Waddell & Reed Financial (WDR) 1 May 182018 Q1 Earnings call transcript

Company Profile

Participants

Nicole McIntosh-Russell	Waddell & Reed Financial, Inc.
Philip James Sanders	Waddell & Reed Financial, Inc.
Shawn M. Mihal	Waddell & Reed, Inc.
Benjamin R. Clouse	Waddell & Reed Financial, Inc.
Brent K. Bloss	Waddell & Reed Financial, Inc.
Amy Scupham	Waddell & Reed Financial, Inc.
Craig Siegenthaler	Credit Suisse Securities (NYSE:USA) LLC
Glenn Schorr	Evercore Group LLC
Daniel Thomas Fannon	Jefferies LLC
William Katz	Citigroup Global Markets, Inc.
Michael Carrier	Bank of America Merrill Lynch
Chris Charles Shutler	William Blair & Co. LLC
Robert Lee	Keefe, Bruyette & Woods, Inc.
Kenneth S. Lee	RBC Capital Markets LLC
Patrick Davitt	Autonomous Research US LP
Macrae Sykes	Gabelli & Company, Inc.
Michael J. Cyprys	Morgan Stanley & Co. LLC

Call transcript

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Operator

Good morning, everyone, and welcome to the Waddell & Reed's First Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Investor of Head Russell, Relations. Nicole ahead. Ma'am, please go

Nicole McIntosh-Russell

management Thank like would call. our our you, On behalf Jamie. team, to earnings I quarterly of welcome to you

me Inc.; COO; President Inc. Shawn Phil President of and will Clouse, Joining is Waddell of CFO; Scupham, Mihal, call & who broker-dealer, CEO; distribution Reed, our our Distributors, our Amy Ben be Bloss, Brent our our on and Ivy Sanders, today leads

comments and we that our Before I some statements. to would will you remind responses begin, like forward-looking include of

we statements. information at I with forward-looking believe and factors press of our that differ due to the to Investor SEC. of Materials copy the call the to Relations results these based been While implied on statements to no filing Phil. are number like materially release that us, that a including We reasonable over assume today's be we posted could from on or ir.waddell.com. a any section update available would those reference website to now expressed call, to is in duty of turn currently supplemental have to public schedule relevant actual our our

Philip James Sanders

we $X.XX everyone. $X.XX net reported income morning, million last net quarter. or share per Today, Good of $XX $XX per of to compared or share, quarterly income million

will by You our will on call. income earnings in million $XX recall in $X.XX. expand net that later the reduce and Ben prior share quarter that, included several financial aggregate, items the per results by

down year-end. ended management approximately $XX the X% under quarter from billion, Assets at

the model, outflows strategic to evolving outlined. improving had XXXX, a we our operational broker-dealer made efficiencies, During and investment progress We're more goals the executing toward previously steady of we performance. overall net competitive first against of in improving reducing initiatives the well underway quarter

objectives task we focused much hand. know our clear That be to done. progress, work said, at can is on we more the needs are see our and Although also organization

enhance organization streamlined our creating also a making we costs are to reducing are long-term more committed strategy, to of key While and our necessary success. tenets investments the

capital with is provides stress. were success during largest us balance their our our to that great quarter performance product and of investment our times of sheet of out strength and first flexibility XX Importantly, long-term strong across exceeded deal our return even solid of essential market benchmarks We respective financial policy Notably, understand strategies quarter. a for line. much X the results

the rankings improvement across five-year exhibited up a most We markets three, the first quarter, MorningStar volatility. and of of Lipper see continue strategies. stepped level key to in and equity In one, our

We trends are on optimistic redemption is for continue to that comparisons a the policy From level and the of are of improve sales normalization backdrop the a recent volatility, focus this Improving sequential a year trend managers. toward global central quarter with investment banks, of and perspective, monetary investment higher ongoing active part will as showed the did combined from ago. marked an performance encouraging. improvement gradual

terms equity markets' the to inflows. lead Our international emerging continue net and way strategies in of core

will priority. distribution background our a our various through key we strategies We will and developing clear move channel, the given leadership, in in broadening in and strategic near-term our deploying intentions distribution strategies, a unchanged today's supported sales some right traction and strategy continue aligning an our our our small our effort as we focus. remains product anticipate We with long-tenured large Institutional a we our our Amy's evolving team-managed collaborative and across to of and channels. approaches for by management departure culture and investment focus, one concerns of landscape. to analytics, distribution growth is effectively some best properly and played priorities remain alleviate approach well-suited in She incentives, That also continue strong emphasize identifying cap said, sharpening headwinds data and the is go-to-market sales however, to marketing sales team. do distribution cap Under can. sales experience managers. role Thus, continue portfolio to will growth portfolio key our refine see but forward and to we Amy's

As and previewed Reed into brand all call, the cost we fund merger Waddell last efficiency greater on Ivy of our for & providing leverage remaining the Funds complete Funds, our did Advisors shareholders.

the Dividend Ivy the Equity of merger the completed into Fund. Income Global Opportunities also We Fund

time. our product we to expect we As opportunities and lineup to over continue our additional product position offerings, review refine better have to

actively funds order in are long-term intending to reviewing competitiveness. their our implement Additionally, structures the and to enhance adjustments are of fee we some

Our cost incremental opportunities recent company to provide growth improve tax from and reduction prospects. us initiatives our our in firm's reform legislation profitability invest long-term and and savings

our now Let it over an for update of investments. broker-dealer me the turn to Shawn? Shawn on evolution

Shawn M. Mihal

distribution first in year-over-year annual quarterly rise are comparisons. in to productivity down of per XXXX, X% Thanks, accounted up and up of the $XXX,XXX average assets $XX annual under compared up the during the to advisor, billion broker-dealer fees the Advisor's slightly average $XX Phil, broker-dealer Advisory good and March at morning. assets quarter. and year-end The is of March – XX% million the compared productivity XX% increased and $XXX administration, revenue ended to billion XXXX. March to for in with XX% while underwriting productivity to continues and

supporting which As a total end at during business roll, licensed Reed of advisors of advisor of X,XXX expected, advisor It's for see model. as that part we or quarter continue of number was with worth as excludes another left have left standard transition part their as $XX,XXX, number retention production Waddell a of succession book advisor. who attrition to plan March the advisors was the resulting The of who an of who more we by XXX an a in industry the & the annual average are advisors to to assistants shift noting advisors. the additional advisors associates, in associate

we stand-alone to we toward seek high As rightsize performing profitable broker-dealer, on the retaining focused and model. to advisors – seek advisor continue our further path further are a

to focus XXXX. enable programs model, ease This greater initially. of and continue efficient in includes strategic comprehensive doing technology advisory Our competitive highest more processes that drive in the to business, for transitioning support a improvements of a and goals advisors our performing enhancements suite for broker-dealer fully our brokerage-centric to will program our

are our actively We consolidate data one into engaged project to core environment. in management broker-dealer's data

of designed of operations intuitive and to enhance increase through platform administration efficient by processes our data allowing seamless us business business aggregated is the data to an connection platform. Our straight-through use The to allow project will business processes. efficiencies

advisors provide platform. a maintain our brokerage advisor environment. account designed expansion our to processing our interface, business back administration to the will for to more allow client service to advisory functionality, this connect investment in end provide underlying XXXX, servicing or intent advise in connections of allow held. to launch business where – will processes is advisory straight-through its are a Whilst user goal processing to efficiently directly intend our advisors in platform. accounts interim, office to This use additional we our investment Our account advisory with held We platform believe with expand custodians functionality on

DOL's service provide a actively rollout Lastly, advisors. to We're advisors designed comprehensive a advisors and developments, highest service the Court a service year the targeting the through issue provide decision of third vacate model With single contact point advisors regulatory for we resolution. service is dedicated to are Appeals' in to the This with speedy regard to quarter model to our subsequent Circuit of expansion being continuing building of to additional a this performing of to fiduciary monitor with and quarters. program to we're Fifth rule.

While defend states petitioned the the not to and case DOL. the Court DOL to an elected case, appeal AARP in on behalf has the handful a the pursue of have this of

We changes burdensome to fiduciary of while upheld. monitor evaluate we the should consideration be decision will these continue requirements Court's most many of for the rule's developments

to on SEC DOL's We're a standard rule understandings In likely this create and remain addition, disclosure. developments. on its compliance is mitigation to reasonable focused is monitor of for conflict on allowing these applicable, The recently and based SEC rule, Best proposed standards But fiduciary broker-dealers, our the Interest the rule continuing would Interest Best intended proposal, the which rule which for conflict for transition. care broker-dealers. of will revamp conduct disclosure the mitigation for much of of early preparation voted

disclosures other must business order help evaluate progress our the evolves, we're business brokerage making in to so our to comparability As investors to promote models. and

Our earnings asset additional includes advisors. and advisory around programs release press productivity movement, transparency

over Ben. it to Now, me turn let

Benjamin R. Clouse

Shawn, good everyone. morning, Thanks, and

in down despite Revenues earnings stated, or sequentially per slightly and $X.XX revenues action. assets. better Phil revenues first lower in offset The part fee Management increase U&D increase fewer asset higher share. advisory in days were were in slightly up by average driven to $XX.X partly revenue. was in million for fee due sales higher due an to by an As quarter, market were total. quarter X% redemptions, increase were the the

with our programs distribution services were and resetting XXX(k) offset contribution, being neutral Other revenue. normal expenses additional in were beginning-of-the-year additional total. increases also were generally than from earned Compensation of in We programs grid otherwise services offered payout generated to down were in more increases these taxes. and advisors. benefits line quarter expenses revenues the and reflected commission payroll the of from revenue with The by expense. the in Distribution the our slightly and merit change discretionary fourth offsetting operating absence in

declined interest sizable expense tax and provided income our repayment, us reform expense. to a reduction expected, in As due debt corporate tax

detail by We an elements Shawn our the quarter, presentation, We the as price changes I'll million. shortfall other our continue statement tax share-based transparency compensation for mentioned, incremental quarter with expect that between second the our about for will forward our we revised out XXth, business financial reclassifications various be outstanding expected going associated and industry. charge shortfalls and and as to significantly rate broker-dealer $X.X to approximately the prevalent made of the XX%, as X-K categories in disclosed our grants. which excluding here of with this historical align of disclosures point in stop the decrease will the income believe the well These for April operating in this metrics improve XX% results filed quarter. to expenses changes our additional

time had compensation was total in XXXX or to opportune to field the move this away impact structure, make commission-type reclassifications our quarter an expenses these no on in from earnings. which Following changes a management

rationalize initiatives. initiative in in continued broker-dealer that cost make progress to our profitability. occupancy We to One with low is we on low containment began footprint or our estate real our locations

to lower less most demand our new productive for continue a on space of office focus we we influx due advisors. As advisors, to have

our in We continue goal The $XX realized savings across $XX toward our changes clarity XXXX to $XX bring company income rate. net to additional target in our run million million million will statement rate. to expense an additional to the overall $XX to million be run

of number first course, but higher limits, XXX(k) and quarter, see was as off of The leveling the the slightly year payroll to resetting progresses. we tax that due

we initiatives focused drive While we on management, expense are to prudent revenue meant to invest in growth. continue

on In and teams. data and fee availability for the We Sean and also of comprehensive investment including competitiveness doing sales staff to merger attractiveness ease We products to adjustments fund enhancements fund advisors enhance add we rates certain research for are mentioned, continue as evaluating strategy, our and distribution to funds. our of well opportunities. are distribution considering the management working that in a of investment increase enhanced more business of data support further make as our intend our efforts, to

tax As we completed share $XX capital we are making. buybacks potential losses will new flexibility provide reform the revenue our of recent January, In strategy, during quarter other any and the help support additional of offset we in investments and noted impact million. We fourth January. Including December progress repurchases annual coming shares in continue return intend of quarter, grants the puts the approximately we to in us making $XX to shareholders in quarters. this on beyond the XXX,XXX made the the million capital of and of

$XX of strong placement our million turn flexibility We back down our end will remarks. cash of us strategic of the first notes liquidity and to of with ample and now meet $XXX goals. for sheet completed the with balance remain to it Phil continues million our Lastly, leaving private closing in investments the quarter. January, at in to tranche pay I

Philip James Sanders

Thanks, Ben.

And establishing success solid company. framework I believe are Over all year-and-a-half, of we focused across we enduring end, have our on an past aspects for to this made progress. the

be of culture way. allow not our through the challenges to and collaboration us will team continuity environment. the Our along We designed easy dynamic to to a initiatives orientation always strategic understand there is changing path provide and that is

mission our service. now investment exceptional for call superior client we financial advice, the Operator, in to like questions. helping However, sound realize through we remain of steadfast open would goals investors their and long-term performance,

Operator

Ladies begin Siegenthaler Credit our first Suisse go we'll and with gentlemen, morning. comes Craig Securities - And from LLC Craig session. Siegenthaler from question. at question the (USA) this time, question-and-answer your Please Good today ahead Credit Suisse.

step take the these be you a quarter operates two distinct either asset a about when year? between two you broker-dealer. businesses level on Waddell back, manager Reed So, generated profits this & color the businesses, and think help margin us And any of Can or last an too. would helpful, really

Benjamin R. Clouse

Maybe and add. to want Ben. start may This Phil I'll is

disclosure. you of know, purposes As operate under currently external one we segment for

continue that, As business to evolves, we'll our course. evaluate of

on the support the working asset generally our I move to don't our I industry, a Phil basis. manager or know, think margins to our stated previously standalone in broker-dealer line in more strategy of that. the to with third we're in pillar of want that margins of are Shawn to and we've improving add business that

Philip James Sanders

know, we'll evolve are kind - future we say And on you that's classes Siegenthaler kind talk commissions but broker-dealer evolved the Craig know Credit front-end as how want also gradually on of more basically the the transitioned (USA) our Yeah. higher, that our, an basically to and I restructuring has were efforts or then I taking don't that we and we've I've separating guess, Most and evolution essentially have in kind broker-dealer, industry adjusted as think Can in sales variable is right LLC businesses broker-dealer options, asset fees fees choices reorganizational in and where where model, Securities I the efforts where sense was mix have business a these our I quarters we're and as and and of share industry Shawn. lot the you gatherer in that's activity going just where saw just moving as were know and the that, stated. But evolved, the supported that the of we're a this next if responding two of to to were – evolving? annuities I the Obviously, business. Suisse asset and quick of don't assets advisors transpires, historically now. clients As load XXb-X more of follow-up, and lower. management about your our as add, like the

Shawn M. Mihal

into represented can I certainly is that. that's We're advisory transition This more space. advisory Yeah. the being space, of seeing obviously for the out take the from Craig, Shawn. overall away the the in of accounted revenues commission-type and products coming

that. model. look industry under large advisory coming the management we of you shift is is that of would that have as $XXX gone revenue, which a longer The some that XXb-X been with sales towards no associated when assets XXb-X as in with some programs off accounted – to years were advisory data So, fees believe, an But have in data of for that over the the million we through course have compression continues in portion and trends program. the commissionable applicable several advisory removed dynamics are consistent, business the around fees the to advisory more pull overall at once around certainly

inside inclusive regard that overall reduction seen an we've prior with were of XXb-X fees to programs. from years So, advisory

Brent K. Bloss

And Brent. Craig, is this

over load On products we're the XX% Credit (USA) still today. a Craig Siegenthaler Thank the you. is it's selling that LLC Securities loaded Suisse little revenue, proprietary - on

Operator

Evercore. comes from Glenn go question. your Please question with from next ahead Our Schorr

Glenn Schorr

very Thanks Hi. much.

the to on clear that and be a I product income, same than AUM. growth of large impact sure about potential we're the little make less you're and cap about talking the to the your Just of more comment see want want as I side. dig departure want just talking PM just institutional stuff. fixed because the about into to X% I

Philip James Sanders

the large I portfolios. referencing was Yes, That's growth correct. Glenn. is Phil. really This cap

Glenn Schorr

– you so. do has you there do? what team The can that's for could over talking or mind six And about Okay. taking years you been

or it I (XX:XX). performance else, read remarks think So, that so trying how to into related was don't you am I your just And manage process? do anything

Philip James Sanders

perspective. give Well, a you of I'll maybe little bit

large I at PM, long-time end of XX-plus the growth long the indicated involved been strategy cap $X.X business has strategy. that in The quarter. the was billion we that institutional departed time. think PM that about years a running first was I that for

have many PMs is There co-PM true years. product three PM business something managed many, has this approach and a you PM So, been cap large the and two – an that we've that to It also a seven we've this just reassess. clients so, key departing, when on team for that for Assistant will there. we've and is now will in consult got affiliated The stop team on stop with had product years. is growth happens

going this how PMs, clients, plays – can team who we our see based when in the and growth and conversations challenges continuity got have and over think that that have with on here have Nevertheless, really firm I the we'll you the we've departure in And cap next embedded style best that a So, philosophies long-time quarters, large key many like but are relationships the the within and we clients. managed in structures. to alleviate do to certain you and have the of process. importantly, we we through style But this know few works some terms our this, out. portfolios, we're familiarity when business how understand of with to our

Glenn Schorr

Okay. question performance on the could slip the Maybe I side.

patches tougher into of largest of the three-year quarters I over funds next rolling the the performance two some think off record. have five seven

that equate that in improve. those equal, in the It it the reasonable like either lately the your unaffiliated should to records or even that improving? there. be reduction case all might gross or a sales be redemptions performance that Has So, changed In looks much the channel, relative shouldn't we on would just keep curious already or both. all pick-up thoughts in to market but so expect else past can working

Philip James Sanders

and Right. she jump Well, has maybe if any let I'll I'll Amy in perspective. start

your think good observation is a one. that I

way of growth performance the the challenges some large with But especially I think we've have more it, area. a more to we about products of in longer some than a cap kind in have some short-term I next with we that's goal, within opportunity, we probably thing. term, shots quarters on suite couple that headwinds years, of institutional steadily that our have good broader had so outlined, and think we've a last speak, few improving the

we of little and deliver I rationalization, industry need and and power the better terms execute industry of think of more the has of and – the bit can't rely marketplace on become can space hopefully, just So, to whole think institutionalized. we do in changed just you that distribution, has fighting we're I upon a the kind shelf headwinds sales. performance

become of little balance characterize you would to I anything sure, short-term some how add as So, don't a that. for think tougher to know, some I if a Amy, bit that's landscape And longer-term opportunities. but it's headwinds with I have

Amy Scupham

No.

that's think right. I

Philip James Sanders

Okay.

Glenn Schorr

both. Thank Okay. you,

Philip James Sanders

Yeah.

Operator

your Company. from Please Jefferies Our Dan Fannon next question & comes question. ahead go from with

Daniel Thomas Fannon

nature? in broad potentially. of you talk the of little of looking could changes? pricing this oneoff guess the some that Is – terms I more give potential Just us at it of pricing detail how bit terms be in strategy a Thanks. might more in a about you're kind

Philip James Sanders

Yeah.

but the I say probably about think more a it. this in process have evaluating to of next little we're quarter, we'll

focus and do holistic we're we our of in in it, taking approach we'll how be to this. focus probably a think strategic funds areas key will but be I the

some savings that I an rate. with and the we've tax think got point opportunity that the tax is here

of We also point know an fees remain the that focal important industry.

have to make competitive. we sure we're So,

to any our we more guidance exact we're would The savings And of that amounts, little I this muted in in quarter. be thing. when The handle about so, relatively make. because likely Keep think those And able more be get adjustments we're we I full suite. talking effect. you're maybe a into probably going think future said, we share more maybe talking half about second opportunity to better offer be I to definitely back we'll product of take on will XXXX that financial XXXX, next total a in invest mind type the like impact impact would The to it. of adjustments have a some

Daniel Thomas Fannon

I'm Okay. of in And sustainability on some thinking April follow-up just then improved. and of the given underlying just – just maybe about improvements. kind of how maybe versus factors gross these seasonality to some trended the has sales, unaffiliated curious channel

Amy Scupham

Amy. softening is a in This I address is In side and on I we've the seen pick-up Hi. unaffiliated can modest in sales a April, that. what the channel. think slight redemptions

due believe, I to is some this, seasonality. of Some

First of quarter quarters. is better one your sales always generally

think I just softer – some I'm also experiencing However, we're sales.

that So, Institutional what would in you the see April saw also add that had approximately few than I channel, million. clients totaling $XXX in the we for you in April have redeem trends lower the are first quarter.

Daniel Thomas Fannon

you. Thank Great.

Operator

Our from next Bill with ahead question your go Citi. comes from Please Katz question.

William Katz

very Thank the taking questions. you much Okay. for

So dollar through of both as to in versus given where and prior could the about things, the or terms restatements walk think how we just on the we timing, compares trying your amount the where expenses, savings, a were. level should guidance? of I just that couple reclassifications you us say, you set are I'm sort

Benjamin R. Clouse

to morning, be I'd that. do Good Bill. happy

in that I the stated XXX(k) to first remarks, my timing and in As quarter some particular compensation impacts tax elevated there in due were resets.

of stock result as have QX January. a last to up little also grant year of incremental date We our moving a bit in comp

million pertinent More of about to occupancy technology, bit we little $XXX your here will quarter. come G&A, a there's grant add off in XXXX the compensation, in and for marketing, overlap roll the first if to we'd question, quarter the So, QX. before up

$X there in to timing is million there. $X think million of impacts I

the rate, some balance the run the remove definitely talked prior I if year. one-time about So, we're items quarter. would have in $XXX that, which at of have or in We'll Brent about million million $XXX

estate, million expect we But see reductions there to that. run to real million don't in late some significant with exit in XXXX. still severance, will also range until be take $X cost million we a $XX some I particular in I associated QX, XXXX $XX of to rate, as we previously expect As of $X in out million. to another our stated, intend

William Katz

of just others then inflows, financial you Can coming And sort side, sort a give Okay. on ins of you of like you disclosure leaving. advisor, the about if me of advisors low the these to are back opportunities? some to advisor of the on the residual brought their where I and value onto the of so financial what's systems the lost? flux sense period plus PM on in officer sort gross of appreciate the productivity changes extra outs own the sort sort how the will, stepping many changes, financial of in advisors terms new terms many platform bring in and senior of spending what of or sort a all back with versus line And both of proposition platform the your you executives then peers of just heavily

Shawn M. Mihal

quarter ins Yeah, a the to of to the me Bill, joined Shawn. outs on the that just course and net. overall the get you It'll here advisors it's minute overall get during take the and third

report look be me those a numbers then give So able we'll and back. up to second to those

The other relevant the... to question was

Unknown Speaker

(XX:XX)

Shawn M. Mihal

Yeah. Thanks.

to other and platform was The the technology stand. where correct? question Is relevant we that

William Katz

those sort toss that other. it come advisors and value dialogue of can for Maybe later. me sort to each given in going back how of sort one that I'll of you the related of attracting lot a also proposition, just Well, of changed, is there understand but to financial to waiting out while of sort just it's terms all just

you're funds as that to I that for give historically could wondering if more your think you've stand could mergers? of if wondering at? I you then, today. amount reviewing well. AUM was we Just you of potential sort mentioned You relatedly, us some as of given where of still you're sort looking And out that the quantify AUM

Philip James Sanders

This is Phil.

opportunity as not far position will fund in they haven't now, decision the But largest not exactly As we're speaking, a any that mergers, to potential we be generally really quantify because finalized making. of right and kind that reallocate obviously, be terms resources, effective most in more will driving our resources consolidating funds an to longer of term be It performance of the competitiveness. and thing.

it'd relatively of we'll how a potentially, modest, it I that we're say would many. be that expect be say, quarter handful, to and I on I So But in terms next would more reviewing. think have

far as if As to AUM spend, the you know I don't comment... want

Benjamin R. Clouse

we've flows Yeah. AUM, as disclosing And in summer. month, that past you bit I think, regard level Bill, year, Sure. this we give data. little then for our last began to last monthly, know, more March, added to to a

in really make particular, let to our In Going forward, week. we're AUM about we call an need number. disclosing execute to is since here accurate Xst, today's a process sure on the we'll disclose yesterday's

William Katz

taking today. for Thanks my Okay. questions

Shawn M. Mihal

nets initiatives. is Shawn, proposition are standard to XXX increase to associates, out we advisor model be roles we've some overall the able of we Project the our still that But and of advisors. seeing course projects, two suite associated regard E the industry through programs I'd that we we offering levels we've those down an seen shift as We've those offered are in to that space to is also, to increasing the suite in shelf licensed we're as well we're along move overall where to back in business. an to to and advisors move enhanced of then get advisory have advisory advisor into platforms as of occur to that our on as with the of advisors XX have done increase dedicated production of a And value regard those functioning advisors. the to efficiencies at model really going leadership doing a to which of advisors are data anticipated associated from to and with field of enhancements will have advisors. to we've And our inflows We continue an with the we advisors transitioning support that drive just to we're services roles our did that more the the note have this field that are to one net on also past, actual advisors. on years through And, overall What numbers the we've see get with from data-driven round advisors. and actual and those what field with were Bill, continuing we that to capacity some over focus last so thing projects, the and greater production perspective. that's technology products requirements advisors we future, from installed minimum the to in that associated headed offered are a advisors. Overall, support enhance we've packages is we the for recruit continuous for of as the licensed

So we support think support we're the dedicated and we model, as in more provide to particularly that advisors. compete performing shift service able that space, model to continue our concentrated highest to

William Katz

Thanks. Okay.

Operator

with And Please go Carrier Bank comes question. ahead America. our question of your Michael from next from

Michael Carrier

you sequential terms kind the some and add flows, that in guys. have improvement? the but of anything platform first or quarter, anything just lumpy Hi. know that? unaffiliated more or you I question the that institutional that in the a may significant the was have a of Thanks, drove one Like Maybe was on driven there win on the of seasonality

Amy Scupham

just was I our the our strategy. say Amy. core market This and it continued In equity international strength is with Hi. emerging products space, would unaffiliated

our net was big the inflow sub-advisor from mid-cap as strategy. positive clients a far institutional, in of one growth our As

Michael Carrier

I terms like to trying already we're million $XX how I in about efficiencies. maybe like when of on this early, reinvesting and we kind about then I'm of look million from the next you million get still and so I like that the $XX guys then to tax And you some year? know the that to new the $XX in tax some about And it's like think, Meaning, think, business that we to the of just to context the color going are we of you're it. million, some at you're an think when look outlined, a have you just that versus forward, And million $XX you you thinking bottom have making of Got a that the review million sort probably that fee follow going standpoint, up, you're mentioned of of of (XX:XX)... fee rates about investments, a in maybe benefit little the $XX going thinking when kind into the of how of efficiency coming savings. investments line? that think the should kind get $XX taking but the Okay. much so I have because more changes, million, at, left $XX call relative to we're when understand

Philip James Sanders

Right.

Michael Carrier

...So, a you have just it. if more big picture

Philip James Sanders

wants thinking I'm give I'll them, Right. Well, just if to about how Ben any. elaborate

through fee of I product our of reinvested the it some this from the think will and and savings taking terms be perspective, we're we're type is, line of thing. reductions in tax way opportunity about that thinking portion that

to fee and we're remain a perspective. have be But to thoughtful it. think about obviously, I competitive going we from strategic

improvement several drive some will help investment some across be appropriate here a that sales. adjustments future broad-based performance term longer to products fee I have We in drive and think

perspective. that's think So, on don't of probably in anything I it. have That's as probably we'll about and forward. guidance indicated Ben, if But them. again, your early we're stages to unsatisfying in going know, there's terms else add how sizing I we're more thinking that I from the

Benjamin R. Clouse

No.

right. that's think I

Michael Carrier

Okay. Thanks a lot.

Operator

from from comes ahead with William question Chris Shutler question. next Our Please your go Blair.

Chris Charles Shutler

Hey, guys. Good morning.

on a broker-dealer the channel. Just few

some guess responding Does are of competitive and environment firm it how to are feel those aggressive recruiting recruiting like the gotten I has in offers terms packages. more to out pressures? So, you you there there pretty

Shawn M. Mihal

this And Chris. has in relationships we've competitive as advisors, particularly regard and being to Hey, a last certainly, advisors. to future things our we platforms think to how is the that our takes to initiatives to the evolution competitive. platform providing that we our focus pretty so Certainly, as with I E, been with footprint. has we regard changed has Project We estate goals a Ben continuing with in of the our of look product retention have In the channel but whereas asset and and a Certainly, past, those here gatherer recruiting and recruiting, inexperienced with our we we're more overall rightsizing were out well do past of a lot how other aspects recruits mentioned, at of the we as inside, from to that which compete to advisors that our forward, side the aspect. our have and been as Shawn. our This advisors focused strategies number offerings longstanding recruiting of on bringing business a several broker-dealer now, has in forward our advisors will associated bringing support and are to us competitive we recruiting model. discussed, place expand with to focused go and on had certainly And are we model how enhancing with what years, for to of we to firms in advisors challenged different to we've high-performing space, conduct continue expanded was focus how to to dedicated place. shifted being somewhat the in. an a as We're we on some regard and And focused to classic advisors. moved, to the of moved environment Phil significant enhancements through and, to higher-performing certainly we're environment doing our respect on strategies with the the times, and to an offer will to with that implemented regard with we for the we're we're as recruiting we data particularly out our recruiting resulted moving – and advisors, shifts engage continue inside remain the into opportunities data the more caused with transitional regard responsive with effort from and of amount that's taking those retain think real

we continue make around adjustments as model. we'll that shifted So to some this

a competitive we think we to package So advisors. our offer

and that We our their have and model scope association us very of broad as an advisors. from purchase with can la programs a advisors carte à associated services

from that into model away on of advisors with has feel a to been amount recruiting significant bringing we those the advisors of there's the focusing the higher-performing associated shifted But inexperienced of more So advisors. mass lower large the opportunity firm. or newer

Chris Charles Shutler

give update sense. the & to party, proprietary an percentage the is at the of And can and you The proprietary broker-dealer, percentage versus currently Thanks. at third on that just Okay. us area. then the, follow up of Waddell the if Reed you same NNA? a assets, Makes sort Funds within just the NNA how compared and on look

Benjamin R. Clouse

is Well, proprietary, could non-proprietary. really I to or quarter. and consistently and frontload start. Brent We look in. it track sales be If This Ben, add continues this might for including at we about XX% don't nonprofit, XX%, about Shawn revenue,

Chris Charles Shutler

All right. Thank you.

Operator

question. next from ahead Robert Lee go Our comes from Please KBW. question with your

Robert Lee

Great. taking I Thanks question. a for guys. my have question, just

going open possibilities. or at strategically forward, fact maybe mean, to calls, be the prior you I that I the about of hinted inorganic So, suggested of may kind more some thinking think,

interested can on broker-dealer space. in particularly the us update that? So I'm RIA maybe guess And you I

lot a of recently. clearly You've seems it activity seen

over inorganic about infrastructure So too kind to space? in look the as a B-D you see you being do that as broker-dealer inorganic interest avenue potential of in time, the and you scaling your may that think something

Philip James Sanders

But growth open wants – a to add just I start. Well, to think high-level I'll inorganic perspective, are Shawn opportunities. we he maybe If from anything, still can.

parties are it the going we It and opportunity here. internally right a we've lot and opportunities of But takes potential that financial flexibility, a right and got thing. doing talked model business we're – we've of lot time strong the about. transitioning kind sheet, balance We on as have fortunately, we a our at this have so takes two

know I would increase We've to some fixing investment some strengths – have side think the we enhance work to capabilities. opportunities look be potentially in focus for and or our core would initially, capabilities broker-dealer where initially, primary thing on our of got our Shawn, to I don't do if our of anything how and is probably first evolves over that our but think it Hard side. I term. the add area to of say longer time, on there. there's management type asset focus

Shawn M. Mihal

you. I agree with

and inorganic I the around really to focused projects think – but a that the nimble of on make have that be on lot inside that, what so the asset business. the growth opportunities in we're of we're certainly will future it the certainly the the providing more broker-dealer on management ability more – focused for side

Robert Lee

maybe expense And to Okay. then up going to kind of question. Great. follow back an

XX% thrown of mean, maybe think of rate recasting there's expense we think to run $XXX-ish always mean, going kind come of evolves? as much core numbers you rate obviously assume helpful. if I obviously are I going thinking just you But could and it. being get $XX real or having So one-time other – the help which plus, I core I your technology your the think disclosure, the maybe say, look it to you is about – getting of on of backdrop many and rest about and goals and just term of of kind you're and that as kind half there's of out. just your I to against that kind longer how out that I down, spend in and be about particularly to run the competitive. so only estate, over another XXXX? severance it's million, so million XX%, to another us and Can ahead – around Is appreciate, remain time you of things

down opportunities million to million that help ultimate $XXX annually, you the goal run rate, So guess. $XX of to your you I outline that where get assume are if over maybe time, think

Benjamin R. Clouse

rate, year Shawn's level last organization. pension Robert, our in goal of we our freeze toward of run through to in half that XXXX, changes and structure original set, market to some million about Well, starting million $XX $XX field achieved

of And half we're this that seeking the so year. other

others might anticipate $XXX or reduction So you targets, long-term the add for on the Brent million seeking to think additional want XX% or about to to be the have significant that if for we million an this. that. $XXX in and the year, XX% quarter I we'd don't

Shawn As there's about the will clearly to to technology investments that comments, we that our alluded investments be we making strategy some and and data think there. are of in need made I that

sunset to possible run major as going systems reductions some think legacy the rate. we don't are I savings anticipate but systems I older or have we that away,

Of against Robert. perspective, don't course to Shawn wage to I annually. you know, be if inflation my increases that, add and up want that'd or we're always continued but Brent,

Robert Lee

really I the just Okay. which – flow benefiting last there of I, hand, numbers if guess I the you that revenues expenses. commissions from quarter from None one offset clarification. recast in was again I distribution that appreciate quick commissions – an in is were question They that And distribution the mean, was recasting. there. just maybe There of talked back. the on there, talked other kind going about in

this quarter. just started that So

look if Xst, correct? recast kind So I at that's January additional XQ, an of change was your that effective

Philip James Sanders

correct. is That

and programs quarter, all $X be distribution million And of the so, clear, of offset a savings those expense our the couple other by grid, items, but revenue within are of we to incremental incremental well approximately modifying line. in – from generally had as be as to by offered services distribution

Robert Lee

very I you questions. appreciate helpful. taking my That's Great.

Philip James Sanders

Sure.

Operator

Our Please Kenneth from from Capital with Markets. RBC Lee go ahead next comes your question question.

Kenneth S. Lee

taking for Thanks my question.

as And down regulatory terms as the advisor time? guys profitability per line, unit? of changes for this available further in revenue is What up the reasonable should the on of to as Just levers in the over being boost aim potential work key improvement like levels as at think you metric well, the Thanks. we for you broker-dealer mentioned, about what to the are terms unit, looks nicely. picking you

Shawn M. Mihal

we're quarter advisors, We we high-performing to end in continue certainly the as Kenneth, average of $XXX,XXX certainly average as of advisors. on at advisor, regard productivity to that's on Ben and noted annual advisors. that the focused And really targeting by to the did productivity reduction north with model. something concentrating that the of track going annual is And on retention and we're $XXX,XXX profitability shift of Hey, we're overall Shawn. and to advisors the certainly, this

evolve the So, we'll that we continue direction to broker-dealer. as target in

space, certainly what's happening front, different regulatory that the monitor areas. to we're On going to couple in a of in continue

the that while the rule the the to fiduciary some were caused something Labor may with items it's move there's of were as comments, easing that I'm increased continue finalization we're process court's the rule, firm, we that into which of or certainly as of there no forward. part required the in business that a Department mentioned number enacted of going expense uncertainty As vacate to of be coming evaluate some our a the I to compliance as to rule, to with what happen may advisors still decision perspective. longer prepared as from

So, we're and of of early to the the broker-dealer rule. we're that flexibility we regard that ahead out how will financial provide before on those proposal, applicable proposal, most and looking obviously based longer Separately, not indications beginning It disclosure at structured SEC associated may the have type road which for increase becoming of at those causing that moves of a of requirements with of the broker-dealer forward the were any it we a support. cost forward. a significant are with But being that does very burdensome advisors it based rule likely be the it early as rule. additional more the finalization move into

stages our SEC to to continue initial that proposal. ranges. the we're So expect don't what annual we're to to going the our increase ability rule productivity monitor happens to regard least at going the continue in to monitor overall hamper advisors' space But with that. I in to

Kenneth S. Lee

Great. sales. us or driving distribution particular Wondering just set and if retail, which some in the give can platforms the have strength? affiliated to as detail strength the on follow-up you been one of sales Thanks. clients And

Amy Scupham

sales Hi. driver that It's strong a Kenneth. wholesalers national channel primarily This our is far. so the Amy, are of see we

diversification distribution channel. which includes in RIA It it at But point looking at what forward, now numbers you're right would would As then and XX% annuities. channel, DCIO. the we national be to would be about primarily include the some look goal this from broaden by also variable

Kenneth S. Lee

very Great. much. Thank you

Operator

question. your comes Davitt Autonomous with from from Please ahead question next go Research. Our Patrick

Patrick Davitt

that from be Good million discussions more given PM thus that could Nikki's of any Hey, guys. will departure pool related could morning. the to redemption then worse any speak incremental? get the And is broadly, redemption, your on $XXX to that large-cap far? relationships departure you from Amy, or

Amy Scupham

Sure.

as out at manager, growth the right million, cap the a As that departure the account large of not large month. to account far were was due the though no, cap those beginning of $XXX of the one growth came the

the and from notified to we of different account that a been due of strategy other The departure months ago performance. was had

departure. here you after the So be of incremental would departures announcement any see the from

Patrick Davitt

on Then Nikki.

Philip James Sanders

want this. can relationships, don't I As personnel, mean that I disruptions add when – But reassured. The in a people I got I'll far these our be obviously know, to We're as never there's on think Amy, there's conversations take great place, it, but you – there's it. place we've are add always things, great strategy these timing about way on team. is things in where committed to

obviously or manage mission, one but But through. individuals our strategy we're forward. philosophy, two we'll Our reassurance, and moving have conversations it our some to is bigger than and something always that's well takes

Patrick Davitt

you. Thank

Operator

comes Gabelli from Company. your question & Mac next go from Please ahead Our Sykes question. with

Macrae Sykes

Good morning, everyone. Hi.

Philip James Sanders

morning. Good

Macrae Sykes

different RIAs, the terms be process for the products from as platforms channels focus the what become sales in sales more particular process you then more And about talk what – the big may As the practices? that targeting you for and on competitive intermediary can to space? of there you're traditional begin

Amy Scupham

Amy. is This Hi.

practices of that I the they're consistent channel, and they're different that more the way consultant. an with it the in institutional much as is see sales RIA So investment

fact, institutional a consultants are at larger just RIAs, investment In level.

bit And diligence so cycle, more differentiated client be a they're base, they're its I their and can their I much for And peers. is from process looking from fee-sensitive. think products little the due in also, that then think that longer

it's And at. so something look continue to that we

our all funds of seven or distribution strategies channels our seven a queue. list have the We focus across of on-deck of all of distribution channels couple with in focus strategies across a

RIA of And conversation so the evolving channel. with it's continued us just a kind with

Macrae Sykes

trajectory the of the remind about or could repurchase plan? And the just you Great. velocity us

Amy Scupham

Can repeat that? I'm you sorry.

Macrae Sykes

just repurchase the could us... plan, remind For you

Philip James Sanders

Oh, okay.

Macrae Sykes

Thank trajectory ...yeah, that? you. the of

Philip James Sanders

Yeah.

plan. over had I two-year think indicated million a $XXX we

we'll the So opportunistic be in way here. along length

I way ought and As we'll I that quarter. to us be indicated, think be in think persistent about expect the effort to see active every to you it is

ebb on things that based about of stock But our any to in have that will it don't and period. concerns market price its and over stated obviously. the flow ability conditions, think intensity and goal other hit terms I I time

Macrae Sykes

Thank you.

Operator

Cyprys have question And go final ladies we ahead gentlemen, from your from Michael a Morgan and Stanley. Please question. with

Michael J. Cyprys

morning. Good Hi. for letting Thanks in. me

Just a question for Phil.

on strengths key is enhancing mentioned earlier You the a investment increasing, that on focus the side.

curious the flush of a terms bit you're to could if you there. if a in more at that what about talk Just investment technology specifically also how could And in you then within little just thinking out have help you Reed. has mind role process Waddell broadly,

Philip James Sanders

Sure.

and though, if last people comparable lift-outs hire We'll the if something or how We in to could a itself. we're be boutique open coming that did additional investment like ways. new I or capabilities, hiring of staff In see far talent some also I acquisition could of itself. internally. a that small right and couple of opportunity meantime terms or also As It adding about our year as a teams number. be the where in investing or we're opportunity right could presents that capabilities. the just it different own But acquiring investment just we're growing transpires and think in analysts seven the think come presented an our

Our this intention is to year. number hire a comparable

So research internal investing capabilities. and we're at commitments looking in our own

becoming resourced is as create and here our to in people investing question core while mind. my organization. part really where all is I'm looking play strengths. of our properly really really idea the to also focused are And idea products our more at Our It this we're your of second And really framework sorry. an was? we're the slipped

Michael J. Cyprys

That's okay.

technology. on How see... you Just

Philip James Sanders

and types That's just data of right, management factor helping making us and Barra terms Yeah. of has more analytics investment most those our detailed and within helping get management, sure this technology. been the role of risk goals, and the process of just ongoing it things. To analysis efficiencies complying attribution understand in and us of we're point,

we've point. As that's at far process, level investment but you're something as of broad AI, at terms what in a a great kind in of level, that's this looked nothing alluding if the to detailed

Michael J. Cyprys

Great. Thank you.

Philip James Sanders

Yeah.

Operator

time, turn management ladies we've session. the closing to And the remarks. I'd for call this back at question-and-answer reached gentlemen, of and any today's end conference like over to

Philip James Sanders

up think in. with all Well, forward attention look and we're I quarter. much. everybody's you to catching tuning Thank set. you very We Appreciate next

Operator

you And gentlemen and today's conclude presentation. that will thank for today's call. conference do attending ladies We

You your lines. may now disconnect

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