Waddell & Reed Financial (WDR)

Phil Sanders Chief Executive Officer
Ben Clouse Chief Financial Officer
Brent Bloss Chief Operating Officer
Shawn Mihal President of Retail Broker-Dealer, Waddell & Reed, Inc.
Amy Scupham President of Ivy Distributors Inc.
Mike Daley Vice President, Corporate Controller & Investor Relations
Craig Siegenthaler Credit Suisse
Glenn Schorr Evercore ISI
Bill Katz Citigroup
Kenneth Lee RBC Capital Markets
Robert Lee KBW
Michael Cyprys Morgan Stanley
Michael Carrier Bank of America Merrill Lynch
Macrae Sykes G. Research
Call transcript
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Good morning and welcome to the Waddell & Reed Financial, Fourth Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Mike Daley, Vice President, Corporate Controller & Investor Relations. ahead. go Please

Mike Daley

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

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

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

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

Phil Sanders

compared per Good for income of $X.XX reported morning. the us. net share for million or or fourth prior Thanks we $XX $X.XX million quarter. joining Today to quarter, per the $XX share during

revaluation As our pension this our a morning, the release gain you from of on $XX.X liability. saw the quarter million included

items $X.XX netted We also a encourage the charges severance to related These to million. earnings $X.X benefit of for quarter.

positioning. or continue calls. phases structural solid to progress with we year to against stockholders. fourth There is is a of that XXXX net we and to business, investments, reform. million X%. income of Due across volatility lay highlighted end of XXXX improvements due the the quarter add past examples asset benefits in tax Specific of the competitive serving to to of all remains the our across our corporate teams, $X.X Operating the our strengthen the the include management company's outlook clients strides year, facilitates the Within many year to mostly challenging, improve challenging delivering work foundational the and Resources, improving individuals, best sharing in there market our made XXXX in the of from for full have goal Analyst hard but we done, enhanced income and business, the improved Despite significant no initiatives the to dedication collaboration implement groundwork be that we have landscape following: and investment we industry but meaningfully, plenty on long made doubt experienced advisors term portfolio more For in improved technology continue corporate and Investment and Ivy by management our teams.

reduced expenses we key to continue We product and funds on our where of we positioned also completed strategies merger set as we compete. funds to focus on the XX and best range of are feel a refine

ETF servicing integrate aspects and to efficiently clients workstation pace sales where all announced of to we of sales desktop With as can that initiatives recently to plans attrition also a of program portfolios. the to real-estate transformation growing advisor advisor broker Finally, standard Also investor distribution targeted response their respect and our independent line with including provide we dealer, third industry strategist continue in the seamlessly. continue serve a these and a technology up we provide expand dealer’s product all have increased optimal initiatives, advisors broker reduction favor overall in platform as to maximize we multiple productivity meaningfully. in advisor an cost applications allowing more From effective launching Initiatives advisor their several technology our in our of needs, we organizational business, while footprint reduced across an for will Amidst continues efforts and of of advisors enterprise standpoint, adding and has manage manner. Ivy work a leadership coverage slowed, to our rapid model. a has evolution all at advisory realigned channels. providers, party our all regarding

deliberate enhanced maximizing on an management accountability instituting through are project We and effectiveness. focus efficiency enterprise resource organization, with

year have remain these come while Asset We transition, Managers least ensuring financial of by will the in markets long the dominant part intermediate undoubtedly came bank some resolved The goal peers. of virtually term we selloff There ongoing meaningful XXXX. challenging proved most Volatility to year to and including detail and continue forces close. but to negative any Active have a year challenging equity reduced effective step I correction into geopolitical have ending sent but every fourth a contributed markets rates in toward a flow as theme challenges visibility. pressures as earnings erased we with expect our corporate we manner asset are talent aligned now for little forward. take success. training what and Equity management for for more outflows the further are culture is assets territory slowing company the quarter investing until the term backwards steps are was people during This our two and or environment policies, be Several advancing record central the rebound analysis. but tensions, overall global we to class returns. could productive focus. clearer over at on in late our issues to in U.S. framework for early into saw build see our it highs Clearly the also with experienced and near a through management, those experienced underlying in Ben only dynamics the for the before resources as our disputes, and trade many we this a ahead, development, undergo set as under experienced markets to I'll expand equity by gains our XXXX growth of XXXX, end volatility, volatile in turn more progress December. they

While and firmly at favorable provide times managers across XXXX. industry can believe research volatility ideas can we the the toward remains passive that remains insight in in active steady the flow investors, muted. for a backdrop Organic growth differentiated for identify strategies

around As management play our to will uncertainties role continue financial long this realizing out from that the we that financial believe end long built into client’s we investment likely important products. a active can investors in however, are To plan an merits confident seek term distinct are financial term guidance, come XXXX solutions.

business as resonate Our continue model industry should even evolving face an diversified landscape. to we

to respect quarter during period Fourth somewhat of Now investment performance. this some performance market volatility. pronounced mixed comments was with

majority However, with rating. a now overall for the showed five having our MorningStar or significant four year a either of relative assets improvement investment performance star

you made of As a including the couple years management research, the prioritize of we know, investment management. portfolio have our organization, over management to concerted resourcing effort risk past and

Our become for forward attribute resonate decades; DNA. research independent Fundamental, as for to sell and it's in pressured. here marketplace. firmly strength our is believe doing distinguishing us and in even research should I an continues we've be the foundation a provides collaborative what been will commitment stable internal does to our research increasingly side as in and more and we move commitment investment organization

to volatility a quarter outflows, turning in in now the the in moment. certainly Okay, for elevated channel. flows The particularly resulted unaffiliated market

in strategy. $XXX one their the million transfer client $X.X impacted broader were net net assets channel from product outflows have institutional that of an Without billion. by of unaffiliated who outflows large as Within that channel, would moved $X.X in retail into billion been part

more such higher mix. short income During beta our at heavy the fixed of this international given was impactful term period domestic to defensive of expense gravitated equity volatility investors asset and This strategies. us as particularly strategies toward

products during flowing Our international the the emerging experienced after equity equity core much quarter year. of outflows market for positive and

positive funds We outflows higher note, Within science that elevated performance a technology in income just six to positive dealer, $X our some environment. our On in for did as funds, we the time this compared also headwinds high broker strategies where several under to across lowest and affiliated strategies mid-cap in cap our beta experienced encountered flows quarter small and of strong risk-off see periods. saw some net and last level Ivy quarters. of XX% improvement slowed our outflows their is some billion multiple we at quite quarter our were in and

institutional last of the net approximately Within billion million. are signaled quarter to level primarily we This in changes at the the related year. outflows $X institutional earlier were occurred that portfolio that channel, outflows manager personnel $XXX incorporates and

the of in from what redemptions our that to on moved the experience transfer of in channel million As that we channel. notified $XXX have of we the Based have likely $XXX unaffiliated channel. mentioned are Challenges of instability know we past also institutional the XXXX. we business half client in will earlier, benefit mid-year to been a this now, the retail persist and expectation the by includes institutional million another institutional our most first is of

various less on have less efforts, the market under every flow reported a to As challenging are reminder, and currently total outflows improvement will strategy we impact across flows. excluding create flows comprises our we have a management to and the a of year-over-year year, profile forces, channel progress in notably outsized our due AUM. the X% the seen institutional We our total personnel net than basis slowed light single have diversifying meaningful on focused broader institutional day from been of X% of channels. some and In that actions committed of Despite remain our changes. assets distribution as would

a we delivery advisors intend access format, XXXX in portfolios to new providing model to way seven and interview strategies. a existing investors During

and platform support progress also efforts. terms with are we in combined to positioning improving the optimistic in distribution these making investment that incremental and will sales in targeted we strides some our marketing modernizing more year of These analytics are to data able are capabilities and with dialogue resulting In of be competitive we more that are of opportunities making and on ahead. distribution and partners efforts. the will enhance initiatives performance particular, constructive capitalize We our fees

Let's now business. we've our evolving discuss dealer toward progress the broker made

changes As changes, the change. have of our to market goal market is and We nimble, responsive to the needs a designed investors as proactively evolve is be industry support and want the platform remember immediate that that advisors. a refresher, to competitive

feedback we are the the are advisor are changes and advisors taking in about community enthusiastic are December the sense concerning our advisor the that markets and we overwhelming recently from and visited We the direction understand business. announced activity We of implementing. receiving positive the is that majority

lower line, advisor support. competitive market a highest support technology new with an platform associates the we including during technology our with advisors who Attrition for saw practice improved product XXXX based producing the strategic to of producers. XXX priority and business to position was We advisors for departure We additional term the focus, year of ended total understand are value on long areas robust be advisors, structure through to business experienced, a a an attract financial the to highest the are a targeted embracing and future the They model the due and robust largely in value proposition focused The of high to X,XXX It intention development the X,XXX. outstanding the of our has and advisors and advisors. decelerated growth. and making for investments attrition firm on is support year. positioning superb of the to producing firm

XX, efforts We evidenced $XXX,XXX high productivity from of XX% the focus to by year. average a months and increase trailing continue December compared resources XXXX, growth of ended XX to the prior the as on our advisors producing

compensation exit through to quarter have real-estate January we During the field broker end and the financial to an pay-out advisors X this increase office of dealer also affiliated by our the year, announced effective rates XXXX. of planned

step the to advisors many for in technology single work and On a advisors, that result will streamlining and experience Adding recently of an in hub reduction. we technology solution an as is In for steps together of signed the Thompson cost and streamlining space. advisors first ONE the Thomson it desktop data agreement this deploy front, term a important tools long will access. toward brings of the ONE as create our all advisor the desktop processes end,

then Ben for up me over Ben. open turn questions and Let then. it now we’ll

Ben Clouse

morning Thank Phil good you and everyone.

some the lower partly net $X.X offset our annual lower costs including the an of we positive offset by to base. The income impact, net or on quarter to million realign quarter. compared to as As due Phil $XX.X support noted, was reported we decrease liability driven fourth functions some included or $XX.X quarter. $X.XX income severance million quarter environment, as which revaluation during interest in pension of of gain a million prior impact The by asset market per $X.XX Operating revenues, $X.XX driven fourth share share by rate our on $XX.X of operating costs quarter. quarter per the partially a during the a assets prior our outsized in million were management lower the under compared volatility decreased had the revenues by average our

share increased the for share also count per Continued reductions quarter. earnings in our

to in share per compared or corporate income For the benefit we $XXX.X share the prior of XXXX million the primarily This an to approximately year year. increase $X.XX of to million per during reported the XX% prior due full income $X.XX or reform. from year, tax net net compared $XXX.X represents

ended at billion XX% assets $XX.X decrease management XX%. for average quarter billion to billion, average decreased $XX.X fourth of quarter, the full to the only in XXXX compared prior under of a X% Despite the volatility quarter, XXXX. Assets assets experienced the the of year management decreased $XX.X while under compared market

under assets to to $XX.X fourth ended due volatility dealer, quarter at broker third again compared quarter. billion quarter, the market XX% in the experienced the administration Within the down the

relates aggregate our Ivy from pace broker it the assets As legacy of within net expectations. to to and products flow advisory products newer an continues within well under to dealers the products remains administration, our outflows

announced the compensation we advisors field to dealer real-estate an exiting and by rates recently XXXX. increase of the payout As broker we end financial Phil for mentioned, are

support We we compensation continue in business office by field to class expect corresponding through and believe footprint our grid, be fully that XXXX. the from reinvestment in in by a what offset the the is will our savings best overheads reduction

XX. the decreased the of X% income impact reductions reduction despite due a the well million were the we administration, Operating million incentive costs which in to $X.X fee distribution the in and revenues with due quarter compared full statement, and to charges July costs due as Turning assets decreased to in of $X.X moved Compensation to effective line as compensation, management stock which million. of lower $XXX distribution third lower under to declined compensation earlier announced revenue. severance sequentially, quarter primarily $XXX,XXX year based

progress invest our continuing this since our strategic growth, pricing changes to underlying in our from systems during on to support closures. areas by occupancy expenses long costs nearly and which office on to began notably controllable We XXXX, support the X% product controllable reduced occupancy and remain XX% technology, broker were These considerable quarter year-to-date. we We've addition, In front items lower expenses, resources term $XXX focused as include realize to benefits management G&A, investment adding focused and $XXX million line having the million in distribution the improving field made and compensation, dealer. and while efforts structure marketing. on team, including totaled

in our in are to improved which mentioned, incremental we will advance continue As costs. XXXX some have investment expected previously technology, to implementation we

operating for flat full investments, those increases, as year as normal Given the we controllable well XXXX $XXX with million XXXX. inflationary be expenses in to the of expect

as Additionally million we full to shift to technologies a quarter for of and costs decrease XX% $XX effective year. income toward as expect software was the the The year $XX for our to million rate depreciation a the meaningfully tax continue we to both range service.

the legislation. or excluding of of issuance to be We the additional items XX%, discrete guidance continue on of the impact in to rate tax any run expect tax non-recurring range to XX% or

ended $XXX million. cash of we and investments quarter with the Finally,

repurchased to million stock in of while of $XX paid million debt, $XX million $XXX positive XXXX paid continuing cash During flow. generate and we dividends, off

as continue with our taking We million share of to in advantage end progress be XXXX. $XXX management, lower opportunistic the our buybacks quarter prices including capital the goal towards of during of we by

execute like our That to as strength attractive questions. now Operator, continue we stockholders. for call to the plans, sheet to comments. continuing remains open we concludes returns my while capital the balance to Our provide growth would


[Operator Instructions].

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

Craig Siegenthaler

Thanks. Phil. Good morning

Phil Sanders

Good morning.

Craig Siegenthaler

net just investments on and million working well regulatory updates capital excess here First, I level as in about debt. within Dell of has cash less the terms what’s capital of this and starting capital, wanted the $XXX balance.

Phil Sanders

Ben let capital the might requirements. working I address Ben? Craig,

Ben Clouse

Good Sure. morning Craig.

Craig Siegenthaler

Hey, good morning Ben.

Ben Clouse

As although particularly not regard you they know, and Both capital regulatory flexibility actually focused The operate requirements, capital, we distributor In we significant. are and to thinking two is working to then a dealer. might board retail thinking on the ‘XX. every repurchase some future we our broker long dealers. this, have on term very will about add clearly our much are are what quarter end about next but concluding do Phil this the toward let about as and our of what we work after focused I’ll hold with the program thinking and we and we broker

Phil Sanders

thing only lot of really the you there a to provides balance strength obviously place. transition out the in our that kind of uncertain point Craig really model source times market the and undergone business in especially we've as and Yeah, sheet a is as is add flexibility of us

comes we that We some do enhanced forward in the or throughout This pretty readdress Ben and flexibility. been along with of the our to we share will the So board complete repurchases. have and will the as that move if acquisitions be we commitment indicated, as and you persistent know in thing capabilities, XXXX. past incremental we've certainly expect fully active something in talked to terms moving about opportunity right

capital of reduction doing forward. the of So transition, spot we this and years of we're think a good this dividend internally. we're things lot a with tough when early and it ago of focused and I a self-help on the has two decisions lot going the been the early part improve lot a flexibility, The in process started took we of

there's to be forward As kind right of looking more and an we transition more growth be think where into XXXX I and now. we are that's opportunity minded focused

Craig Siegenthaler

think Got important valuation in that our because it. I is know number of exercise. lot it’s And you a

fund Looking at the understand just of add to dealer your key it more improving proprietary sort us flows true share know AUM and tough here. looks Capital are for less such broker Reed actually or my there, see access a to actually it’s the like the just is stabilizing multiple, going & as you to broker/dealer follow, against us. but what’s Waddell backdrop nice of for is in important something

wonder just in if I driving that of stabilization So point? any you terms of thought had kind at what's this

Phil Sanders

might some of and dealer I broker the address within playing how let Shawn that going he sees out. what's maybe on

Shawn Mihal

through in its and a we Craig. mid-XXXX and saw programs, that the subside. some stabilization those and that of that unaffiliated was initially demand Hey, dealer, which are demand ranges to to movement introduction launched of of with programs launch good affiliated broker advisory transitions some funds when to to from the into and of some There that portion inside new broker started we change a course time forecast seeing of a morning we've some the exposure respect to course that we include with amount We of expected in including Yeah, saw inside the stabilization affiliated programs. XXXX funds funds absolutely unaffiliated dealer those some make channel. the holdings some as some of over launch know we there those of holdings primarily we affiliated the significant ran of

see product we new continue sales up all our stabilization with open to of expect products We platform. that to across as

we our that assets that continues on So see, management. are affiliated on relatively go-forward basis stabilization expectations under the a

Craig Siegenthaler

Great. Thank guys. you


Evercore Please comes question with Schorr next from ISI. go The ahead. Glenn

Glenn Schorr

very much. Hi, thanks

you’d to I sales the attribute spot what In any color such So quarter-on-quarter in were you fee and and backdrop, a on there. backdrop early have of a more give cuts curious impact bright was see momentum that recent to it to little of if if or can tough brutal too up is market an X% a seems kind think a year-on-year. flat I'm

Amy Scupham

do Hi obviously cuts, is think in some we the this that Glenn, of of themselves. don't a it bit and little I can attribute is this Amy. fees drive to although fee sales

the on we year franchises. position channels a we and have have a market across – small-cap focus the saw some each to worked their saw of is of performance course lot we market the from distribution products in short best We to a where compete improvement we franchises are as really in our really increase distribution client which force starting focus our on feel Over to of and in and show our base, we pay-off standpoint mid-cap our in sales saw term. here some in

into You know set that’s as – broader XXXX a look to we we have continued we selling. product

year had ago those we pretty garner product you to franchises sales sales If domestic equity gross market extending of two equity of international income look a our and it's our and in products as a high and back as some emerging know core concentration well. into our continue high you

Glenn Schorr

follow-up on how Okay, or once leadership more, that growth? realignment guys drive twice curious there mentioned channels. expand of just to bit you there's sales going the I across Can that’s little And just did on a just to you I’m that. the what – and a appreciate you

Amy Scupham

sure. Yeah

investment those distribution and lot which businesses organization calling the an are as inclusive contribution historically think channel, institutional professional I what separating know our retirement of and and of basis. of the out we really today business a is needs haven't on or RIA into insurance fund put focusing You we in business unique client buyer our

of brought forward had little we’ve he throughout of but in cycle we really and a of national is sales running built pay-off is of we more we as XXXX term strong refer you we to pay-off teams inclusive those will which focused out focusing and it's longer term And and a and it leadership channel will spending the Grant a [ph] on as think that well continue with that. looking be broker are continue which there, know a dollars is and September under a – Joe is longer in bit dealer effort we improving then in Moran Cleghorn what the and to forward messaging as where wholesale specific farm, all all our So Reed evolutions to the push we and are it working we channel our to our those in really XXXX. dealer and national where resources & accounts having of starting broker are and as throughout Waddell our spend channel, together or we

Glenn Schorr

Alright, thanks very much.


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

Bill Katz

updated Okay, thank morning. for much this you questions very the taking the guidance and

that million, I you become you or downside scenario $XXX flexibility sort around here? so want of number? markets much maybe have on Just hard an from that how more to upside cooperate Like do problematic to [inaudible]

Phil Sanders

Good the couple assessing you our term. all ways the at business overreacting sustained we to in in a making certain to which incremental prudent market, you is way the $XXX have next With we are those our flexibility, constantly pull implementation regard morning on I the If looking In of see short are know of out and just assessment base to ability things of expense That some face said, be at to areas headwinds that. the back do in we to year. manage our want costs. start through Ben. us ongoing we point the and do Bill, investment we maybe million. inclusive it’s and technology, in will won’t will continue

the we to that on longer want much position ever cutback we We things or term. the in long term don’t to compromise on focused very us are believe competitive the be and will

Bill Katz

footprint just seems Okay you us that’s of some was a core a the is is How off competitive behind Could And helpful the dynamics. maybe of you've and more been it follow-up that the less of you? and then changes how pipeline making? of on like the sense look? give FA or run pipeline transition now question just of of given it and systems repositioning pricing does sort that; some

Shawn Mihal

Bill. question. I'll it, that Got take Mihal, Shawn

pipeline to some having recruits see are starting today. active to and are respect with we some the working We that with turnaround

with We our working the department. really are regard are also our model recruiting through November, and we we to to place in recruiting up in open bringing recruiting positions our stand overhaul resources doing national changes are fill a seeking in substantive which currently as to

that We low expect have several see at in of morning, attrition channels channel inside do drop the through bit we we has for been of XXXX XXXX. advisor dealer growth as our expectations the the So changes our this XXXX, that’s the along mentioned with do a continued broker we've of in call slowing made in year. recruiting what’s close to the here little work of as terminations beginning producing a at typically the

high we have but producing recruiting of based focus just more do a requirements, meet expansion on didn't advisors. drop advisors are producing a production bit of So that on focused however little and to we minimum lower efforts the through XXXX continue our our

producing advisor recruit industry on new the past, will advisors, from very forward over focused advisors to we inexperienced So our advisors to as be our more what really being grow these XXX,XXX recruiting channels, where targeted we changes focus additional substantive the these changed has targeting going we production continuing in starting inside typically That’s high target the used to in. we’re annual and as announced of some as to in recruiting in more pipeline. particularly forward our we move resources add explore this

Bill Katz

taking you Okay, questions. thank the for


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

Kenneth Lee

taking Hi, thanks my for question.

in Is on that a correct? to XXXX it spend and presumably of be to for follow Thanks. XXXX. going tech costs. like level incremental the Elevated similar there's looks up expenses, Just

Phil Sanders

that of that. we're said, of very $X at Good to morning costs that Kenneth. as base part those of I implementation the million $XX in put the the incremental million, in would but range of somewhere our expense early with end

systems. have XXXX; don't point are into the you At a break bit reiterate software I as it service of although to we span rate I expect other ’XX, a I know statements really are the stand that longer also a think to the time correct, be particular more I from new, up we One although there to in versus the some heavier we model. in run this some in that to I ‘XX quarter, expect working down. older made as will ‘XX last moderate term just sunset some same

So X the long next once in get I we there think term X.X through year bit period. see we'll more a to the implementation moderation

Kenneth Lee

Okay, up initiated think institutionalize while management on obviously the process, just the there to a stepping a sales risk sales. I investment follow back, back, and so efforts And the speak the realignment; were great. to

higher restructuring point level, we seeing were more we start to the is in sort that to see is to if of wondering, process of the nearly say set benefits the want at and so you Thanks. at a that to much terms or complete – look pretty just Just know we this are correct like there. speak it efforts where should then whole of

Phil Sanders

this is of we When can process need maybe of I'll Phil. and risk we philosophies, then take articulated about refer all talking clearly in Okay, that to. to attribution those world the if processes, portfolio today's dynamics, we’re institutionalization Amy and wants really types this add things full she management. analytics,

between know you of there the and years institutional was business retail. side I looking ago back think some our delineation

the requiring are evolving consistency industry very are a in the and every away of levels analytics you channel which diligence see deliver are gatekeeper, blurred. distribution going today, really high product. they how and and has we Almost case those As lines pretty of due

division. through investment you completed that, vastly management completed the lease essentially we've at know So that

We’ve PM we've couple our capabilities. over last our know of the strengthening lot a products. years back in fortifying of with about talked We transitioned strategies the research you from single past teams. portfolio kind managed filled team to of investment As

so. his place team investment or a He and embedded within last the fully X.X have We now in Risk years Chief our division. for are Officer

with now We all and of are that marketing day-to-day is the basis. now dealing integrated and folks being folks on – the a distribution

So I for have – think and forward the what's successful to really contributed in and we've company forward. hard worked moving lot to laying positioning the spanned a of how be we move kind we of expected groundwork people

a we’ll and think this it's better assess be look in in get can or of are But technology clear we're to to think we spot. and what's always resources needed. I and whether continue to make required we I There have we're So individuals good through where and business. pretty pretty investments understanding ways that at continuing a successful

so institutional through You Amy's got is Director from know the consulting have kind organization. the side; side, side. came Amy if I know in of was anything to think the there. Research DNA I Their you background don’t my of that whole pushing we've institutional add background from the

Amy Scupham

to over No, our said, alongside all like XX course to service the don't to channels. which I the come all better or and happened across starting help us investment professional of really just think Like the have next of distribution we see that fruition clients there's of complete out look more I is the our management, channel XX to know you that build forward buyer months much. to evolutions in institutional distribution

Kenneth Lee

helpful. Okay, great, very Thank very you much.


The next KBW, Lee go Robert with from ahead. comes please question

Robert Lee

thanks Good morning, for Great! questions. taking my

particularly to know sure the little I'm may on that's know back you bit they and well are You about $XX us you the on end kind quarter be I them. of billion somewhat distributors. I to to approach now. I struggle mean be – seems know – level up distribution, can mean, question your at mean, of be But to would unaffiliated you a know update relevant have be distributors channel. my have you down to terms a level had be with that a first guess to you is places enough you change that share a adopt these sure unaffiliated you mine in or it to in making relevant I a allowed know different how

Amy Scupham

question. that take I'll

to recognize that we be everyone a know So we everything this go and and you to no. that is struggle is be with can't to know a trend is We the I'm going across relevant, it going industry.

if that's inclusive today at you annuity unaffiliated and fund. our retirement, So insurance flow, assets look under of RIA variable broker management dealer our and

what XXXX lumped is that's all say look really need XXXX and and where taken does into relevant The and of to be to that like. kind steps So do as want roll into we've the everything, course we of one. we to that over

the for the retirement investment product address consultant, manner. appropriate the really said talking same from our a setting So all investment is our RIA we just everyone we that consultant, each message, force national partners earlier, standpoint to putting that is wholesalers standpoint, partnership to sales of sure our and compete, expectations compete how resources products, our carrying the from a a that and where we to I best going product of positioned ensuring our same about are to like making accounts to needs unique of our are our in where from

just really it's know to things you and becoming not – all about it's for focused be more So all trying people.

Robert Lee

the you understand to may with go just and for in run built about just you that expense I up step for as the know follow-up of next much that up kind kind should the as spending we as of make research maybe really rate – things to you, expense of we understanding back capabilities, I know think and you want – Thank of and sure kind much. but a the want among you've investment new question expense tech as really other look guidance and how year, I be a to not it. mean is

there's know of flexibility base always really your base. your kind – That's kind some guess. of expense You I

over thinking to beyond should next or even you if of you to how know looking for the progression not think just from we maybe that or fall kind are be that two. room XXXX to there's or know lot that, So the of year off a expenses of venture you

Ben Clouse

when costs the technology run earlier longer the or morning in to in our term. have in stated we we’ll Ben. In up run moderate from think term. run a old to our rate sun Once the standing so period we're expect our In and In run significant are solutions rate. it’s current term have XXXX know I Rob, some I to base to Thinking those I longer of expect cloud with get we setting costs level new the obviously again, some things sunset hosted continue we systems through about are particular, up consistent implementation and today. long beyond, that as a late won't to new I technology rate Good increase some regard which older software that more over some have based that's some relatively though, to clearly the of don't and stand systems that out rate you will swap speak, as things.

Robert Lee

Okay, additional thank you color. the for


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

Michael Cyprys

question. good Thanks Hey, for morning. taking the

going Just in delivery. model you introducing the seven wanted a be portfolios back are circle guys that to on

terms in could you portfolios expectations goals on then going and coming if timing, in of upcoming to those in funds. verses economics the of you particular around that, just which the the be expand If there, that could comment strategies what's new on

Amy Scupham

bit. expand Hi Michael, can little that I Amy. on it's Yeah, a

here the some So and as original quarter, be far time the should first as timing the it. implementation rollout in of

conversations platforms. we really would of goal have distribution work up capabilities continue our some on XXXX, through opening the other be delivery around partners As to to extended model with their

So – about the would capability. extending to be that months that’s probably you six expanding nine know first and

cap franchise, in portfolios, opening the mid and cap cap opportunities. them as we are income our mid growth far mid As

offered as large portfolio. delivery We an cap being value science and cap have growth small well and growth portfolio, that tech our of be modeled as energy will cap and large our then versions concentrated both

know As it's out high high expense a economic fee traditional economics position the platforms various model. option has as low in though is standpoint. not producing the lower provided on fee, it paid From our to that's I margins, far the advisors delivery wholesale know as go, you even an you model think fairly from

Michael Cyprys

Okay, thanks, a up Phil. question just follow and for

are comes be approaching about You you was for space. might could just flush in or that, of out potential that mentioned thinking there I little terms capabilities where white that, just there, appetite acquisitions some hoping if incremental something potential along. enhanced a bit you how

Phil Sanders

think it’s consistent said mean integrate we capabilities that in really to what the core cultural or think complementary are and past. competencies, some is. our I Well, I to with extensions ability I the fit

there's maybe asset a also different bit interest classes think are than some doing. uncorrelated from what that we or in are I little

As of is now or we yield or XX% the XX% in probably so Half that in side. are income. fixed equity, credit you high

product multi think can we broadly extensions think I external know of it's maybe terms So seed sheet the capabilities, whether versions highlighted you we have as I also develop, think more as we've side and well. capabilities we some development, opportunities and strong have internal broader concentrated and that for in asset of what enhanced or we a from we more are offering, existing maybe capital have balance international

things that range think be things that a wide would of surprising So interested to be or of too others I kind we'd it's don't in.

Michael Cyprys

Thank you. Great.


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

Michael Carrier

one expenses. good just more maybe and morning. thanks Alright, Then the on

AUM a know seems know some variable when we're year end, just we XXXX. know be maybe look into I on like the saw as that you should I bit pressure at you get You a you more the you just know it comp of wanted going the know of sense on towards to some

know if know you as year, know and this can seems So are any that’s as you given you there we you an just some just just I update impacting like market, there, because there's insight is, offsets much not maybe variability that there's maybe it the rebound the in you guess if maybe AUM know know expect, just maybe of of where offset? because the give you some would on kind

Ben Clouse

have be Mike. about to the question. monthly morning and your in looks Amy believe Hi compensation, sales you is Monday I monthly might answer team total pipeline levels our have I total pay to Phil a variable that well have to and we regard are heard you on of in see at start internally positive we we about when Michael. Phil not don’t the in spend know base. and we but where end here, the then some little the performance your month like. details focused I ways portfolio bit incentive to as so of course on base, might to its know from management. we and with some money we recovery on repetitive the talk portion, we'll doing disclosure the to if Monday. our for want the obviously some of to for and expenses constantly let focused and are are assets, answer we'll we as portfolio regard think the Good the have to as that January I’ll looking bit you on Phil variability along you the markets programs continue question finish describe, add what a did as a can and disclosed all of asset Not drivers you add of group were and course, do make that let earlier Phil, In compensation what know are But comp very we disclosure, aligning Clearly that. regard modifications what again best but and to In more the even goes levels I clearly been management our we on we separated my as of large as on at well. my management those

Phil Sanders

every our our the asset and the we management group of investments our it's know in to investment research returns the would that's only be the performance They term, is potential the the portfolio the for management working based staff, of really think day also side. portfolio in – are and on there under long growth that what people think products add analytics terms to that especially portion also thing I the and driven But the I type these of assets of hard obviously on and are we they really the thing. and management of risk over Yeah, of compensation that superior bulk managers clients. by investment are company staff's lifeblood and and is Look, some important. side generate focus it and

So to if compensate going strong portfolio we that. we're recognize them managers, and performing have fairly

are that a short to growth. there term know us was you So in performance incremental long respect things not going compensation, to and we the going and of in while make term with are change hinder short terms some to flexibility

Michael Carrier

sheet, I then if a bit earlier, think you on think Okay the balance can color you in this how just Ben little guys of that’s on And regulatory but cash, about could in you produce hit helpful. future seed you terms do or growth. know free products provide that CapEx, know then of kind and think you you the have you of any capital cash, kind what operating

Ben Clouse

I little a bit. mentioned Sure,

have the our some – Of from capital overall, sheet just are to flows positive in broader be not significant net which we continue balance couple regulatory operations we've do requirements course picture and maybe buy execute to to have our flows cash course of the of capital doubt year those earlier my use prepared to which matured ago. we cash dividends in backs, regard able in down a as about incremental particularly points and would to significant been our as strategy one pay that talked comments I about well

know longer and as manage opportunities well. about you mentioned, with look We how there as continue to focus thinking capital about board in a quarter on Phil and taking we think at that regard landscape that term each as we we're M&A the our to

We looking XXXX. remaining level, our maturity minimum the is as to debt are you $XX in which continually know million at and comes

a earlier, to don't In do track make-whole regard lot neighborhood use to in seed $XXX and that for a to and and market term. of to feed Phil at us have look currently we thoughts has let in sheet significant to changes our further go rollout any planned they I I might we to flexibility them that. if that. develop as help that add before any have build he balance record Phil products the and able longer are there million that's alluded we basis, an strength to of in clearly as a our that. On products; that of early. ongoing source beneficial we so a for of have to We on know have we provision us it particularly you isn't the repay know an we and economically something

Phil Sanders

flexibility. of covers No, It I much pretty that gives lot us think it. a

as management that an our also group and portfolio strong We new as to products. are distribution develop using kind It’s a and opportunity our well sales of group. internal interest to as

how see plays out. we’ll So that

Michael Carrier

lot. a thanks Okay


Sykes G. The is from with Macrae ahead. next question Research. Please go

Macrae Sykes

the impact right more alternatives. today then actually you terms that three give morning questions regional in competitive. and versus then you dealer I are AUM just expectations in sort of of might don't risk I’ll how advisor know is, step your a for addressed and guess that them I there had does qualitatively fixed a much just bigger terms a of in as going just of we components any in being I also management, up Good your forward? quick them level ask my of row. of national today in might growth is investment you there broker offerings, last question And a exposure count, edge business, digital Shawn; terms where some everyone. need scale have further you've

Shawn Mihal

one. first Good me let back morning. Yeah, to go the

desktop, a day-to-day agreement use I digital entered are a Thompson on – you which to I connections basis press which them trying there write was arrangement me to morning side, of support on an here collectively can't so so we quite on enter remember to to the keep the honest down, looking in that through as questions the solution the, to our I this that together release announced that case to for if on So with into we yesterday, into and the detail Mac. is But the advisor ONE, the we’re advisors. systems the excited focus really we've bulk

or the program you that competitive It’s marketplace aware, a advisors. well advisors down over which likely your today. to are technology consolidate you in to allows supports As XXX,XXX aggregate offerings highly platform

use really an support which we allowing to basis create systems and platform do for into support consolidating of one better us day-to-day utilizing experience those clients. our our advisors, business things connect in the by and overall to in So down on to a that access better better they advisors scale

in So those out. together. this significant forward that and We’ve course technology to so things us and strong advantage competitive through we is technology the other years that another packages rolled all collectively of that just pull we with a last initiatives moving gone feel three the the us direction in that gives to regard enhancements step or throughout and

and goals we’ll doing data allows better frame the some other overall in capabilities. to reporting access technology to XXXX data have aggregation be us well consolidation for We time for as as which

additional that another agile broker about dealer more way of that. announcements for under scalable looking environment and making Again, forward So project be some ours producing a XXXX we'll that for more and to the and is work supporting allowing increasing significantly without a in of that as us to working grow advisors. associated support processes dealer as business, broker our flow well to meaningful the on consolidation the costs with our way is

they technology, So to as in engage advisors the we account continue maintenance our and offerings processes processes. converge overall opening in support product better having which their, in single to and

we continue for moving continue advisors technology environment an standpoint, we're to consolidate direction again, to We into integrate allow us that solutions to So our this the as digital from experience core that we in in technology further allow data and overall deliver aggregate feel broker places further we connection innovative grow single a a environment. feel enhance the from out and which and right we both new will in, business. advisory dealer packages to us the to as

invest the want assets business growth broker advisor for AUM as investments us continue under the It’s broker to recruiting the broker that clear the inexperienced. not and in those the overall focus an is important grow count into several were to from dealer we on On that dealer a year we digital advisor hundreds help in of we it years. it focusing did are way will intent it us account to to grow dealer making but in and AUA. and and to of administration as back our we that inside make growth the we our do for continuing the past perspective, are believe over positioning the in component the side advisors next per I that

higher on higher as move focused We advisors recruiting are we forward. quality, producing more

on our those productive is the of rather industry in those the in type recruiting advisors numbers we types the highly to recruiting of experienced not as So saw past advisors. expectation see advisors efforts focus so that our seeing same we

dealer. XXXX the provide had inside to better the broker initiatives that in way, to put support a we versus through on and and The for that we and structure just overall us announcements us the we So as lot investments into early the grow saw made additional to I the focus dealers XXXX. believe as as all direction sure repeating of the dealer advisor I'm quarter to overall and with those made that fourth in we belief broker continuing account, as the on related a into broker February my that inside AUA last some here that'll be is in general as announcements I you into national mind with – regional will question of of work was do a stabilization us continue that not quite up all year, model. so you regard picked on platform one. the lot just the January well this

Macrae Sykes

traditional at terms growing the perhaps to the in that versus trying you how stronger just you so, get in of impacts of some your think compete and trying exposure different to you on markets markets footprint. to are still faster growth, Yeah national where

Shawn Mihal

organization. really focused regions which efforts bit regions the centralized growth to with particular opportunity we of regions. of to have recruiting with we region, two on strong practice our We’ve focused establishing for core region. on made and the believe an those higher in regional aligned in sales, broker levels from better service in Vice that's growth west our advisors, in overall year aligning the as three Presidents in into So to have regional adjustments and more of as also support existing Diamond our support per and a east six a as overall central markets dealer to seen advisors quite in respect but advisors development, our to those based last a we our markets through growth changes particular the putting are national the regions making Service We’ve business we well are Group. structure also with structure structure to from effort led three respect out November really new those for plus then that advance a across We by three regions regional developing place

those continue to particularly national to that expand will across We continue advisors support our as looking focus channel and in opportunities, overall for advisors. a we efforts model of to

exposure past concentration which for in had but and So opportunity, we see overall with respect to potential the really areas we've three are those certainly we focusing is the across future focused growth. presenting on where in markets, all

Macrae Sykes

Great. Thank you.


concludes This I our back any turn to Sanders question-and-answer over session. like closing conference the for to Phil would remarks.

Phil Sanders

and I you! few will Okay, up you everybody thank we here and day, Listen, tuning you. months. in in in appreciate great joining a Have today, catch a with thank


for Thank now today's concluded. is attending presentation. conference you The

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