WDR - Earnings call transcript Q2 2019 | Waddell & Reed Financial Inc

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Operator

Good morning, everyone, and welcome to Waddell & Reed Financial, Inc.

Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please also note, today's event is being recorded.

At this time, I'd like to turn the conference call over to Mr. Corporate Investor President, Vice Daley, Controller Relations. and Mike go ahead. Please

Michael Daley

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

CEO; today COO; and our Hanson, Amy Reed, Ivy Wealth our President of Phil call Management Brent Mihal, Dan our Distributors, Shawn Scupham, our on our CFO; President me Sanders, Joining Inc. Inc.; our of Ben CIO; Business, Clouse, Bloss, & are Retail Waddell

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

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

like I Phil. over to the call now to turn would

Philip Sanders

and morning Good joining for you. Thank us. thanks

strategic our first to model year of been significant noteworthy half accelerate our as long-term improve we to take transformation The our company and agility and business has continue for the steps effectiveness.

disciplined focus ongoing while and be all significant this is position wealth potential, know manager our efficiency we that We endeavor, in will on improve and operations our long-term to but will strengthen operational on growth capital improvements to long-term foundational We and capabilities, to continue distribution our an approach. investment persistent shareholders. our management maintaining its returning capitalize

specific Then prior high follow million per or I financial share the But quarter with we'll the took the during a $X.XX $XX net minutes, during second we or compared few $XX actions quarter. a at for million of share per will to $X.XX reported the details. highlight we income level, several In quarter.

tensions trade markets ongoing associated solid economic volatility in Despite performance. some global slowdown, equity another fears posted of generally a with of quarter

during propelling equity plenty best first table global banks half providing accommodative highs suppressed to the outlook. record about back favorable lack blank remained Sluggish policies, hit to of strength monetary stocks markets relatively backdrop geopolitical year. room around this of well. the U.S. and the bond income linger, have as in uncertainties resulting trade on S&P XXX for Index indicators, global yields, the breathing a and assets have trade inflation central Questions for the policy fact, also growth period, XXXX. economic talks considerations performance maintain With since their however, In its of the fixed

compared we'll moderated detail, although cover quarter, I have asset flows the redemptions remained would first second to during half of with quarter the the but in XXXX. and challenged were flows the line that in note Then

Given the been expense earlier, products global with the on growth trade have outlook weighted income associated industry noted products. the of the of I at equity across uncertainties the progress strength fixed flows active the front that towards substantially and

year one performance relatively basis, complex. to a year Investment On holding three improve. quarter trailing continues the across during steadily in steady performance resulted the performance

of past funds under in our peer of assets management the majority their For now top total of the and the year, ranked groups. half both respective

top of groups. half AUMs of X total For their year peer now in the and the ranked majority trailing periods, X the

our few years improvements. are paying trends performance management in capability see performance improving for shorter-term lay have portfolio and made encouraged over staff, groundwork the investments we teams, the is management Overall, past know to research technology longer-term that We we off. risk

our this organization to key move actions several undertook quarter highlight would I that previously mentioned forward. I we

while bringing fully investment work of you know, Dan both embraces new veteran, direct of investment Chief broad the that and Dan industry the Hanson, First, as team. diverse Investment our culture experience our Officer. elevate we as most complement named our will recently and strong

align believer is in talent, management of sustainable heritage extensive of Dan a strategic have to of investing performance. and a and and member values-based a committed has product efforts from to our research of to experience and complement and foremost, investment sustainable Standards Directors and also approach commitment XXXX. is with fundamental Dan in onboard. more First development served extensive Sustainable record natural Dan's a couldn't active to be Overall, models. culture We experience ESG we He our and as has to firm culture. Accounting excited Board business integration top-level of and the identifying remain XXXX founding to acquiring long strong Board the investment track in developing strong, investing proprietary his our and ESG

Secondly, internal a our of during our couple of corporate partners. with one beginning the agency the important transfer transactional we initiatives, announced outsource technology to of our intent long-standing processing operations quarter, to

seamless our a agile, generated financial its shareholders, advisers plans. growth help Savings creates achieve mutual for and this more will be partners. business We to move reduce to structure long-term position to expenses better shareholders. to from expect company to action This fund the operational our change fund the

options announced we that headquarters within City needs for Kansas metro a are estate review Also, of and have future currently we our comprehensive the new a undertaken real area. evaluating corporate

as is we process more sharing look to information progress. and ongoing, we Our forward search

lastly, continue management service advisers wealth leading our model. a build we financial to to on our value products technology, business, And and within through proposition

management available this is financial desktop part incremental initiatives, providing coincided of year is One series key the One associates to we existing centralized enhancements our program. part business of One excited the connectivity over Waddell adviser and with which of several Waddell part technology to were the wealth well a of As to introduce of technology partners. national advisers adviser Waddell our administration next implementing all business a firm's an its conference. quarter, platform direct as is

processing business and simplified model. Additional improved a components data reporting, enhanced will include analytics

portfolio, added broadened these We the realizing our our of planning toward of available Each represent the construction managers progress quarter. within services this asset of also actions wealth programs franchise. value range management and advisory long-term additional and

and tell, initiatives a was -- an our we're to the can of quarter, strategy. of each the busy results it of you integral as see play part they over they transformation overall as So as long play these term each excited

I will turn now it over to Ben to the results. quarterly discuss

Benjamin Clouse

you, morning, everyone. and Thank Phil, good

Phil $X.XX or million noted, prior As million net during to compared the we per of $XX.X per $XX.X reported income $X.XX quarter. or share share

on release, from investment first morning's this portfolios in periods. as investment both seed and included $X.XX highlighted quarter other gains markets we benefit in and the and second unrealized a both income our corporate from benefited strong we in As

covering and detail quarter. our review results by start asset flows will operating more in I then the for

while the at Assets the than the prior last average to quarter management with under compared quarter billion Net assets ended year. billion, under $XX.X nearly the of management improved outflows of were X%. prior but fairly quarter, same increased consistent $X.X higher $XX.X billion period

$X.X unaffiliated management equity was Increased to first unaffiliated set. our during preferred our distribution sales products compared in more and channel our Within markets distribution channel. investors the channels, as the million quarter increased money the key management wealth billion, market Redemptions slowdown quarter. to sales wealth The product funds lower-risk, compared $XXX across our also contributed slightly respectively. present net were volatility income to fixed both equity-focused and and outflows slower in and

net year, first months headwinds. year-over-year in experiencing on broad international The shifted From fund for to net the perspective, six flows sentiment during core our market experienced the months six changing inflows challenged of but category blend to was product after large notable through XXXX the net impact last the and has second comparison outflows. flows is XXXX of the a foreign of as investor now positive demand performance first quarter patterns equity due particularly some

net year. Although from remained dynamic flows it solid, performance has market similar equity emerging our have to a seen positive over the past we shifted for where has strategy flow negative

We of in their these strategies, and both however, confident we long-term are in have teams prospects. well-established

We our strengthening strategies. added equity to and to past have growing international, year emerging over global the resources and franchise equity dedicated our remain market committed non-U.S. and

our quarter tough the we flow our a confident asset performance of that from future. improve flow in perspective, impact in infrastructure significantly improving While was improvements are sales trends it investment and the foundational a combined will

outflows channel, redemptions $XXX were is which of the to remain expected occurred. institutional us million last in The year. $XXX million. We net known quarter, balance highlighted with known later amount $XXX million until of the Within that of

We reestablish but are time focused channel understand here. our on institutional it future some within opportunities our presence take will to

to at billion, under $XX.X the compared to X% due first increasing Wealth market management quarter the appreciation. primarily quarter administration assets ended

of the to pace attrition the and adviser adviser ended with advisers As we quarter slow, and continues associates. X,XXX planned,

At in average capabilities of for the time, as each ended XX We quarter a building highs productivity out compared hit XX% quarter are inflection the our making second year. toward growth. productivity the on progress point continue trailing drive new we for with months, of the quarter we the second increase full adviser to recruiting steady same last and $XXX,XXX adviser to

million the points asset and fee additional increased X% $X.X Turning now XX.X relatively mixed management our dynamics with increased average and was results. simply rate consistent as effective quarter. was one Operating reflecting the stronger prior revenues income in basis base. assets to on operating day The the quarter, investment within

in the day, distribution seasonal fees benefited In underwriting commissionable from additional and lift increase addition to and a asset sales.

cost by million of higher of entirely drivers expense expense due already decrease million lower lower side, low within and technology, $XXX.X million a related main $X.X revenue expense Improvements We marketing controllable compensation which to payroll the higher of operating the were taxes in the $X costs management increase. $X.X decrease quarter and totaled compensation and compensation, On an quarter, G&A, had occupancy to seasonal first from distribution were the equity the million, of the strong expense. of another expenses a advertising, quarter. for from in categories

throughout those expenses back higher and first continue were implementation G&A while addition, technology will the technology costs efforts our the initiatives quarter, be in not costs evenly of elevated half expected and we In the to from the from the incurred expect year, than year.

in factors, two that to all will Given these $XXX million $XXX is expenses be quarter the our of of quarters. per remaining range million expectation the for controllable

mentioned, previously we our Phil agency. intent As operations our transactional of month processing to transfer outsource announced last the

approximately transition We will impact employees fourth XXXX. XXX the of quarter by substantially expect and completed will the be

discrete charge Income or range $X to quarter of restricted in in the be pretax this to previously tax shares. record which the the across range $X.XX expect the quarter, We disclosed additional impact related quarters the restructuring million the tax drove of the of items. expense the expect $X.X spread XX%, and million, for continue fourth million $X will effective we XX% included third to of the a be rate for or This charge item also of but from of to excluding any higher to non-recurring shortfall income rate run vesting the tax to XXXX.

investments our target. the we the beginning made complete since consistent We quarter. last and against quarter progress quarter almost end outstanding with of XX%. $XXX buybacks of that Finally, ended the goal million XXXX, XX% we cash a in compared shares by by ended XXXX of and share have of further to at the towards level Notably, reduced

affords us flexibility of As the as to the our have our management future. sustainable below in level should with practice repurchase both buyback at we look maintaining previously plan. and allows pursue authorization, we as an opportunistic last our shared between the organic buyback dividend Recall million management to wealth sheet they a $XXX program capital plan as capital reiterate advocate target current asset flexibility open to spaces. current the quarter, opportunities transition their attractive will levels the growth available managing and balances which we we our I become balance an while that current return share or we cash complete been share in a seamless pleased have plans tightly well continue that announced inorganic and of

organic continuing inorganic an firmly We maintaining return growth opportunities. capital are active options focused and to on program related while

like open now for call to Operator, would questions. the we

Operator

[Operator Instructions].

Lynch. question today from Carrier Merrill of first from Our Bank Michael comes America

Michael Carrier

flows on just the in and one, the first outlook. sales Maybe terms the of

starting some the of performance year some improvement. you're X eventually maybe you a So and see offset just guess that saying in the seeing where but understand to are X early headwind a the more can product redemption? industry seeing like being where some on performance? improvement I you're interest the more I any from product anything factors given like renewed mentioned the the of this standpoint, you in on side showing environment, what signs areas you're And

Philip Sanders

the across general, respect with science and pockets a I'll I'd of think made income the we've a the let of sales lot broader Large-cap about say, got to foothold I'll progress engage on franchise. well, to have on just of the we've significant of our tech I performance international thing, of the infrastructure if and basis. comments, improving -- growth, approaches investment in more marketplace the asset mid-cap a Amy lot and Obviously, couple Yes. the Maybe the as investments and turnarounds. performance, a opportunities we're combined some organization risk in the and strong credibility small follow of last And that type to things. make look high management kind quality up. and side and established and over we've other strategy with getting with people couple years respect I institutionalizing reestablishing and with and made back

and broad about know, any a specific has as any she I'll let getting is process. maybe So I'd a And in better we're engaged. more talk additional Amy having this on areas But say thoughts conversations we're sense, this. you or maybe

Amy Scupham

Yes.

this year I discussed well as we're that think And -- seeing we that for couple you seeing we a compete I opportunities new recall, new of would then I half the business of as a ago, as that year, weren't is coverage channel leadership add Ivy look that ago. when the to in a really model. at first to quarters coverage and new all

see signs channels we early some of So having success.

very insurance well is franchise. market relates in well our to really very well the field the very is group emerging equity reestablishing our channel goal. RIA year-to-date then out doing And doing and to partnerships as Our established, it across X%

the about clients in what committed taking our this made across we're and that And way a firm So and early the and we're we're doing The approach, by evolutions seeing feedback. we're our some and that by made seeing. nice the excited we've been well changes have we've long-term to partners. right received just

improving mentioned direction moving some from right year. the Phil Getting strategy, think sales strong classes can the help asset of growth. I performance forward look meaningfully last us we in the into large-cap half as asset of these larger performance a in in standpoint

Michael Carrier

kind clarifying things Ben, the Okay. just of And then, two on expense side.

mentioned charges mentioned the the to outsourcing, the discretionary you those think including million $XXX quarters. in think per I $XXX side. the half million some second on quarter But during I you

be. discretionary you spend, maybe discretionary the want outlook said those just on I So where $XXX like just million for given to XXXX, then million. would million longer-term to to those understand look tax as any some change level. think But moves, to was the are you be maybe I going the And which $XXX like $XXX the somewhere plus around

Benjamin Clouse

million. few charges to $X Incremental for spread expect Sure, between will a relatively range I $X for QX Mike. period, think, In regard that I evenly, million and Those here QX. $XXX QX. and some weeks ago to $XXX million correct, of -- the the to a will million QX and through to controllable, that gave we restructuring encaged be be that

XXXX, out regard the less we In to further can course, the look, be. I precise of

don't we expect the XXXX as a the that we'll very cost variable previously as that technology. mentioned, and I increase the our for helps. expense although expense in we think end a I base get our we'll in proxy of offset making, incur significant ongoing growth, through that that long-term of we through continue transitions Once bit talked I that I good inflation into Hopefully, some well. is to as probably most would look is in structure. about transition much I of in there here XXXX, are review expect a can as know to cost probably significant what our we as

Operator

Our next question from comes from Bill Katz Citigroup.

William Katz

advisory Just will? through related the several are inflows for what assets might business door as Can some moment. those kind out the Seeing in me non-advisory you coming just the out the continued and then how a staying nice if walk look I next outflows, some of flows sort evolve over you you with guess, that door of going and growth quarters, to versus the in in the the business.

Shawn Mihal

Yes. Mihal. is Shawn This

the business, talking management non-advisory I you're think and side. on on you're about advisory the really when wealth the focused flows

which I'm But area the going wrong, over to of to if within to course the and building different then see I me year, been advisory that that our of we've a we're inclusive last continuing business, correct the of launched business just advisory a of years to this platforms. growth So that see been there. the couple migration this side more advisory up new expectations side. on of of continue falling to the we've few we've that the opening overarching the side, in think, variety advisory within product out channel advisory on And platform products

in program. also we Our MAP June, Guided Investment launched January. past Strategies And launched this our Direct

So advisory out is up the and the business. side that which resulting opening increase that business, the of in side in of architecture expanding

William Katz

the I here Okay. And terms as then just relocation. two part in of question well. guess

sort minus with as then, on your First inflation that? And plus review? way is timing that you about update is ongoing guidance XXXX associated of in any preliminarily any think or b, influencing

Benjamin Clouse

anything I again, anything we'll related don't the timing, in there, be expense to through timing, to don't working are our is through that process can In we moment. all We In my incorporate assess 'XX certainly but I regard at any expect guidance, it the the options I regard longer the And 'XX. on indication have significance to term. share to better of what might expect on to comments really and be. learn that we

Operator

Company. comes Our next Jefferies from from question Dan and Fannon

Daniel Fannon

I management potential both you and So segments M&A. capital your across prepared last think two your highlighted M&A. -- just for quarter question In wealth and or also, and on remarks a potential the

curious to on those sit your just you are focused with of core So have point this where given how potentially or inorganic kind nice you are at growth how business.

Philip Sanders

Well, opportunities on as I come think we're those about. focused definitely they

or One has significant feel execute been opportunities are all position like I could of our while years balance than been couple the the to accumulating of look couple and We've done ago. in and inorganic acquisitions this and of I last years in the better over company we've controlling much strengths we the have on a that. of sheet. And our transformation company a back today of cash growth made

lot a of flexibility. have financial we Now

you been vocal pretty see we've think I it. can about So

is we wealth as well think I -- management capabilities. within as our intent the asset our expand grow to for manager look to opportunities

the You the can to in lot flexibility reducing it's stream revenue as be a have at. a culture. I doing. do in a of hopefully. see not think to model. our down going mindful opportunities the the approach about the in broadening we potential actively take lot for lot of of and obviously, benefits advantage volatility going We're we're diversifying a our operating But road. I of we're said that sake where something of across But can it in of and of pragmatic to just the something prudent. be an past, disruption. potential and We're and to organization it's that's our think highlight the just be we disciplined We're seeing going of industry But position And I looking

Daniel Fannon

pricing. And the on follow-up it. Got then

products. in a to pricing guys little trying of terms changed competitive in back You more whilst certain get

how then that's go-forward tool proactively more see effect, where the might think gross a and if be on a to using or you're basis. sales seeing you going you forward, -- impacted that's wanted also So desired

Philip Sanders

you more resourced of and about and about going product got to talk the those it performance forward, specifics. changes based so. opportunities a and Recall, product the we'll basis. an or would But might expectation year be ongoing I have in a maybe you've made not and broader properly kind review with only general, probably and an start and management, risk of this obviously, say, comment, industry, on that is and ongoing to strong ago let have a we have a something have thing. that's bit a I'd Amy little overarching My type incremental they in I'll nature is we in priced. product know -- competitively on strong strategic

committed And to so well. doing as that we're

go-forward feedback ongoing an address see options more So the I -- on and but will marketplace the can Amy, what has the think basis. be incremental Maybe, in been. your you

Amy Scupham

in obviously feedback The the Yes. has marketplace positive. very been

tell, it to a As it's impacted have sales, bit how today. a of to relates it's but a we early bag mixed little

products so us from to seen in And a have some some that so. addition play price. hard into seen it It's many course, tell things standpoint. less of quick So there's really that for have pickup, to

to that the in to mean think be a amount or we sits point at lot we've products standpoint. And make our price I marketplace, in a our our year. an made the of I that look average a as the of assets increase I substantial is pricing made price moves of would progress competitiveness we -- in lower-than-average really last

Operator

comes from question from Lee Markets. RBC Our next Capital Kenneth

Kenneth Lee

you Dan product on of as and development one touched in this process prepared of envision ESG. you've CIO, you the efforts I specifics could as upon the changes recent the if that to regarding the perhaps terms and outline in wondering investment But employment any Just well. potential remarks think Hanson

Philip Sanders

too ESG Sure. background a of more has little obviously, money attractive. decade a to got world lot specifics, over the importantly, ESG research. ESG in managing that I'd approach performance to But it's a but into integrating investing. top-level in soon and He's it's fundamental Dan's experience real is something worth in was say get his in of been and

and come a level perspectives, new sought think really who of new I So -- capabilities. new it new we position, this somebody was bring could as out

ESG approach as one had on framework and a just Dan's in product a I of he's be and across him suite. other of result across the our change and offer beauties able to. products and here background. that's And first we implemented minds want investment I'll something to in indicated, organization. something process we'll we let clients can one That's I the investors, maybe in to But type his know something think see our significant will second. is very Look, to our clear our and don't that that's it in along we've ways the approach way, it's where is as pragmatic be investor, that's fundamental of chime conversations that think a foremost, we different a of

So say about you more but we'll to want there's if terms specifics, don't have on know add I in to anything Dan, think of how it. you

Daniel Hanson

thanks just attitude is question, from believe in attitude so fundamental Well, sustainability the fundamental to for of bottom-up changes business Kenneth. core analysis. process, issues I investment separate hard our analysis to of quickly sort just of terms And guess the and really it's my we're investors,

overwhelmingly, at have we part fundamental issues a that's -- the take share analyst But we formulaic think that's the serve relevant not investment pragmatic to there the serve is a of ESG a is something approach authentic clients the ways looking to approach, certainly extent way more material in clients. to that to and a approach. future. more So view to can integrating. dogmatic, be opportunity We'll any We market our to in case, are an be

Kenneth Lee

Great.

well. And comment prepared touched Just in follow-up briefly the the experienced on side. upon advisers. if think just as you remarks on could I current management wondering recruiting environment one the wealth this for But you

Shawn Mihal

been for changed building recruiting inclusive out really we've And advisers. the department robust more platform several aspect, course recruiting of the as really through a out the future. the structure over that our yes, building And how inside Mihal. has working of recruit Shawn we we've last been is months This

to were of the on certainly, going more we significant industry that numbers advisers were in newer bringing forward. So focused past, in the

changing approach to and advisers. our are attention more higher-performing higher-producing, We those

and that positions So to pipeline changes our advisers, introduce as to regard of prospective lot last gained a we've a working the little getting filled, XX ourselves these additional with and over been robust we've is as setting bit we've made foundation from attention worked starting the as there to out more the we've months. become recruiting

it's So them as time in we do a XXXX going in half place take second more little of resources, over into the we as the of all get seeing team months. We and are activity. couple really that the next an the here uptick expect working a together to get bit year the to course of recruiting to

continue more that report So back up. as to we stand to

Benjamin Clouse

add just a what to augmented the we this overall grid of as that to year, manager reminder, adviser also beginning would which environment an our I wealth Shawn talent. said for contributes payout Ken, being of just that our attractive

Operator

Our Robert Lee KBW. next from question comes from

Robert Lee

I this just first a the a modeling bit on The better the transfer of guess, one, financials. little to And the maybe is in agency question. trying grasp change

and So there's can did you revenue -- away goes you obviously, shareholder there affected there's mention -- sources assume I some that that is some employees, too.

us that's moving incorporated no kind I'm So should kind impact? the about expense pieces? of assuming line your $XXX million you help to in within think we bottom Could million guidance. the thinking this be of $XXX And

Benjamin Clouse

Rob, that's correct.

for P&L. bottom in bit expense little in significant the be their movement The there really a benefit. there, some But first a ultimately move savings statement Again, Essentially, up part on fund XXXX. and gross bottom see line passing significance. we created move will won't there, revenue be there's with of a are There our shareholders impact. any we'll your to line really again, that the won't

Robert Lee

you whether total Great. in account sales just going if of mean think could maybe think update more I were sales, channel, to -- if could still to just wealth we occur, update the management traditional-type -- I Okay. fund fee-based or And to us you you're you just maybe it's product of those -- -- on reason level -- there of how improve any Or of the -- much stable from at capturing expect you're today? are the that to that? here? products feel kind like managed sales do that you worsen of is us of of you or into kind are Waddell you And extent

Shawn Mihal

platform Yes. We've to Shawn. mid-'XX quite a course inside Ben, years. of these the the programs some of advisory additional X other flows some maybe of those, had to to launching X.X into or the and if products. I'll obviously, and the in investment expectations funds product color anyone else, And kind initiation add And it. been to Robert, take of the this programs other And over been over with of comments what wants affiliated bit the that. the last was migrating is forecasting advisory the rationalizing from seen really opening of we've

of XX.X% When affiliated quarter, about low across been side the that concentration we've the of we XX% ratio entirety business, of look the wealth funds that in management maintaining the think range. I end the inside channel. of And

before, do expect that we a as are product to moderate time As new spectrum. broader slightly over sales flowing into really reported we

So other as the with products platforms, we seeing, competition we are that those platforms. are in investment available these inside additional build

out it's has much advisory going more pace rationalizing go-forward to starting the affiliated side we and little a reasonable -- a -- a unaffiliated investments of of the see are seeing bit that and of accelerated moderation first slightly, saw the really overall it's funds programs, really where to again, a these point we're little to more concentration, but bit So into to allocation funds. launched we when resumed we some now

funds. depending into advisory stay on range the programs, affiliated to into with programs anywhere programs single-digit-type the Inside launched, seeing, the the them. funds So to double-digit all the allocations that we do affiliated architecture we it inside allocation associated are expect we're XX% on open have exposure more there up still expectations. from way that those And depending

staying continue but expectations. we we'll monitor I mentioned, that, are, to So inside as

Operator

Our from question from next Evercore. Glenn Schorr comes

Glenn Schorr

the money of noted a follow-up putting fixed are some income lower-risk your one of of products, into type that on more market. people you questions this money when environment the Kind and comments

And of people asking set, lot a the you If look at to cycles do have you durable steadier on I you sure do of product? endure product product And a more this do with the impacts a that's huge dividend guess come. long-winded flow the what type So of stream? and have products new and enough it preference you have you. question and return having your count I'm product enough capital share love But that big shrinkage. balance how

Philip Sanders

think on do and some a Yes. our obviously something I there broadening I bit opportunities diversifying little Glenn, that's tried benefits about. touch this mix. long-term think real And to think and product earlier. are we by I

asset we're the obviously, under-indexed Within fixed to capabilities. manager, income

or for acquiring to opportunity I some us so think there's talent capabilities. new an And be there

been think growing an at. demand. international we've of organically long-term grown to that's been I expect area and see But has kind generally, also one I'd recently that successful

So we opportunity. that in history that thing. some good would of type be have an Multi-asset,

of uncorrelated opportunities at set, domestic bit to some think equity. as do a are to little the internal strategies. we concentrated to respect and I U.S. as So product versions get are know, the broaden some into more existing of looking well you Also, potentially diversify there product development with

a real that's opportunity. So

diversify operating wealth is to way volatility of Another are focused the manager. model revenue to and on that's broaden the that's and grow else well. reduce -- obviously, the stream as And something we

take the acquisitions advantage capital So strong we return made a in the necessarily niche think strong ability position you terms opportunities. to the mutually acquisitions. don't to of also or and I I program think have of complementary it's capital a whether these Certainly, point. have exclusive flexibility good we

So something it focused environment, sure. in this we're is on for

Glenn Schorr

could Maybe is follow-up. do a where are Maybe spent related bit what you working right the you best talk to the with about It now. little dollars. marketing a dollars feel has

Amy Scupham

like you're best with you partnerships? that Is a where are our asking standpoint, going distribution from question? that Glenn,

Glenn Schorr

that right to products I you it think it, certain distribution performance purpose that actually where open have left with it right could you on channels specific the see now go sell. be whether profile or

Amy Scupham

Yes.

Okay.

that, anything relates else can. certainly to a to talk we other the as little bit add wants of it parts about I'll if and anybody business, So

into. either partnerships those, mid-cap of dollars such to products we newsletter strategies able put our partners some in been of in a of strong quarter, distribution as as Inside for have be a is highlighted We version highlighted opportunities, lot an fund we've a income a our or income-oriented that that mid-cap which have whatever. top

that. around lot we've so done a And

their from our of to drive distribution standpoint through in channel really has able We of dollars advisers their hands put rate each created a channels. national in the territories. new approximately where individual XX% We their restructure wholesale scenario that a inherited that our force the to to business back be money a have into force hands them sales of in have went

front So get people different of in groups of we advisers can what the to our are done. we've investment capabilities ways and that out our evolutions showcase investment that

as dollars on good put we're that seeing we've and So returns there this year, well.

Philip Sanders

I might just perspective just on add broader and that just one Amy's points. and up from a to be follow of clear

approach. we've all if and in meaningful distribution developing made having was infrastructure in look different indicated, our sales Amy hitting you right wirehouse-centric, at to channels as opportunities make think I available very historically mix comprehensive getting investments some sure channels our more that the products sales and broader, shift a are sales to our and

Amy Scupham

Yes. that. agree I would with

professional we building -- would to spent our as bulk buyer channels. really institutional with refer the think groups and our XXXX institutional-like I which out I of

a Ivy And staffed marketplaces. so in reintroducing and parts the that out XXXX. they're group It's those was of in fully the today, progress throughout

So there's some dollars being spent there.

development investment back I to your that, any vehicle how consuming the go In kind focus go with, of that really what marketplace in or addition strategies do the that is to the new we kind that's addition one we've product to have. products to are on think is to Glenn, people of or tried first thing to necessary other to question,

for model I adviser long-only of of delivery important way as lot think, a -- a So the force. our opening that of in products, substantially is portfolios, consumption a lot major of is equity

Operator

Cyprys Our Morgan next question comes from Stanley. Michael from

Michael Cyprys

wealth I this inorganic M&A Is side. just mention you on you there guys hoping more that the to wealth was open Can could management your on for framework criteria growth elaborate and with about you're your management number you Just and thinking asset side. advisers wealth expanding management you're growth the that versus and of about how technology more the scale about inorganic on side prioritize or curious how the capabilities? manager?

Shawn Mihal

Michael, this take is others fill in. first that, and then the some may I'll Shawn. of portion

we've related technology, and initiatives. continuing management On and we're technology to an of been from our number growth respect to commentary invest business, a in the some side perspective, doing projects transitionary provided technology inorganic the to with of wealth I Ben think

So we're continuing those efforts.

support wealth on the we're really purely that the more been well at But isn't we capabilities this set growth advisers services looking bring significant model more with really to are side really side scale doing be technology and of a presenting grid, the a in opportunities foundation an the the the of inside standpoint. So scalable that payout of things as productivity of and of management that outside space. perspective, a we've overall the business to business existing other have from our across an that from as that mass aligned the model innovation a been technology, and of the It's opportunity acquisition amount as recruiting looking scale to building focused inside advisers.

that those higher-performing perspective. really business to So a line scale focusing specifically growth more of advisers from on of

Michael Cyprys

are July? an Okay. on flows And Great. update then for able you also provide to

Amy Scupham

Yes. similar I we've year. look mean think moved what I you've July flows seen very as for through the to

slightly sales So are but slightly are redemptions depressed, still year-over-year. also down

So it's much of the same.

Operator

next And Mac from question our Sykes Gabelli. comes from

Macrae Sykes

capital metrics sense this your the just be quick opportunistic and a one. point sorry if whether given about I to timing I'm us program makes more you Just this. more repurchase could and position? remind at But it just missed

Benjamin Clouse

Sure.

of framework 'XX, As about buyback October the a million reminder announced target. $XXX we a in

we continue XX% going opportunistic we for forward, in we'll adjusted XX, inorganic expect pursue. with to that half to XXXX. my through I the about potentially opportunities we comments, buybacks June complete were here and be of may As towards latter share said regard in as -- target prepared that that complete In

As million a operate -- our open authorization at we do $XXX continue we'll have which complete under whatever reminder, to point an target. we

its manage our We balance continue at to current or level. to cash below intend

Macrae Sykes

improving marketplace and respects. segments but kind us some in Could those recent model? in And individually sold management of individually. off of job of done I those and kind for on transactions apologize some And for having of a the segments you seen the update management Waddell platform where both Great. importance wealth nice repeat total we've it, you've Phil, the were both the just having the asset

Philip Sanders

our Yes. manager. for marketplace we Well, exposure little of bit heavy unique the a in and us, wealth are think Funds I heritage obviously, given Ivy our the within proprietary

we're we and we see of challenges and the for we've improvements, bit opportunities last some unique opportunities both real underappreciated to think provides in our But committed grow company. I that manager the our these made think, wealth really businesses a eyes of couple overall. And a is over to So years. little the and company of lot of

for calls, grind. these up mean a providing architecture of better and lot by clients. is more better advisers gradually a the in services, better this indicated has it's choices I opening technology, opportunities, Shawn As

we to think this actually opportunity at where an we're So point now the is business. this grow

kind longer-term and two are we a spent so potential. last about the excited getting And lot us position. the of of in years establishing We this

these it them. makes sense opportunities to And to -- real So businesses keep I and think and for us, them develop hold to grow see strategic together. on we

Operator

[Operator Instructions].

Citigroup. Our Katz next from is Bill a from question follow-up

William Katz

inside it. A nestled couple maybe questions

We're terms you the in the capital? of would And much start latest to opportunities cash about you then do and here discussion seed of from how levels. I seeing in capital themselves? terms thinking the maintain buyback appreciate What's sheet, need sort incremental think of that balance present sort Just this to inorganic lot the extent of of sustainable working investments. to

Benjamin Clouse

we to about seed, in development. our sheet, our $XXX In we portfolio have of I seed in I million regard change to part particular, a see regard near we balance. question. of around of your that, think the significant investment in as I would expect forgot In term the currently -- apologize, balance second product don't

William Katz

Sure. capital. Working Working capital.

Benjamin Clouse

you. Thank

we Sorry. generate free capital, working cash In regard flow. significant to

working need our product development As you seed is for and portfolio. capital know, the in primary

working consider capital need particular or of our growth significant a have amount for a don't seed. that investment beyond and we for capital available that So beyond

William Katz

you coming advisory you sort rate Okay. And do on? one. margin think effective incremental how the versus one what triangulate that think of in, coming are FAs the just assets be last When the those new about you about fee of might

Shawn Mihal

Bill, this clarify question. is just Shawn. Maybe to the

talking you the program? advisory Asking you effective fee are on about the rate, about on Advisory grid? programs? talking are payout Or

William Katz

Advisory, correct.

Shawn Mihal

we data about The consistent pull look range, that the typically Yes. the out we effective been some the XXX which industry that at down is rate, with the fairly across has in fee providers basis from averages of I points there. think,

programs, a be to tracking bit it might but be that little certain might little So in average. some lower, higher certainly a

don't on assets, new advisers, don't advisers bringing to average. bring fee existing those or I I seeing change new we're anticipate we look substantial anticipate rates the the program effective seeing a So -- as pretty tracking in much to with on into since

Operator

KBW. Lee from And our next from Robert follow-up question is a

Robert Lee

growth, Maybe needed you've I a little on deciding over of different more a to be of the banking they to the managers competitive in set walk seen products customers. kind is mean, broker-dealers, this a to question. of clearly and for for inorganic walk types But I bit years channel, field their product wealth left management mean, wealth complete

does your So I something maybe as necessary? which view bank looking for tiny that mean, do includes -- inform you're inorganic that banking inorganically, And or you products? a to what capture

Shawn Mihal

is So Shawn. this

last you're purging, And inorganic high particularly that we growth expanded perspective purging touch evolve We've just over a product and set. first relates the had two on more the worth-type the number me years. services available, it product to likely continuing and continues over And different through of its the out available net it's a clients. out products and we're as several initiatives different of years. expand introduced set, as which products clear as last Let purging that. we've services not But to has of the we've of And the from and aware, set. that product to number through part

high holistic the talked the investors. we from, a providing before, net early all accumulators, So worth as albeit competitive way platform about

evaluate that product to space. that some is loan to we've we compete out and we even So services, of programs, really sets, and fill in like gaps that need banking private services, areas those where things in platform continuing we're making where expanded any trust that really to feel certain through services advance-type

over progress that is high have something bringing clients space. worth that So those of variety to continue that significant different made for But net we'll a evolve in we services in time. in

Operator

to turn management and we'll any today's like session. back over the closing question-and-answer to ladies end for call that, And gentlemen, I'd with conference remarks.

Philip Sanders

much. look months. a you joining Just want to for we us day. you everybody in today, few and to catching Have a forward Thank up to very great thank

Operator

now you Ladies do attending and gentlemen, thank conference for presentation. today's has We concluded. the

You may now disconnect your lines.

Waddell & Reed Financial (WDR) 30 Jul 192019 Q2 Earnings call transcript