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After 2018 slowed a bit, the Concord, Calif.-based firm's growth rate picked up in first six months of 2019 and the firm has its star CEO locked up now for three years
August 29, 2019 — 4:33 PM by By Lisa Shidler
Brooke's Note: "Bulls make money, bears make money, pigs get slaughtered," goes the old Wall Street maxim. AssetMark and Charles Goldman seem to have steered well clear of the pig sty with a compensation deal sure to reward a CEO for a job well done and keep their mutual TAMP mission forward-facing. Goldman continues to earn less than many of his peers at firms of similar size and post-IPO status. But the steadiness of AssetMark's growth means that he remains in a catbird seat that few wouldn't envy.
Charles Goldman has excellent news for shareholders but his biggest shareholder has even better news for him.
The president and CEO of AssetMark told Wall Street analysts Wednesday (Aug 28) his firm's platform assets increased 23.8% to a record $56.1 billion in the second quarter. He also revealed the board of directors at the Concord, Calif.-based investments outsourcer awarded him a 47% pay raise.
The raise is on top of equity-based incentives that could push his salary well over $1 million a year.
The stock closed at $26.38 Wednesday before earnings were released after the bell. It's up near 1.5% in today's (Aug. 29) trading at $26.75, but still well off its 52-week high of $28.61.
"Our IPO in July was a tremendous milestone for our organization, and we are indeed excited to be a public company," Goldman said Wednesday.
Three years to run
Though Goldman was fuzzy about the details of his contract, inked just one month after the company's popular IPO, he confirmed a new three-year-deal. His contract was set to expire Oct. 31.
"I'm happy and my Board's happy to have gotten that done. As I mentioned during the roadshow, there's really no substantive terms in my contract. We renewed it. Easy, good discussion. We're very happy to focus on the future, so we're glad to get that 8-K out before this call so we didn't have to talk about it."
Goldman began life with Assetmark as its Genstar-installed chairman, largely in place to oversee an investment. He eventually succeeded Gurinder Ahluwalia as CEO to take a more hands-on role in affecting a turnaround of the TAMP. It had fallen into disrepair as a neglected Genworth asset. Gurinder Ahluwalia to step out, Charles Goldman steps in, as AssetMark CEO
Goldman then executed a sale to a Chinese firm that also saw fit to keep him until an IPO. Now, as the majority shareholder, it is betting on him, again--in a big way
Goldman's base-pay of $510,000 in 2018 was bumped to $750,000 in a new, three-year contract finalized Wednesday, according to SEC documents. See: After a great IPO, AssetMark still needs to nail down its biggest asset, Charles Goldman, who assures that it's 'really nothing'
His total pay in 2018 was $1.49 million including the $510,000 base salary as well as a $660,000 bonus and other compensation totaling $324,603.
In his new contract, Goldman's $750,000 annual base pay could be bumped by an incentive bonus up to a maximum of 100% of the base pay - which could push his salary to $1.5 million.
On top of that, he's eligible for the equity incentive programs. The contract filed on the SEC's website does not specify how much he could earn with those incentives.
Goldman's main focus during the analyst call Wednesday was boasting about his firm's recent performance . AssetMark reported net income for the quarter of $16.6 million based on total revenue of $104.5 million.
He also enthused about his firm hitting $56.1 billion in platform assets - a new record, after growth had slowed in 2018. From Dec. 31, 2014 to March 31 this year, platform assets grew from $25 billion to $50 billion, representing a compounded annual growth rate of 17%.
Much of that growth traces to how IBD reps using AssetMark continue to aggressively shift assets away from a transactional model toward a corporate RIA.
Killer trend is a friend
"In 2018, advisers received 67% of their total revenue from fees, which is marked at an all-time high and up from 40% in 2013," Goldman said.
"This shift has been driven by the long-term adviser trend towards a fiduciary standard of care. This trend is a major driver of growth for AssetMark because we are a -- we serve fee-based advisers who are independent, serving clients in a fiduciary model."
It was a welcome uptick.
Growth slowed to 14% in 2018, and its organic growth rate was much lower given that it had acquired Global Private Capital. The firm's assets added $3.8 billion of inorganic growth. See: AssetMark readies its IPO as growth rate eases
This was AssetMark's first earnings report since the company went public July 18 The stocked popped 16% on its $22 offering price in a big thumb's up from Wall Street.
The IPO opened at $25.45, topping analysts' expectations and pegging the company's value at more than $1.6 billion.
On the analyst call, JP Morgan analyst Ken Worthington asked if the firm has gained more attention since it went public.
"With the successful public offering, do you think going public has improved your profile with financial services advisors. Has the number of conversations changed in any noticeable way?
Goldman said advisors are more interested in his firm now, and the public branding from the IPO has helped.
"Our profile definitely has been enhanced. We've had many great conversations with existing advisors who are quite excited about that transparency that we provide, the success of the IPO, our brand value that creates... And so we've heard nothing but great feedback about the IPO."
AssetMark borrowed $249.4 million in Nov. 2018 primarily to buy Global Financial Private Capital. It pulled the trigger on the acquisition in Aug. 2018. The deal netted about $3.8 billion in assets. See: After year of slower growth, and as the contract of Charles Goldman nears expiration, AssetMark readies
Just three years ago, Huatai Securities, a wealth management company based in the People's Republic of China and Hong Kong, paid $780 million for AssetMark. See: Charles Goldman's turnaround of Genworth castoff leads Chinese investor to pay stunning price
"We believe our financial results...demonstrate we truly are 100% client focused," Goldman said during Wednesday's analyst call.
"We deliver personalized and a scalable business. Our advisors are in the relationship business and we're in a relationship business. Almost half of our employees are advisory facing with the sole mission of making a difference in advisors' lives."
More than 17,000 new households and 280 new advisors joined the AssetMark platform during the second quarter. As of June 30, nearly 7,900 advisors and about 155,300 investor households use AssetMark, according to SEC documents.
He added: “For the second quarter, AssetMark delivered double-digit year-over-year growth in total revenue, adjusted EBITDA and adjusted net income per share,” he said in the call.
Unlike many CEOs in the RIA business, Goldman does not posture about his firm angling for giant RIA clients. Just the opposite.
His firm is angling for advisors who manage less than $250 million in AUM because these advisors derive the greatest amount of value from outsourcing their fee-based fiduciary asset management to Assetmark.
"They're doing all the due diligence themselves. They're trying to combine all the technology. They're doing reconciliation and reporting and all the middle-office functions. It's really a challenge for that group," he added.
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