Gary Zyla: No. I would just echo that last point. We know advisors come to us for service. We talked about last quarter, our NPS score of 72, which is, like Michael said, world-class. And so the investments we want to make, Michael, are to allow us to grow — scalably grow into the future. And as we head that from the first question, [indiscernible] engaged advisors to be able to continue to offer all of them the same amazing level of service that we have now.
Michael Cho: Great. Thank you so much.
Operator: Thank you, Mr. Cho. Our next question is from Jeff Schmitt with William Blair. You may proceed.
Jeff Schmitt: Hi. Good afternoon, Michael and Gary. Looking at your fixed rate mix, it’s near 40% now, and then you’re at the net yield threshold of 4% too. So just curious if you’re considering increasing fixed rate allocations. I know you want to maintain flexibility there, but, are you thinking of increasing that and how high could you potentially go there?
Gary Zyla: Sure, Jeff. Thank you for the question. So obviously — not obviously, but our first concern with the cash that we’re managing in the ICD program is to ensure that we have liquidity for every client. And so that’s why we’ve started out in that 40% threshold. We have evaluated going a little bit higher. We could both go higher and we could also extend the duration out past the 1.4 years that we have if pricing and rates really allow us to do that. You’re right that our overall rate is approaching the 4% cap that we’ve talked about. And so as we look for further growth, that will be growth through our high-yield cash offering, other cash alternatives, as well as just our overall growth at our custodian.
Jeff Schmitt: Okay, great. And then client cash balances look to be stabilizing around this $2.9 billion level. Could you speak to that? I mean, are you seeing sorting slowing? Do you think we’re approaching sort of these operational or transactional cash needs? Because I think Gary, I think you had mentioned earlier that that percentage would go up to 3.5%. I presume that’s sort of X the high-yield savings. So maybe if you could speak to that.
Gary Zyla: Yeah. I’ll start Michael, and you can give your perspective as well. But just regarding the numbers, Jeff, so, yeah, the ICD program, which is that kind of non-discretionary cash, is at 3.2%. It actually has declined over the past couple of quarters. Now, in our prepared remarks, we noted that historically, it’s been at least 3.5%, and we expect it to get back to there when we do our long-term planning and when we’re looking out into next year. We believe that it is at its lower rate now, primarily because the strategists are putting more money to work rather than leave it in the ICD program. I think when you think about the cash sorting and how that works, I think that impacts this issue a little bit less because this is non-discretionary cash. It does impact in our overall flows as this money coming onto our platform or into, a bank account, but I believe it impacts this item a little bit less.
Michael Kim: Yeah, Gary. The only other point that I would add is related to cash sorting. We have definitely heard from advisors just in terms of their search for additional yield for their clients. And what they’ve been really delighted with is really around kind of the curated set of solutions on our platform. So whether it be our short-term US treasury ladder strategies and/or high-yield cash, and we’ve recently launched a money market pilot as well. And so those are some of the products and services that our advisors are gravitating towards to really meet the needs of their clients as it relates to the yield.
Jeff Schmitt: Okay. Very helpful. Thank you.
Operator: Thank you, Mr. Schmitt. Our next question is from Patrick O’Shaughnessy with Raymond James. You may proceed.
Patrick O’Shaughnessy: Hi. Good afternoon. Maybe to follow up on the earlier question on your engaged advisor goals, is there any way to quantify how you get to doubling it or get to 5,000 by 2026 in terms of the expected contribution from M&A market appreciation step up from non-engaged advisors, et cetera?
Gary Zyla: Yeah, Patrick. Let me give you rough math, right? And who knows exactly how it’s going to play out, right? But we’re attracting, let’s call it 700 to 800 million — 700 to 800 new producing advisors a year. And we’re currently converting those to engaged status at about a mid-teens rate. We aspire to double that. And so if you’re going to double that, you’re going to add — that’s going to increase our rate about 100 each year. Then — so you can look over the three-year period that engaged advisors from our NPA group could be in that, let’s call it, rough range, 400 to 500 range. When you look at the non-engaged advisors, the 6,000 non-engaged advisors, if we can capture again, rough math, 10% to 15% of that, you’re talking somewhere between 600 to 900 engaged advisors from that 6,000 group.
And then, as Michael said, M&A is going to play a large part. There are consolidation plans out there. We’ve done that before. We believe we’re a great home for advisors and that fills in the hole. And so yeah, any of those numbers could be a little higher or lower. But that’s sort of how you are breaking out from the paradigm that Michael laid out.
Michael Kim: Hey, Patrick. It’s Michael here. And just to kind of maybe underscore the last point about the M&A, one of the key areas that we’ve been really, really focused on is to ensure that we have that focus on the consolidation opportunities for subscale TAMs and other platforms that can yield scaled access to number of advisors. And so we absolutely do believe that acquisitions is going to be a meaningful part of our march towards 5,000 engaged advisors.
