Craig Siegenthaler: Okay. Thank you.
Operator: And your next question comes from the line of Mike Brown from KBW. Your line is open.
Michael Brown: Great. Hi, good morning, guys.
David Brown: Good morning.
Michael Policarpo: Hi, Mike.
Michael Brown: So I guess a really nice margin result this quarter. As you called out, this is the 12th consecutive quarter above your 49% guidance, looks like the lower comp was certainly helpful this quarter. Any thoughts on perhaps changing that guidance? Or any quick comments on how to think about maybe the coming quarters here?
David Brown: So I’ll start and Mike will follow-up. We’ve always talked about margin guidance from a long-term perspective quarter-to-quarter with the ebb and flow of investments that we’re making in the business, the way the market is and then how we realize revenue. Really, it’s tough to think about it quarter-by-quarter, and we’ve had a great track record of exceeding the guidance. But our guidance, we’re comfortable at 49%. Over the long run, we have a really differentiated operating platform. I think this is the second highest margin — operating margin we have achieved as a public company. And I think the first was Q4 of 2020. So to think that we would have our second highest margin in this environment just says a lot about our platform.
Michael Policarpo: Yes. I would add. I think the ability for us to continue to make the investments, and we highlighted a few areas where we are reinvesting for long-term, data, product, distribution, continuing to invest in those areas really pointed for the future. And as Dave mentioned, those investments will ebb and flow. So while this quarter, we had a 50.9% margin we think that the beauty of the model is it’s highly consistent. And if you go back and look, we’ve been operating at 49% margins for the last 12 quarters, and that includes those investments.
Michael Brown: Okay. Great. And then could you just comment on the broader investor sentiment. Just looking at your flow trends and a lot of your peers, it looks like the gross sales have been — just remained quite soft, and that’s really an important part of the net flow trends that we’ve been seeing. What causes investors to really engage in a more meaningful way in your view? Any green shoots that you’ve been seeing on this front?
David Brown: Yes. I would agree with you that gross flows from an industry perspective have been soft. I think a lot of investors are sitting in money market investments. I think the last number I heard was $7 trillion, which is around quarter of the industry is invested in money markets. I think that there is a lack of certainty of what the future holds from a Fed perspective, from a rate perspective. So I think to earn 5% in a money market essentially risk-free is a good risk adjusted return for many investors. I think as we get clarity on the Fed and the economy, I think a lot of that money will move. And I think that’s what we’re excited about. We do see some movement now. We’re seeing a pickup on our won but not yet funded on the institutional channel.
We called this out the WestEnd platform that we have. We’ve seen a nice pickup. And I do think when we get some clarity, you’re going to see a lot of money move. It will go into various types of investments. I think until then, I think people — many people, many advisers, many investors are going to be very comfortable just sitting in a money market and earning a 5% yield. When you go back two years ago, you think about what money markets were yielding, it is a good risk-adjusted return when you look at it historically.
Michael Brown: Okay. Great. Thanks, David. Congrats on the anniversary. It’s a big milestone.
David Brown: Thank you.
Operator: Your next question comes from the line of Ken Worthington from JPMorgan.
Michael Cho: Hi. Good morning, Dave and Mike. This is actually Michael Cho for Ken Worthington. I just wanted to follow-up on the margin discussion and organic growth — organic investment discussion. I mean, you listed a few — several different organic initiatives. And so I guess, we’re thinking about kind of the 49% long-term margin target. I mean what’s kind of the level of annual organic investment that’s kind of assumed in there long term?
David Brown: So we set the 49% margin guidance over the long term factoring in that we would make investments in our business to grow the business. We’re making a lot of investments today. Mike went through a few of them, data, technology. We launched the brokerage platform. We rebranded really the direct business. We also have launched products and there is a lot of other things happening behind the scenes where we’re investing in our business, and we’ll continue to invest. We think the balance of investing for organic growth and then maintaining the 49% as our long-term guidance is the right balance. I do think that our model is different. And I think when you compare us to other firms in the industry, we just have a different operating model where a good portion of our expenses are variable.
And then we have the ability to really scale up and to scale down during tough markets and maintain our margins. And so the balance of the investments and the 49%, we really think that’s a really — that’s threading the needle and getting both of those things right.
Michael Cho: Okay. Great. Thank you so much.
Operator: [Operator Instructions] Your next question comes from the line of Alex Bolstein from Goldman Sachs. Your line is open.
