Wisdomtree Inc

NYSE:WT

Earnings Call Analysis

WisdomTree Strengthens Position with Solid Growth

WisdomTree, an asset manager, showcased a steadfast quarter, with a persistent delivery of industry-leading organic growth. The company's operating margins are expanding, and it remains at the forefront of the industry's evolution with tokenized assets and blockchain-enabled finance. This quarter marked nearly $2 billion in net inflows, maintaining a 17% annualized organic growth rate. Compensation and discretionary expenses are projected near the upper end of guidance, while gross margins are expected to sustain between 79% and 80%. Interest income forecasts also rose, now anticipated to be between $3.5 million to $4 million due to higher invested assets and rising interest rates.

Steady Assets Under Management Amid Market Headwinds

At the close of the quarter, Assets Under Management (AUM) stood at $93.7 billion, mirroring the prior quarter's figures. Despite challenging market conditions, the company's inflow of $2 billion across diverse product categories balanced out these adversities. This inflow trend marks 12 consecutive quarters of positive momentum, underlining a robust annualized organic growth rate of 17%. This level of inflow bolstered the year-to-date flows to $10.7 billion, subtly boosting AUM to $94.1 billion.

Revenue Growth and Margin Expansion

Revenues witnessed a sequential quarter increase of 5.5%, amounting to $90.4 million, and an impressive jump of 24.9% compared to the same quarter last year. The operating margin of 29.5% in the third quarter was a substantial improvement from 20.5% in the previous year's quarter. Contributing to this growth, besides the settled contractual gold payment obligation, the business's scalable model propelled a 330 basis-point margin expansion, excluding the gold royalty buyout impact, facilitating earnings per share growth.

Controlled Expense Increase and Guidance

Adjusted operating expenses experienced a slight uptick of 1.7% for the quarter, attributed primarily to higher incentive compensation and increased third-party distribution fees, particularly due to the 70% AUM growth in Latin America. The forecasted third-party distribution expenses have been adjusted to fall between $9 million and $10 million for the year, with interest income expectations set between $3.5 million to $4 million, evidencing the strategic financial management in play.

Strategic Focus on Industry Innovation

Firmly directed on delivering leading organic growth, WisdomTree is intently focusing on expanding operating margins and pioneering the shift towards tokenization and blockchain-enabled finance, which is central to their long-term strategic vision. This approach is not only about current financial metrics but also places the company as a forerunner in the evolving industry.

Unwavering Client Growth and Product Utilization

Client relationships have notably flourished, with an increase in the average size and a broader, deeper engagement through the utilization of more products and services. This trend is exemplified by the successful onboarding of 8 new clients managing between $100 billion to $1 billion in assets through customized model experiences and automated trading and rebalancing services. Such expansion initiatives have led to operating margin gains of 900 basis points over the previous year.

Diversifying to Reach New Milestones

WisdomTree has effectively reached a new breadth of diversification across assets and geographies alike. Their world-class models and solutions coupled with their integration of technology across the business positions them for greater reach and optimizes their ability to act on major market opportunities.

Earnings Call Transcript 2023-Q3

[Operator]

Greetings, and welcome to the WisdomTree Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to turn it over to Jessica Zaloom, Head of Corporate Communications, to begin. Thank you.

[Jessica Zaloom, executive]

Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including, but not limited to, the risks set forth in this presentation and in the Risk Factors section of the WisdomTree's annual report on Form 10-K for the year ended December 31, 2022. WisdomTree assumes no duty and does not undertake to update any forward-looking statements.Now it is my pleasure to turn the call over to WisdomTree's CFO, Bryan Edmiston.

[Bryan Edmiston, executive]

Thank you, Jessica, and good morning, everyone. We ended the quarter with $93.7 billion of AUM, unchanged from the prior quarter as our inflows served to offset unfavorable market conditions. We generated $2 billion of inflows in the quarter, which were broad and diverse across 7 of our 8 product categories. Diversification is driving year-to-date average fee capture on our flows upward, which was more than 2x greater than our fee capture in the prior year.Our flows are strong and stable as it has been -- now been 12 consecutive quarters of flowing positive. Our year-to-date flows through September of $10.7 billion translates into a 17% annualized organic flow growth rate. Our AUM currently stands at $94.1 billion, slightly higher from the end of September, having benefited from further inflows.Next slide. Revenues were $90.4 million, an increase of 5.5% from the second quarter and up 24.9% versus the prior year quarter. Our revenues are growing and our margins are expanding. Our operating margin in the third quarter was 29.5% as compared to 20.5% in the third quarter of last year. Our margins have benefited by the settlement of our contractual gold payment obligation last quarter, which has been a meaningful contributor to this expansion, but not the only contributor.When excluding the impact of the gold royalty buyout, our margins have expanded 330 basis points versus the third quarter of last year, demonstrating the scalability of our business model. This margin expansion is translating into earnings per share growth. Our adjusted net income was $18 million or $0.10 a share.Next slide. Our adjusted operating expenses were up 1.7% for the quarter. This was driven primarily by higher incentive compensation as well as higher third-party distribution fees payable to our marketing agent in Latin America as we have experienced roughly 70% AUM growth in the region since the beginning of the year. These increases were partly offset by lower contractual gold payments and marketing expenses.Next slide. Now a few comments on our forecasted expense guidance. Variability in our compensation expense is driven by our performance-based compensation plans, which consider our organic growth, revenue growth, margin expansion and our share price performance in relation to our peers, whereby we currently rank #1 out of 13.Given our performance to date, we anticipate our compensation expense to be near the high end of our guidance range. We anticipate our discretionary spending to be near the high end of our guidance range as well, having recognized $43.4 million in discretionary spending year-to-date and forecasted Q4 seasonal spend. We reported a gross margin of 80.1% in the third quarter, and we are updating our gross margin guidance to be between 79% -- and 80% from 79%, which we believe should be sustainable at current AUM levels.Our forecasted third-party distribution expenses being updated to be between $9 million and $10 million, driven largely by the growth we are experiencing in Latin America. And our interest income is trending higher, given the magnitude of our invested assets and higher interest rates. We now anticipate our interest income to be between $3.5 million to $4 million for the year. That's all I have.I will now turn the call over to Jarrett.

[Robert Lilien, executive]

Thank you, Bryan, and good morning, everyone. Our strategy continues to be clear and straightforward, which is to deliver industry-leading organic growth to expand our operating margins and to lead the industry's evolution in tokenized assets and blockchain-enabled finance. In each quarter, we consistently deliver results against this strategy as we did again this quarter.In the third quarter, we generated nearly $2 billion of net inflows, our 12th consecutive quarter of net inflows. Year-to-date, we've now generated approximately $11 billion of net inflows, representing a 17% annualized organic growth rate, which continues to be best-in-class among all publicly traded U.S. asset managers. And we have confidence that our 3 years of momentum will continue. Our existing clients continue to grow in average size, while also utilizing more of our products and services. In other words, our client relationships are becoming larger, broader and deeper.In addition, we are adding new clients at a double-digit rate. Taken together, we have multiple growth cylinders working together. A great example is our experience with our U.S. Floating Rate Treasury Fund, USFR. While driving strong flows, it's also driving new customers. Roughly 40% of advisors buying USFR are first-time users of WisdomTree products and services, and we are already seeing a development path where these advisors are expanding their relationship with WisdomTree into additional products like our quality dividend growth front and our Managed Model solutions.Well, speaking of models, while they're still in the early innings of growth, they continue to be one of the largest and longest growth runways we have. Here, our strategy is 2-fold. First, it is to continue to build a large group of recurring model users at large distribution partners; and second is to pursue the RIA, an independent broker-dealer channel with a more customized model approach that will allow us to manage a majority of those firms' assets.Today, our models are available on some of the largest distribution platforms in U.S. Wealth Management, including Merrill, Morgan Stanley, LPL, Castra, Cetera and Schwab. In total, over 65,000 advisors have access to our models at these firms, and there is a long growth runway ahead. At Merrill, for example, our model assets are now over $0.5 billion with approximately 850 advisors using at least 1 of our 7 available models and nearly 60% of those advisors having more than one client in our models. Both the AUM and the number of advisors had doubled from this time last year.Likewise, we've launched Managed Models at LPL earlier this summer. And as of the end of September, well, from a lower base, we've already doubled our model assets from June levels. Once again, our client relationships are becoming larger, broader and deeper. Outside the very large distribution networks, our strategy is to provide a bespoke model's experience for the broad RIA and independent broker-dealer marketplace.About 1 year ago, we launched our portfolio and growth solutions effort that offers a custom model experience together with automated trading and rebalancing services, which is essentially an easy button for implementation of WisdomTree's Managed Models. To date, we've onboarded 8 clients ranging in size from $100 billion to $1 billion in assets.But more importantly, we have a pipeline of over 60 RIAs and IBDs representing potential partners with over $60 billion in assets under management. Overall, WisdomTree is well-positioned with the large distribution platforms and has a differentiated approach to the RIA and IBD market. We continue to score wins in the model space and have a clear and strong line of sight for continued organic growth. And given our high incremental margins, all of this growth continues and will continue to grow our operating margins.The third quarter saw operating margins expand by 900 basis points versus the year ago period. As Bryan has highlighted, roughly 570 basis points of this increase was driven by management proactively resolving our gold 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 with a growing product and feature set now available in 33 states.All in all, these are exciting times at WisdomTree as we continue to deliver industry-leading organic growth. We continue to expand our operating margins, and we continue to lead the industry's evolution in tokenized assets and blockchain-enabled finance.With that, let me now turn it over to [ Jono ].

[Jonathan Steinberg, executive]

Thank you, [ Jarrett ], and good morning, everyone. I'm very proud of WisdomTree's ability to execute on our goals to drive positive results.As Bryan and [ Jarrett ] discussed earlier, we have strong momentum in our business today and high confidence that the strength will persist for the coming quarters and years. Our foundation has never been stronger with approximately $95 billion in assets under management. We've achieved asset diversification, also geographic diversification. Our models and solutions business is world-class as we've been added to almost every major platform in just the last few years.Our integration of technology into every aspect of our business is why WisdomTree can do more on less resources than any other asset manager, all of this against the backdrop of over $11 billion in year-to-date inflows on top of last year's over $12 billion in inflows.It has truly been a team effort, and I'm very proud of WisdomTree's workforce and our unique culture. It is from this very strong foundation we've been able to leverage the skill set of our entire company from product, legal, research, Ops, tech, et cetera, alongside a dedicated and focused digital asset team to cement our first-mover status in tokenization and launch WisdomTree Prime.Starting with WisdomTree Prime, last quarter, we announced the launch of our mobile app and mentioned that the goals for the remainder of 2023 were: one, to increase the app's availability across the United States; two, enhance the product and features of the platform; three, continue to test and iterate our marketing messaging for low-cost high-ROI customer acquisition; and four, explore strategic partnerships and other business development efforts.I'm pleased to report that we've made progress on all 4 areas since our last call. On the geographic front, recall that the initial launch of our wallet was in 21 states. In the past month, we expanded the availability to 12 additional states. WisdomTree Prime is now available to 60% of the U.S. population, and we are on track to have the platform available to substantially all of the U.S. population by year-end. We are also hard at work at continuing to enhance the products and features of the platform.I'm happy to announce that we are currently tracking to have new products available to customers later this quarter, including a Digital Money Market Fund as well as the launch of 3 new WisdomTree Siegel branded digital funds, where customers can deploy a model like experience with just one click. From here, expect new features and capabilities like peer-to-peer transfers and payments in coming quarters.On the marketing side, we believe it prudent to limit marketing spend until we are available across most of the U.S., and we have our initial full suite of product features. To us, this is a better use of capital. That said, we are seeing encouraging early signs on both our tactical spend and our messaging. The acquisition cost of each app download is in line with our modeled expectations. The key messages for our user acquisitions are tracking in line with our beta test.And we remain laser-focused on high-ROI customer acquisition. As our marketing budget expands going into 2024, the spend will be measured, thoughtful and under control. Every additional state added or feature enhancement or product launched has generated interest in what WisdomTree is doing from larger players in the financial and technology industries.So in addition to our bullish outlook on the organic growth prospects of 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.WisdomTree has put in a lot of hard work to cement our leadership status in tokenization as the only provider with a broad suite of products. But the market is starting to wake up to the opportunities in tokenization with lots of exploration and early positioning in the space. This is not only a validation of our tokenization strategy, but also underscores WisdomTree's early mover position.As I've mentioned in recent quarters, it's very exciting times for WisdomTree. We have best-in-class organic growth, a meaningful margin expansion story and meaningful leverage to the secular shift towards tokenization.Thank you. And now operator, will you please turn the call over to Jeremy Campbell, our Head of Investor Relations, to field some questions from our shareholders.

[Jeremy Campbell, executive]

All right. Thanks, Jon, and good morning, everybody. Similar to prior quarters, we're going to take some questions from the Say Platform from our retail shareholders. The first one, I'm going to direct to Jeremy Schwartz, our Chief Investment Officer.Jeremy, the question is the Fed has tightened a lot in a short period of time. What's the house view on the rate cycle from here? And what do you think it means for total net flows across our fund lineup?

[Jeremy Schwartz, executive]

That is a great question, very relevant to today's markets. The recent data have all come in very, very strong. And our senior economist has raised and extended forecast for interest rates over not just the coming quarters, but years. And we can see long-term interest rates settling at much higher levels than we thought, even just 6 and months ago.So we're upgrading our outlook for rates. We believe we're among the very best positioned asset managers for this dynamic. USFR, our floating rate treasury [indiscernible] with $18 billion of assets has proven as utility remains one of the best and highest yielding treasuries in the market because of the inverted yield curve.And you've seen a lot of money go from money market funds. Other treasury short-duration products have all benefited, but there's still trillions of cash in banks earning meter rates. And so we educate clients every day about the opportunity for this floating rate treasury ETF versus other cash management solutions. But we have a broad lineup of ETFs that have compelling value propositions for these rate dynamics.Just this year, we launched our Enhanced Yield Universal Fund with Voya that's attracted over $1 billion in assets in less than 12 months. And we have longer-term solutions, core bond solutions, high-yield ETFs, mortgage-related funds that are becoming better opportunities as these yields rise. And our fixed income model portfolios have delivered very consistent alpha and relative performance versus their benchmarks. So we see really a broad diversified mix of inflows coming from other yield opportunities ahead.And now, of course, we have things beyond fixed income. And you could see even just this year, how well diversified the flows have been. We've got over 24 products with $100 million of inflows this year, ranging from the commodities in Europe, thematics,like artificial intelligence that have been working both in Europe and in the U.S. And I'd say the highlight of the year and what I see -- the biggest franchise ahead has been our quality dividend growth franchise, which is taken in $3.5 billion globally this year, a very exciting cross-section of funds covering many different regions, but working here in the U.S. and in Europe.And the simplicity of that story, buying high-quality stocks, high profitability stocks resonates in each of these markets, and we think it's well-positioned for further flows ahead. To summarize, I just say we already heard the breadth and depth of the inflows have very diversified opportunities ahead.

[Jeremy Campbell, executive]

For the second question, I'm going to have our Head of Digital Assets, Will Peck, answer it.Well, the question is -- and the wording is a little bit unclear, but I think the heart of the question is around evolving regulatory regime for both crypto and blockchain tech. So where does WisdomTree see the regulatory regime over time? And how does it fit within our crypto and tokenization plans?

[William Peck, executive]

So I guess I'll answer this by saying, I think there's a lot that can be done within existing rules and regulations here in the U.S.. I mean sure, there are some things you can point to that you wish you'd have more clarity on. And I think some of the big issues of [ weight ] in the U.S. like altcoins, aren't really a part of our business model here in the U.S. Crypto and blockchain impacts a lot of different regulators, state, federal, securities, commodities, banking, AML. And in the U.S., it's not just one body that makes decisions. So I think things will move at different paces. But I think the ability to innovate within this environment has been a major advantage for WisdomTree as a company at this current moment in time. So it's actually an advantage for us, and we're looking forward to continuing to press it going forward.

[Jeremy Campbell, executive]

And we'll -- stay on deck for me here because the last question we’re going to take from a retail shareholder base is probably one you've heard quite a bit lately with all the news flow. But is there any update on the Bitcoin ETF?

[William Peck, executive]

Well, it does seem like there's been some exciting momentum, right? It's certainly been in the news a lot. You've seen a lot of competitors and others do things you're -- we remain very focused on a spot Bitcoin ETF. We think it's the best execution for the asset class in the traditional channels in the U.S., and we're looking forward to continue engaging with regulators on it. The big points I'd make though is that unlike a lot of other financial services firms in the U.S., WisdomTree does actually have Bitcoin product in the market today.That's both in Europe, where we've got a leading set of ETPs that have had positive inflows this year. But also, it's in the U.S. for retail customers with WisdomTree Prime. We're leveraging the same cold storage custody model that an ETF would use. And we just think we're doing it with more utility in the wallet. So Bitcoin in the U.S. for retail investors is something that we already offer today. We think it's actually a very good experience within WisdomTree Prime, and we're looking forward to continuing to press that and hone in on that in our marketing messaging going forward.

[Jeremy Campbell, executive]

Operator, that's all we have from the Say platform for this quarter. So please feel free to open up the lines for the sell-side community.

[Operator]

[Operator Instructions] Our first question comes from Chris Kotowski with Oppenheimer Company.

[Christoph Kotowski, analyst]

I'm looking at Slide 10 and the $2.5 billion that you have in the models -- Managed Models. I think last quarter you indicated that it was around 12% of flows. And I wonder if you can kind of update us on that metric? is it increasing or decreasing as a percent of flows? And just any more color that you can have on the momentum there?

[Jeremy Campbell, executive]

[ Jarrett ], why don't you take that first?

[Robert Lilien, executive]

Sure. Yes, 12% overall is still a pretty good number. But really, at the heart of your question, the momentum is picking up. And it's picking up -- as I mentioned, we're adding more platform partners. So that gives us bigger reach. We said 65,000 advisors have access today. When we add a new platform partner, that number goes up. We're getting more advisors using more of our models, and we're getting more of our advisors getting more of their clients in our models. And so all those things are increasing the momentum.And another thing I can say that actually wasn't in the prepared remarks that will speak to the momentum is that this last quarter, Q3 was the best quarter on record for us so far in terms of model flows. So overall, I think 12% is a number that's going to gradually go upwards. But all -- and it is going upwards as evidenced in the third quarter. But also all the elements for increasing momentum are there and are active. So we're very happy with the momentum we're seeing in models.

[Christoph Kotowski, analyst]

And then on WisdomTree Prime, Page 12, you show the map. I'm thinking about like, if you look at the first states that you [ were ] active in, is there anything that one can see in terms of the monthly trends of subscribers to Prime?

[Unknown Executive]

Yes, sure. Just really echoing what John has said earlier, we've been testing out our hypotheses around marketing messaging in these states. We're getting cost per install in line with our modeled expectations. We're seeing which messaging is working, and we're leaning into that. So that's really the learnings that we've gotten that so far, which is, I think, a prudent use of shareholder capital at this point in time.

[Operator]

Our next question comes from Adam Beatty with UBS.

[Adam Beatty, analyst]

Actually, a multipart question around the model portfolio, is a bit of a follow-up to what Chris was asking about just now. Just wondering, obviously, gaining more platforms is kind of job [ 1 ] in the priority right now. But beyond that, just how you're thinking about kind of wallet share of model portfolios and within that of WisdomTree at the various clients that you've already onboarded? And the second part is perhaps more importantly what you're doing -- you mentioned kind of one button trades and what have you. But what other operational kind of initiatives that you have to grow that wallet share once you get on those platforms?

[Jeremy Campbell, executive]

Jarrett, I mean, you might want to take this, and I'm not sure maybe Jeremy Schwartz has something to add as well.

[Robert Lilien, executive]

Well, first of all, there's the different approaches that I spoke about. Getting on large platforms like Merrill and Morgan Stanley, very important. There's then a development time. When you're on a platform, as you mentioned, Adam, that's the first victory. But really, that's just gotten you in the door. And the reward is that you're allowed in the door. Now you had -- the real work begins where you've got to go out and get the advisors excited about what you're doing.So on the large platforms, a lot of what we're doing is educational material, a lot of support for models. We have a lot of model tools that we provide to our customers. And sometimes before you see a real ramp-up on a large platform, it can be about a year before you get that real traction. You've seen it in Merrill and some of the things that I pointed out, how we've seen a doubling in assets and advisors in the last year.They were one of the first on the models of the big platform players. So we've got that kind of momentum building with our other platform partners. Then on the RIAs and IBDs, there, you do have more of an operational component where we want to help those advisers who don't have the same resource that the wires have, the big platforms. We help them build their models, implement their models, trade their models, and that's really the replication of the wire house easy button.The other thing I'd add is that, I guess, if you think about it, every sale is a model sale. In the old days, when we were just going before we had a model's effort, you were still trying to win a position in an existing advisor or home office model. Now what we get to go out and do is provide a model solution, which when we have a win there, it's a multi-ticker win. It's a very long-term and sticky win.But that's sort of -- a second type of model win is the third-party model platforms. Then the third is that working with advisors to customize their models for them and solve operational or workflow issues. But the other thing that you've heard in one of the answers from Board, and actually in Jono's remarks is through WisdomTree Prime, that's another model opportunity. And soon, we'll be launching those effectively. WisdomTree Siegel funds, that is really a models like experience. So it's another model opportunity for us. So hopefully, that answers your question, but a ton of opportunity there and a ton of momentum.

[Adam Beatty, analyst]

You mentioned, Jeremy -- I don't know if Jeremy wants to weigh in.

[Jeremy Campbell, executive]

Jeremy, do you?

[Jeremy Schwartz, executive]

Yes. I think the -- we're certainly doing a lot with Professor Siegel. We -- as you've heard about the Merrill models have – we're working on that, the Morgan Stanley models. We had that -- those coming in Prime. He's been a leading figure for us on -- this idea of interest rates, when I talked about the senior economist upgrading his outlook for rates. He's been a big proponent of where things are going. So all those things are mutually beneficial in driving this diversified [ close set ].

[Adam Beatty, analyst]

That's great detail, exactly what I was looking for. Every sale was a model sale.

[Operator]

[Operator Instructions] Our next question comes from Mike Brown with KBW.

[Michael Brown, analyst]

I guess just starting with the USFR product. It's clearly been a major success here, but it is, I guess, levered to rising rates. I suppose it's hard to say, but how much of the assets do you think are more tactical in nature that could be a risk when the Fed starts to cut versus how much might just be more of a cash allocation that could be stickier? And then maybe just a quick follow-on. How much of the flows is just -- maybe a percentage have come from the models and therefore, could probably be more sticky?

[Jeremy Campbell, executive]

Jeremy, do you want to start? And then maybe [ Jarrett ]?

[Jeremy Schwartz, executive]

Yes. Well, so I think I gave this view that we think rates -- the long-term rates -- I alluded that we think rates could stay higher for longer. You would have thought if rates going to be really painful, you would have seen more of a slowdown even this year. And so we think sort of the longer-term settling of rates is that they may not fall back to that 0 rate environment that you had, that even sort of the 10-year maybe it settles at 3% over the longer run. versus where it got down to sub-1% on the 10-year. So there's -- we don't think these rates are going back down quickly anytime soon.Yes, there is definitely a group who uses it for its cash [ management ]. We talked about Prime as one of the nice features of how do we take it to the next level, adding spending features on top of these things. There's a huge opportunity across the interest rate curve in Prime for things like that. So the cash management solutions are getting extended. But we're not just reliant on USFR. That's been the best place to be for the last 18 months, but we have a very robust fixed income lineup. We have a lot of new users to WisdomTree from USFR. There's something like 40% of USFR clients have been new users.And so we can now help them talk about where they're going next, and we have a very robust set of opportunities in our fixed income lineup to position them, and we're going to keep working on more. So you hear more from us on the product set, but we think we're well-positioned today, but we will further develop some new things, both in Prime and in the ETF world to [ keep ] those assets in our lineup.

[Robert Lilien, executive]

Yes. And let me double down on some of those messages as well. Big picture -- and again, I already mentioned, we're growing. We've got 3 years of -- 3 consecutive years, 12 consecutive quarters of organic growth. We're doing that because we're adding more advisor clients growing at a double-digit rate. But within that, we're also adding more products per advisor, more AUM per advisor.And that puts, hopefully, in context how great USFR has been for us. 40% of the advisors buying USFR are first-time users, and that sets them down that development path for us, where what we're seeing is the next most purchased product of ours after USFR ends up being DGRW and/or models. And so it's this great sort of entry way product for new customers and existing customers. When you look at the customers now, some view it as fixed income, but others view it as cash. And a typical advisor at any time is 10% to 20% in cash.I'd also add again how this all fits really well with WisdomTree Prime. We have digital USFR and a retail customer is typically 15% to 30% in cash. So there's a long life for this product. It's a great product -- It's a great relationship product. It's a core holding. And so we couldn't be more happy with the product.

[Michael Brown, analyst]

And then if I change gear to the WisdomTree Prime. It's great to see the launch in 12 additional states. But I guess it sounds like you won't reach a full national rollout by year-end. So what states are really the toughest ones to get done? Can you just give us a view into that process? What's needed to get them over the hump here? And when you get to 50 -- I guess, what's maybe the updated time frame on when you might get to 50? And then just to give us a view as to maybe when that marketing will start to kind of pick up more in earnest, which I think was one of the guideposts that you mentioned?

[Jeremy Campbell, executive]

Well, why don't you start?

[Jeremy Schwartz, executive]

Yes, happy to. So different states have different rules. I mean some operate under exemptions, some you need to get licenses for. And then certainly in New York, they've got kind of a stricter regime around crypto assets and kind of a very forward and, I think, mature approach towards regulation for the asset, but some of these things just take time, right? So I think our guidance around being in substantially all states or substantially all of the population by the end of the year, like we're on track for that, and that will position us for a broader national rollout in Q1.

[Robert Lilien, executive]

Yes, Mike, I just wanted to make sure that you heard me in the prepared remarks. We expect to be virtually 100% of the country or 100% of the population by the end of the year.

[Operator]

Thank you. There are no further questions at this time. I'll hand the floor back to Jonathan Steinberg for closing remarks.

[Jonathan Steinberg, executive]

Thank you. As we are closing out 2023 and are preparing for 2024 and beyond, I am comforted and I am gratified by the fact that WisdomTree is in the most enviable position. We are levered to almost all of the most exciting growth drivers in asset management and more broadly financial services, whether it's global ETFs, models and solutions or tokenization, bitcoin and blockchain-enabled finance.We are there, we are early, and we are a leader. Truly 2024 and the next few years should be the most rewarding with the fastest growth that we've had at any time in WisdomTree's history. And so, first of all, we thank you for your time today on the call, and we'll update you on our progress next quarter. So thank you, everybody. Have a good day.

[Operator]

Thank you. This concludes today's conference. All parties may disconnect. Have a great day.