Waddell & Reed Financial (WDR)

Nicole McIntosh-Russell Waddell & Reed Financial, Inc.
Philip James Sanders Waddell & Reed Financial, Inc.
Benjamin R. Clouse Waddell & Reed Financial, Inc.
Shawn M. Mihal Waddell & Reed, Inc.
Amy Scupham Ivy Distributor, Inc.
John Dunn Evercore Group LLC
Daniel Thomas Fannon Jefferies LLC
Robert Lee Keefe, Bruyette & Woods, Inc.
Brian Wu Citigroup Global Markets, Inc.
Patrick Davitt Autonomous Research US LP
Michael Carrier Bank of America Merrill Lynch
Kenneth S. Lee RBC Capital Markets LLC
Michael J. Cyprys Morgan Stanley & Co. LLC
Macrae Sykes Gabelli & Company
Call transcript
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Good morning everyone and welcome to Waddell Reed's Second Quarter 2018 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time I'd like to turn the conference call over to Ms. Investor of Head Russell, Relations. Nicole ahead. Ma'am, please go

Nicole McIntosh-Russell

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

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

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

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

Philip James Sanders

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

X% ended Assets $XX.X quarter. the during approximately quarter under down the management billion at

our expand long-term and year. will outlined Ben our against to we well the As my on is success. key investments initiatives. for reinvigorate morning update we provide are various the we then evolving update progress financial strategic as and strategic this last easy sales results, will quarter's on on This efficiency steady an as focus and business investment provide our our corporate in organization, product progress an efforts line performance. on on work, an continue I establishing remarks execute I making to not framework initiatives model but believe the

will our broker dealer business. Shawn, an Finally, provide update on

our product November industry disciplined any and quarter also stays improving to approach Morningstar flexibility key of relevance part We product areas continue strategic in investment investment of last improve their Lipper notable the marketplace the firm's consistent the continue and majority Similar the provide where of their initiatives, to set It performance essential and our line. investment with took vehicles resourced of client this earlier to three in steady of make the of year competitiveness and continue active mergers one, distribution step by and to progress our long-term the can the this the our Funds across for merger saw offerings. the completing we similar the clients. line we clients in of Advisors rankings. economies success we of five-year our operational resources and outperform to investment we of benchmarks creating manager, quarter, focusing much strongest are strategies we As first for our and and is relevant, capacity amid & intention key management This properly take by internal landscape. product to to funds. ensure and greater that in merger competitive, evaluate Waddell former in core approved with rationalization to the Strong expand focused, our Reed Funds capabilities. performance product helps the expected evolving the Once Ivy place into six our efficiencies new shareholders, thereby firm's announced In scale us provides introduce greater year. June, our our and demands additional while offerings

representing over peer basis, have our group performance on improved XX% In over of of funds rankings. one-year their management our XX% assets fact, a trailing under

monetary of volatility in to toward time. for banks normalization continue part over global will management that provide of the uptick backdrop more the We active a believe the favorable policy and on trend central gradual

made months, a to performance and XX the and remains in a products we our must only technology, strengthening past both equation. is the of are our significant and Over priority. of risk products investment commitment competitively this terms Having personnel have the We management solid also right ensure management capabilities investment part and priced.

important in well redemptions. broad client partner performance, to institutional on due rose as As in of extensive best sales a result recently we the increase market to Net sales opportunity, focused compared quarter – second declined which of and quarter on products. in refinement key can of in ongoing our to across recently our gatekeeper generally are evaluation seasonality, limited our redemptions we evaluations. couple The in our pricing the Within in reductions distribution, in review another adjustments selective distribution in as channels. pricing outflows selective quarter, represent flat. key to a step announced placement both platforms, be the prior not of institutional compete quarter previewed included, and last The are to sales positioned unaffiliated an weaker strategies. and believe the pricing fee of part in XX adjustments of but for announced we an strategies attributed reduction trends, adjustments industry strategies XX The of while structure product unaffiliated The were sales distribution key multiple and declining line. are was softening

income markets weaker Our international domestic both as experienced and core global equity trends strategies fixed emerging trade underperformed equity tensions. international amid and rising sales equity markets market

both strategies. the long-term Given their of track records, teams well-established and confident investment these remain we of in prospects

As a our products trend. we cap are and other growth mid-cap seen growth broadening our including performance pricing have optimistic set, and into improve sales help could that small product this continues of initiatives across to

large decline and cap equity sales quarter redemptions Our by when growth clients prior institutional institutional $X.X increase The mandates. channel quarter. billion were experienced in our to during both a and compared in on the an redeemed centered the core

tenured, portfolio manager we on departure a earnings previewed may our long cap create growth to continue channel. this for call, near-term As headwind last of a large anticipate the

Currently, We under have proprietary be X% about products net to been their quarter institutional more notified coming our management. represents million second declined of Within the broker-dealer assets the Shawn months. at channel business in XXXX. our in $XXX our approximately that say outflows broker-dealer, another will and of redemptions will a were minutes. have level lowest consecutive for the redeemed since just few

distribution diversify under We to work profile and diligently management assets continue various the to across flow channels. our

to this structure ensure As effort, part growth. future we distribution resourced support of of to our our to refine properly each channels is organizational continue

sales forward. These efforts a effort analytics with necessary going build Additionally, a and marketing for we improving data will out continue targeted structure, to support performance pricing growth. combined and capabilities the investment foundation provide that more competitive

to Ben. over Let me now turn Ben? it

Benjamin R. Clouse

and good Phil, you, morning Thank everyone.

institutional quarter. we reported the by channels. in was distribution of quarter the while more Phil first redemptions income with management during were in positive all assets million the of average modestly loss $X.XX distribution $XX XX% which $X.X and quarter. revenues sequentially. said, reported under while broker-dealer declined As similar net Sales unaffiliated to consistent per slightly we or million were redemptions $X.XX due Unaffiliated second in cents primarily was declined market institutional the Total sequentially. share, improved both action assets the to the Lower across first quarter

a count, costs $X.X $X.X The million and high basis. included a declined on unusually intangible in by lower million million slightly partly decline and million to in to total Operating as fees, a otherwise savings despite in enhancements sub-advisory taxes, some their accounts We impairment with decline $XXX,XXX in quarter. consistent the revenue also the to add the related cost marketplace, head asset which rate retirement that severance reduction reached run in $X annual advisory Compensation offset in fee limits, will revenues. quarter a $X of slightly year implemented fee a of per a agreement on are These payroll result management individuals declined as equity compensation. also costs due lower plan assets. client

of of improvement. assets technology, the sequential Controllable marketing compensation, The our expenses Lower all the $XXX with to first in that compensation and declined G&A, million remaining fund costs severance – quarter charge. occupancy, core associated from are business. mutual slightly. $XXX Our consisting expenses, million drove intangible increased remainder declined operating despite

vested. that rate shortfall from compensation tax and settlement due significantly impact decline state second quarter. slightly declined the The to a as the effective now granted offset fully of primarily at than tax the vested were expected is tax stock in of are favorable XX.X% the during share-based more price share-based to quarter which was a higher tax shares Our issue, which payments

on low to broker-dealer real with low initiative We our further expect cost rationalize or and containment continue locations footprint profitability. in estate to occupancy make progress our

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

to progress reach by end to million $XX $XX reduce already costs by the goal track the million of across savings $XX have against on in to We net final company XXXX. meaningful made and the $XX to million are our million,

contract run with be reduction streamlining full the of areas of and addressed in our and The quarters. in XXXX We real in second rate. expect our resources are reductions further cost estate resources and primary to being focus through realized the third systems latter

group we week While We in drive of of pricing to some to we last invest continue funds. on repositioning are meant expense select announced a growth. revenue management, focused initiatives mutual on

market. the these fee believe basis mutual changes Phil in from The points reduce will effective XX approximately aggregate enhance As to our funds the reductions on we in XX basis fee beginning position in August. noted will competitive our retail rate earlier, points

will initiative asset and sales strategic will While efforts. to be help take this near-term positioned management of products revenues, fee retention better these pressure advantage our opportunities

add of strategy, are investment enhanced team. including data sales and for our in distribution on working enhancements comprehensive the for business data a to continue ease We staff and more doing advisors research

total During $XX of buybacks goal our million completed $XX purchased the two-year we million the $XXX to million. cumulative quarter, share bringing toward of

strategic of and with strong affording liquidity update June, at our to Shawn $XXX turn will now end ample remains it sheet I over progress. balance Dealer to and our investments million flexibility to Shawn? us Broker the meet of cash on an objectives. provide Our

Shawn M. Mihal

and morning. good Ben, Thanks,

of net during of the the assets to increase $XX compared XX billion Assets drive quarter under continue growth with the second and months. first products and representing million quarter quarter increase ended $X.X and a billion, $XXX Advisory last X% over XXXX. the administration to administration to inflows new quarter, at under compared the X% a

the the quarter, Asset-based to quarter increase sequentially an X% of advisory for accounted during the revenues, revenue million, $XX compared of and XX% XX% which fee XXXX. of were broker-dealer second

the is of choices started products Given products last broader to was of third one expand partners importance with ongoing key evolution the investment more The advisors. advisory choices expanded fund advisory product addition advisory by strategic financial in year available with product our suite families. strategic marketplace, The was of families all of to strategic list our the priorities relationships further this consultant. funds of independent to This with two funds new fund of manufacturers. from party of in introduction the financial by of an year new these review adding coordination

our to individuals. we access allow is quarters, offer them more worth products As the effectively goal to advisory service early that client all in advisors accumulators to net discussed from prior to way high every

Another and to for with efficiently. is the enhance conduct easily broker-dealer business experience important providing tools to advisor by goal our them

the business to a seamless continues is to Technology selection rollout underway. expected choice. well processes with of XXXX. and right & advisors and crucial imperative platform business increase the in as the business for conduct for by a in Waddell year-end investments broker-dealer to anticipated aggregated will strategically a an Our vendor which secure standing of data of make decision our administration allow Reed how final play platform is A is efficiency role platform and connection

quarter, our internal provide supporting designed a and development of work highest advisors professional program ongoing an steadily. part Last to Our elite offer concierge we of with performing progress personalized resources as dedicated advisory service service continues our service. repositioned will that to

our experience value service minimum head service-based and XXXX and advisors introducing service in high-performing we to quarters. the quarter, increased intend level our lead further believe production starting is throughout advisor's with declined Advisor off the expand to additional our as service below recent count positions into begin top dedicated remainder percentage substantially XXXX. our and newly this We to to the of has This advisors expansion fill falling created enhance of will or proposition. advisors

competitive, You profitable four our strategic broker-dealer evolve pillars self-sustaining, into to is will recall that of a one the entity.

As advisors. focus inexperienced a toward shifted and our recruiting efforts our individuals we proactively directed industry-experienced result, from away financial

first production for improvement mind average While has months average for six June months a the productivity trailing advisors annual during XX $XX,XXX. head to stood this This led which count, is in the who has left at meaningful XXXX. significantly $XXX,XXX into to it the important keep was of impacted XX, in that XXXX

the purposes additional For had financial financial productivity of an an We licensed comparison supporting XXXX, recruited for associates overall advisors and implementation with hundred broker-dealer the and decrease XXX assistants $XXX,XXX. of who several we prior to ended lost the a June advisors. average in advisor advisors are of year nominal strategic XX advisor annual advisors net X,XXX and pillar,

is firm our of rooted Our of importance founded are financial we and planning. the core is do. at beliefs Planning in the what

to of become starting we turn been planning, payouts which service conduct consolidation service, since business enjoyed. financial to industry to a have financial personalized In just commoditized losing have very attention on historically are of and firms continuing how it their advisors dealers the focused other element exclusively a has broker beginning. the potential light While the foundational

of corporate we advisors, initiatives technology, of in performing broad With to and strategy advisors' service and practices, product support our have offerings. payouts deployed increase programs designed for our expand development to our offer and the selection higher a enhanced designed services

our of advisors of for a financial personal are service our delivers and focus Within our serve. individual planning, dedicated support, proposition we broker-dealer value that important the components While personalized maintain all position, our these the and they and our offer designed experience legacy we needs clients support of competitive on service.

Modern are to other evolve engagement community planning leaders Waddell We financial is and our to sustain & are collectively our span core elite now platform planning of Operator every redefined three elements. we heritage a broad between Across broker-dealer open to business day permeates culture. processing and advisors planning years, firm. systems, is as call than committed of of focus XX we of state-of-the-art questions. our and doing Overall advisors. culturally products, broker-dealer. kept financial work more this diverse mandate accessible, that supporting long the on a supports mandate we support intact, like client-centric inspire its strong, for model core through and our through efficient, to culture our our a The with of a an the to operationally competitive. yet each I'd suite Reed's collaboration tools, work services to


Evercore first question begin comes Schorr with at the question-and-answer And session. Ladies ISI. ahead this question. from and we'll gentlemen, Glenn time your today our from Please go

John Dunn

in It's Glenn. for John actually Hi. just filling Dunn

the enjoy class between cuts interest and the there that that the shares, does a On were the with the rate? the and – I settle is share cuts, tough the and it fee how Is average, thing you don't other N account the how is being go to right class pull to the the classes like? on off? do what conversations distributors median, the the Also, interplay

Amy Scupham

Hi. Do you that? me want to take

Philip James Sanders

Amy Yeah. why don't you...

Amy Scupham

Hi. is This Amy.

that, of get Phil around think in and and fill can edges. then can the I Ben and part I –

and put I with product the And the are these interplay class on N we fee others, to and we actual was the that did I waivers went class as we shares the across far shares shares. cutting sure N line the fees. as make that management weren't class into what and class So, we the go

that how where out did of of some get really that as number was we other months. far minimal actually And some we classes. rate the share so, had have we broad as we the to impact what across if did, The to was conversations they a on figure wanted

standpoint the we wanted have kind started product and pricing channels. can multiple on distribution set So, be, like methodology we zero in on we Morningstar aimed feel of distribution then median from to out by do rates across the pillar as utilized we broad started average where we And the we the the focusing in quintile. on average of for of to below where the we

with management fell edges five it's where with discussions we this were and which investment we ones that's so, it have into figure And kind down and out. of the And had to we and is then broken distribution for. out around quintiles to wanted where what aiming Phil

John Dunn

give list a quarter? dropped industry? but just in activity just guys of kind And seeing then And material Can far funds follow-up. any a like for you. not for you're the as what if flavor Got as getting or you distribution us any you the from

Amy Scupham

repeat sorry, that? you can I'm

John Dunn

Were about material lists consolidation book a distribution for Yeah, guys sure. you're and what from any you you seeing any you funds any for and quarter that – the dropped about if lists us in competitors? and flavor give

Amy Scupham


So, we and second the rationalization official in the became of quarter. announced believe our was quarter had three go distribution during through first I of kind that partners

was As being X% rationalized the far partners probably not of total. any our it as averaging of around goes, to X.X% substantial at in AUM AUM

John Dunn

you. Thanks Got much. very

Amy Scupham

the At partners. Yeah.


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

Daniel Thomas Fannon

I just you basis what you also might pickup then another talked for result that the points Can see what's on guess you the highlighted, guess, that? change the impacted And you'll AUM a which about the you can – think here sales. guess, behavior us by I period as potential of – changes. that Thanks. these I give follow-up just is in you the pricing. time the X is

Benjamin R. Clouse

Good talk let I'll the Amy Phil first maybe Dan. half. about It's Ben. and morning, take sales. I'll

to mentioned to of retail end think at want you let if assets, to that I X And I'll I being As way add. shares N sales that. guys then our applicable about and impact about is you the maybe billion class $XX basis point June is across retail the speak class

Amy Scupham

reduction. the back call revenue XX We period did in to we're a time months. impact looking to what in would from – look I think modeling at take it of get fee XX to this to And it over order lift some sales

strategies of have near-term the others of there's bit might take that might positive some impact the that little think a longer. a I while couple a

to think felt with the position feel what performance, a and investment improving to compete. pretty that about gave we were we the I ultimately we us ourselves to do And reductions, was are. we in looking opportunity when where long-term fee this combine put a good we

Daniel Thomas Fannon

And then a of activity. on in follow-up just terms Okay.

the a terms months. and redemption updates activity anything or You Any a July well of of the retail on institutional? kind next in of kind as I as coming mentioned in other guess million as $XXX whole few

Philip James Sanders

high Maybe to Phil. do a Amy is at This she it any I'll and can. color add level wants if

we in the preliminary a was will $XXX there I large this additional said, know out I That's of comments the to think point we account. is institutional core cap large with there respect indicated in transitioning The institutional is As an majority and world. that that then cap growth, be million at business. what our

I third we to of gotten the into pattern change head continuing the for think trends the way quarter, And terms quarter. I would sales into of we've the trends through the of I we redemption similar, no that the of experienced month that say in say the of that consistent off the then kind quarter are are one-third second kind also sales as now right there. July, trends in really pretty softer very would in the broader third

Amy Scupham

had In we other some the And would institutional add across just have interest some strategies. I that. space,

say wouldn't anything needle at I move point significantly. However, that would this that it's the

Daniel Thomas Fannon

Great. Thank you.


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

Robert Lee

on position to questions. mergers Maybe product up my taking the for the following actions of line. and Thanks fee just some Great. fund

on year? fee take to the impact mergers, break you revenue So, And can least of like to to pending this through obviously time action least Is then fund that? funds those there the those November, update that's those if maybe at on need in just associated going end you with an at then do just actions feel you kind assuming for end the the I'm mergers mergers you're maybe being from could fund be maybe the did I of well. quantify of us points the you and you additional reach as with and guess at

Philip James Sanders

in Phil. Sure. can. This if to they is else jump anybody and wants I'll start

assets think $X less are so than under management they'll fund of into the be funds we total, funds. mergers announced existing those I the merging in billion,

experience will We some revenue incremental headwinds.

I it million does I $X thing. sure properly we're us again It product help think to we type make focused, less model that'll indicated resourcing the and out. of and as than line, consolidate be that as

will what relevance review ensure and and where we'll So say in as is us, process over shape line and that and to forward, this type opportunities, an be continue evolution, this that think as product the will – I we're pretty at in moment takes that thing. going far I good and time to of though the time.

afraid down this stead if being. road, So to we won't we the pretty it. But time I be do think us further good see in for opportunities gets the

Robert Lee

plenty have as road to the follow-up, particularly play maybe on trying excess think capital – business, revamp that maybe us eventually on maybe the growing producing to of substantial then, firm's your interested in M&A and the you in if of understanding play but been producing do and well dry uses you business thoughts focused And liquidity to the M&A you you as could that capital, could of advisors. higher acquisitive, back part a not you get in broker-dealer can management but higher historically because of Great. going update on a your advisors, the the role have and I'm role recruit your that, advisors, down number powder

Philip James Sanders

of that use clearly, of and acquisitions more a sheet. open balance there. types indicated in We've position Right. the good to And those we're we're

on the would side we type investment the if the I where business likely with thing. incremental We enhance can or do resources to and of think culture think we preserve strategies I likely asset new more our would in that to focus to of our initially management be be is be any want going capabilities nature. things

side to look the I be or looking opportunities term as we out at think longer broker-dealer. a and little a opposed wouldn't management little wealth in the bit we bit,

in to our Shawn – where leading know, that initially. really in get some part to the we and potential opportunities need operational be, have order then that we of issues But you and we has we been business transformation of we've some improve presents new as kind road. that down get a As to

Benjamin R. Clouse

as well. might we Rob, as significant I new products add just seeding a reminder, it's a of liquidity Ben. portion our dedicate to

Robert Lee

you. Great. Thank


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

Brian Wu

Good This Thank taking Wu Bill Brian you morning. is for question. my for filling in Katz.

Just mentioned as turning to that? on these organization should across they and as rollout about technology high as guys be – your investments you your expenses, data services of for or your of well Are expense included investments top guidance in performing controllable financial thought advisors.

Philip James Sanders

Those would be included.

Brian Wu

Okay. you very Great. Thank much.


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

Patrick Davitt

want up decision your on? to that. Good I rationalized, you answer. X.X% you they being say has rationalization made been I kept Hey. AUM Thank of by sure that and was quite does morning. you. to When wasn't X% mean what that on mean the follow you

Amy Scupham

firms, I'm the Amy. Two Yeah. soft close, forced it of It's liquidation. was Patrick. Hi, no sorry. Hi.

X% And of our then and total little was at our anymore. forced and X.X% can and a partner that higher them, be the liquidation sale. into continue to was that we a a sell one that hold that between of in products those was that able to can of AUM AUM forced choose advisor won't distribution was So, to that be that percentage it

Patrick Davitt

is And gone that already now? money

Amy Scupham

months. No. the It call out six will be it going in next

Patrick Davitt

is commentary as the behavior even outflows the that maybe process? since in client opening in given to the guidance we you've that any changes around follow-up and architecture, get change from the expected kind guess along I of there you've that further through done The, like on broader Okay.

Philip James Sanders

that? Can sorry, repeat I'm you Patrick.

Patrick Davitt

the outflows Any by expectations then broadly that? Yeah. your you've as in driven changes and guidance on done opening any of on the behavior more for update the client architecture,

Philip James Sanders

our of The our open families MAP addition outflows up the it's Navigator quarter to to particular addition continue program. the one architecture into broaden program been of – have going architecture into to advisors, with few was introduced a intent the products in eased fund fund this with that our open additional of going certainly the families classic two and the that

As to we proprietary from quarter and at the about moving assets in mix million that of steady over about have that $XXX total for MAP $XXX being at that that the program, of Currently, into movements proprietary holding the just inside movements Navigator proprietary coming other somewhat program. of and program that moved looking of seen look of $XXX we've holdings about the outflows at see assets into program about program inside million. we million the total Navigator XX% of assets a still MAP the

as the balance into proprietary and roughly going into those the move last nonproprietary steady are that program, several XX% into So assets pretty with other for holding assets going assets that's quarters.

Brian Wu

Helpful. Thanks.


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

Michael Carrier

right. Thanks All a lot.

like $XX million fee the to so expense I'm just execute understand with given of on color any about the year looking that to line. $XX question, that just $XX million or on, maybe first The to wanted for think just just million reductions. the the rest on the rationalization these the and efficiencies, the I to I you're trying guess, maybe

we should side from view, $XX expense of fee the changes so be that still to income that? $XX million million some be an on will more those of offsetting operating some expecting And and

Philip James Sanders

let Well, in a me couple Michael. take that parts,

the that. know savings this, bit clarity, of diluted. the modernizing I items so way I I months probably course, of older of Just the process of expensive fee – realizing see in little concentrated as elaborate In in on space. to I what don't we're are you we tell area you some and going business. line some Shawn those but transition to. in line the Brent by our specifics streamlined technologies guys a a G&A wouldn't And applicable specifically five the will will to in of want that to fact to alluded where some are savings, item And more only the and expense away broker-dealer provide the for last our year, for technology regard impact any well savings in systems be the doing or could where as in reductions, in would as to be we to and if continue as and more we be We'll do. compensation rent from add the other really of are

Shawn M. Mihal


that I it. that covers think

Michael Carrier

Okay. quick one. And just one

tax mentioned you rate. the think I on

you think that going on impacts like the that would volatility I the commutation on sounds be equity tax muted It said rate. forward. more the

Just this volatility wanted of that comments like saw we similar like that year. expect level make into and to XXXX we shouldn't heading meaning sure the like

Philip James Sanders

expect vesting well Yeah. to In be we quarter the I impact of below impact expect the particular, in million $X the based $X from shortfall on in million. be second stock that XXXX. to would price about QX would current

less than dramatically drop this impact of half the off So and that. after then year,

Michael Carrier

it. Got

Okay. Thanks a lot.

Philip James Sanders



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

Kenneth S. Lee

my $XXX,XXX. Thanks revenue $XXX,XXX that that were or for in path going advisor you generation just increasing to the business, dependent guys containment? increased the level on within like quarter, in be I'm terms is question. taking it Thanks. on more revenue be of that cost above aiming to going previously of is now substantially for, more per Looks and that to profitability, the north it's relying broker-dealer curious

Shawn M. Mihal

we've cost we're the as controlling inside And organization, on This and certainly focused the Kenneth. Shawn. Ben Hi, focusing saves. discussed, as has is of on been expense

and higher attriting certainly on opportunities our rightsizing focus and have equally are advisors, focus that attention to additional we're the And working been space. been on direction from quarters. revenue the been as performing and differences growing channels on that there continue some revenue in operational something as mentioned, while they move the advisors Certainly, forward we subsequent Phil and and the classic to turning our choice business we're in on their efficiencies what that growth, way of in an produce perspective between we However, the we into finding to on. has resolving operational certainly as focused had we've focused

still of we while continue to on revenue we of feel control more have it side the opportunities focus working on expense the we'll As that effort, that side.

Kenneth S. Lee

you. one quick just follow up. Got And

company the do which pricing you categories color give a little adjustment? better terms to more maybe Where think terms Thanks. any you're In the without has could do fee able of kind maintain bit of perhaps us think in fees adjustments, you of power. fund more you

Amy Scupham

question. I the know if I understand don't

Philip James Sanders

Yeah, this here. in jump can is Phil. Maybe Amy

we going think certain about that is very this have day, but where had there really the are going grow single that performance little has the performance competitive I the not business. assets. have at better on have by and anybody we Obviously, think case didn't be true strong structure know every way because we really don't were did you had the the fees realistically competitive as adjustments tough personally power well. product in I And don't end good – it's case of pricing – and be less it pricing make funds that I a we to I'm competitive bit this products if to always those competitive of the flexibility performance. you to But

been indicated, to do And approach ability thinking our investment we so, we're pricing competitive. ensure ourselves about opportunities take day want hard of to position the over every will has when in as the that to work the have is don't on it. working know where we really opportunities we have Amy where we the we But – to But structure that, manage. bit these present present themselves performance also try every product advantage across strong time. to sense And little getting it a altruistically

low It's about So, And it. performance fees win in thinking of how business. need necessarily the about the not poor I about both. to about way matter our sustainable combination power you of think how it's a we're kind is competitive less We view the because that's it getting thinking pricing cut aspects. no

Kenneth S. Lee

Very helpful. you. you. Thank Got


Michael comes ahead Cyprys Stanley. question question. your from Morgan from with next go Please Our

Michael J. Cyprys

the of bolt-ons just could of types taking – of out a how the Good you make that more or flesh strategies, the investment in terms types new morning. your think for I that potentially Hey. about Phil, on thinking of more where strategies, wanted and M&A were sense enhance of and to new little full team do capabilities context versus question. hoping just there M&A bit could in hires? in what you terms Thanks of you kind commentary on as capabilities a earlier about way that that I just you're mentioning back capabilities circle there. to with

Philip James Sanders

way, Yeah, I opportunities lot likely the it's but think to we this in be a think few looked a at about along and nature. incremental have

I think likely can any feel integrate. We we're we and things of like to modest relatively be focused. that outright something acquisition is on and lot have a we we're working internally

situation we of a And to have a management where taking kind distractions. type so, lot of we're on be likely not of wounded

think individuals investment we it's more would or strategy of the to a a with that or kind or channels whatever, be or also incremental however more it'll kind through bolt-on of open clean perhaps. acquiring be. of be think a the case that of something would that team-based capabilities our maybe may distribution idea are I benefit talent I

So, and to not of Cultural our of be the here. going modest terms incremental. and in really more approach it's is likely important disrupting culture integrity kind

think we – likely opportunities. be I it'll see

international lots track – be credit and We of growth cap, record competencies or those there certainly some lot the cap We a small core large so opportunities situations core in of strong that area. types we'd strategies, have would a traditional successful to strong products, capabilities. of pretty there's have in like I be expand core think one

incremental I think the category in there's multi-asset perhaps well. as opportunities

think do a would They would but of in incremental be well would likely we the that are we anything we on. those So, classes with nature. focused more most consistent what few be I do asset are

Michael J. Cyprys

the regarding just question a And Great. balance sheet. follow-up

and versus excess think say seed Just excess and $XXX of million $XXX I about the balancing is much curious towards you how think buybacks do investment in how the would million, and securities M&A? you cash

Philip James Sanders

and in can us and thinking go all strong it balance anything I proactive just I'll very being then jump in Maybe sheet and think liquid, Ben is, from here. these way of we're ahead The we is see inhibiting areas. that's about the really start, don't and

of We capital we on seed So, two to do fund to execute track years. would We're or have ability a initiatives inhibiting that. at plan all over million stock we acquisitions. repurchase worth that $XXX incremental our indicated don't perhaps find to commitment that

on As you cash a we lot generate a basis. of know, quarterly flow

have of flexibility really that But along. any adjust make those strategies. We the can unique we now, that? we that if I opportunity add adjustments. if to right don't to So of Ben, find want know, you comes to don't a certainly terms inhibiting in our me, to anything

Benjamin R. Clouse

we I in it I want. and The we is favor agree obviously only that because thing regulatory the liquidity us less would have versus of to capital we we're flexibility more balance, that. add requirements that some gives do have to with that that

Amy Scupham

I partners distributors. When Phil, clarify assets I quick our percentage just talking of wanted distribution the about assets, clear I'm talking I in that more about of percentages jump along terms to and from numbers. the can third-party something the be so really was at with rationalization of those

a So, we million, soft wanted more I about from forced so forced let of hard be kind know guidance that And Ivy. you a of can is clear. wasn't we're was to perspective, looking close just $XXX total on It to just close the million million at approximately $XX – $XX a liquidation. AUM no the liquidation

Michael J. Cyprys

clarifying (XX:XX). for Thanks


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

Macrae Sykes

for Good taking morning. call. my Thanks

channel funds? has could how it you you performance to the back go unaffiliated, it Maybe further to comment. in changing evolved the time, do talk about improve your rationalization Just see for and as mix you over your

Amy Scupham

national heavily now, channel weighted channel. mix Sure. our This Right our is Amy. is to

to to our looking coming is we XX% diversify wholesale. mix so, over to What And in national at look sales institutional, do space, into channel we're of insurance, further the that that defined time RIA. contribution-only broker-dealer and about XX%

sales we're client a what each is see in of standpoint hope better not but the in distribution those those some pickup marketplaces what distribution what I to is and national channels. And these diminishing diminishing different sales – in different doing of approach you in a needs sales And so, trying the exactly define from are, how and marketplaces. to channel not would other a the

Macrae Sykes

place just those them? product in And a of mentioned, have you feel able to you some in follow-up be of terms right like channels to the other you reach vehicles do as for innovation

Amy Scupham

we're some – we're that. So, working working on on

client just development in to for at that model look investment more We're trusts, We're approach up and certain a something of have number the picking collective and undergoing evolution continued currently now So, which product we're more becoming of defined strategy. is vehicle. a have we've group bases, looking it's our delivery contribution that strategies as available vehicles also do expanding space. where our that we we in popular we at the project of

Macrae Sykes

Thank you very much.


Please question. go question next with follow-up is from Lee Robert KBW. your Our a from ahead

Robert Lee

a progression then you you're things of Great. – you're Thanks be update maybe activity kind today? kind kind hearing any the sales third how investor maybe just I'd maybe seeing, for quarter, us if you follow-up. quarter Could what how has my us to maybe in stand of – gotten of through the how and update taking of can flows off of start, second kind interested momentum in and change

Philip James Sanders

add to know don't there's we if in much I Well, what indicated earlier.

of slightly softer in quarter. has I levels the sales the in level – I than the seen have quarter we And start, experienced kind have think off a trends as experienced redemption gotten a at – we similar to persisted think than second third the quarter. has quarter we've second what sales level the

I our then institutional but So, it's to as kind the of terms at beyond earlier, of really obviously the side think a that the we've that indicated of I continuation in this And outflows notified same nothing trends. point. been business add of

Robert Lee

then follow-up, correct. quick Okay. want numbers I make Thank the have you. just to sure And to maybe I one just

of annualized should know, short close that any points X kind I revenue fee think that the are the maybe offset some from, about to the adjustments. term? $XX kind some in don't kind back absorbing and – that bottom there to all fall we Is of or of the envelope to of impact take of sub-advisors million some basis the going it's of to line that's I from the products if So,

Philip James Sanders

accurate that's an to bit be other expenses impact classes. incremental common of Rob, estimate. a There'd for little share

on is you're expectation north the what ballpark of an in it'd bit be of annual our a your So, basis. I number think right little but

Robert Lee

of they there vendor some I is costs payments it? lower it And some some know, absorb from, of of don't absorb kind or any may offset sub-advisory

Philip James Sanders

no. any significance, of Not

Robert Lee

Okay. Great. you. Thank


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

Philip James Sanders

Okay, forward to you next look and an quarter. much. very everybody. joining update give We appreciate we in you Thank


Ladies and We call. today's attending does you conference today's that conclude for gentlemen presentation. do thank

You disconnect lines. now your may