Good day, ladies and gentlemen, and welcome to the WisdomTree Q3 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Jason Weyeneth, Director of Investor Relations. Sir, you may begin.

Thank you. Good morning. Before we begin, I'd 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 WisdomTree's annual report on Form 10-K for the year ended December 31, 2016. WisdomTree assumes no duty and does not undertake to update any forward-looking statements. Now it's my pleasure to turn the call over to WisdomTree's CEO, Jonathan Steinberg.

Thank you, Jason. Good morning, everyone. I will begin the call by highlighting some of the progress we've made on our strategic initiatives before turning it over to Amit, who will walk you through the results. We'll then open up the lines and take your questions. The rapid evolution of the asset and wealth management industry continues to gain momentum. Firms able to build more holistic relationships with advisers consisting of tech solutions; practice management services; and strong-performing, competitively priced products will thrive. With the investments we made over the years, WisdomTree is well positioned for where the industry is rapidly headed. In September, we formally rolled out our portfolio analytics tool, which we call the digital portfolio developer, or DPD for short. Once a financial advisor enters their portfolio holdings into their tool, they are then able to analyze portfolios to better understand risks and opportunities, understand how specific changes in the portfolios can improve desired outcomes and stress test portfolios under a variety of market scenarios. What differentiates this tool, in addition to its robust capabilities, is the fact that it's fully digital. Advisors can use it at any time from any device, and it allows WisdomTree to educate advisors on the benefits of incorporating WisdomTree funds into their portfolios while improving the productivity and reach of our sales force. Early feedback from advisors has been very strong, with users impressed with the functionality, speed and ease of use. We believe this tool will help drive flows into our ETFs. Last week, we announced an exciting win related to our model portfolio initiatives. In collaboration with IQCIO, we have developed a series of models to be part of a select group of model portfolios available through Envestnet to advisers at key investment services, the insurance and wealth management…

Thank you, John, and good morning, everyone. Most of our operating data is already known, so I'll quickly go through the important numbers for the quarter. Beginning on Slide 4. This quarter, we reported stable financial results. Our U.S. AUM grew to $44.4 billion at the end of the third quarter, primarily due to positive market movement. As the middle chart reflects, we had outflows in our currency-hedged and U.S. equity ETFs, which more than offset of inflows into our international and emerging market ETFs. As you can see in the chart on the right, outflows from DXJ and HEDJ expanded sequentially, along with continued pressure on the U.S. dollar. Turning to the next slide, we can dig a little deeper into our flows. During the quarter, we saw a strong demand for our international, emerging markets, Europe and Japan small cap strategies, which had an aggregate inflows of $440 million. Our suite of emerging market ETFs successfully gathered assets, with inflows into 7 of 10 funds in that category. The flows of these categories were diverse, with demand for broad EM as well as more focused EM strategies. In fact, 10 of our ETFs across a broad range of strategies saw greater than $25 million of inflows this quarter. We are encouraged by the continued success in diversifying our flows and stabilizing our asset base, as you can see on the next slide. We continue to take steps to diversify and broaden our flows into products that fit broad asset allocation strategies in order to stabilize our asset base. As you can see from the chart on this slide, which we first shared last quarter, flows and AUM in our core strategic funds continue to grow. Flows into our core strategic funds generated more than $3.6 billion in net…

[Operator Instructions] Our first question comes from the line of Craig Siegenthaler with Crédit Suisse.

I wanted to start with the technology solutions. And I know you just launched DPD and your full suite of technology solutions in mid-September, but do you expect to see some benefit already in 4Q flows, while small? And what type of impact do you expect these offerings, including the model portfolios, to have on flows in 2018?

Craig, it's Kurt MacAlpine here, WisdomTree's Head of Global Distribution. So on your question on the digital portfolio developer tool, as Jono mentioned, the tool itself is designed to support advisors with portfolio construction. So it does everything from helping them stress test their current holdings to also building new portfolios that are designed to optimize against a number of criteria like income, performance fees or volatility. The primary difference in the tool between our tool and most competing tools in the industry that it can be done in a completely digital manner where advisors can access it on our website without having to talk to someone. They can run the portfolios in real time, upload their tickers and conduct and save analyses. We launched this tool only 5 weeks ago, and already, we have over 1,600 portfolios that have been run by advisors to date. So in addition to helping advisors build the portfolios, this tool also gives us a lot of great data so we can better interact with advisors, both in terms of the products that we're having conversations with them around, but also how they intend to use these products in their portfolio. So it is, like many of these initiatives, very early days, as a lot of them have just been rolled out over the past few weeks, but early signs of DPD success in terms of getting deeper to our clients, better understanding their thought process and the products that are important to them, we've seen great early success. In terms of our ability to map it to flows, this year, I think it's still to be determined. We do have a high degree of confidence in terms of how we built the tool and integrated it, that our sales team get real time visibility into the advisors that are using the tool. So they are notified, and we do have an opportunity to follow up essentially immediately, based upon actions people are taking in the tool.

Got it. Second, just on operating leverage of the U.S. business. We've seen actually decent revenue growth over the past few quarters, but there hasn't been an improvement in the core operating margin, which I thought was a little surprising, just given how high your gross margins are. So I just wanted to see why we haven't seen maybe even just a little bit of improvement in the operating margin in the past few quarters.

Yes, Craig. So I think this quarter particularly, we had a little bit of noise around compensation catch-ups and we had some periodic taxes around fund cost. But I think just generally speaking, we've always said that we're not managing the business today to maximize margins. And right now in particular, I'd say there's a little bit of a timing issue. Many of the growth initiatives that we've spoken about are -- have just launched. So while we're bearing the expense right now of them, we haven't yet seen the revenue come in. We're very optimistic that, that revenue will be coming in. So right now, we're really dealing with that timing mismatch. But I would say, as you've seen in the past in our business, as the AUM scales, there's tremendous operating leverage in the business. And as soon as that AUM does begin to scale, you'll see those results show, as you've seen in the past, that operating leverage in the business.

Our next question comes from the line of Bill Katz of Citigroup.

So Jono, there's been a fair amount of industry consolidation lately in the smart beta space as well as a number of newer entrants. How do you think this plays out on sort of 2 levels? One, you've seen some market share gains in the market cap weighted names going to the BlackRock, to the Vanguards, but smart beta seems like a little bit more of an open field, yet a lot more focus on that. So how do you think it through in terms of both the volumes and pricing for your business model, just given what you've seen in terms of the consolidation landscape?

All right. So first, I think there were 2 parts to the question. First was the competition and the second is the recent consolidations. So with respect to the competition, we were really, from the very, very beginning, very well prepared for what you're seeing today. This is -- nothing that you're seeing today is a surprise. We've always been competing with the established giants, and we knew always that other strategic players would come into the market out of necessity over time. What I would say is that WisdomTree competes through its innovation. We always -- it starts with our differentiated products. We have long track records. One point to make is that first-mover advantage is a huge advantage, and we have lots of first-mover products. So I mean, those are really how we compete. And the differentiated long-term track records definitely helps you against some of the newer smart beta competitions. In terms of the recent consolidation, let me first state the obvious. It's good to be an ETF sponsor of scale with proprietary IP and strong brand recognition. And yes, recent consolidation by INVESCO has been very favorable for WisdomTree from a scarcity value standpoint. But we are focused on growth. We are focused on executing our business strategy. And we are confident that we've made the right investments, the required investments, to capitalize on the secular trends. And we are committed, we are not backing away from, we are committed to achieving the aspirational targets that we've laid out, the 5% to 7% market share of the flows. However, we acknowledge that we have a fiduciary responsibility. We will always do the right thing. And if we can't drive significant growth from a standalone entity perspective, we'll look to maximize shareholder value through finding a partner. I think that answers your questions, Bill.

Okay. It does. And I just have one quick sort of modeling questions, for you, if you don't mind. Can you help us out a little bit on the other line? I know it's small in the grand scheme of things, but it's been bouncing around a fair amount over the last couple of quarters. Just trying to get a sense of maybe what the right run rate is. And then could you just sort of give us what the catch-up accrual was on the comp line as we think about that? And then more broadly, as you think about gross margin into next year, is that a lot of sort of upfront cost? Or is that also a point of margin expansion as well?

Sure. So let me take that backwards. So on the gross margin, this quarter, we had some periodic taxes that we have to pay for our India fund. So that was sort of a particular driver this quarter. We think it'll be around in the 82% range. So that's -- you should model that out going forward, I think there's operating leverage there. As we continue to see growth in our AUM, because of the fee schedules that we have with our third-party service providers, as the AUM does go up, we'll start to see the gross margins start to tick up a bit. On the comp line, I think it's important to remember that we don't -- we manage that number on an annual basis, right? The biggest driver there is incentive compensation. And so in any particular quarter, it reflects the operating results of that quarter as well as how we're thinking about incentive compensation for the full year. And now that we're getting closer to the end of the year, we have little bit more visibility on what we think that incentive compensation will be. And so you have a little bit of that timing catch-up that you see this quarter. But again, that's why we give the guidance at the beginning of the year to help you model that out and sort of think about how we're thinking to how that will wind up for the full year. And on the other line, I think if you just want to model sort of that year-to-date number, that's probably not a bad number to think about from the modeling perspective.

Our next question comes from the line of Surinder Thind of Jefferies.

First, I want to start with a kind of a big-picture question. As we kind of look ahead, where are we in the investment cycles at this point? Over the past few years, you guys have made a lot of investments, we were beginning to see the partnerships build up at this point. But how should we kind of think about it in terms of, maybe, like a 3-year strategy or something like that? Because when I look at headcount, it's been relatively stable over the last year and it was actually modestly down versus quarter-over-quarter.

Surinder, it's Amit. So broadly, we made a lot of investments over the last several years. And this year, we did take that level of investment spending down because we thought -- we believe we've made a lot of those investments in the past. And now is it's really going to be just sort of incremental of what we need going forward. I think that general theme will carry forward. Next quarter, we'll give more guidance on what we're thinking about as investment spending for next year. But where we sit today, I really don't see any broad changes to that overall theme of sort of managing it, but not at the same levels that you've seen in the prior years.

Understood. And then maybe turning to technology portion of the business, more specifically, AdvisorEngine. Any additional color you can provide there in terms of the conversations you're having with the various financial advisors? And maybe where we are with that products?

Yes, absolutely. It's Kurt MacAlpine here again. So -- the -- our investment and AdvisorEngine continues to show strong growth and progress since we made that initial investment about 11 months ago now. At that point in time, the platform had 28 clients using it. Those clients were predominately medium and small RIAs. As of September 30, of this year, we have 53 clients on the platform. We've expanded that client base to include larger RIAs in addition to the small and medium RIAs. We've also on-boarded or are in the process of on-boarding independent broker-dealer clients, which is a new segment for the platform; and are in the later-stage discussions with a series of bank trust and bank brokerage platforms. So I think the initial investments from WisdomTree allowed AdvisorEngine to compete for larger kind of more flagship mandates. And they've made significant investments in the platform itself, continuing to expand on the functionality, the usability, which is resonated really well. So our distribution team is in the field, actively talking about AdvisorEngine when opportunities present itself, and I think we have a good working relationship with them today between our 2 distribution organizations, which we can, I think, attribute some of the strong client growth to.

That's helpful. And maybe one more quick follow up. Just looking at the International business, obviously, though there's been a lot of success over the past year since the reorg, but when I look at Canada, it's actually done extraordinarily well right out of the gate. Can you talk about the success that you're seeing there? I know it's a really small part of the business right now, but is that part of the partnership that you guys established there? Or how should we think about that part of the business?

Yes. It's Kurt here again. So regarding Canada. So we launched the business about 15 months ago. And we built out our distribution team for the following months. And the team really hit the ground from a distribution standpoint only in February of this year. There's a bit of a unique nuance in the Canadian market that in the first 12 months of the fund's existence, the fund -- the track record doesn't show up anywhere. So if an advisor is looking through a database or a platform is looking through a database, the funds will screen as N/As everywhere. So I think the success that we've realized to date is a function of a couple of things. One is building out the distribution team and having cross-country coverage from that standpoint. The second thing is our initial set of funds have since have hit their 1-year track record, which allows them to be screened into databases. And I think we are benefiting from just having more consistent and broader conversations in the marketplace. Specifically, regarding the Questrade acquisition, which you referenced, that deal hasn't closed yet. So in terms of the assets that we acquired, those are not reflected in the growth numbers that we're showing.

Our next question comes from the line of Chris Shutler of William Blair.

Could you just talk about what percentage of your assets are in the RIA channel today?

It's about 1/3 of our assets today.

So okay, so about 1/3. And the wirehouses are the vast majority of the rest?

Yes. Really hasn't changed so much probably since the last time we spoke. Roughly 1/3 with the wirehouse; it's roughly 1/3 of it would be RIAs; we have about 11%, 12% with institutional; about the same percentage from non-U.S. investors; and then the balance is retail investors.

Okay, great. And then can you just talk about the decision to put the 72 ETFs on the TD Ameritrade platform, including most of the bigger ETFs? While on Schwab, you only have, I think, 18 funds, mostly smaller ones. And how should we think about the financial implications of flows coming on from TD Ameritrade?

Great. Thanks for the question. It's Kurt here. I'll answer the first part then I'll turn it over to Amit for the second part. So as we think about the TD Ameritrade commission-free program overall, it's one we're very excited about. As Jono had mentioned in his initial remarks, the platform itself covers both the retail and advisor channels and gives us access to approximately $1 trillion in AUM that exists on the platform today. So despite the fact that industry commissions as a whole have decreased this year, the cost of executing trades is still a major pain point for advisors and their clients. And many of those have indicated to us that the cost of executing is often a tiebreaker between 2 funds that they're considering. So when TD decided to revamp their platform from the one they had in the past to this one, it gave us the unique opportunity to capture prominent shelf space as the primary or predominant smart beta provider. So as Jono mentioned, we went from 1 ETF on the program, we now have 72, which will allow advisors, both retail investors using TD, but also the institutional or their RIA client base, to execute these strategies completely commission-free, either for individual transactions, for building model portfolios themselves. But the additional benefit that we get from TD is that it is a platform that's fully integrated with AdvisorEngine. So now clients that are using the AdvisorEngine platform, that custody FTD, now have the ability to build and execute commission-free models as well. So in addition to the benefits we're getting in their core channels, we also get this additional benefit through AdvisorEngine as well.

Yes. And Chris, on the economics, it's -- there are always some particular nuances. It's not so different than any of the other fees, platform fees that we pay to our other firms that we pay that fee to.

Okay. And then on maybe just to clarify on the compensation line comment from earlier. If we were to assume flat AUM from here, how should we just think -- how should we think about the trajectory of comp in Q4?

Where we sit today, we think we're going to be -- we'll be within the range. Right now, we're thinking sort of the middle end of the range.

Our next question comes from the line of Mac Sykes of Gabelli.

In terms of the TD Ameritrade agreement, can you talk a little bit about how you're supporting marketing there specifically? Whether you're working with them, you're just doing your continuous efforts? Just a little more color on how you're thinking about ramping up that.

It's Kurt here again. So in terms of the -- how we're looking to tap into the platform, there's really 2 parts it. There's marketing efforts that we will do in collaboration with TD. This will range from educating their client base through some of their advisor and in-client portals, it'll include us being present at their conferences and in industry events and things like that. So we are definitely working alongside TD to educate their clients, both retail and their institutional clients, on the platform. But in addition to that, as many of you know, we built out a robust database over the last number of years, where we have very deep relationships with a lot of advisors that are using the TD platform. These are advisors that we already know and have long-standing relationships with today. And then we're going to continue to conduct our own marketing and sales efforts, creating awareness of this program and hopefully helping to drive assets as well. And then as I mentioned in the last comments, we will also be collaborating with AdvisorEngine, given how well-integrated they are with TD. And then the additional benefit's that advisors who are using that platform, now get that custody with TD as well.

Okay. And then my last question is a little more holistic. But you had mentioned how you're using technology to benefit clients, advisors, et cetera, that seems to be accelerating in the marketplace. Maybe you could talk a little bit about how you're seeing technology helping to support margins related to your operations, whether it's custody, clearing, other back-office functions. Just trying to understand if we could expect some benefits in a material nature as we go forward in terms of your internal operations.

Sure, Mac. So our technology efforts have really been focused right now on bringing more top line revenue around building technology-enabled solutions for advisors. We have been, in the past, also trying to implement technology initiatives to bring more automation and more efficiencies to our back-office operations, and that's an ongoing thing that we'll do. But there's efficiencies there. You can change, obviously, headcount resources as things can get more automated and the like or not have to bring on as many people as you thought. But that's an ongoing effort that we have been doing at the firm over the last several years.

And our next question comes from the line of David Unger of Deutsche Bank.

Just a big picture capital management question as it pertains to tax reform likelihood, which would help your bottom line obviously. What portion of that tax savings, would you reinvest in the business? And maybe would it be international investments? Another technology partnership? Or maybe more into marketing?

So when we think about capital management, as I said, we've got 3 buckets. First is making sure that we have enough money to make investments in the business because we see the tremendous growth that we have in the ETF industry. The second is to have dry powder in case there's some opportunities out there to do some M&A. And then third is to return capital back to our shareholders, and we do that now through dividends and buyback. We've been focused more on the dividend side of that equation today. I really don't see any change in that if there is tax reform. If anything, it would be great, we'll be a good beneficiary of seeing a reduced tax rate. And it's just as -- how do we want to deploy that capital into 1 of those 3 buckets. So we'd have to wait to see at the time to see exactly what that tax reform is, but there really is no change in that philosophy. Overall, we're not a type of firm that's going to just let cash build. If we can't find a need for it, we're going to return it back to our shareholders in the most efficient way possible.

That's great, that's great. And then just another big-picture question. I think historically, your stock is very highly inversely correlated to the yen. We're starting to see some movement, it just broke through 114, is there an inflection point of when you think advisors might step up more into the DXJ? And is there anything you would do differently to educate advisors on what's going on over in Japan right now?

This is Jono. So just if you look at Amit's quarter-to-date update, you see that flows to DXJ turned positively, and is tied to progress on the budget and also on some of the ECB comments. So the strong dollar's certainly been helpful, and the market's very well educated on the benefits of a strong dollar for Japanese equities. But we always are continuing to educate.

Our next question comes from the line of Michael Carrier of Bank of America.

This is Jeff Ambrosi filling in for Mike. Last night, the treasury released their asset management report. And in there, was there was a suggestion to adopt a plain vanilla ETF rule, making it easier and less costly for ETF issuers. So was just wondering to get your thoughts on how that might impact WisdomTree if a rule like that were to happen.

Sure. So over the years, ETF sponsors have received different forms of exemptive relief from the SEC. In fact, a few years ago, the SEC did put out -- they proposed a rule that said they would allow asset managers to launch ETFs without getting exemptive relief, but then they pulled it. So it's hard to say what -- if a rule is going to come out or not, but I would say, having exemptive relief is just one of the competitive advantages that we have in the marketplace. There's other competitive advantages that we have around having the first-mover advantage of our funds, having a 10-year track record that has got great performance, we have one of the largest distribution teams in the marketplace, today, our product development expertise and our strong brands. So we're confident, where we sit today.

That's helpful. And then just a follow-up on the flows. So in 3Q, despite the outflows, like, the international asset flows were actually pretty strong. But then if I look quarter-to-date, it seems like those flows have kind of turned a bit. I'm just wondering what's changed in the past couple of months, and if there were any lumpy wins that kind of drove that strength in 3Q.

So for the flows for the International Business, as you mentioned, they've been strong year-to-date. In Europe, we've seen both success in our UCITS and our notes business. And then obviously, we've seen very strong flows relative to the starting point in our Canadian business. I think it's -- from a fourth quarter perspective, if that's what you're referring to, I think it's a little too early to tell in terms of where flows will go. So I think they have been some trading activity on both sides. So we benefited some from inbound flow and also a little bit of outbound flow as well.

Our next question comes from the line of Brennan Hawken of UBS.

I know you had indicated, I think on the Ameritrade deal, that the rev share was not any different than the prior deals. Can you just remind me how you guys account for that? Is that a contra-revenue item? Or does that flow through as an expense? And if so, which line item would we be watching for that?

Yes. So that flows through as an expense. And you'll see that in the third-party sharing line item on the income statement, on the expense side.

Okay, great. And then on the Canadian fee rate, I know we had the Questrade come in, right? So there was some noise there. But as we think about modeling that on a go-forward, I know there's probably still some catch-up still due to averages. How should we think about the sort of stable fee rate in that business, go-forward?

Yes. So this quarter, you saw the fee rate had dropped. We had some, as is normal practice in the Canadian market, we had a management fee rebate to the -- some of the seeders of our Canadian-listed ETFs, so you see that's sort of built in. So as that continues to flush through the system and as the business continues to grow, you should start to see that sort of start to stabilize to a more average rate that you see for the products set.

So that you're saying that will revert back to historical averages? Or how should we think about it?

Yes, once we flow through -- once we go through the initial seed, we should start to see the fee rates come back to more average levels.

The only other point to add, though, is the asset mix in Canada. So we've had great success early on in 2 fixed-income funds that we had launched in the marketplace. Obviously, those come at a lower price point than equity funds, so I think part of it, as Amit mentioned, is the seed part of it, is just the asset mix and the early success we've had in fixed income.

Okay. So I guess it's a little difficult to say what the right go-forward rate would be. Just to try to think about how to model this, we have to kind of let this stuff flesh out. Is that what you guys are saying?

Yes, I think you have to let it flesh out a little bit. Still small compared to the overall, so.

Our next question comes from the line of Robert Lee of KBW.

This is Andy McLaughlin filling in for Rob Lee. A lot of our questions have been asked and answered, just but can we get your updated thoughts or just thoughts in general around pressure to provide seed capital as you guys look to expand?

I'm sorry, repeat the question?

Just your thoughts around pressure to provide seed capital as you look to expand your offerings.

So we have very strong relationship with the market makers, long histories with them. We launch funds, we launch, really, conviction funds which the seeders really appreciate. And we often support it with aggressive marketing, which it has become more difficult to establish a new fund in the marketplace from the -- all the new competition. But we continue to be very successful in finding seed. I'm not seeing that change in the model. So that's -- things are stable from that perspective.

Okay, great. And then just one other question. You mentioned that if tax reform were to go through, you might look to deploy some of that in M&A sense. What do you see as kind of a gap? Or what would you be looking for from an M&A sense?

So when we think about M&A, it's anything that we can get into an asset class or a geography, things that would help us build scale or help us diversify. Those are the types of things that we would look at from an M&A perspective.

Only other thing is our recent investments into technology as well, which is a relatively new additional focus for the firm.

Our next question comes from the line of Keith Housum of Northcoast Research.

I guess most of my questions have been asked as well. But the one that is really in my head right now is, as we look at the various technology solutions you guys have, between DPD now and your model portfolios and your investment AdvisorEngine, I mean, how many of those are just going to be purely paid for by growth in your AUM versus through the opportunity to get any potential advisory fees or any other fees outside of just the growth in AUM?

So from the economics side is, the bulk of it is kind of coming in from the core ETFs, right? So how we get models onto some of these initiatives on the AdvisorEngine platform. Selling technology solutions, all of it is the goal, end goal, is to selling our ETFs. So that's where you'll see the bulk of the economics start to come in.

The only thing I would add, though, is that AdvisorEngine is committed to building a profitable business and theirs are fees outside of our ETFs, bps on the assets on their platform. So that is a -- should become, at some point, a significant additional source of revenue for the WisdomTree ecosystem.

Our next question comes from the line of Ryan Bailey with Goldman Sachs.

I was hoping you could spend a little bit of time to talk about your fixed income ETF business. I think part of INVESCO's announced acquisition thesis was bullet shares and the self-indexing opportunity there. So how do see competition in the space? And kind of what's the opportunity to grow that business?

This is Luciano Siracusano, Chief Investment Strategist. So within the fixed-income front, we have had some success in the last few years with a few funds that we created. AGI, which gets you a higher yield in the overall ag, that's an index that we were able to collaborate on and have a lot of input in terms of trying to enhance the yield on benchmark. We've also innovated with 0-duration, high-yield, and that's a product that's seen inflows this year. It's index-based, but it's also a product that can potentially take in more inflows in a rising interest rate environment. So I would say we've had pretty decent success over the last 2 years with some of the newer products. Again, sometimes, they take a little bit longer to scale, to get on the platforms, but I think there's growing awareness that we have those in the field. And increasingly, we're also incorporating them into our models.

Got it. And then I guess just a quick question on DPD. So I think you mentioned that the product optimizes portfolios for whatever goal on an adviser is using. Does that suggest products to use? And if it does, are those products -- or is DPD open architecture? Or is it tailored to WisdomTree-specific products?

So it's Kurt here. So yes, the tool does suggest products and it suggests those products along those categories of optimization that I had mentioned, whether it's income, performance fees or volatility. It is open architecture. So this is not a tool that, for every ticker that you put into of one firm, it automatically translates that ticker to WisdomTree. So it does optimize portfolios, which include proprietary WisdomTree strategies as well as third-party strategies in there.

We have a follow-up question from the line of Craig Siegenthaler of Crédit Suisse.

Amit, do you have any early thoughts on how the U.S. comp ratio may look in 2018?

Too early to tell, Craig. We'll talk about that on our next call, where we'll give guidance for next year.

Got it. And then on the non-U.S. business, which is still unprofitable, do you have any expectations on when that could be profitable? And then what that would do to your tax rate, just given that nice ramp in flows and AUM we've seen here?

Sure. So the management teams of those businesses, we're really driving them to get to profitability as soon as possible. We're hoping the next 2, hopefully, 2, 3 years, that profitability should hopefully come in. From a tax rate perspective, it'll be beneficial because right now, we're not getting of the tax -- any of the tax benefit from those international losses from a GAAP perspective. So once they do turn profitable, we'll be able to shield that income for a period of time until we burn through those historical operating losses.

And this is Jono. And although we're trying, Amit gave conservative guidance on the profitability, we are optimistic that we'll start shrinking the losses as we continue to scale.

We have a follow-up question from the line of Bill Katz of Citigroup.

Just going back to where we started earlier, you mentioned KeyBanc and then a bunch of others within the pipeline. Presumably, you don't want to give names, but is there any way to sort of think about the total addressable market of the assets that you might have an opportunity to sort of cross-sell to?

This is Luciano again. Yes. So Envestnet is one of the larger platforms out there. So that once we get our models onto Envestnet, they become visible and accessible by a very large population of our RIAs, some kind of broker-dealers. So the key there is really connecting with the home offices, getting through the due diligence processes and getting available at the individual firm level. So we've completed that with Key Investment Services. Their FAs can now buy into our models. We're starting to be able to market and discuss it then to them in the past few weeks. I think the reception has been very encouraging from the get-go. But as we expand on to different platforms, including AdvisorEngine, we're dealing with a much larger addressable audience. And we think that over time, this is going to be a significant driver of assets for the industry.

And just, Bill, it's -- the secular trend is, I think, the models will be an ever-increasing portion of the total flows, though it's still relatively early days for the industry around this trend.

Thank you. [Audio Gap]