Question-and-Answer Session
Operator
(Operator Instructions). And today your first question comes from William Katz from Buckingham Research.
William Katz - Buckingham Research
Rich I was curious you talked about expanding the business which is a common theme coming through most of the asset managers in the third quarter. Could you may be mention the expense growth rate if you will or how to think about margins incremental margins or the absolute level of margins again so it could be more of a market driven and then anyone climb in the near term?
Rich Pzena
Yeah, the magnitude, the way to think about those is we are going to add I would say the best desk let’s say four people to the staff which is going to be less than 10% of our existing staff, that would probably be slightly higher than average wages. So it’s going to add, the staff expansion is going to add about 10% to the run rate, of course we don’t get everybody added to the full year and then we are likely to experience some upward pressure in comps for existing staff and while it’s really hard to say where the market is going to go we will be competitive and so we are planning for expense growth but we are planning for expense growth at a significantly lower rate than we are planning the revenue growth and so we think that margins will expand next year and the incremental margins should be for our business should always be in excess of 50%.
William Katz - Buckingham Research
Yeah, that’s very helpful, thank you. My second question revolves around the fees if you will, I apologize for the analysis of this question but as anywhere more to build and presumably institutions would exceed retail based on your commentary about mainly the rolling three year return outlook. How should we think about break points from here, considering its every billion dollars you know how is that work against the fee rate?
Rich Pzena
It’s a difficult thing to model because at all times its all kinds of stuff going on and I think really what you have to do is look at what our average account size is, not average account size as generally been trending up, not independent of the marketplace. We have been winning bigger accounts and losing smaller accounts. So I think that actually has a big if not a bigger impact when you know the performance impacts. The break points, our average account size just to give you a rough indicator in the third quarter of ’09 was all the way back to where it was in the first quarter of ’08 and at the low point in the first quarter of ’09 it was about a third lowest. So that you can look at the weighted average fees rate and get some indications from that. I don’t know if that’s helpful to you. It’s hard, very, very hard to explicitly model that.
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