Jen Dardis: Sure. So from an overall perspective, that’s what we tried to give the 2% to 4% range for the full year to give you a sense for what the fourth quarter would be to fill in against the actuals through the first three quarters. And then with regard to the seasonal items, some are seasonal and would be similar in fourth quarter this year and fourth quarter next year, some are more one-time in nature. But the comment that you made about carrying over into Q1, certainly things that are seasonal in Q4, we would expect it wouldn’t go into the Q1 number. Just to dimensionalize it, first of all, we mentioned a one-time item. This was an operating item that we mentioned was a recovery of prior period costs. That’s about $20 million, so you would expect that would not recur and then that benefit would not recur.
And then the other items are a little bit more evenly split in terms of an increase in professional fees the long-term incentive plans. This is the stock-based compensation, and we have retirement vesting that are recognized in December when we do those grants. So that creates a pop every quarter, every fourth quarter.
Operator: Thank you. One moment for our next question. [Operator Instructions] Our next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.
Michael Cyprys: Great. Thank you. Good morning. Just a question on retail SMAs. I was hoping you could update us on the traction that you’re seeing in your approach to the marketplace there with retail SMAs? And how much is it contributing to flows today. Maybe you can just remind us how many strategies you currently offer in SMAs and where you’d like to see that in three years and some of the hurdles you guys may have to overcome so you kind of want to bring more to the marketplace, particularly over on the fixed income side?
Robert Sharps: Yeah. Brendan, this is an important element of our strategic initiative with regard to US wealth. And we’ve worked pretty hard to bring a broader number of strategies to market. Today, we are over 20% in terms of the number of investment strategies that we offer in retail SMA, and we are getting traction as we broaden the availability and broaden our offering. It’s going to take some time. This is a part of the market where manager rosters and lineups are, in many instances, reasonably well established. I do think that many of our wealth partners want T. Rowe Price strategies available in SMA and are looking for opportunities for us to get new placements. We have seen a number of new placements this year. So it is a focus. Jen, any specifics with regard to AUA or flows that we share?
Jen Dardis: No. There hasn’t been. It’s not a significant number in the flows at this point. Again, I think this is part of an overall plan. If you think about the wealth strategy that we’ve been talking about for the last year. Newer vehicles are part of that broader plan and some clients prefer ETF just based on their clients and how they buy, some prefer SMAs and obviously, some platforms still have a fairly large mutual fund complex. And so as we think about being able to provide our products for clients, we want to just make sure we have that broad suite of vehicles available for whatever type of clients that are buying from them.
Robert Sharps: Yeah. With regard to specific successes or launches this year, we did bring a muni SMA that was developed specifically for a single distribution partner. We also launched earlier this year two additional equity SMAs, US all-cap opportunities and global focused growth. As I said, this continues to be a big opportunity. I think we disclosed an AUA number that is roundly $10 billion. But you have to remember that, that includes not only model account submission in retail SMA, but also where we do glide path advisory and custom target date funds. So that wouldn’t all be the sort of SMA that you’re necessarily referring to or that we’re talking about in terms of addressing the channel — the opportunity in the wealth channel.
Operator: Thank you. One moment for your next question, please. Our next question comes from the line of Glenn Schorr with Evercore ISI.
Glenn Schorr: Hi. Thanks very much. I guess, straightforward one. Target date allocations to you all have normally or traditionally been very long equity. It’s helped you have great performance, your flows are great, kind of no complaints. But I’m curious if you’ve made or contemplated making any shifts in allocation given the rise in yields and flows into fixed income. Just curious how you’re thinking about that as the world has obviously shifted some? Thanks.
Robert Sharps: Yeah. Glenn, maybe less straightforward than you think. First, we offer our flagship series, which is a higher equity glide path. We also offer a target series which is a lower equity glide path for those clients whose participant base has a lower risk tolerance or for clients that prefer that as part of their overall plan design. That’s the first point I would make. The second point I would make is that while the strategic portfolio design determines the equity allocation at a certain point along the glide path, we also have the ability to make tactical allocations to asset classes and underlying building blocks. And we’ve actually been underweight equities over the course of this year from a tactical asset allocation perspective.
So our asset allocation committee has the flexibility to — within bands, reallocate funds along that glide path. I also would say that within our equity allocation, there are building blocks that are more or less conservative, and we’ve worked on developing and introducing a hedged equity component that ultimately has a little less equity beta. Finally, I would point out that in Q3, while the markets were down, we had excellent performance within our target date series across low and high equity glide path and across vintages and that was driven — at the margin a little bit by that underweight of equities, but I would say more so by the strategic portfolio design in some of the building blocks that we have in fixed income and just very strong security selection in the underlying strategies.
So beneath the surface, there’s a lot going on there. You’re right that philosophically, we do believe, particularly for longer dated vintages that a high equity component is really important. But there are other ways to drive value in terms of the strategic portfolio design and the building blocks, the tactical asset allocation and the security selection of the underlying portfolios. And so far this year, I think we’ve been hitting on all cylinders.
Operator: Thank you. Our final question comes from the line of Daniel Fannon with Jefferies. Your line is now open.
Daniel Fannon: Thanks. Good morning. I wanted to follow up on the target date franchise. I think, Rob, you mentioned gross sales were up 10% year-over-year. And then, Jen, you also mentioned some of the year-end dynamics that sometimes happens with plan sponsors. And so I was hoping to talk about the near-term opportunity associated with some of the strong performance you just highlighted and what that means for gross sales. But also maybe longer term, as you think about the passive dynamic within this asset class or this channel and ultimately, how conversations are happening with plan sponsors and how you think that develops over the next kind of 12 months?
Robert Sharps: Yeah. Dan, thank you for the question. Look, we feel like our flagship retirement date funds are the best offering in the business. If you look at the strategic portfolio design, if you look at the underlying building blocks, a number of alpha rich diversifiers in there, areas like bank loan, areas like high yield. It’s been a big focus for us. We made a substantial investment in 2021 in the competitiveness of our fees. And we also have a broad range. For those plans that are particularly fee sensitive, we have a blend series that does use passive in US — in large cap US equity and in core fixed income. So we really believe we have a great value proposition to take on passive. And I think if you look at the performance of the T.
