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Waddell & Reed Financial (WDR)

Participants
Phil Sanders Chief Executive Officer
Nicole Russell Head of Investor Relations
Tom Butch Chief Marketing Officer
Brent Bloss Chief Financial Officer
Glenn Schorr Evercore ISI
Robert Lee KBW
Craig Siegenthaler Credit Suisse
Bill Katz Citigroup
Michael Carrier Bank of America Merrill Lynch
Dan Fannon Jefferies & Company
Kenneth Lee RBC Capital Markets
Chris Shutler William Blair
Call transcript
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Operator

Good morning ladies and gentlemen and welcome to Waddell & Reed's Third Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instruction] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that we do ask that you please limit yourselves to one question and a single follow-up.

If you have additional questions, you may rejoin the question queue. event recorded. today’s note, also is being Please And conference call time, I turn the like to over at this to Mr. Phil Sanders, Officer. Chief Executive go ahead. please Sir,

Phil Sanders

Tom would Officer; and Okay, me Russell, our Officer; morning, Good Investor Nicole read Bloss, Butch, Relations. the of are statement? Nicole, Brent Financial thank Marketing please our Chief everyone. our Head Chief you you. today With forward-looking

Nicole Russell

our call, and responses statements. some forward-looking of comments this During include will

us, statements these due is to be results on from based differ that to of to factors, implied believe reasonable currently including limited information those available in reference but filing Materials that relevant call, we we and of our actual press section a on number or today's with materially could not While Exchange today's ir.waddell.com. expressed are those public to, copy We website including Relations Investor Securities posted and of have duty been Commission. our schedules, statements. at relevant to our supplemental release no to the forward-looking assume update any a

Phil Sanders

thanks observations morning. reviewing financial million some we capital this our policy sharing begin of results prior income share and before I or third high-level by briefly quarter. return would per or $X.XX Okay, share the on the $X.XX $X.XX quarter quarter announced expanding revised compared like $XX per increased Net on to Nicole. to in the

of an day basis a quarterly sequential additional current and management XXX benefited on XX%, points operating up from was Our margin basis. The continued quarter discipline. revenues cost

offset Brent provide our shortly. the slightly the the management on prior ended up outflows. financial quarter under as will than market more quarter strong from details results at billion, $XX.X additional environment Assets net

laid plan the morning, quarter under product the broker-dealer competitive operating around $XX.X billion. The four this of to priorities, plan. profitable approximately our entity, we reinvigorate sales, a processes improve our line at management results, and centers of and evolving model. our stand in our assets initiatives management business key detail investment main fully strengthen self-sustaining Last resources and efficiency corporate total out and of evolve As our

strength current we provided to We the the our we current business our managing return and while the continue our Board financial team model, our ensure evaluate growth capital to are Directors with continue policy also transition along dividend would indicated investment our the that management us as balance to effectively. flexibility of of pay opportunities to outlook sheet

in are As part capital of return indicated this a we implementing process ongoing our release policy. new as and earnings

Our we engage to per current share. board approved this In our on per buyback reach million repurchase dividend dividend in repurchases stream intention two common believe a return We plan opportunistic with shareholders, $XXX enhancing within goal more as an providing a stock. and reduction Based of our still share being and $X.XX in our provides forecast, we a share our our while our sheet. returning to from conjunction the level $X.XX adjustment, years. balance quarterly also announced financial income balanced to policy capital shareholders. this approach to competitive sustainable, for to maintaining our while new very We very dividend strong current a adjusted view flexibility intend capital

share growth provide approach believe gives this to of savings shareholder repurchases. our product plan our supportive flow seed needed flexibility maintain recalibrated the and stress. Ultimately, value on over will times cash long-term. us to the financial investment and we top-flight corporate is this program execute even the for greater opportunities, create of market fund return during fund inorganic capital strategy pursue resources more initiatives, sum, to Additionally, provides In new capabilities, potential capital accretive ability

much respective in quarter was capabilities our as broader number we to build embedded peer Risk becoming of strategies perspective had scale a our across resources. across said term increasingly records a product post groups. investment it quarter, from management returns their That done management suite. to the to were to we of still be are an significant on top continue performance turning a improve Now solid track our investment there on longer quartile firm the and

Over the strategies a approach past moved to research hired team so year or have managed nine we and new seven different analysts.

We growth as a focus sequentially committed on products outflows the division a moderate. investing opportunities. were allocation net perspective, to resource despite slightly continuing support company channel to outflows From unaffiliated retail in was management will in our continue a of and net within mixed on to quarter are key investment flow worse total basis and it

architecture open lack overall As current presents combined funds & the of channel the understand merged previewed Advisors some Tom our successfully additional provide shortly. flow the funds into challenge on Ivy Also, quarter for of company institutional our all receive end our momentum are Advisors Waddell of Waddell our natural regulatory board attempt Reed color assuming positive put near-term funds a face on we our we into call, on & will first we we quarter-end, we a that This all Ivy we to to gradually XXXX merge last with and remaining in to Subsequent nine as approvals. Reed of as track dynamic. the we funds. by up transition in broker-dealer, our this to will headwinds.

We distribution market optimizing also progress of the through initiatives. physical structure footprint our broker-dealer to make our continue

details as to model main as our to the our of intended you efficiency. model and know, this, the improve just one is improving initiatives well is our on additional operating key a of overall few will competitiveness Brent other minutes priorities. element In some business corporate As this provide

Let it me over Tom. turn now to

Tom Butch

morning Thanks everyone. Phil and good

channels well unaffiliated for reflected continuing the quarter outflows reflected net in in our channels, our a dynamics. increased, situation decreased each consecutive in and experienced outflows retail we three each there. sixth While expectations but in broker-dealer. Outflows channel varying Outflows challenges within institutional

program May as the in-light increased incorporating funds. in the outflows unaffiliated in broker-dealer of advisory channelized sales anticipated launch at Looking new a results, proprietary of

of been the among advisors has uptake As this program strong. expected,

Asset billion XX over $X to stated existing $XX shares million of has months $XX months and been with average million. billion migration to the advisory our middle migration weekly estimated aged expectations $X from of between and commissionable towards run having previously XX

the is coming compared about In from migrating program AUMs channel the to commissionable assets. the at rate X%, sales funds new XX% into quarter-end billion, into sales XX. program addition, the billion at the were doubled quarter. up in run during migrating the $XX.X proprietary of of in has was coming $XX.X from Separately, a Channel June its flows of versus proportion less about third nearly assets current flow flows to rate since levels, meaning inception at

of tiers. under to of annualized have of increased business, advisors, decreased anticipated coming sequentially, strategy, $XX.X about production primarily offset producing the $XX.X on articulated which quarter. billion within end that over Due $XXX,XXX. the corporate billion Assets by hiring largely our the It to of at which X% quarter-end, advisory focuses and producing new our was AUA X% lowest administration to This as at $XX.X billion production increased much-reduced number representing second XX% Advisor to an the increased two of X% historically lower XXX our reflects per coming advisors. advisors And would by to our attrition XX% from lawless headcount with departing total in previously quarter-end higher from AUA. the the from XX% attrition. advisors channel advisor reduction the at company tier sequentially

for to platform appears and along meaningful been have at again multi Our In service advisors net and we gross advisor announcement low. and XX%. where sound changes by new at received July of the advisor compensation, office product late delivery retail quarter productivity Sequential increasing to over with quarterly believe, should, which to tiers the footprint, driven retention our all basis dropped of in time. decrease outflows redemptions, dissipation provide advisor ongoing sales the well by intermediary, continued

AUM quarter-end. redemptions XX of book in meaningful continued this Institutional performance business domestic a mostly type During equity in significant with large strategy. to and key The offering flows. our to income, at core momentum diversified remaining at strong Channel book small top prior client a will subdued. international regaining by comprising emerging $X.X up equity core positive reflected of billion remains our clients. products. asset was priority essential number breadth The and outflows including from sales by the roughly we X.X% equity multi-asset cap products, and markets institutional fixed sales in are experiencing the the remains The $XX.X our equity, remains billion net the of cap high-quality effort. well be others pipeline Expanding and quarter,

regain Asset opportunity preservation performance here over the that key as top levels more invite will strategies remains time. priority

it over turn Let me to Brent. now

Brent Bloss

good morning everyone. Thanks Tom and

prior during the share share remarks, Phil compared noted in $X.XX the were his As to in per earnings per opening quarter $X.XX, quarter.

realignment per legal the freeze, of The second cost additional income severance the related $X.X million cost pension expenses XXX(k) to freeze tax starting well by in of in in current to costs the reflecting baseline impairment increased channel, broker-dealer to the structure resulting share targeted operating quarter quarter. contribution the Combined, pre-tax charge fixed field additional included from of lower distribution support. related based included for costs and the $X $XX or second as we management in by and of As from to the increased million quarter to wanted for I in benefit costs, expense provide implementation our guidance These costs discretionary current quarter XXXX in the additional offset prior items quarter declined some as pension and period, prior to approximately the accrual $XX $X.X plan. X%, were these $X.XX in revenues a share related reminder, announced the guidance of accounting Sequentially day the resulted a additional point one plan the the new payments. on the million of due a million, unaffiliated million. and cost of and by the the as quarter. lower the partly pension underwriting intangible announced an of

in statement. U&D, compensation on G&A discretionary and As lines expenses are the a reminder, income included our indirect the

this $XX million approximately cost the for establishes indirect direct management baseline earnings have I expenses second statement the with XXXX in rate The from half past, changes the and an U&D and half annualized to XXXX fourth at totaled run added we million. discretionary on equity, indicated these moment discretionary for for brands, the of stock $XXX in related three XXXX our to as This we resulting in cost changes. of income expenses our in basis. XXXX As for million the cost To the release. the of adjusted for outlined XXXX base, adjusted be quarter charges our to forecasted second field certain of in-line $XXX lines

for additional not and expenses and an forecast D legal this to the DOL primarily that costs merger rule, are fiduciary baseline, annual fund XXXX part also of million Our discretionary due the includes implementation our the above run of ongoing rate. Project $XX payment, and XXX(k)

our in I As highlighted careful are is prior research strategic have plan. allocation central quarters, through

of evaluation underway, the in million announced targeted We next income we reach XX savings. company ability working to to are Based our August have initiatives in comfortable number to XX areas work, months $XX a a months. where million $XX we evaluation of initial to operations on on and series the our between are in our we on the pre-tax identified to of expected add are

annualized to the quarter, realize field of expect savings. and third cost realignment the we in During the completed $XX million broker-dealer management

are early and cost focus the of savings We to we as other approving evaluating additional expect to on in provide that operations we across services advisors. enterprise our opportunities the stages

U&D the channel, we previously compensation the the has bonus, and made salary of be overrides, future. was changes, our moved as and from part which broker-dealer in which as management U&D recorded indirect structure cost to captured will from As managers direct commissions to in cost

in notes the XX, of will our million per million. to January Early As senior defined savings due interest next plan, we annual pay million benefit approximately which save XX come that [ph], approximately $X.X in result froze $XX year, will of cost pension down year. company which on $XX intend the September we

This fixed a is million investment in portfolio portfolio have earnings of up of laddered income balance that also $X to September. a basis. the to million has end $XXX increase We at expected annual on our place an

our tranches families plan two of As previously and affected mutual we merging the have fund first last week. on disclosed,

implemented, is of tranche these approximately second the completed will management million. by first fee in to quarter reduce Once expected $XX fully The be revenues XXXX. mergers

share by cash As of repurchase the year-end earlier, We program an dividend outlined in flexible quarter return release by XX% ended our XXXX. $XXX a since press reduce will with an revised and us implementing we investments, the discussed plan, million a which Phil in for and return and provide expanded $XX million more capital are plan. capital give increase

$XX a year-to-date During or our for total through to quarterly continues the and will repurchases balance to Phil of model stockholders a share generate our sheet regular I Despite million challenging we now substantial environment, back solid million. and to is the $XXX returned quarter, closing combination it dividends remarks. flow. having of turn cash business faced

Phil Sanders

Amidst the in Brent. in of for organization implementing initiatives out Thanks we our change engaged Okay. industry in is corporate particular, a the unprecedented last evolving company laid backdrop period quarter. now our fully

success. transition the committed changes to necessary built business making We are a for to to long-term model

manager highly both active competitive at a and foundation. its are broker-dealer We’re

and our is capital for fully we ensure shareholder of supportive over our long-term. period create have we open the Our financial will through Operator, only transition company best strategy, not take to also advantage key as to but that strength asset this call we now our of policy the value flexibility to will revised manage opportunities questions. return is a corporate the

Operator

ahead comes question Please today Glenn - ISI. question. go Instructions] Schorr your from with Our [Operator first Evercore

Glenn Schorr

you. Hi, thank

tell appreciate the the - there I'm suite all words, out industry more around Answer forward. Or commentary you side the are new on the in product and to to what that sales now? things are change you've to going this providing the future reposition need about told to dividend I adapt rolled and us? financial So, being flexibility; us comment help and/or other distribution curious, of is are flexibility the

Phil Sanders

is Tom add and if start he this Glenn anything I’ll Phil. wants to can.

more little we DOL having for as sheet we rules time to year balance company, something evaluating development kind Product a architecture flexibility of it’s be the gradually looking where those think out. financial ongoing we’ve are things quite something we open financial is and acknowledge think strong I up read - at us kind of as position contemplating selling it’s up We on the internally process as will in got better and an about now company. been do some a few the getting open earlier - that broker-dealer and the of spoke I we’ve been the patient a where we’re for and now. of things are we’ve for the the what our

not a to We’re that position moment. disclose probably at this in

don't to want opportunities and also when it. way that’s kind flexibility. be a see I kind - of think We provides our come greater flexible degree are we opportunistic - of that I we how inorganic and this know of where

Glenn Schorr

a Okay, On cool. that's just numbers thing. -

either through as top channel. we how line? make on the that unaffiliated and more that a of but retail see flows - runs item, size markets, is and commentary, the that might frontload we material Like, still? mentioned on you lower revenue guesstimates Can you XXb-X the revenue number in our the can On much pressure we lower line in in the broker-dealer the commissions so just or fees those both know

Brent Bloss

fees Now, reduction that’s the channel, Glenn you over in mentioned the the a in simply time. AUMs XXb-X due unaffiliated to

other So, that point? was have related I I the and share and the based in a trend to what seeing classes you’re you those your mean AUM fees that then as out think can them upon percentage XXb-X drop levels

Glenn Schorr

commissions It line. and that running should Like, was both forward. really load XXb-X we modeling just through the think the how same revenue about question lowered of going sales the

you So, Thank it. I think answered you.

Brent Bloss

the as we That down a load in side, just it quarter, current new somewhat probably product It the are the on in platforms, And is business quarter-to-quarter. considerably navigator quarter. seeing of number to Tom so but sales wasn’t the and elaborated side lot fluctuates on in the from future. the just of fee-based the more the in fee-based going was down uptick which Glenn expected

Glenn Schorr

right, All thank you. Excellent.

Operator

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

Robert Lee

maybe million you trouble having I'm Brent, little $XX $XX my questions. of take Great. pre-tax the Thanks target bit million reconciling to - for I guess could that to a the the just some still mergers. of up million I million If the you giving you was numbers will fund $XX with correctly, with that revenue remember be $XX gave. of inclusive to

feels that like gave, numbers still short million feels you I to $XX So, like little up it's, least still the $XX it's a it at if add of million.

$XX you're be? may So how maybe to about of estate just footprint, whatever that going deeper technology, on into should we it think some the specifics a where you million - get - update Changing think range. maybe us more initiatives $XX or million little to real

Brent Bloss

Yes, good Rob. morning

included bit, the Just which heading the, go setting XX so little revenue yes, down the have million up from would line, in fund a of we terms of it because breakpoints. the in mergers

take in to if into that the range. So, $XX targeting you is that more member expenses we’re the for $XX million account million real

got an down our market to $X and reduction we structure disclosed reducing - to million million be related management XX item due from the would for If to you $X million $XX I run take run target, rate, that XXX net that, you XXX as given the have baseline a a off pieces of we if the the that that $XX and you be targeting million pension the infrastructure that describe million field. some debt, rate expect a additional in I forward. future we $XX We’ve so include of intro pickup, at to in a going part that you million revenue the XXX - the million the given XXX reduction as income, as and savings XXX, loss investment then of here the of with would run to would have rate, pay $XX

around million. all of So, $XX those the total

as still and we we continuing of have our we company, million other at about a of part areas initiatives So, have described to yes, those we’ve run underway. are of of look items already rate lot savings $XX the disclosed,

that feedback to every as the of the of my will initiatives we’ve expect and We served through in become with And XX hone think be mentioned like better - this some fourth [ph] the where as end looking XX number more other we are the very forward clarity we company, actually around, as area have you going, at, we those, month hitting we’re we IT this quarter and I in savings that we and we move on accumulating said comfortable some we here. can point. gone those at in commentary, a expect probably company will areas number but more by of efficient, in have but to

Robert Lee

beta platform thanks. maybe early Again, days, launched we'll type and of know also question products number to guess a broker-dealer you it's of a early I'm and And elsewhere. but the in the as call Okay, to a for - are uptake days, products. smart you've just Tom. And any of launched? lot them maybe but it’s you've newer strategies I the curious, open I starting up fair some you see retail new

Tom Butch

I are - being pretty launch uptake product, as Rob, things the I talking newest the is one my about Yes, did point remarks think the some referenced was in out advised advisory good. navigator you’re one funds that to which Hey has effectively add those as that programs of and been passive/smart the map of we of our sub- the with you beta-ish. concurrent

launched the program. has to million one in uptake date. in The in And mid-May. greatest proprietary AUM products any products in think of advisory of our that of those XXX program about I fact,

the has and shelf uptake So, thought our It those newer they are managed ourselves as been similarly expectations. I of strategies whether would. for space within or think other we for also performing by sub-advised the of potential provides they

Robert Lee

a in that that knows taking you tax how overall to fairly more a would of your about as tax or would sharing get philosophy we payer. structures you theoretically rate if hypothetically your think reform get think supposedly, maybe, given about but investment how using bottom a one speak, with reducing all could, aggressive even be to Great. versus get that hypothetically, is we or I if Clearly, - more line? if largely more to it last question. use no this. really you were if reform, US sense you just one of to it's But fee step could, And guys I'm What's shareholders, curious big strategically windfall, it large would you trying for on Or thoughts your strategic just just if that much. up maybe of whether an or be that, then so beneficiary are hypothetical, funds? this the If Just tax your if; on what had that investment? of to opportunity, you to

Phil Sanders

be spend don't whole and well about be we would those things would I that different thing, react would of I we is but happens hypotheticals This beneficiary - it of something those would but that leave we about could will the a give time pursue we consider avenues. us Phil. know, that. obviously when flexibility, a in more we and thinking we at - and accordingly, just a be lot think don't Obviously, things all good

clearly good be be think it I yet a but it thing. would be defined, would to

Robert Lee

my Great, take thanks for questions.

Operator

question. Credit Please with go from Our Craig Suisse. your comes Siegenthaler ahead next question from

Craig Siegenthaler

you’re morning. Nicole. Hope Thanks, Tom, doing morning good Phil, Brent, all Good well.

broker-dealer First on retail channel. one here the

so trough I advisor detail, for at? comments of too, advisor here year-over-year, the And see any So, where to but almost you expect timing visibility appreciate is strategy, the count on heard which advisor the XX% headcount, Tom, that should we will sort to have do your on stabilize? when down

Tom Butch

which has multiple fair It’s a dimensions. very question,

at me it way. let go this So,

is producing on sales concurrent our percentage have we of has self-supportive its freestanding as both that advisors to higher with strategic a principally of As a broker-dealer goal make channel, our the undertaken disportionate of stated as channel. and we in it entity profitable who we time supportive and of review time, mentioned that focus over or last AUM have a the overview which

given really minimums that were the the we that brought we the that firms, about things at and was was which supportable talked business, to to great the historically on they to the were we as as And minimums we second, the low we to capturing to business. industry we to grew in said, channel, fact the focused business also the be proprietary people one going over raising next four of consistent people that because in accommodated and are extent We years it assets. through a many two with relative more new are those We believe industry raise the norms. time what

So, with at XX% AUAs. the revenue the if XXX,XXX XX% exist today. in about look AUMs you our business, represents of total advisors production And more half annual of about than of the and that that’s

best half, of a functions as conscious So, we we very certainly that new we’re one production That many we at advisors of meeting they get which is and/or the in that did. decision. be number do the the minimums. keep to unless them our to they to in that teams, of the new but risk levels hope It over but our is new will that of want are head part not span can, bringing put the help the new of our well past we strategic advisors would the become time fact other do not for as the count on that as mat really volume of pressure

drive minimums for that and and who no maintaining because that to the advisors to our and decline who best are people those meet just here the number don't is dismissing can are perspective. one and from group is principal strategically levels we’re sales So, them those on doing In are job focus say AUMs doing new the risk. will be the everything we everything I can making from is the to maintaining I mathematically continue when sense it a we comes of don't us that quarters of that that rest, number at we’re the but give to options who focusing that I would on behalf probably here, bus really the level know, meet we sure do that to believe

so, its moving very decline number expect new be your from that finds the And perspective retention, sales place, can will served quarters I you better that AUAs. the of say levels, but before asset might I to number a also for focus be would on it think and well ahead

Craig Siegenthaler

my the proprietary it. year-over-year that broker-dealer months, we given And channel. Tom. in also Got XX you XXX-basis-points expectations? just is line And see in in will just from your per-year XXX-basis-point the slipped product XX% And per-year it have your to is XX% your the increase over Thanks, with as decrease share here, more next decline tweaks follow-up view, likely why? to decline or retail I’m wondering, offerings of this sort the made and a

Tom Butch

the said funds much pretty of the of bips within navigator the in say the think in I what within the they you would multiple is expectations XXX no substantially pointed it’s unaffiliated been I products program, the that is probably of and of seen things in change uptake going of utilization out, which There our of on, within as XX% the material and toward has the map unaffiliated number we’ve the commissionable expectation. our part I I the business the are business, - stated, were span the part particularly but or the business span of as advisory we proprietary directed thought.

our would uptake the or is, decrease less next level hard the the of think be the over for exertion it transferred more, is trends will Your to mentioned number funds be assets money for funds, whether in it’s basis on both the seeming the quarters. into forward-looking which product moderated going proprietary I AUMs the and would as I of new a to What relative one to percentage advisory modelling to question unaffiliated we has already the answer program to over at versus call of have of is it expect watch kind same that those of time, you as the continuous which, a happen.

to predicted. proportionality that’s be So, for some moving I at for the manageable level think but our and modelling away of would period time, that us from call

Craig Siegenthaler

taking Got it. questions. for my Thanks

Operator

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

Bill Katz

questions Okay. much Thanks for as very well. taking the

talking management said to back as on of those might certainly, support some broker-dealer just little just it the was who release, policy, And what broker-dealer wondering I coming press arrived how And there capital of or a seems tied big at your more. like the Just spend expense to of as digit on what are a in was type call, about need have two dividend. peers the well I the then core how $X.XX growth, of operations you wondering operations be you the together? was sort single sort mid- bit you to-high based

Phil Sanders

good the portion. was dividend morning a was lot that This of kind start bit, at our Board we might went a you into it there be payout will the think how out return it of really terms imagine feeling little and as I Phil. is, I Brent we end a in a I discussion day and dominated add where became arrived decision of of lot decision, guess, settle is probably, a - at may think total - Bill. can Okay, thought capital the obviously we and I the this of

of accretive present business, flexibility us a in active stream terms repurchasing also for to and to in program, So, of when invest some advantage some but adding wanted the also be income opportunities take offered share we which and approach our themselves, shares return repurchases. to competitive they balanced a present shareholders, gave more capital

of balance So, was think where different this settled At which good out. of considerations. I that level, just is day, represented of end of lot a we competing the the it combination these a a

I environment we a view $X think good when generation which here. time in of flow our stressful a and deliver on one as base also consistently we model, is volatile. the sustainable I pretty cash becomes financial level, our the think We’ve in environment market more and shareholders the lot strengths that it a and over can even rewarding been

are. obviously know, for so but number that where years, could we change the you As comfortable of last feel we anytime,

things of types investment spending be of, I’ll a other the Brent maybe terms let add little In may bit and there.

Brent Bloss

Bill. morning good Yes,

we’re that area side the risk I adding there, I think and remarks technology the risk highlighted, division his well then the to doing really our broker-dealer for easier will us, we business in a is investment the things investment think and efficiencies that as resources on at place, that on are as And still as in well area. terms with in robust we management in we we’re look do so of some end in but that plan opening making management on the Phi’s be do initiatives in sure think hired risk have investment ongoing to put more more there in of into we as we two the terms our making to the back advisors even out in that project, build side. manager broker-dealer as more the of Phil the there plan

at of currently. So those that are investment couple of we’re looking a areas

Bill Katz

the numbers $XXX month. you you you than in for ran a a are million reasonable case, was if higher then just AUM to morning, give if If bit some follow-up. a like looks the seeing that disclosed guess we I are the wondering the correct on And that's based where could it is Okay. you as this color outflows attrition? of I calculation? And as what

Phil Sanders

the Bill? Could question you repeat

Bill Katz

Sure.

month of quarter figure this morning north the flows It of looks are? like that math to update based what your the out through trying date on outflow somewhere of $XXX had you the October. for Just million

that's if you reasonable, if attrition. the is a wondering seeing where if reasonable A, and are that B, Just estimate;

you spread be would distribution different helpful. the segments could it out If across maybe

Phil Sanders

I that. think trying to we're reconcile

Brent Bloss

minute. us Give one

Phil Sanders

to Give us Bill. back one we come will that and minute

the disclosed, at billion this and of XX.X think as ended quarter then morning billion. XX.X I we we

at looking one that back So, - Tom is come answer an minute, question. couple a to you Bill give us will we

Okay.

Bill Katz

Okay. Thank you.

Phil Sanders

All thank you. right,

Tom Butch

to go next then we will Bill. circle to We will question, the back

Operator

from next your comes question Bank question. America Lynch. go Merrill from Please Michael Our Carrier ahead of with

Michael Carrier

per looking And from that on of just million and were policy the we net per and just just year. question. of But quick been so everything next historically the think buybacks, facility, detail the you looks at update, more terms Brent, that was guys. $X anything a have it million you $X maybe a meaning guys to year. Thanks an then expire to on year? changing that But capital going like on credit just one like like know basis. overall was one in I grants the in

updated So, that and front you the on reengaged wanted else make sure facility there on that, but to just was there front? nothing

Brent Bloss

Michael. morning Good

buying year, math little shares stock upon you that prior issued normally, restricted $XX and chair last the we the we would offset that current the forward of our somewhere go gives do million that in around that that front, back idea. don’t mean so price an expect did you over that million if dilution, I much, based On you to shares to about in as we neighborhood. X.X as stock [ph] we change I restricted under restricted to policy

it facility it the company On in place the I has went backup facility. a renewal. XXXX. really is just is public since credit That mean facility in been really a

never time have drawn the facility. a We on

facility. expanded really though it It from but it, it backup to there a use are expand as facility. still million, it’s can can reduced just it to We our is backstop XXX. not expectations to a So, XXX be we XXX even

downsizing in just bit the of to renewal past. - it nothing it So, never we’ve a because the again that, tapped

Michael Carrier

Got it. Makes sense.

you fee fee a just some fund And those the the terms as the a just that and as get? a you funds, like we get, as economics of pieces on. of in becomes proprietary And open but of guess associated the distribution I then that don't In obviously non. the management channel, architecture, what asset Okay, with maybe of that to when the wanted going advisor go the are at - the advisor into follow-up. a you asset lot look then how under in fee third-party assets do moving understand, cost part or administration shift a versus

I of will impact some net look the as pieces, to at but that there flows the see over time. economics of but obviously we assets, the in just can matter a So, trying lot know moving is the assets Because shift.

Brent Bloss

a at I will it. take shot

of from way order platforms platform economics. assets fee-based losing you are sell or into fee migration nonproprietary think where nonproprietary the from to put you’d our make up selling of the to any our I product it calculations to that the to show is, have architecture funds, to the open make proprietary up [ph] delta in the management simplest product about X×XXX

So, driver is that. obviously losing a the management big of fee

and important the look the have becomes we is to we driving is the important is - why pie channel. So I broker-dealer the even as to more think that the that and number future it bigger drive AUA in

Michael Carrier

you. Thank okay. it, Got

Tom Butch

at Tom prior is back Hey B, having properly and for the apologize question, first I this not your ready the second. A, Bill, to not hearing time; which getting the

be as which will the of Looking is this the if The a high that size to line nothing number. the of months results asked, in it broker-dealer particularly old the think is much point the pretty of that are, quarter. a in and The be with question outflow appears at institutional on wholesale but not at think the it again largest though quarter. prior I and October, to the in basis I appear be These to outstanding monthly in unaffiliated advisor you look even there months retail was the channels. prior does side, that

driven to in largest each institutional. say think sense any channels I I So, of date the not remarkable would it is sense in by the outflows in

Phil Sanders

Okay.

question. Next

Operator

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

Dan Fannon

what I Thanks. that with and potentially how doing or gross doing is there you - you what or potentially guess about those and those to gross I very wanted you have guys for meaningful wirehouses, get going. talk those relationships talk incentivize historically I the ignite are about to changed. sales to particular sales And guess been they've ignite how dynamic. - In are

Tom Butch

a is are it’s think the noting. question. things worth great Tom. Broadly Yes, wirehouses, I of This in couple

important We them is, of our of are brand of from rationalization our that we in as still through each part which in things remain less access, a sales those some them, and of affected of were but of perspective each you them some they lesser importance process, the our very mix. have sales very that, others happened remains a strong, that think a products I gone also couple important know our predated major had that participant remains, have by

our some the of become would have important. say I that planning other business important, become very and the financial firms So, also of firms have piece especially RA

two certain products distribution. I things noting. international equity core to look driven really sales we of worth the as are couple other of remarks, near think be brought seem the the in that that talked the fact opening about the my us potential markets have to into I have towards and beyond to emerging broader equity future,

subject As the from equities go the entrants which categories year. sales as good to we we are central domestic fix, one be that been of quarter fourth our into high-quality you have some into pressures largest seems know, that the the to couple a we of efforts have next there, not to equities passive and

get now distribution partners. enough products better long from have our been to of and that couple a existence are maturing in a have We look

a we hopeful have of a We distribution. at result firms of that those into products underway getting for number are number searches products those in and

third The be investment selling little a thing we’ve that and us significant pretty products emphasize. and where more we take prescriptive targeted enter relative firm sales data think would and is the we and I made as by year to say which next enable effective technologies, will our more will products that in to we I by a drive

of and we to in is more sort and market take I think what effective we forward. available constructive way that now architecture, to us of shelf do way I have to refilling to a in a those have think sales the going

of - has firms or we simple relatively do. a be and talk platforms market time now process into to AUMs as products that many new used other of what a major You a the getting are emphasis become wanted challenge wires there go and by which and to to adjudged more adding one somewhat and that has factors do into we products distribution, that the things to talk all the as about rationalization lot be about a too

Dan Fannon

they Great, about expenses. terms just items totaled of Brent, then in thanks. $X I a million follow-up. The in the quarter, And this believe as one-time

- going continue Just fourth quarter. are couple curious a about into to think them headed are think I as we - the of

If expenses. for you of could just we should about highlight sequentially kind what think

Brent Bloss

will XXX(k) terms we’ve last frozen think expense X the quarter now about contribution in I also up offsetting plan $X about of in couple pension though that the we the is of quarter. quarter disclosed that discretionary fourth fourth in pension of in the go that related in reduction the by contributions, million was million that a a quarter, have in that to the million this Yes, additional there will

around in maybe pension million net freeze. additional X related the kind of So,

potentially We in fourth but through quarter. E will that continue million-dollar don't in to another the have those severance quarter, I I be but in in DOL - I cost this some quarter, end potentially it the million of the fourth to was year and Project range and think million expect of a the couple expect, maybe the believe

Dan Fannon

Okay, thank you.

Operator

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

Kenneth Lee

my for question. taking Thanks

on the potential securities sheet cash investment most of for sheet used resources could be management has the and the past, level stated share balance as repurchase. think that balance I on in of

over $XXX Just total want million sure to resource that’s still and a little the or make case, whether still the so? is

Tom Butch

course allocate disclosed the XXXX. down will we senior pay have XXX then the of another capital over money couple dedicated have because notes - which we XX million we at And broker-dealer, little in million of a of XXX some the are million to that. January of we requirements have going we a obviously million beginning broker-dealers feed XXX we Well some are of to have we

do cushion there giving balance to little of available at excess couple million is probably this would So, expect on hundred million working XXX in of capital sheet. I point - a the us

Kenneth Lee

opportunities opportunities on on? follow inorganic mentioned earlier. was that sorts What up growth Okay, company focused the great. Thanks. just to And be want would the of

Phil Sanders

environment relationships have with certain our think lift in product I Well opportunities think our it’s or or in that something a boutiques given I in we I think or some open, We've the or towards mentioned up culture. opportunities firms capabilities line potentially outs smaller strategies that - the be there. past and more worked are be the partners or could open in there we to past, whether complementary would have like different also

shareholders, we be but are something So, a will it we that different but them, evaluate will at and what themselves. I and I I think different good we will opportunities leave be things think have things, evaluating at will present think and the obviously and taking clients look but flexibility I just openness for be our the to selective want in them that, to see we

Kenneth Lee

Okay, thank you.

Operator

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

Chris Shutler

of Couple the questions on channel. advisor

the asset lot a what's to just like the And easier advisors? sounds make by are process, about cutoff? the to what the date hit that are join it you First, it they for of advisors you which doing talk teams. smaller to need going facilitate Can have to

Phil Sanders

meet question new reverse a we’ve them. of are next and multiple of there to changes the possible gives order, in years minimums answer grade at the consciously so tried four To opportunity manner, sort the which best in advisors each to your

four over the are in the Those grade multiple years. they So, next cut-offs.

specialist they’re driven it technology, teaming role may what either technology, or that one, particular is of out doing it’s and also have that product and complex financial a be in team context or advisors who driven relevant their substantially whatever to production or looking by to may planning set the advisor a to perhaps relative managers. Second, fill really by themselves, are with teams skill and those be particular

field. models will in out engaging team also new process that in are the different been advisors it’s ways of find structuring that seeking give a multiple and has teams members so to normally bringing - driven We that time give that teaming the those

mentioned, in really our I we we important have role market markets. we local facilitating managers of each As will XX market think have structure an this in complex who play, wherein a new

Chris Shutler

add many is process, advisors it add? how to then about but you new hope many advisors And how that Tom. know how think evolving you we targeting guess should each targeting thanks, to that, I And of forward? right, are transition year making follow up types or to to these add, to days? assistance the are do an I payments guess, you on I All experienced sort of going

Tom Butch

people been up year. first folks a in experienced the doing everything to been the answer To both getting goal going new that set on given subdued and has We out recruiting experienced of has XX market year. had with this for place, structures question, and this

to two from sort from as year, use hit market. our We will could new three intent to that baseline to next was which XX look a think start you of goal respectively XXX by we - as and that advisors not and effectively year, experienced hire this I

people do the complexes, Our market this managing take of into the doing, level into create that of they you own their waxes or to have are and bring managers will into account. each wanes their financial the P&L’s some opportunity so to know In incentive and in industry.

sometimes forward to it our a of What period broadly but our I to be want don't support, to outsized want transition in it financial resources never and waning, to trying all a we're we have We put do a place does in some been make of leadership, platform, a we purely support we are We bear. think, where the really is financial and local degree culture, bring decision. to difference.

Chris Shutler

All right, thank you.

Operator

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

Phil Sanders

Okay.

Just be will to a lot us information new and today. of everybody follow-up. available we wanted there for for Obviously, here thank joining is any

can to Thank reach and up to Nicole much. very team look the or you soon. out catching You forward to you

Operator

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

disconnect You now lines. your may