During the years ended December 31, 2020, 2021 and 2022, our wealth management fees were impacted by the acquisitions of new partner firms and the growth of existing partner firms, which includes the acquisitions of wealth management practices and customer relationships by our existing partner firms. In 2020, 2021 and 2022, we completed acquisitions of 7, 14 and 5 partner firms, respectively. In 2020, the new partner firms were Nexus Investment Management, MEDIQ Financial Services, InterOcean Capital, Seasons of Advice, CornerStone Partners, Fairway Wealth Management and Kavar Capital Partners. In 2021, the new partner firms were Hill Investment Group, Prairie Capital Management, Rollins Financial, ARS Wealth Advisors, Badgley Phelps Wealth Managers, Ancora Holdings, Sonora Investment Management, Cardinal Point, Ullmann Wealth Partners, Mosaic Family Wealth, Alley Company, Cassaday & Company, Provident Financial Management and London & Co. The new partner firms Provident Financial Management and London & Co. combined their respective businesses in December 2021 and operate as Provident Financial Management. In 2022, the new partner firms were Azimuth Capital Investment Management, Octogone Holding, Icon Wealth Partners, FourThought Private Wealth and Beaumont Financial Partners.
In 2020, 2021 and 2022, our partner firms completed 18, 24 and 19 transactions, respectively, consisting of business acquisitions accounted for in accordance with Accounting Standard Codification (“ASC”) Topic 805: Business Combinations and asset acquisitions, including, 4, 8 and 1 transactions completed by Connectus in 2020, 2021 and 2022, respectively.
See Note 4 to our consolidated financial statements for additional information about our acquisitions.
For the year ended December 31, 2022, in excess of 95% of our revenues were fee-based and recurring in nature. Although the substantial majority of our revenues are fee-based and recurring, our revenues can fluctuate due to macroeconomic factors and the overall state of the financial markets, particularly in the United States. Our partner firms’ wealth management fees are primarily based either on a contractual percentage of the client’s assets based on the market value of the client’s assets on the predetermined billing date, a flat fee, an hourly rate based on predetermined billing rates or a combination of such fees and are billed either in advance or arrears on a monthly, quarterly or semiannual basis. We estimate that approximately 24% of our revenues for the year ended December 31, 2022 were not directly correlated to the financial markets. Of the 76% of our revenues that were directly correlated to the financial markets, primarily equities and fixed income, for the year ended December 31, 2022, we estimate that approximately 66% of such revenues were generated from advance billings. We estimate that approximately 28% of our revenues for the three months ended December 31, 2022 were not directly correlated to the financial markets. Of the 72% of our revenues that were directly correlated to the financial markets, primarily equities and fixed income, for the three months ended December 31, 2022, we estimate that approximately 65% of such revenues were generated from advance billings. These revenues are impacted by market movements as a result of contractual provisions with clients that entitle our partner firms to bill for their services either in advance or arrears based on the value of client assets at such time. Since approximately 65% of our market correlated revenues are set based on the market value of client assets in advance of the respective service period, this generally results in a one quarter lagged effect of any market movements on our revenues. Longer term trends in the financial markets may favorably or unfavorably impact our total revenues, but not in a linear relationship. For example, during 2020, 2021 and 2022, the Standard & Poor’s 500 Index had a total return of 18.4%, 28.7% and (18.1)%, respectively, and the Barclays U.S. Aggregate Bond Index had a total return for the same periods of 7.5%, (1.5)% and (13.0)% respectively. By comparison, for the same periods our organic revenue growth was 7.0%, 24.0% and 8.5%, respectively. For additional information, please read “—How We Evaluate our Business.”
Operating Expenses
Our operating expenses consist of compensation and related expenses, management fees, selling, general and administrative expenses, management contract buyout, intangible amortization, non-cash changes in fair value of estimated contingent consideration and depreciation and other amortization expense.
Compensation and Related Expenses
Compensation and related expenses include salaries and wages, including variable compensation, related employee benefits and taxes for employees at our partner firms and employees at the Focus LLC company level.