So you got a little bit of weakness in January. And then on the attrition side, a little bit of the opposite and that attrition is going to be a little bit heavier in January versus February and March, as we had two practices that were acquired to part during the month. And that’s normal. It happens from time to time. We just happen to have two in a single month in January. Outside of that, our retention remains consistently high with the levels we’ve seen. So lots of color there, but I would headline it in, we’re looking at Q1 and continuing in that 6% to 7% zone. And you’re just going to have a little bit of a different shape to the quarter with January in that 1% to 2% zone.
Steven Chubak: Lots to unpack there, but thanks so much for the detail, Matt.
Operator: And our next question comes from Alexander Blostein with Goldman Sachs.
Alexander Blostein: Good afternoon, everyone. Thanks for the question, as well. Dan, I was hoping we could talk a little bit about the large enterprise channel for you guys. It’s been an area of significant success over the last couple of years. So maybe talk a little bit about deal activity expectations for 2024. And in particular, curious about the level of engagement you guys are seeing from insurance company clients on the back of the Pru deal.
Dan Arnold: Yes. Thanks, Alex. So look, with respect to our large enterprise channel, we opened this market up back in 2020 with a novel outsourcing solution. And initially, we targeted larger banks. And we have seen some success up to this point, capturing about $85 billion of assets to our platform. If you look at the total market for banks and outsourcing of wealth management for wealth management, it’s roughly in and around $1 trillion. We believe our experience, reputation and capability set, it’s a compelling solution that helps continue to strengthen that pipeline and offer up an interesting durable growth opportunity as we move forward. That said, at the same time, we took our solution that was targeted to banks and we made some additional investments and capabilities and personalized options, which enabled us to extend the appeal of that model to, as you said, the insurance companies or product manufacturers that operate wealth management solutions.
And now that market represents an additional $1.5 trillion of opportunity. And with the Prudential announcement, it was a catalyst for additional inquiries, exploring the question. So why aren’t they outsourcing? And we continue to progress in these discussions and explore others. They’re still in the early stages, but we do believe this part of the pipeline will continue to evolve as well. So if I summarize it, as we move forward, we believe our market leadership capability set and a real deep IT for this enterprise channel creates a really unique growth opportunity for us. We’re excited about it.
Alexander Blostein: Great. And a quick follow-up for you, Matt. So nice to see you guys moving forward with reinvestments of the six ICA maturities of the $2 billion that you mentioned. How is demand holding up in the ICA channel for additional fixed maturities as we kind of think about the $6.5 billion tranche that’s coming out this year? And is there a way to sort of accelerate some of that reinvestment? I know you provided a schedule kind of how that shakes out over the course of the year. But any opportunity to move a little faster in case rates just to start moving lower to lock-in wider spreads?
Matt Audette: Yes, Alex, I think on the demand, the demand is strong. Like if you look at the $2 billion that we did place into new contracts towards the end of the quarter, we’re able to place them in 5-year contracts. So that’s kind of the longest duration that the market typically offers, which is where we prefer to be right now. And we’re able to place them at a 30 basis point spread above where the curve is. And I think we’ve talked about for a long time in this marketplace, there really were no spreads to the curve and sometimes they’re even discounts. So I think that’s probably the most empirical data that the demand is out there is strong. And you see similar demand on the floating rate side as well. On the second part of your question, the opportunity to accelerate really aren’t there.
It’s kind of the nature of a fixed rate contract, right, for the same reason on both sides of the equation from a bank liquidity standpoint where they get it on their side. It’s not a very common thing. So I wouldn’t expect any opportunities to accelerate it. But as you noted, we have — when you look at the year, we’ve got $6.5 billion coming up. And if you look at the marketplace right now, we’d be able to place them in even higher rates. And if that 5-year point is available, we’ll be excited to do it there as well. So market is good, but acceleration opportunity is probably not there.
Operator: And our next question comes from Kyle Voigt with KBW.
Kyle Voigt: Maybe just a question on the prudential expenses. First, I just wanted to confirm that the $125 million of the integration and onboarding expenses in the promotional line are one-time and still expected to entirely roll off by the start of 2025. And then can you just help frame the size of the incremental G&A growth we should think about in ‘25 either on a percentage basis year-on-year or framing relative to the size of the Pru expenses in promo that will be rolling off in ’24.
Matt Audette: Yes. Sure, Kyle. I mean I think on the $125 million, yes, they are definitely one-time and specific to bringing Prudential on board. I think the majority of them will be in 2024. So if you look at what we spent so far in ’23, it’s in the $25 million, $26 million range. Of that remaining $100 million that will primarily be in ’24. But just depending on the timing of when they come on board, some of that could flow over into 2025. Now the total amount wouldn’t change. It’s just a — it would still be $125 million. It could — some of it could just go into 2025, but the majority would be in 2024. On the core G&A front, I think the headline I would give you in kind of emphasized in the prepared remarks that the amount we expect in 2024 is relatively small, and it’s all about the timing of when they come on board.
I think to your question of how to dimension it, I think I’d just go back to the estimated EBITDA when it’s fully ramped, which is around $60 million. And maybe just look at overall margins in our business around 50%, that should give you a sense of the overall expenses. That would go along with it. So I think if you did something like that, you’d be directionally correct. I’d just emphasize that it’s — from a cost standpoint, it’s likely to be primarily in 2025, just given the timing of when they’re going to come on board is towards the end of ’24.
Kyle Voigt: Understood. And then just on the follow-up, if you just ask on the M&A environment, we’re seeing a macro backdrop now that I expect to be more favorable for M&A in the sector. Markets are at all-time highs. We’re starting to see some clarity on interest rates, at least relative to the past year or two. So just wondering if you could speak to the opportunities you’re seeing in the market, whether bid-ask spread between sellers and buyers maybe narrowing and the number of — or types of deals that you’re seeing come across your desk now versus maybe this time last year?
