Q3 2023: Strong Execution on Strategic Priorities in Q3

October 27, 2023

On this morning’s earnings call, we discussed WisdomTree’s strong execution on our clear and straightforward strategy: we continue to deliver industry-leading organic growth; we are expanding our margins; and we are leading the industry’s evolution in tokenized assets and blockchain-enabled finance. 

I wanted to take the opportunity to provide an update on the growth trajectory of the firm and the momentum in our business today to you – our clients, our partners, our stockholders and our broader network.

WisdomTree achieved its 12^th consecutive quarter of net inflows and continues to showcase the fastest pace of organic growth among our publicly traded U.S. asset manager peers. This is the byproduct of multiple growth cylinders firing at the same time: we continue to add new clients at a double-digit rate; our existing clients continue to grow in average size; and our clients are utilizing more WisdomTree products and services than they have in the past. 

One of our services that’s gaining strong traction is the WisdomTree managed models franchise – an open architecture framework built around the needs of advisors that features a mix of WisdomTree and other investment products. We started this effort back in 2020 with zero AUM and have grown that to over $2.5 billion today, and our traction continues to accelerate. At Merrill, for example, our model AUM now eclipses $500 million across 850 advisors – both of which have doubled from prior year period levels. This past June, we launched new models at LPL and, though it is still early days, we’ve doubled our model AUM in the past three months. In the registered investment advisor (RIA) and independent broker-dealer space (IBD), we’ve initiated new model relationships with 8 firms in the past 12 months and still have more than 60 RIAs and IBDs representing potential partner opportunities with over $60 billion in assets under management.

In other words, our client relationships are becoming larger, broader and deeper, and we have confidence that our three years of positive momentum will continue.

Given our high incremental margins, we’ve maintained steady growth, which will continue to grow our operating margins. The third quarter saw operating margins expand by 900 basis points compared to the prior year period. As our CFO, Bryan Edmiston, highlighted on our earnings call, roughly 570 basis points of this increase was driven by management proactively resolving our contractual gold payment obligation, while another 330 basis points was driven by enhanced operational efficiencies and organic growth on top of our scalable operating model.

Meanwhile, we continue to make significant and steady progress with WisdomTree Prime™. In October, we expanded the availability of the WisdomTree Prime™ mobile app to 12 new states and 33 in total, meaning the app is now available to 60% of the U.S. population. We expect availability to continue to expand, enabling us to reach an even broader portion of the U.S. population by year end.

At the same time, we are hard at work enhancing the utility of the platform to our customers through the ongoing addition of new products and features. We are currently tracking to have new products available to customers later this quarter, including a money market digital fund, as well as the launch of three new WisdomTree-Siegel branded digital funds where customers can deploy a models-like experience with just one click. From here, we expect to offer new features and capabilities like peer-to-peer transfers and payments in the coming quarters.

Every additional state added, feature enhanced and product launched has generated interest in what WisdomTree is doing from large players in the financial and technology industries. So, in addition to our bullish outlook on the organic growth prospects for WisdomTree Prime™, we are having many conversations around B2B and B2B2C applications for both our platform and product suite that could unlock additional tokenization revenue streams in the future.

As I continue to mention every quarter, it’s a very exciting time for WisdomTree and we remain energized as we continue to successfully drive organic growth and meaningful margin expansion and have substantive leverage in the secular shift toward tokenization.