deepening our penetration in the channels that we're already in. And to do that, we need to add to the services that we offer. For example, with our RIA offering, we want to make sure that we add to our AssetMark managed -- I'm sorry, our advisor managed portfolio offering adding security types, add new capabilities, etc. As it relates to delivering a holistic differentiated experience, we're investing deeply in financial wellness and the future of eWealthManager, which is our advisor and investor portal, make sure that we are saving advisors' time, increasing their effectiveness and delivering a great experience for investors.

And then as it relates to enabling investors to serve -- sorry, enabling advisors to serve more investors, we're expanding our offering to include high priority share of wallet areas. So we'll expand into more separately managed accounts. We'll expand into more customized solutions, direct indexing, SRI, the high-growth areas in market as it relates to helping advisors grow and scale their businesses. We're investing in the outsourced solutions that we've talked about in the past, whether it be administrative services outsourcing, tax transition outsourcing, expanding on our marketing outsourcing, we're investing in the various. So those are the key areas of investment for us.

Gerald Edward -- Jefferies -- Analyst

Okay. That's helpful. And then perhaps one for Gary. I think you mentioned in the prepared remarks. Can you remind us what sort of the steps you've been taking to reduce asset-based expenses are? And what -- how we could -- might be able to sort of see that flow through on next year's guidance?

Gary Zyla -- Chief Financial Officer, Executive Vice President

Sure. So what we discussed -- I mean, we discussed this a little bit last quarter as well. We -- our asset-based expenses, we have a universal providers, whether they're strategists, broker-dealers, universal providers that we pay asset-based fee through. So I won't get into which contacts, and what not were renegotiated. But through that process, as we keep growing, we continue to find scale, great points and contracts, etc. And so the changes that went into place last quarter will reset our basis points on assets. And you probably could use that modeling forward. And yes, ma'am.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

I was just going to say when you're finished, you might want to give the Voyant numbers. The Voyant.

Gary Zyla -- Chief Financial Officer, Executive Vice President

I'm very unknown. So did that answer that question there in terms of the expectations?

Gerald Edward -- Jefferies -- Analyst

Yes, that's helpful.

Gary Zyla -- Chief Financial Officer, Executive Vice President

No worries. And to Ryan's question, I'm sorry, I did the math. It's between both revenue and EBITDA, the growth number that we are showing there for 2022, about three to four points of both the revenue and the EBITDA growth are due to Voyant's full year contribution next year.

Operator

The next question is from Michael Young with Truist. You may proceed

Michael Masters Young -- Truist Securitiesa -- Analyst

Appreciate the numbers on Voyant contribution for 2022 as well. I'm just going to follow up on that and just kind of see if there's any other further ways to kind of break down the growth year-over-year because it looks to be pretty strong headed into 2022 coming off of a strong market performance and tougher comps from 2021. So just trying to think about sort of the new initiative contributions, in particular, any -- should we expect a more sizable contribution from PEP in 2022? Or is that more of a 2023 initiative?

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Yes. So as it relates to the pooled employer plans, we are in the very early innings of that offer. So while we're really happy with the early growth, I wouldn't expect it to be material until 2023 at the earliest. And then as it relates to Voyant and Voyant growth, we're really pleased that their growth has been a balance of growth outside the U.S. in the enterprise market, growth outside the U.S. in the independent market, in the U.K., in Canada and Australia. And then the beginnings of growth inside the U.S. because of relationships that we're helping Voyant form, either with independent affiliated broker-dealer advisors who use AssetMark RIAs, who use AssetMark and then broker-dealers who AssetMark has a relationship. So really, really excited about the balance of the growth with Voyant.

And we continue to monitor and make sure that we're investing as needed to help that part of our business to be as successful as it can possibly be inside the U.S. and outside the U.S. And then other thing just related to growth and growth in 2022. We're getting a lot more experience as it relates to AssetMark Institutional, and we've expanded that team and scale that team. We'll be returning to the road, which while we've been incredibly effective in growing AssetMark, while we've been in a remote workforce environment for new producing advisors for those clients who are looking to make a wholesale decision to use any platform to partner with a new platform, meeting face-to-face is important. Obviously, we mentioned Voyant growth and how excited we are about that. And we're also investing in other sources of new producing advisors in 2022. And so these are some other areas that -- growth in 2022 that we're very excited about.

Michael Masters Young -- Truist Securitiesa -- Analyst

Okay. Great. And then just as we look to 2022, there's some potential tailwind like was mentioned earlier, interest rates or stronger market performance. We're already off to a good start this quarter, which could affect next year, etc. Should we think about additional upside from other opportunities as being spent on continued kind of platform improvements and technology upgrades next year? Or would some of those drop to the bottom line? Just kind of general thoughts on how you would kind of manage that throughout the year.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Yes. So I'll start with some general thoughts, and then I'll leave it to Gary to add some specifics. But every quarter, when we bill in advance, we look at opportunities to do both. So we look at opportunities to invest in our infrastructure, so investments for future sale, opportunities to invest for future growth. If we'd like to accelerate an investment that's already underway or we feel there's an opportunity we'd like to add to our mix, or if we feel like it's more appropriate to drop the improved revenue to the bottom line, to expand our margins and also provide more capital for future M&A. So every quarter, we're very disciplined about having conversations where that next dollar should go. That's part of how we make sure we're growing revenue over the medium and long term while we're also expanding margins every year. And Gary, I don't know if there's any specifics you might have?

Gary Zyla -- Chief Financial Officer, Executive Vice President

Right. I would add, Michael, let you know. As we see tailwinds from the market, right, which help our revenue profile. Not it's right. As a business, we're making that decision regularly in 2021, our margins increased enormously because we let some of that fall the bottom line, but we did take some of that to invest. I don't know exactly 50-50 or something. But there's some -- we'll make a decision on the way, but we're going to let some fall on the bottom line in the tailwinds that we shape and when we're going to take the opportunity to invest in the future. And so the upside of the market or interest rates will be both invested in as well as help improve our earnings.

Michael Masters Young -- Truist Securitiesa -- Analyst

Okay. Great. And if I could just sneak one last follow-up in on the M&A front. You're rolling out into a lot of new TAMs, new markets with a lot of new opportunities. So should we think about kind of the bias in terms of M&A and M&A dollars spent toward kind of strategic product expansion opportunities versus consolidation opportunities as there have been in the past? Or any other color kind of just in terms of direction of M&As that you guys are pursuing?

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Yes. That's a really good question. I mean, as you know, we have a 2-pronged strategy. Capabilities M&A, which allow us to pull forward delivery of essential products and services to our advisor clients and then scale. And we love scale M&A because it allows us to invest more in our client relationships that allows us to invest more in building over time. And we like both, and we like to invest in both. We're potentially a little more focused on capabilities.

In that, there are scale acquisitions that also give you capabilities. And right now, advisors have never needed more support from their partners than ever in the past. And as a result, we need to make sure that our platform is expanding to serve these new and evolving outsource need. But either we feel really, really strongly about either because they both -- and the end result, they both allow us to deliver more for our clients over the long term.

Michael Masters Young -- Truist Securitiesa -- Analyst

Okay, great. Thank you.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Thank you.

Operator

We have a follow-up question from Patrick O'Shaughnessy with Raymond James. You may proceed

Patrick Joseph O'Shaughnessy -- Raymond James -- Analyst

Sorry about that. I was on mute. So your net new engaged advisors in the quarter was 58, which is still reasonably healthy, but it was your slowest quarter, I think, over the past 6. I'm trying to figure out what do we make of a little bit slower quarter in terms of adding engaged advisors versus the really strong growth that we saw in your flows in the period?

Gary Zyla -- Chief Financial Officer, Executive Vice President

Yes. It's interesting observation. And part of the engaged advisor growth has a market talent. Honestly, just on the edges, but the market was down in the quarter, and so that does cause a little headwind in terms of that number, right? On the edges, but it's certainly does come into play as the market was down in total for the quarter. So I think we generally look longer term because we can't look at the quarter periods like that. And so when we talk about the year-over-year in the 350 over four quarters, I think that's a better way, you divide that by 4, and say on average, you're going to get somewhere 90 to 100 a quarter or something to that effect. I think that's how we will look at it, Patrick. And then that view is supported by the fact that net flows are really strong before, right? And so we really are making a lot of progress in our engaged advisors.

Operator

There are no additional questions waiting at this time. So I will pass the conference over to Natalie for closing remarks.

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Thank you so much for joining us today. We really appreciate you taking the time to learn more about AssetMark, and we look forward to talking to you again in January or February, I guess.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Taylor John Hamilton -- Head of Investor Relations

Natalie Grace Wolfsen -- Chief Executive Officer, Director

Gary Zyla -- Chief Financial Officer, Executive Vice President

Patrick Joseph O'Shaughnessy -- Raymond James -- Analyst

Ryan Peter Bailey -- Goldman Sachs -- Analyst

Gerald Edward -- Jefferies -- Analyst

Michael Masters Young -- Truist Securitiesa -- Analyst

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