process. processes. We believe investorslong-term clients turn to us because they appreciate that our investment approach continues to identify and create opportunities for wealth creation.

Our investment management team is comprised of 8390 professionals, including 3733 portfolio managers who average 2324 years of industry experience and 1617 years of tenure with our firm. We have significant experience in virtually all major asset classes, several specialized asset classes and a range of investment styles. We have moved more fullycontinue to move towards team-based portfolio management on manyour funds and have fortified our research team with additional investment analysts.analysts, while continuing to foster a collaborative culture across our investment management professionals. We also engage subadvisors who bring additional expertise in specific asset classes.classes, when appropriate.

Investment Management Products

Our mutual fund families offerfunds provide a wide variety of investment options. We are the exclusive underwriter and distributor of 9480 registered open‑end mutual fund portfolios in the Funds, which includes 1460 investment styles.strategies. During 2018, the fourth quarter of 2017, nineremaining Advisors Funds merged into Ivy Funds with substantially similar objectives and strategies the remaining 11 Advisorsand six Ivy Funds will mergeand one Ivy VIP fund merged into Ivy Funds and is expected to close in February 2018. Additionally, we have one closed‑end offering and threean Ivy NextShares exchange-traded managed funds. The Advisors Funds, variableVIP fund, respectively, with generally similar investment objectives. Variable products, offering Ivy VIP and InvestEd are offered primarily through W&R independent financial advisorsAdvisors in the retail broker-dealerour wealth management channel; in some circumstances, certain of those funds are also offered through the retail unaffiliated distribution channel. The Ivy Funds are offered through both our retail unaffiliated broker-dealer channel and retail broker-dealerwealth management channel. The Funds’ assets under managementAUM are included in either our retail unaffiliated distribution channel or our retail broker-dealerwealth management channel depending on which channel marketed the client account or is the broker of record.

During 2017, we launched the Ivy IG International Small Cap Fund, subadvised by IG International Management Ltd., the Ivy Crossover Credit Fund, and the Ivy PineBridge High Yield Fund in partnership with PineBridge Investments. The Ivy IG International Small Cap Fundseeks smaller-capitalization companies outside North America that exhibit perceived growth at a reasonable price. The Ivy Crossover Credit Fund is an actively managed strategy designed to provide exposure to both investment grade and non-investment grade fixed income securities. The Ivy PineBridge High Yield Fund seeks to provide total return through a combination of high current income and capital appreciation, primarily by investing in a diversified portfolio of high-yield, high risk fixed income securities from both U.S. and foreign issuers. In addition, the Waddell & Reed Advisors Asset Strategy Fund was renamed Waddell & Reed Advisors Wilshire Global Allocation Fund and the investment strategy was changed to operate as a “fund-of-funds” that allocates assets among a diverse group of affiliated equity and fixed income mutual funds with both domestic and foreign investments. Wilshire Associates, Inc. sub-advises a portion of the fund consisting of the multi asset segment, which invests in affiliated mutual funds.

Additionally in 2017, we introduced five new index funds in partnership with ProShares Advisors LLC. Ivy ProShares S&P 500 Dividend Aristocrats Index Fund invests in S&P 500 companies with at least 25 years of consecutive dividend growth. Ivy ProShares Russell 2000 Dividend Growers Index Fund invests in small cap companies that have increased dividend payments for at least 10 consecutive years. Ivy ProShares MSCI ACWI Index Fund seeks to track MSCI ACWI performance. Ivy ProShares S&P 500 Bond Index Fund is designed to track index of corporate bonds issued by S&P 500 companies. Ivy ProShares Interest Rate Hedged High Yield Index Fund invests in a diversified portfolio of high yield bonds with an interest-rate hedge using short Treasury futures to minimize the effects of rising rates.

Broker-Dealer Products

We also offer our retail broker-dealer channel clients a variety of fee‑based asset allocation products, including Managed Allocation Portfolio (“MAP”), MAP Choice, MAP Flex, MAP Select, MAP Latitudestrategies in other structures, such as institutional separate accounts, collective investment trusts and Strategic Portfolio Allocation (“SPA”). These programs utilize a variety of investment options including mutual funds, as well as individual stock, bond and exchange traded fund investment options. During 2017, we launched MAP Navigator, an open architecture advisory program and enhanced the SPA program, partnering with Wilshire Associates, Inc. to develop five proprietary investment models consisting of Advisors Funds and Ivy Funds. model-delivery separately managed accounts.  As of December 31, 2017, clients had $21.62019, we managed $70.0 billion invested in our fee‑based asset allocation programs.AUM.

In our retail broker-dealer channel, we distribute various business partners’ variable annuity products, which offer Ivy VIP as an investment vehicle. In 2017, we enhanced InvestEd by lowering fees and expanding the available investment options. InvestEd offers lower sales charges, reduced minimum initial investment, an increased number of aged-based and static portfolios and individual fund options, along with an expanded range of underlying funds within aged-based and

static portfolios. We also offer our retail broker-dealer channel customers retirement and life insurance products underwritten by our business partners. Through our insurance agency subsidiary, W&R’s independent financial advisors also sell life insurance and disability products underwritten by various carriers.  We offer unaffiliated mutual fund products, other variable annuity products, and full service brokerage products and services through a clearing broker-dealer.

Distribution Channels

One of our distinctive qualities is that we distribute our investment products through a balanced distribution network. Our distribution channels cover retail products are distributed throughsales channels, including our retail unaffiliated distribution channel, or through our retail broker-dealer channel byaffiliated wealth manager, W&R, independent financial advisors. Through ouras well as an institutional channel, we distribute a variety of investment styles for a variety of clients.sales channel.

Retail Unaffiliated Channel

The IDI focused distribution model centers on two sales channels, National Distribution Channel

Our team of 37 external wholesalers lead our wholesaling efforts, which focus principally on distributingand Professional Buyers Distribution, to best diversify asset flow and the Ivy Funds through three segments: broker-dealers (the largest method of distributing mutual funds for the industry and for us), retirement platforms (401(k) platforms using multiple managers) and registered investment advisers (fee‑based financial advisors who generally sell mutual funds through financial supermarkets). Additionally, our national accounts team, comprised of 10 employees, is dedicated to home office relationship coverage. The Ivy Funds maintain strong positions on manyAUM profile of the leading third party distribution platforms, and we continue efforts to diversify our sales. During 2017, we had five funds exceed gross sales of $250 million. We expect the retail unaffiliated distribution channel to be critical in driving our organic growth rate in the coming years. Assets under managementCompany.  AUM in this channel were $31.1$26.3 billion at the end of 2017.2019.

Retail Broker-DealerNational Distribution, inclusive of National Accounts and National Wholesale, drives sales throughout the nationwide broker-dealer network. The National Accounts team focuses on firm home office interactions and the National Wholesale team focuses on driving sales at the financial advisor level. This alignment provides a holistic, cohesive and collaborative sales and service approach to our national broker-dealer partners. National Wholesale includes 24 external wholesalers, four of which are exclusively devoted to W&R.

Professional Buyers Distribution focuses on sales and service across the institutional, consultant relations, insurance, registered investment advisor (“RIA”) and defined contribution investment only (“DCIO”) categories. Unifying sales strategies within the Professional Buyers Distribution group brings collaboration, shared knowledge and enhanced service levels to key institutional, retirement, insurance and RIA clients that require specialized interactions and communication.

The Distribution Operations team supports IDI’s sales and service-related processes including training, business intelligence, client relationship management and sales systems, and practice management. This group also includes IDI’s professional client experience team, which creates key client-facing deliverables utilized by both distribution groups. The Distribution Operations team is designed to help increase the overall knowledge and responsiveness of the entire distribution channel.

Agreements with the Funds may be adopted or amended with the approval of the disinterested members of each Fund’s board of trustees and have annually renewable terms.

Competition

The financial services industry is a highly competitive global industry. According to the Investment Company Institute (the “ICI”), at the end of 20172019 there were more than 9,300 open‑end9,400 open-end investment companies, more than 500 closed‑endclosed-end investment companies and more than 1,8002,000 exchange traded funds of varying sizes, investment policies and objectives whose shares are being offered to the public in the United States alone. Factors affecting our business include investment performance, fees, brand recognition, business reputation, quality of service and the continuity of both client relationships and assets under management.AUM. A majority of mutual fund sales go to funds that are highly rated by a small number of well‑knownwell-known ranking services that focus on investment performance. Competition is influenced by the achievement of competitive investment management performance, distribution methods, the type and quality of shareholder services, the success of marketing efforts and the ability to develop investment products for certain market segments to meet the changing needs of investors.

We compete with hundreds of other mutual fund management, distribution and service companies that distribute their fund shares through a variety of methods, including affiliated and unaffiliated sales forces, broker-dealers and direct sales to the public of shares offered at a low or no sales charge. Many larger mutual fund complexes have significant advertising budgets and established relationships with brokerage houses with large distribution networks, which enable these fund complexes to reach broad client bases. In recent years, there has been a trend of consolidation in the mutual fund industry resulting in competitors with greater financial resources than us. Many investment management firms and independent financialunaffiliated advisors offer services and products similar to ours. We also compete with brokerage and investment banking firms, insurance companies, commercial banks and other financial institutions and businesses offering other financial products in all aspects of their businesses.

The distribution of mutual funds and other investment products has experienced significant developmentsevolution and change in recent years, which hashave intensified the competitive environment in which we operate. These developmentsenvironment. Changes include the introduction of new products, the rationalization of the number of products offered on third party platforms, increasingly complex distribution systems with multiple classes of shares, the development of investors’ ability to invest on‑line,online and through mobile applications, the introduction of sophisticated technological platforms used by financial advisors to sell and service mutual funds for their clients, the introduction of separately managed accounts—previously available only to institutional investors—to individuals, and growth in the number of mutual funds offered.  In recent years, we have faced significant competition from passive oriented investment strategies, which have taken market share from active managers like ourselves.  While we cannot predict how much market share these competitors will gain, we believe there will always be demand for active management.

Regulation

The securities industry is subject to extensive regulation and virtually all aspects of our business are subject to various federal and state laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients and shareholders of registered investment companies. Under such laws and regulations, agencies and organizations that regulate investment advisers, broker-dealers, and transfer agents like us have broad administrative powers, including the power to limit, restrict or prohibit an investment adviser, broker-dealer or transfer agent from carrying on its business in the event that it fails to comply with applicable laws and regulations. In such event, the possible sanctions that may be imposed include, but are not limited to, the suspension of individual employees or agents, limitations on engaging in certain lines of business for specified periods of time, censures, fines and the revocation of investment adviser and other registrations.

The United States Securities and Exchange Commission (the “SEC”) is the federal agency responsible for the administration of federal securities laws. CertainTwo of our subsidiaries, W&R and IICO, are registered with the SEC as investment advisers under the Advisers Act, which imposes numerous obligations on registered investment advisers including, among other things, fiduciary duties, record‑keepingrecord-keeping and reporting requirements, operational requirements and disclosure obligations, as well as general anti‑fraudanti-fraud prohibitions. Investment advisers are subject to periodic examination by the SEC, and the SEC is authorized to institute proceedings and impose sanctions for violations of the Advisers Act, ranging from censure to termination of an investment adviser’s registration.

The Funds are registered as investment companies with the SEC under the ICA, and various filings are made with states under applicable state rules and regulations. The ICA regulates the relationship between a mutual fund and its investment adviser and prohibits or severely restricts principal transactions and joint transactions. Various regulations cover certain investment strategies that may be used by the Funds for hedging and/or speculative purposes. To the extent the Funds purchase futures contracts, options on futures contracts, swaps and foreign currency contracts above certain de minimis thresholds established by the Commodity Futures Trading Commission (the “CFTC”), they are subject to the commodities and futures regulations of the Commodity Futures Trading Commission.

We derive a large portion of our revenues from investment management agreements. Under the Advisers Act, our investment management agreements terminate automatically if assigned without the client’s consent. Under the ICA, investment advisory agreements with registered investment companies, such as the Funds, terminate automatically upon assignment. The term “assignment” is broadly defined and includes direct assignments, as well as assignments that may be deemed to occur, under certain circumstances, upon the transfer, directly or indirectly, of a controlling interest in the Company.CFTC.

The Company is also subject to federal and state laws affecting corporate governance, including the Sarbanes‑OxleySarbanes-Oxley Act of 2002, as well as rules adopted by the SEC. Our report on internal controls over financial reporting for 20172019 is included in Part I, Item 9A.

As a publicly traded company, we are also subject to the rules of the New York Stock Exchange (the “NYSE”), the exchange on which our stock is listed, including the corporate governance listing standards approved by the SEC.

broker-dealers. Any failure to maintain the required minimum net capital may subject us to suspension or revocation of our registration or other limitations on our activity by the SEC, and suspension or expulsion by FINRA or other regulatory bodies, and ultimately could require the broker-dealer’s liquidation. The maintenance of minimum net capital requirements may also limit our ability to pay dividends. As of December 31, 20172019 and 2016,2018, net capital for W&R and IDI exceeded all minimum requirements.

Pursuant to the requirements of the Securities Investor Protection Act of 1970, W&R is a member of the Securities Investor Protection Corporation (the “SIPC”). IDI is exempt from the membership requirements and is not a member of the SIPC. The SIPC provides protection against lost, stolen or missing securities (but not loss in value due to a rise or fall in market prices) for clients in the event of the failure of a broker-dealer. Accounts are protected up to $500,000 per client with a limit of $250,000 for cash balances. However, since the Funds, and not our broker-dealer subsidiaries, maintain customerclient accounts, SIPC protection would not cover mutual fund shareholders whose accounts are maintained directly with the Funds, but would apply to brokerage accounts held on our brokerage platform.

Title III of the USA PATRIOT Act, the International Money Laundering Abatement and Anti‑TerroristAnti-Terrorist Financing Act of 2001, imposes significant anti‑moneyanti-money laundering requirements on all financial institutions, including domestic banks and domestic operations of foreign banks, broker-dealers, futures commission merchants and investment companies.

The Company and independent financial advisors associated with W&RAdvisors in our retail broker-dealerwealth management channel are subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and related provisions of the Internal Revenue Code of 1986, as amended, to the extent they are considered “fiduciaries” under ERISA with respect to certain clients.  TheIn April 2016, the U.S. Department of Labor which administers ERISA,(the “DOL”) adopted regulations in April 2016 that, among other things, treattreated as fiduciaries any person who provides investment advice or recommendations to employee benefit plans, plan fiduciaries, plan participants, plan beneficiaries, IRAs or IRA owners.

Our operations outsideowners (the “DOL Fiduciary Rule”). Although the United StatesU.S. Court of Appeals for the Fifth Circuit vacated the DOL Fiduciary Rule, the DOL is expected to re-propose these regulations and other regulators have enacted or proposed other fiduciary standards. For example, in June 2019, the SEC adopted a package of rulemakings, including Regulation Best Interest, Form CRS Relationship Summary (“Form CRS”), and interpretations, including an interpretation of an investment adviser’s fiduciary standard of conduct and when broker-dealers are deemed to provide advice that is “solely incidental” to brokerage services and thus not subject to the lawsAdvisers Act, which are intended to enhance the quality and regulationstransparency of various non‑U.S. jurisdictionsretail investors’ relationships with broker-dealers and non‑U.S. regulatory agenciesinvestment advisers. In addition, certain states have enacted or proposed fiduciary and bodies, including the regulation of the IGI Funds by Luxembourg’s Commission de Surveillance du Secteur Financier. Similar to the United States, non‑U.S. regulatory agencies have broad authority in the event of non‑compliance with laws and regulations.best interest standards for broker-dealers.

Our businesses may be materially affected not only by regulations applicable to us as an investment adviser, broker-dealeradvisers, broker-dealers or transfer agent,agents, but also by law and regulations of general application. For example, the volume of our principal investment advisory business in a given time period could be affected by, among other things, existing and proposed tax legislation and other governmental regulations and policies (including the interest rate policies of the Federal Reserve Board), and changes in the interpretation or enforcement of existing laws and rules that affect the business and financial communities.

Our business is also subject to new and changing laws and regulations. For additional discussion regarding the impact of current and proposed legal or regulatory requirements, please see the Legal, Regulatory and Tax risk factors

ITEM 1A.   Risk Factors

You should carefully consider the following risk factors as well as the other risks and uncertainties contained in this Annual Report on Form 10‑K10-K or in our other SEC filings. The occurrence of one or more of these risks or uncertainties could materially and adversely affect our business, financial condition, operating results and cash flows. In this Annual Report on Form 10‑K,10-K, unless the context expressly requires a different reading, when we state that a factor could “adversely affect us,” have a “material adverse effect on our business,” “adversely affect our business” and similar expressions, we mean that the factor could materially and adversely affect our business, financial condition, operating results and cash flows. Information contained in this section may be considered “forward‑looking“forward-looking statements.” See “Part I—Forward Looking Statements” for a discussion of cautionary statements regarding forward‑lookingforward-looking statements.

MARKET AND COMPETITION RISKS

We Could Experience Adverse Effects On Our Market Share Due To Strong Competition From Numerous And Sometimes Larger Companies.Competition. The investment management industry is highly competitive.  We compete with stock brokerageinvestment management firms, mutual fundwealth management companies, investment banking firms, insurance companies, banks, internet investment sites, mobile investment products, automated financial advisors, registered investment advisers, and other financial institutions and individuals based on a number of factors, including investment performance, the level of fees charged, the quality and diversity of products and services offered, name recognition and reputation, and the ability to develop new investment strategies and products to meet the changing needs of investors. Many of these competitors not only offer mutual fund investments and services, but also offer an ever-increasing number of other financial products and services. Many of our competitors have more products and product lines, services, and have better brand recognition and also may have substantially greater assets under management.recognition.  See Item 1 – “Business – Competition.”

Many larger mutual fund complexes have developed more extensive relationships with brokerage houses that have large distribution networks, which may enable those fund complexes to reach broader client bases. In recent years, there has been a trend of consolidation in the mutual fund industry resulting in stronger competitors with greater financial resources than us.

There has also been a trend toward online internet financial services and financial services that are based on mobile applications or automated processes as clients increasingly seek to manage their investment portfolios digitally.  This is leading to increased utilization of “robo” adviser platforms.  If existing or potential customersclients decide to invest with our competitors instead of with us, our market share could decline, which could have a material adverse effect on our business.

We have faced significant competition in recent years from lower fee, passive investment strategies.  Investment advisers that emphasize passive products have gained, and may continue to gain, market share from active managers like us, which could have a material impact on our business.   

We Could Lose Market Share To Competitors That Have Broader Investment Product Offerings.There are a number of asset classes and product types that are not well covered by our current products and services. When these asset classes or products are in favor with investors, our competitors may receive outsized flows compared to others in the industry.  As a result, we may miss the opportunity to gain the assets under managementAUM that are being invested in these assets and face the risk of our managed assets being withdrawn in favor of competitors who provide services coveringoffer these classes or products.  For example, to the extent there is a trend in recent years in the asset management business in favor of lower fee, passive products,investment strategies, such as index and certain types of exchange-traded funds, it favors our competitors who provide those products over active managers like us. In addition, we are not typically the lowest cost provider of asset management services. To the extent that we compete on the basis of price, we may not be able to maintain our current fee structure, which could adversely affect our operating revenues.

Our Business And Prospects Could Be Adversely Affected If The Securities Markets Decline.Decline or are Volatile. Our results of operations are affected by certain economic factors, including the success of the securities markets. There are often substantial fluctuations in price levels in the securities markets. These fluctuations can occur on a daily basis and over longer periods as a result of a variety of factors, including national and international economic and political events,

could result in investors further withdrawing from the markets or decreasing their rate of investment, either of which could adversely affect our revenues, earnings and growth prospects.

Our revenues are, to a large extent, investment management fees that are based on the market value of assets under management.AUM and AUA.  A decline in the securities marketmarkets may cause the value of our assets under managementAUM and/or AUA to decline or cause investors to redeem or sell assets in favor of investments they perceive offer greater opportunity or lower risk, both of which decrease investment management and other fees and could significantly reduce our revenues and earnings.  We do not hedge our revenue stream from this risk through derivatives or other financial contracts.  Our growth is dependent to a significant degree upon our ability to attract and retain mutual fund assets and advisory assets, and, in an adverse economic environment, this may prove more difficult.  The combination of adverse market conditions reducing both sales and investment management fees could compound one another and materially affect our business.

There May Be Adverse Effects On Our Business If Our Funds’ Performance Declines.  Success in the investment management and mutual fund businesses, including the growth and retention of assets under management,AUM, is dependent on the investment performance of client accounts relative to market conditions and the performance of competing funds.  From time to time, we may experience poor investment performance, on a relative or absolute basis, in certain products or accounts that we manage, which may contribute to a significant reduction in our AUM and revenues.  A Fund’s performance record is calculated over various trailing periods and, therefore, the Fund’s underperformance may continue to be reflected in a particular trailing period long after the Fund’s performance has improved.  Accordingly, the Fund may experience delays in realizing, or may not realize, any increase in asset flows from improved performance. Good relative performance stimulates sales of the Funds’ shares and tends to keep redemptions low.  Sales of the Funds’ shares in turn generate higher management fees and distribution revenues. Good relative performance also attracts institutional and separate accounts.  It may also attract institutional accounts and may result in higher ratings or rankings by research services such as Morningstar, Lipper or eVestment Alliance, which may compound the foregoing effects. Conversely, poor relative performance results in decreased sales, increased redemptions of the Funds’ shares and the loss of institutional and separate accounts, resulting in decreases in our assets under managementAUM and revenues.  Poor investment performance also may adversely affect our ability to expand the distribution of our products through unaffiliated third parties.  Further, any drop in market share of mutual fund sales in our retail broker-dealerwealth management channel may further reduce profits as sales of unaffiliated mutual funds are less profitable than sales of our affiliated mutual funds.  Funds.  

As of December 31, 2017, 29%2019, 39% our assets under managementAUM were concentrated in five Funds. As a result, our operating results are significantly affected by the performance of those Funds and our ability to minimize redemptions from and maintain assets under managementAUM in those Funds. If we experienced a significant amount of redemptions of those Funds for any reason, our revenues would decline and our operating results would be adversely affected. Further, any adverse performance of those Funds may also indirectly affect the net sales and redemptions in our other products, which in turn, may adversely affect our business.  We have experienced net outflows in recent years due in part to underperformance of our mutual funds and depressed sales. During fiscal years 2017 and 2016, we had $11.4 billion and $25.3 billion of net outflows, respectively.

In the ordinary course of our business, we may reduce or waive investment management fees, or limit total expenses, on certain products or services for particular time periods to manage fund expenses, or for other reasons, and to help retain or increase assets under management. If our revenues decline without a commensurate reduction in our expenses, our net income will be reduced. From time to time, we may experience poor investment performance, on a relative or absolute basis, in certain products or accounts that we manage, which may contribute to a significant reduction in our assets under management and revenues.  In recent years we have experienced a decline in investment performance for several of our investment products, particularly in connection with shorter-term performance.  There is typically a lag before improvements in investment performance produce a positive effect on asset flows. The implementation of the DOL Fiduciary Rule could also reduce asset flows in the event of underperformance.   There can be no assurances as to when, or if, investment performance issues will cease to negatively influence our assets under management and revenues.

Changes In The Distribution Channels In Which We Operate Could Reduce Our Net Revenues and Adversely Affect Our Assets Under Management,AUM, Revenues and Growth Prospects.  Our ability to market and distribute mutual funds and other investment products we manage is significantly dependent on access to third party financial intermediaries that distribute these products.  We sell a significant portion of our investment products through a variety of such intermediaries, including major wire houses, national and regional broker-dealers, defined contribution plan administrators, retirement platforms and registered investment advisers.  Assets under managementAUM in our retail unaffiliated channel at December 31, 20172019 were $31.1$26.3 billion, or 38% of total assets under management.AUM.  It would be difficult for us to acquire or retain the management of those assets without the assistance of the intermediaries.  As third party intermediaries rationalize and reduce the number of product offerings on their platforms, including in response to the recently adopted U.S. Department of Labor (the “DOL”)new best interest and  fiduciary standard regulations,standards, we cannot provide assurances that we will be able to maintain an adequate number of investment product offerings, or access to these intermediaries, which could have a material adverse effect on our business.  Relying on third party intermediaries also exposes us to the risk of increasing costs of distribution, as certain intermediaries with which we conduct business charge fees (largely determined by the distributor) to maintain access to their distribution networks.  If we choose not to pay such fees, our

ability to distribute through those intermediaries would be limited; significant increases in such fees will cause our distribution costs to increase, which could lower our profitability.  In addition, over time, certain sectors of the financial services industry have become considerably more concentrated, as financial institutions involved in a broad range of financial services have been acquired by or merged into other firms.  In April 2016, the DOL adopted regulations that, among other things, treat as fiduciaries any person who provides investment advice or recommendations to employee benefit plans, plan fiduciaries, plan participants, plan beneficiaries, IRAs or IRA owners (the “DOL Fiduciary Rule”).  The implementation of the DOL Fiduciary Rule is likely to require modifications to our distribution activities and may impact our ability to service clients or engage in certain types of distribution or other business activities.  The convergence of all of these activities could result in our competitors gaining greater resources, and we may experience pressure on our pricing and market share as a result, and as some of our competitors seek to increase market share by reducing prices.  If these changes continue, our distribution costs could increase as a percentage of our revenues generated.  We could experience lower sales or incur higher distribution costs or other developments, which could have an adverse effect on our results of operations if third party selling agreements are terminated or there is a change in the terms of those agreements.

ApproximatelyOver half of our assets under management, $43.7AUM, $40.6 billion, or 54%58%, as of December 31, 20172019 are held in our retail broker-dealerwealth management channel.  The investment products distributed in our retail broker-dealerwealth management channel include our affiliated mutual fundsFunds and other products,

unaffiliated investment products in our advisory programs, as well as changes resulting from the DOL Fiduciary Rule,implementation of new best interest and fiduciary standards, may result in a higher redemption rate in our retail broker-dealerwealth management channel, as independent financial advisorsAdvisors may move to sell more unaffiliated products.  An increase in the sale of unaffiliated mutual funds compared to sales of the Funds in our retail broker-dealerwealth management channel may reduce profits, as sales of unaffiliated mutual funds are less profitable than sales of our Funds.  See “Legal, Regulatory and Tax Risks.”

Fee Pressures Could Reduce Our Revenues And Profitability. There is an accelerating trend toward lower fees in some segments of the investment management business. The SEC has adopted rules that are designed to alter mutual fund corporate governance, which could result in further downward pressure on investment advisory fees in the mutual fund industry. Investors and clients are increasingly fee sensitive. Active management continues to experience pressure by increased flows to lower fee passive products.  This trend has resulted in pressure on active management firms to reduce fees to compete with passive products.  The DOL Fiduciary RuleNew best interest and fiduciary standards could increase fee pressure as financial advisors may have more fee sensitivity given their new fiduciary role.higher standard of conduct.  In addition, competition could cause us to reduce the fees we charge for products and services.  In the event that competitors charge lower fees for substantially similar products, we may be forced to compete on the basis of price in order to attract and retain customers.clients.  In the ordinary course of our business, we may reduce or waive investment management fees, or limit total expenses, on certain products or services for particular time periods to manage fund expenses, or for other reasons, and to help retain or

redemptions and withdrawal of assets from other accounts could accelerate. Poor investment performance generally or relative to other investment management firms tends to result in decreased purchases of Fund shares, increased redemptions of Fund shares, and the loss of institutional or individual accounts.  TheHistorically, the risk of our investors redeeming their investments in the Funds on short notice has increased materially due to the level ofbeen greater for assets in our retail unaffiliated channel and the high concentration of assets in certain Funds in this channel.  Additionally, redemptions in our retail broker-dealerwealth management channel may increase materially with the introduction of additional unaffiliated investment products in our advisory programs.  The implementation of the DOL Fiduciary Rulenew best interest and fiduciary standards could also result in increased redemptions.  An increase in redemptions and the corresponding decrease in our assets under managementAUM may have a material adverse effect on our business.

There May Be Adverse Effects On Our Business Upon The Termination Of, Or Failure To Renew, Certain Agreements.  A majority of our revenues are derived from investment management agreements with the Funds that, as required by law, are terminable on 60 days’ notice. Each investment management agreement must be approved and renewed annually by the disinterested members of each Fund’s board of trustees or its shareholders, as required by law.  Additionally, our investment management agreements provide for automatic termination in the event of assignment, which includes a change of control, without the consent of our clients and, in the case of the Funds, approval of the Funds’ board of trustees and shareholders to continue the agreements.  There can be no assurances that our clients will consent to any

different industries and counterparties.  We routinely execute transactions with counterparties, including brokers-dealers, commercial and investment banks, clearing organizations, mutual and hedge funds, and other institutional clients that expose us or the Funds or accounts we manage to operational, credit or other risks in the event that a counterparty with whom the Company transacts defaults on its obligations or if there are other unrelated systemic failures in the markets.  Although we regularly assess risks posed by counterparties, such counterparties may be subject to sudden swings in the financial and credit markets that may impair their ability to perform or they may otherwise fail to meet their obligations.  Any such impairment failure could negatively impact the performance of products or accounts we manage, which could lead to the loss of clients and may cause our assets under management,AUM, revenue and earnings to decline.

Regulations Restricting TheRestrictions On Our Ability To Use Of “Soft Dollars” Could Result In An Increase In Our Expenses. On behalf of our mutual fund and investment advisory clients, we make decisions to buy and sell securities for each portfolio, select broker-dealers to execute trades, and negotiate brokerage commission rates. In connection with these transactions, we may receive “soft dollar credits” from broker-dealers that we can use to defray certain of our research and brokerage expenses consistent with Section 28(e) of the Investment CompanySecurities Exchange Act of 1940,1934, as amended. If regulations are adopted eliminating theWe may be limited in our ability of asset managers to use “soft dollars,”dollars”. If our use of “soft-dollars” decreases or is eliminated, including due to the adoption of regulations, or if the “soft dollars” we generate decrease because of reductions to our AUM or commission rates, our operating expenses could increase. The Markets in Financial Instruments Directive II (“MiFID II”), which was effective in Europe in January 2018,

At this time, we cannot predict the nature or full impact of future changes to the legal and regulatory requirements applicable to our business, nor the extent to which current or future proposals, or possible enforcement proceedings, will impact our business. All of these new and developing laws and regulations are likely to result in greater compliance and administrative burdens on the Company, including the investment of significant management time and resources in order to satisfy new regulatory requirements or to compete in a changed business environment, and the imposition of new compliance costs and/or capital requirements, including costs related to information technology systems.  The evolving regulatory environment may impact a number of our service providers and, to the extent such providers alter their services or increase their fees, it may impact our expenses or those of the products we offer.  Changes in current rules and regulations that impact the business and financial communities generally, including changes in current legal, regulatory, accounting or compliance requirements, including state and federal taxation, or in governmental policies, could have a material adverse impact on our results of operations, financial condition or liquidity.  

The Department Of Labor’s New Fiduciary Regulations Could Result In Material Changes In Our Business Model, Operations And Procedures, Including Our Distribution Channels And Product Offerings, Which Could Have A Material Adverse Effect On Our Business and Results Of Operations.  On April 8, 2016, the DOL published the DOL Fiduciary Rule, its final rule regarding the definition of who is an investment advice fiduciary under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and Section 4975 of the Internal Revenue Code, as amended, a new “best interest contract” prohibited transaction exemption regarding how such advice can be provided to retirement investors (primarily account holders in 401(k) plans, IRAs and other types of ERISA clients), a new class prohibited transaction exemption for how ERISA investment advice fiduciaries can engage in certain principal transactions with retirement investors, and certain amendments and partial revocations of pre-existing exemptions.  The DOL Fiduciary Rule focuses in large part on conflicts of interest related to investment recommendations made by financial advisors, registered investment advisers, and other investment professionals to retirement investors, how financial advisors are able to discuss IRA rollovers, as well as how financial advisors and affiliates can transact with retirement investors.  Firms and individuals that recommend financial products to retirement investors would be required to act in the best interest of the investor and, to receive variable compensation, would be required to enter into a contract with clients and produce complex disclosure documents intended to highlight financial conflicts of interest that may arise from the compensation the financial advisor receives. 

These regulations have wide-ranging consequences for the Company, our distribution partners and our product offerings. Qualified accounts, particularly IRAs, make up a significant portion of our assets under management and administration.  Further, a significant portion of those retirement assets are invested in our affiliated products.   The DOL Fiduciary Rule, coupled with the introduction of unaffiliated products in our advisory programs and sustained underperformance of key investment products, could cause us to experience lower sales of our affiliated investment products, increased redemptions, or other developments that could materially and adversely affect our business.

The expanded fiduciary definition became applicable on June 9, 2017, as did the revised exemptions subject to certain transition provisions that expire on July 1, 2019.  The DOL is studying whether to make changes to the DOL Fiduciary Rule as adopted.  We are continuing with the implementation of our business and compliance initiatives in order to make necessary changes to our distribution methods and operations.  We intend to work with, and provide guidance to, our wealth management and asset management businesses, including independent financial advisors in our retail broker-dealer channel, to make the necessary changes to effectively implement these new regulations.  We are likely to incur additional compliance costs in 2018 for required consulting, legal advice and technology enhancements.

The DOL Fiduciary Rule will require various changes in the asset management industry and, among other things, our distribution methods, compensation models, products, and business operations that could materially and adversely affect our marketing strategy, our fee structure, our independent financial advisor compensation model, our ability to engage with independent financial advisors, and the design of our investments and services for qualified accounts, any of which could materially and adversely affect our results of operations.  Similarly, various changes in the asset management industry due to the DOL Fiduciary Rule may result in product rationalization and reduction, as well as changes to our share classes and fee structures, revenue sharing arrangements, and investment opportunities for certain funds we

manage.  The DOL Fiduciary Rule will require us to implement new policies and procedures designed to comply with the new requirements.  There are no assurances that we will be able to successfully execute the significant changes and enhancements to our business model, operations, technology and compliance policies and procedures required by the DOL Fiduciary Rule in a timely manner, which could materially and adversely affect our business.   The new rules create additional liability exposure to regulatory enforcement activity, including litigation and arbitration, which may result in awards, settlements, penalties, injunctions, reputational risk, costs of defense regardless of outcome, or other adverse results.  The SEC is targeting July 2019 for the release of its own fiduciary rule proposal; any such rule may also have an impact on our business activities.

Compliance Within A Complex Regulatory Environment Imposes Significant Financial And Strategic Costs On Our Business, and Non-Compliance Could Result in Fines And Penalties.  Non-compliance with applicable laws or regulations could result in criminal and civil liability, the suspension of our employees, sanctions being levied against us, including fines, penalties and censures, injunctive relief, suspension or expulsion from a certain jurisdiction or market, or the temporary or permanent revocation of licenses or registrations necessary to conduct our business.  A regulatory proceeding, even one that does not result in a finding of wrongdoing or sanctions, could consume substantial expenditures of time and capital. Any regulatory investigation and any failure to maintain compliance with applicable laws and regulations could severely damage our reputation or otherwise adversely affect our business and prospects.

Our Business Is Subject To Substantial Risk From Litigation, Regulatory Investigations And Potential Securities Laws Liability. Many aspects of our business involve substantial risks of litigation, regulatory investigations and/or arbitration, and from time to time, we are involved in various legal proceedings in the course of operating our business, including employment-related claims.business.  See Item 3 – “Legal Proceedings.”  We are exposed to liability under federal and state securities laws, other federal and state laws and court decisions, as well as rules and regulations promulgated by the SEC, FINRA and other regulatory bodies.  These regulatory bodies have the authority to review our products and business practices, and those of our employees and independent financial advisors,the Advisors, and to bring regulatory or other legal actions against us if, in their view, our practices, or those of our employees or independent financial advisors,the Advisors, are improper. Actions brought against us may result in awards, settlements, penalties, injunctions or other adverse results, including reputational damage. In addition, we may incur significant expenses in connection with our defense against such actions regardless of their outcome. We, our subsidiaries, and/or certain of our past and present officers, have been named as parties in legal actions, regulatory investigations and proceedings, and/or securities arbitrations in the past, and have been subject to claims alleging violation of such laws, rules and regulations, which have resulted in the payment of fines and settlements.  From time to time, we receive subpoenas or other requests for information from governmental and regulatory authorities in connection with certain industry-wide, company-specific or other investigations or proceedings. These examinations, inquiries and proceedings, have in the past and could in the future, if compliance failures or other violations are found, cause the relevant regulator to institute proceedings and impose sanctions for violations. Any such action may also result in litigation by investors in the Funds, other clients or by our stockholders, which could harm the Company’s reputation, potentially harm the investment returns of the Funds, or result in the Company being liable for damages.

In addition, the Funds to which we provide investment advisory and management services are subject to litigation and governmental and self-regulatory organization investigations and proceedings, any of which could harm the investment returns or reputation of the applicable Fund or result in our investment adviser subsidiaries being liable to the Funds for any resulting damages.

risks, that we consider appropriate and commercially reasonable, where such insurance is available at prices we deem acceptable. There can be no assurance, however, that a claim or claims will be covered by insurance or, if covered, will not exceed the limits of available insurance coverage, that any insurer will remain solvent and will meet its obligations to provide us with coverage, or that insurance coverage will continue to be available with sufficient limits at a reasonable cost. Insurance costs are impacted by market conditions and the risk profile of the insured, including prior claims, and may increase significantly over relatively short periods. In addition, certain insurance coverage may not be available or may only be available at prohibitive costs. Renewals of insurance policies may expose us to additional costs through higher premiums or the assumption of higher deductibles or co-insurance liability.

Financial Advisors In Our Retail Broker-DealerWealth Management Channel Are Classified As Independent Contractors, And Changes To Their Classification May Increase Our Operating Expenses.  From time to time, various legislative or regulatory proposals are introduced at the federal or state levels addressing the criteria for determining the status of independent contractors’ classification as employees for either employment tax purposes (withholding, social security, Medicare and unemployment taxes) or other employment benefits.  Currently, most individuals are classified as employees or independent contractors for employment tax purposes based on relevant statutory, regulatory and common law tests, including the multi-factor test utilized by the Internal Revenue Service.   We classify financial advisors associated with W&RAdvisors as independent contractors for all purposes, including employment tax.  There can be no assurance that legislative, judicial or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existing rules and regulations that would change the independent contractor classification of those financial advisors currently associated with usAdvisors or that private litigants might file actions seeking to change such classification.  The costs associated with potential changes, if any, with respect to these independent contractor classifications could have a material adverse effect on our business.

Misconduct By Our Employees And/Or By Independent Financial Advisors Could Result In Liability, Subject Us To Regulatory Sanctions Or Otherwise Adversely Affect Our Business, Results of Operations or Financial Condition. Our business is based on the trust and confidence of our clients, for whom independent financial advisorsAdvisors handle a significant amount of funds, as well as financial and personal information. Misconduct by our employees or by independent financial advisorsAdvisors could result in violations of law, regulatory sanctions and/or serious reputational or financial harm. Misconduct that could occur includes: (i) binding us to transactions that exceed authorized limits; (ii) hiding unauthorized or unsuccessful activities resulting in unknown and unmanaged risks or losses; (iii) improperly using, disclosing or otherwise compromising confidential information; (iv) recommending transactions that are not suitable; (v) engaging in fraudulent or otherwise improper activity, including the misappropriation of funds; (vi) engaging in unauthorized or excessive trading to the detriment of customers;clients; or (vii) otherwise not complying with laws, regulations or our control procedures.  Although we have implemented a system of internal controls to minimize the risk of misconduct, there can be no assurance that our controls or precautions to detect and prevent misconduct will be effective in all cases. Preventing and detecting misconduct among independent financial advisors,Advisors, who are not employees, presents additional challenges.  We could be liable in the event of misconduct by employees or independent financial advisorsAdvisors and we could also be subject to regulatory sanctions. Although we believe that we have adequately insured against these risks, there can be no assurance that our insurance will be maintained or that it will be adequate to meet any liability resulting from these activities.  Any damage to the trust and confidence placed in us by our clients may cause our assets under managementAUM and/or AUA to decline, which could adversely affect our reputation, business and prospects and lead to a material adverse effect on our business, results of operations or financial condition.

The Application of Tax Laws and Regulations and Challenges To Our Tax Positions May Adversely Affect Our Effective Tax Rate and Business.  The application of complex tax laws and regulations including the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Reform Act”), involves numerous uncertainties.  The Company has recognized the provisional tax impact of the Tax Reform Act related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. The impact of the Tax Reform Act is expected to be complete when the Company’s 2017 U.S. corporate income tax return is filed in 2018.

Tax authorities may disagree with certain tax positions that we have taken, as we are periodically under audit by various state and federal jurisdictions.  We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on our financial statements.  Tax

We remain subject to various state and federal laws and regulations related to the privacy, integrity and security of nonpublic personal information we create, collect and maintain in the conduct of our business concerning individuals, including Fund trustees and shareholders, our directors and shareholders, our clients, Advisors’ clients and our employees and independent contractors.  For example, the State of California recently enacted the California Consumer Privacy Act of 2018, which was effective January 1, 2020 and, among other things, creates detailed notice, opt-out/opt-in, access and erasure rights for consumers vis-à-vis businesses that collect their personal information, and provides a new private cause of action for data breaches.  Other states have enacted or proposed, or in the future may enact, similar privacy and data security legislation.  Privacy and data security laws and regulations, particularly when enacted on a state by state basis rather than at the federal level, could impose significant limitations, require changes to our business, restrict our collection, use or storage of nonpublic personal information and subject us to legal liability or regulatory action, which may result in increased compliance expenses, fines or penalties, the termination of client contracts, costly mitigation activities and harm to our reputation.

Failure To Establish Adequate Controls And Risk Management Policies, The Circumvention Of Controls And Risk Management Policies, Or Fraud Could Have An Adverse Effect On Our Reputation And Financial Position.  We have established a comprehensive risk management process and continue to enhance various controls, procedures, policies and systems to monitor and manage risks; however, we cannot assure that such controls, procedures, policies and systems will successfully identify and manage internal and external risks to our business. We are subject to the risk that our employees, Advisors, contractors or other third parties may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our controls, policies and procedures. Persistent attempts to circumvent policies and controls, or repeated incidents involving fraud, conflicts of interestsinterest or transgressions of policies and controls, could have a materially adverse effect on our reputation and lead to costly regulatory inquiries, fines and/or sanctions.

Our Own Operational Failures Or Those Of Third Parties We Rely On, Including Failures Arising Out Of Human Error, Could Disrupt Our Business And Damage Our Reputation.Our business is highly dependent on our ability to process, on a daily basis, large numbers of transactions. These transactions generally must comply with client investment guidelines, as well as stringent legal and regulatory standards.  Despite our employees being highly trained and skilled, due to the large number of transactions we process, errors may occur. If we make mistakes in performing our services that cause financial harm to our clients, our clients may seek to recover their losses. The occurrence of mistakes, particularly significant ones, could have a material adverse effect on our reputation and business.

RISKS RELATED TO OUR BUSINESS

A Failure To Protect Our Reputation Could Adversely Affect Our Businesses.  Our reputation is one of our most important assets. Our ability to attract and retain customers,clients, investors, employees and financial advisorsAdvisors is highly dependent upon external perceptions of our Company. Damage to our reputation could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial strength or liquidity, technological, cybersecurity, or other security breaches (including attempted breaches) resulting in improper disclosure of client or employee personal information, unethical behavior, and the misconduct of employees, financial advisorsAdvisors and counterparties. Negative perceptions or publicity regarding these matters, even if they are baseless or eventually satisfactorily addressed, could damage our reputation among existing and potential customers,clients, investors, employees and financial advisors.Advisors. Reputations may take decades to build,re-build, and negative incidents can quickly erode trust and confidence, particularly if they result in adverse mainstream and social media publicity, governmental investigations or litigation. Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.

Our reputation is also dependent on our continued identification of and mitigation against conflicts of interest, including those relating to our proprietary activities. For example, conflicts may arise between our position as a provider of financial planning services and as an investment adviser to Funds that one of our financial advisorsan Advisor may recommend to a financial