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Waddell & Reed Financial (WDR)

Participants
Michael Daley Vice President, Chief Accounting Officer and Investor Relations
Philip Sanders Chief Executive Officer
Ben Clouse Senior Vice President and Chief Financial Officer
Shawn Mihal Senior Vice President, Wealth Management
Amy Scupham Senior Vice President, Distribution
Call transcript
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Conference CallParticipants

Glenn Schorr - Evercore ISI Daniel Fannon - Jefferies Michael Carrier - Bank of America Merrill Lynch William Katz - Citigroup Michael Cyprys - Morgan Stanley Robert Lee - KBW

Operator

Good morning, and welcome to the Waddell & Reed Financial Second Quarter 2020 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, and Investor Relations. ahead. go Please

Michael Daley

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

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

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

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

Philip Sanders

morning, thanks us. for joining Good and

uncertainty broad of was amid strongest journey downturn in The the brought recovered dramatic the in the started investors we uncertainty as the bank market health unusual economy health quickly the typical economic global one to This although stock stock three the remain And part and of quarters has to what date from of much policy central resurgence has XXXX. pandemic, period concern Broadly, and years the market QX progress more be generally the the stimulus; an a since year. to ongoing a a tests health by period, recovery in public quarter Enthusiasm public perspective. gradual Thanks remains second downturn markets recovery the the have unrest question. recession more. of rapid lost or earlier the a on about our US Historically, US, country, the and country. and throughout pandemic. that its this sustainability to the taken a returned markets social parts in depths two could Despite QX economy from been the financial ongoing more of a muted challenging in strong. regarding risks of reopening

models, within leadership do to the time, is expect we personal environment our companies active planning on valuation. management, management for While concern models, advisors with from remains, type fundamentals, this our financial financial invest market is high based on At as investing, IB the focus leadership consistent suited valuable well same affiliated helping their continued to We and quality goals. clients delivered and downturn delivering financial about more market we long-term ever achieve see as disciplined wealth business, business advice of another results. business which believe where approach have

has management whole quality clients work we are service the the our of or our across as the enterprises to circumstances, to our a the remote advisors. our teams, not For environment changing and delivering shift of wealth capability comprehensive altered affiliated

and enterprise over the effectively evaluate to Our these to to workplace meet options COVID-XX navigate and regularly safely continue for steering time. teams returning committee preparedness times unique

our we our steadily stakeholders are in on have environment on mind, growth with committed executing mentioned we the and or clients, a through we approach employees, taken call, As of shareholders managing to and circumstances advisors, community. vision all affiliated strategy. last our to holistic Regardless this long-term earnings environment,

it meet wealth to for greater in as introduced as went dislocations below our metrics, medium separately the focus some enabling affluent this and the focus consists these of and culture model that acquisition the finally, opportunities reminder, on the like classes. asset organization, our advantage and clients. ability strategies growth having steps managed unified while XX% our the designed major and managers In of in retail into leverage third accounts. in going of pricing, in we accounts continued is wealth agile bringing strong, effect bonds plans provide total quarter, in are to the internal of reductions nine. organization, this in Competitive awareness clients brand asset advisors or growth financial the to supported sharpening peer they Within asset wealth strategies management These believe enablers. business, at services management as delivery a holistic, analytics I'd fee and suite and strategic as party financial we vehicles their and pricing, forward in both that quarter industries. the format, key affiliate under two products a legacy products, high introduced priced because provides products potential effectively and opportunity respective we more products performance We the as more In now them by and introducing as closure our managed as strategic core share business, situations. to approach certain investment financial space our we flexibility flexible assets offering strategy products well allocating and on taking and technology initiatives, to professionals on processes finalizing our over offer after management management available highlight complex key increasingly businesses. clients needs marketplace their six of of cap a to took a strong large our of new As to network the management model delivery a well are areas. the turned across unused core capital to additional and

the who technology range separately the spearhead we Within our new and to also We newly offer position allowing efforts in benefits have affiliated Officer. with clients a money managers, other institutional to data ex-strategy initiatives. options advisors transparency, ownership, partnership structure filled introduced of Chief managed direct strategies Analytics analytics, benefit. of account role SMEs enterprise artificial of on intelligence our focused and wide may enterprise across analytics will the This created and

platform and We internal and our continued our advisor enablement, wealth technology experiences, with operations. management improving sales and have also management improving asset goal affiliated with enhancing of the client initiatives,

implemented while from environment. we additional the home quarter for employees productivity operational capabilities navigate digital to technology for we work efficiency, Lastly, throughout and and continued

the management, and reducing manager, to in distribution our the COVID-XX. and progress asset continued operating launching our manager, implemented client more during challenges technology we new our quarter. In to a strengthened seamless our We also asset made a progress enhancing institutional core with our processes advisor by create performance AUM we redemptions. recruiting remote recruiting associated process activities experience maintain wealth to support In us despite that and allowed model

innovations benefit in will environment. We normal efforts recruiting more expect a even our these

As technology to nimbly able and we to our are quickly more leverage in evaluate strong candidates pipeline.

format to annual management of conference team converting also our vision entire Our an extraordinary challenging under circumstances. virtual did a job wealth

let consecutive pandemic. has part to of shared more and for be years. conference this content experiences to our been year's not XX want the annual And than plans for diminished we did Our culture due

our that and advance took and agility, an create quickly an attended able was X,XXX additional interactive to actions to growth we our experience by initiatives. inclusion solutions technology advisors, further office culture staff. to effort leverage enabled team was into two-day In diversity pivot to home virtual Our nearly partners drive organizational and

of within We strides to have have our belonging a organization. culture made great ensure true we

recent company more the months, forward. However, needs as to industry do across past moving with especially know country a the we events over that we and and society a few also

Difficulty] recently diversity XX our This actions or the additional Additional have include Also all [Tech called speakers focused employee justice. from and each provide a local include employees on sessions guest announced holiday. of we completed year session, June as observe and paid These conducting we our racial beginning in will company steps communities. days understanding, XXXX, will learning and

Operator

We to call I put This have Mr. would conference if up on me. operator. can hold, someone choice. location, is Pardon or lost else back appear like pick to your Sanders the

call the back One please. dials Mr. Sanders moment, hold, put in. on we'll Okay, until back

Ben Clouse

It's Ben. on. continue I’ll

where for Apologize I'll off interruption, bet. the join everyone. up left and Phil hopefully, pick You he us. will

XXXX, hire newly will As entirely we diversity created and two into and to XXXX we dedicated roles progress inclusion.

aligned responsible our organization. strategy, First, evolution developing the and and purpose, goals, that and our Diversity vision, the inclusion for with delivering Head across of and mission, business next Inclusion is comprehensive the on diversity values of

affiliated and partners. will of and as including role they enhance focus outreach and women-owned diversity candidate work outreach our will community industry and efforts, and sourcing, the business to diversity and as well the across for vendors second pools diversity employment sourcing The organization minority on advisers,

addition quarter support a to earlier This all this the help the support diversity this a and provided include with brands project. review a we partnering phase full donations three premier this will of organizations communities. across we that and second and better COVID-XX we recently underserved first on launched brand the With are racial multiyear we in of global agency our to our to respect and focus justice In related local brand, to have on launched made have year, initiative is brand well-respected enterprise. the effort the of phase

during In a to strategic opportunities and sheet capital efforts, by us enables maintain of position arise. of Strategy M&A, quarter shareholders share regular while dividends finance these if balance created Lastly, return we of way buybacks, us newly in support have President, also and terms that to allocation, the and Integration. of capital Acquisition Vice our filled we announced pursue to positioning a

vital growth across and have acquisition will this is management strategy We inorganic and role wealth that asset evaluate position our component as been opportunities management. key we play a of a clear continually

continuing this just strategy. ongoing growth vision our progress on to of and the of we deliver are All highlights work long-term some

of progress enterprise robust that across growth in the We believe see resilience positions well us and our our continue for the people capital positioning, evidence adaptability and the to future. position importantly, and most strategic our of

and Turning in $X quarter, businesses our by aided improved now. meaningfully to a flows this Investments asset against Ivy few both billion details sales. our management lower management within net redemptions wealth gross

positive redemptions compared flow quarter XXXX. strategies quarter. strong in Sales in first same quarter XX% both to to fact, with net suite, to and continue XX% in the Mid-Cap for our the In improved compared be the

performance has While term improved. short

We continue strategy. in core see to international outflows our

traction we teams realign and sales our working continue since Our distribution channels of well teams. structure to remotely are make the across

focus to our top We employees priority. quality wellness access clients and the keeping service continue provide with and and providing of safety to while on unique highlight their capital our as high as our meets intellectual as well needs, clients our that

low for catalyst the investment announced quarters performance, quarter markets in marked sell resurgence proven for year Fed, the to quarter Equity appetite March to quarter equities this are following to bottom factors term was which XXXX. purchase by which XX, returns. over particular second the Turning strong in the the have best detrimental risk market of compounded the the of the driven U.S. The and by securities one quality long programs be the in since first was off.

institutional long year. mindful the on of Our market maintain in commitment of that consistency the short-term focused and to are dynamics, half caliber seen we volatile first as while we discipline means term times such have and processes in we the remain

commitment owing returns pace were long franchises prospects. with not in across performance quarter. to term, long-term finding keep relative our the generally benchmarks did growth in second quality-oriented strong We absolute our maintain differentiated long-term active and growth investing companies While managers to strong, with

investment international relative which its seen has noted, previously strategy, performance. value flows, discipline by been Our have more has equity results we negative improved as in recently core challenged

delivering term cycles. to to on we continue success fundamental insights, research discipline through clients through long have communicate many We our and focus our our as and market

distribution will As term sustaining capabilities, improvement. of a caliber be on across long sales focus distribution consistently enhance our driving we and opportunities, while performance investment wide near-term breadth institutional our

value planning aspect a year individuals, Turning enterprise guidance in businesses to find personal and wealth advisors. continue and professional of stable that the as management form this to held financial consistent business, families our true has it from to

results in management in a resonating our with as differentiated long-term wealth this shared the vision think newly and are added model, we've past, suite pipeline. as we is well the package advisors full strategy. technology driver and combined And recruiting recruiting and growth We've year. support these product our to As service other with advisors, key advisor seen our business our strong

wealth a We see managers cycles. illustrates strong ability assets net challenging also these growth advisory in straight quarter backdrop, through the flows. market have The occurred assets the despite continued with been pleased inflows market of sixth to fact to that advisory positive capture

with comprehensive, to accessible and of further platform by repository now web integrated a advisors. affiliated which On based the cloud of all technology front, digital data are database, digital other both processes, along introducing and procedures centralized we WaddellONE information, expanded financial a available

financial income share turn I'll in of share, reported million, results. million, $XX to $XX Now, or compared per $X.XX to quarter. We per the net prior $X.XX or

expected, investment was to operating market stronger we Net compared to increased due lower first gains into partially administration to quarter investment dropped XX% and from asset our Management brokerage million redemptions. seed expenses revenues Lower decrease to sales, assets headed offset of ended $XX.X well As revenues and the primarily billion levels quarter. sharp our to rebound. and corporate due quarter, million the second hedging account as on the compared as income strategy. Wealth the better, while advisory prior investment assets partially in to under unrealized improved the were $X.X lower new $XX lot a improved the the quarter at due as portfolios,

saw metric new include how you the assets this in it others action. report including the to updated versus aligns our net of and which market in release, dividends interest, with As definition in industry we've

We our schedule, data have presenting on included a website. the historical IR

advisory end. So, billion a new growth in high quarter quarter net multi this you definition, impact continued updated at assets Notwithstanding annualized assets $XX.X trend net with an this of the change. advisory growth X.X% can and new quarter see all-time balance in the assets of

firm. continued And were quarter. we business in the advisors another have the the progress Our XX to with pleased wealth management affiliate transforming

newly stabilizing Reed challenges to As efforts, billion. differentiated at an affiliated Ivy investments in ended an continued model recruiting Advisors increase added from combined our have the billion believe under brings. and worthwhile. redefined the while legacy modestly service continuous sales what X%. full at advisors suite technology in our still this of and the with and with at affiliated inflecting been remote far we've quarter add quarter, with active advisors, encouraged and you June flows I that steady product This package gross has We the recruiting or management and productivity of down Associates assets in attrition pipeline we quarter the of our management XXX,XXX consistent flows support $XX.X potential revenue. would the only the earlier early, Since resonating combined detail it's advisors on call just billion, our know, recently administration strategy XX% at advisors. been improvement the firm thus reinvigorated prior the while strong over well, proven XX and the in recruiting are totaling these $XX under progress prior resulted in & combined we've remained with average assets to of far our in with of beginning and the that $X.X year, with count adviser recruiting thus Waddell pleased as low the Advisor despite the XXth. average under total with year, X,XXX over

quarter asset quarter the cap were on the to lower total fees prior primarily Turning and lower effective to as well service management well decreased due fee distribution due implemented bond levels. from results, quarter, lower as and to growth products. core U&D advisory fees rate fees $XXX the and our as a revenue the targeted lower reductions levels. fees and the in were to shifts, due fee mix large to lower lower to also resulting compared due financial management was asset for million the Investment

across compared quarter. lower commissions revenues, to of G&A $XXX.X result costs million to equity we compensation insurance across rebound. $X.X the million million initiatives organization. a compensation the deferred of due lines. into as $X.X $XX.X totaled higher to lower technology sales increases market product and increased prior savings reduced entertainment $X.X activity year. also expenses to deployed the as and plan, costs lower mark-to-market redeployed addition, solutions were during due In new decrease the our the and sales to Operating million software travel $X.X higher controllable G&A increased both expenses while million as Technology Compensation were were the Distribution strategic result a due increased on due costs. and costs million compensation,

take take drive and pandemic While and view in reduce a that actions growth we the long-term come of of several through areas out were control last a to the strategy. would clear we us incremental in first invest expenses to did months in six to year. our strong We continue call position our we will allow the think long-term the earnings

expect expense on closely shortfalls million continue and the per of to efficiencies, asset the guidance forecast, our the XX% While drive to shares. restricted we expense prior run rate do we to million opportunities the resulting high related of of levels remainder at investments, Based subject $X.X be we related end $XXX vesting primarily range to the guidance cash year. to the our quarter, million by to the from tax project the despite of portfolio, Cash investment broader prior market XX% tax will of current dividends. for the flows, share well quarter were and modestly offset repurchases which due to balances the on gains and operating prior to balance compared investment increased The partially range as $XXX return effective of forecasted of unrealized the for to lower additional as earnings, expenses volatility for but for controllable to the quarter year, to to of was monitor expect this and due was rate environment. to discrete XX.X% including rate tax continued income strategic of course

to pleased an maintaining active on our growth organic while shareholder strength inorganic opportunities, be sheet while all flexibility execute return the the we to balance of capital maintaining plans program. the continue pursue with We as

Finally, win accordance for access retirement action the contribution addition we participants removes include contribution defined for liability discretionary Operator, maintain record us. who matching component. plans. a now in are of and their both of Phil we with company which gross rejoined the to direct the which this keeping open transition that perspective, from our for settlement I'm as enhanced the a this firm. cost as pension to competitive balances viewed part million call has well We overall a able from completed plan of them to reduced $XXX as and We company compliance a still and component, as like to questions plan, a would we their told in

Operator

The Instructions] is with from question first Schorr Evercore. Glenn [Operator go Please ahead.

GlennSchorr

you Thank much. very it. I appreciate

Okay, activity want to executive the a lately little in I of of industry. your We've on hiring a ask front. question M&A pickup seen the a on so bit in

to what curious probably you, come Thanks. buy the and do but the valuations willingness in inflowing on tension so of with your higher seeing overall. then you and the fees that's higher favor, So, that in this to balance you're for I'm sheet something with wanting stronger, And balance marketplace? curious how that healthy

PhilipSanders

Glen. off dropping and want of I from apologies times. different add know maybe don't earlier. Ben for home But working I'll for you if taking to say, And guess thanks I'd to highlights Okay. on This this is Thanks, challenges Phil, my was I start this. the over. at Ben,

and opportunities strategic kind that ability through type that bit. we've have this I business acquisition terms of capital no model, as of a the position, as the little the market of little there's more transformed time, along jumpstart over with our growth our a in And thing. has investments we've the bit buying made think to in of it's obviously, activity fact or rebounded, strong been we secret

not are side, more you on manager strategies you of portfolio, would as been a focused existing it think, with be as I for provide said, the our uncorrelated can equity likely broaden it income the be don't think huge specific asset augment area Historically, been our we've I or more will company. that relatively said, either think, areas within specific string expertise currently area, asset I that classes fixed excel, that's minded. we or

made be I asset in acquisitions mindful area the active there. think respect this we're certainly I our is do there I we in, transforming specific think to open that significant the culture present would want think management opportunities an margin of with in I model architecture and also integration are on of challenges do and, wealth progress that. that also that to say platform. kind business So, wealth to be some very area management, the an side, management interested to within transition we've

you've As count, improvement we're recent we've can the optimistic now the advisor significant stabilizing a results, respect to forward. in that made then with grow we really going business seen

as I obviously, scale a business part finally, So, there as well, be our of are that just the opportunistic think focus we then would remain I there. which be stabilizer share well, company of overall area opportunities would to buybacks an and model. to long-term And say, can

say I'd flexible profile, in this and we industry. provides in be balance to dislocations sheet So advantage financial strength take our environment, good a our in it's lot this potential opportunity have of asset, of us and and a real it

there. So know there's we else add, I you want might Ben, stop terms of to if that. in see anything how don't

BenClouse

was on be pleased have M&A well focused opportunities. Charles our that we part well one us, will said, plan is out. laid as like continued who is addition in of that focus which we're as think very join strategic particular And to I would thing, have Phil. add his I

we're So just that marching respect. in toward

PhilipSanders

you think point. I make one wanted Ben, to Okay,

BenClouse

cases a And that opportunity. dislocation trade out hot; And some challenges a view other there be rightly it not. areas you and that in they're and Glenn. because equally market potentially short-term what at can equation very Glenn, is where that the demanding point, are of well market are The a add the has higher of less valuations. part in just an I'll the areas of Yes, to there market interesting point going

our within take institutional are active as of the fundamental caliber our areas who investment we is we are And which inorganic through core is, advance platform? There taking view. asset an add clearly valuation as is identity the attitude market. Does Ivy, core it that, that complement value so, there we part as advance by our a the Can management, investors, levers? to rubric. So a if capability like with in is strategic all a areas and M&A, our longer fit hot

Operator

is ahead. Company. Fannon question Please Jefferies next with Dan go and from The

DanielFannon

Thanks.

Just wanted of talk little of could about bit mentioned growth. and outlook to sits backlog that's with the where about today. XX getting you I the is advisor year-to-date the the you talk And you just a if And advisors coming talk profile kind your know advisor recruiting that about advisory for easier, but on platform also you've typical new added.

PhilipSanders

you that one? Shawn, Sure, want do to take

ShawnMihal

profile. see thanks Phil. look overall to Thanks, backgrounds, pipeline the Yes. even pandemic to mean midst alternate we We're I the Dan at virtually, the continuing type question. with do that's a of approaches to we're and the recruiting regard seeing through still the impacts some your in coming for the actually organization. having in typical COVID-XX and And We're strong

been Our average XXX,XXX. advisers XXX,XXX. recruiting for about that has XX about the be take average it XXXX-year the right to for And we

independence trying laid that variety targeting towards with we different banks, channel. firms, production. recruit we're RIA the diverse some more consistent a warehouse, as target XXX,XXX So background as from in high well With coming seeing advisor around that producing there, of relatively a that out type we're that, to

package. value technology to support what of advisors. overarching development competitive we've detailed with experience more our which nature the those with of services, build focused advanced have out providing But has the our driven things with about that So our model the advisors that support, into a organization, that's been consistent has sales, that relatively service diamond practice been, proposition really diverse on but group been coming the

and a pipeline quite of strong remaining on are of that assets $X.X revenue. seeing Again, July total us there around advisors bit we're with coming range into about five the gross trailing advisors organization. background TGR, million of board here multitude we've for in a is month seen that competitiveness the driving aspects bringing the of So of that's different that in in

working the the complexities to active of So, through we're remaining pipeline pandemic. is COVID-XX and the related some

Operator

with question America. go is Bank Mike Please next The of from Carrier ahead.

MichaelCarrier

the that redemptions that on Hi, certain and questions. good Waddell? Obviously, firstly, steady. in good certain Maybe a for just in just trend or just a thanks you to we change. is of if so products the net noticed platforms, saw specific unaffiliated terms wanted there like you the of were guys driving channel, flows, terms still can sort see was trends fairly significant of morning low taking for industry got particular see your the improvement the But like there But anything better. the anything

PhilipSanders

want Amy, do you that? to touch on

AmyScupham

related Yes. of Good morning. improving board right coming you're sales core it efforts. with short-term in thought we our redemptions. is it, the Good that decreased especially the mentioned but strategy But the some favor, focus strategy. in the product, really driver, better, say and international with his question. we to scripts I in with saw value just at we That for got would and back the relative morning, of was where a everybody. performance we by as big And thanks flows heavily when the Mike industry Phil generally the look it more strategy in redemptions product across

across board So, it led core. really was the international but by

MichaelCarrier

Okay, it's and the fee just rate. on quick follow-up,

get a more mentioned if terms the changes. parse sense in the everyone of, impact, guys what's it created just of trying of a can that quarter? the just mix to given you lot significant the this volatility. And price normal, out in move don't I in pretty but the quarter, for You know

PhilipSanders

I don't know, but Ben do you take want that? to

BenClouse

of again, on have that and to we waivers we core Yes, happy. sure the that would And Sure. to were added fee of expect a I those annualized an I impact cap wasn't of $X.XX piece course new growth be large $X.XX. bond.

of course those. the of piece was So, quarter proportional

the there Equity very markets our many of mix a rate low then flows, as Core on we some others, up a ICE to on alluded, Amy making the fee And going in as thing that the International shifted in small rate just or are had was other The quarter. that also impact money are, particular due environment rate little bit.

Operator

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

WilliamKatz

very you Thank Okay. much questions. the for taking

of distribution Appreciate parts their might bit of about items squeezed of that be be little its thinking look So a sort quarter-on-quarter, your and there's in about unusual back way profitability. bit a as just sort coming in moving down Could price little terms little to and like of you sort right what any to a margin talk looking bit. a that it ahead? it but driving does

PhilipSanders

a that. Okay, crack to at Ben do want take you

BenClouse

morning, Good think. Bill. I Yes,

part of in lower most significant and asset had asset particular starting which that, beginning the wealth both think of the of I on impact were management. the period, probably levels at course,

a reminder, of the business levels. on are assets advisory of most first our billed month As based asset the the at wealth in

some is you know. calculations of was all that movement, as work and the the of so course, way during the just quarter quite And and significant

also in a contributing that little in that. comments again, had the decline to wealth we're we of that bit products, We sales our insurance in in a business mentioned

WilliamKatz

the business, segments now? -- as then pretty it's the set the Okay, wealth about talk good. you could really greatest a opportunity within management helpful. bit you you're I think And pipeline, mentioned, you'd just which about seeing that's When little right

PhilipSanders

you potential are referencing of that opportunities Bill, thing? type and/or M&A Okay,

WilliamKatz

an down views. it to way, open Well, organic sure, if I'd I question. you want didn't too, was the more be of double But actually that to to your but answer it argument, sitting organic want on

PhilipSanders

on over why the in to recruiting and you're about our Shawn, add to you seeing opportunities talk the time? front don't Well, count of terms Yes. advisor what

ShawnMihal

well across us. there as on service what levels really materiality lot we've of competitive as package resonating resonating through Yes. with embedded and assembled the that Hey, to situation working of to done is firms type, segment. the models other coming of field we're here it's support around Bill. sales of been really programs what's product architecture is been seeing group. XXXX several the a the We've on good still development we a predominantly, our I reorganization. there. our virtual fluid working practice of that course been for additional advisory independent so different over that light other support And overarching independent have our of and into pipeline out opportunities, including the quarters. doing payout well in-person models really we've inflows on We team Most variety associated a where technology and relatively it's channel conference solutions most past based development advanced the The But maintain our success think open a with we've the for that that. overarching virtual of grids, conference, COVID-XX, morning, lot the support migration look advisors in had and Yes, evaluating support

this resonating uptick, to So, here just quarter with all promoting modestly those headcount grow a modest obviously are advisors first since with quarter and the organization. With but increase point, things that past XXXX. it's the the uptick inflection the of advisor organically seeing opportunity in headcount an fourth

the is I firms where firm the that to of is compete, of isn't and Ben lot driving I grids the overarching advisors competitive, having type like a back this the more with of technology regard larger to to over done getting personnel packages maybe support that and, refer where seeing Phil really type those that and lower, what's to the really that different mentioned, work that at and several through so the from that the provide the not to are to dedicated on payout mentioned And those of robust coming inorganic support firms, So, or we're as obviously, with side. opportunity other but those over things what years been that, that and M&A, services, larger really from couple that's support independent can't the competitive the support smaller is firms and firms resonating. last drive programs we I'll quarters giving either various

PhilipSanders

Ben, Shawn. make did thanks, want Okay, point there? a to you

BenClouse

advisory just I comments with growth points suite you we're Bill. in made you on addition we've our which products, would and advisors, add perspective product the pleased regard heard to Yes, very to as as and certainly comments a there. know grown we're in of from expanded to Shawn focused the the Shawn's in asset

more business; M&A adding in driving to earlier Phil's comments the really the scale. it's just about On side wealth

a grid. believe best-in-class we we So, have

infrastructure now that more made of greater progress have building to our together. of place platform out the in in put best a in huge we the We and class the are technology have to also amount advisors process support scale, believe But be with there. we've

WilliamKatz

code Great, know the violating it's I helpful, of in. to squeeze one here, but have kind more question

side. of there have Just Can the what month retail step going month-to-month, of sequentially, back better sort broadly, June you elevated a how then maybe little like little things engagement we more talk a appreciate of bit on might look July? gotten and despite have in very that retail was just flows your bit happened but a were

PhilipSanders

do that? to Amy, you take want

AmyScupham

Sure. Yes.

a see of of was a than that it was more it increase sales. redemptions a an month setback actually did in decrease we little in in yes, Bill, in So, June, bit trends little better When par we're you redemptions. due maybe I seasonality. what look better bit is of I slightly with guess, But at think July, on to a June, you're seeing, seeing

one Just quarter generally, of -- month, summer year. our our of one second-best going the second the of time into quarters is

the the so worst. is third And typically

look little that we to from lot losses, see in client have to a continue the point I growing Because make. that's there. perspective, long-term flow important a positive markers and two little of know, of bit to lumpy gatekeepers that we're we've presentation. a the had would and flow, quarters institutional Bill, some that no across return consecutive some inflow, the a say, across fixed you that And the a marketplace. had to during you an we've also clients, our just then seeing and pipeline for had as So, it's intermediary and outflow, institutional of no big overlay quarter context, channel some then think And big of of the I marketplace. seasonality. have especially more fixed final channel, success side And add business, heavy those with income, of seen retail can one on when we've intermediary two semi-finals income bit And to

that So, help flow which definitely as side well, the business of on overall progress will the profile.

Operator

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

MichaelCyprys

morning. for good the taking Hey, question. Thanks

in by you've quarters, been ask quarter for the where the to AUM operating margin XX% think XX% about or from level. this I about down a number wanted arguably lower so, Just around here operating current impacted of quarter average profitability

you're if to, is you'd the So a floors, which more of I keeping that guess will, falls level of kind there if business consider you that if below you're and it and minimum strategic profitability in managing changes. mind here it

out that? about you're are couple years, over next you the you pretax thinking as over next how years? about thinking And what's or the right the margin that? Waddell curious just couple operating of look of So level margin for How of

PhilipSanders

high we Ben, just Okay. the see think to term the the managing that? investments a volatility to company balance the Let's get the want long the profitability, do need be clear, Is strategic term address the here. us make the I kind of to we’re the Michael, of where to and do us financials pretty respect think for we and kind strength I'll of with longer are sheet and allow I'd I need say, line? term. over to would short Ben at say, on we I Maybe you level, to

a as operate pointed short you've influenced metric and of we in type move over going not as out, we're asset the And thing. think by a forward, market. of that profitability to to that we term So volatility was will of, that levels lot time. overreact lot But

terms and opportunity business We more and levels management the respect get competitive of the here profitability aspect have a we'll the strengthening our in enterprise to with over to time. of long-term wealth

back on? Let if on. Ben you back see is Ben, No. me are

is so on, have come question back can maybe that Michael, to circle and to go back to back reconnects, we'll him I we trying think so he next get question. and when he

MichaelCyprys

I'm a quick the up happy sure. to that on are retail well. of up follow you Maybe SMA new just to as delivery. some of the distribution initiative, some offline And marketplace on model Yes, follow vehicles bringing the

Just the how and look and things opportunity you that to say out, you're the there? today set of curious is thinking as on next do are would much you there, flows how list sort about what to contributing, AUM your

PhilipSanders

Sure. No, go Amy. ahead

AmyScupham

Yes.

today, portfolios little or the AUM very the delivery So model picture. as to SMA contributing flow it it's overall relates to in

we the May. seven that model last first You'll launched delivery portfolios recall

So seen just ago, flows. side getting a huge couple a model little progress the and placements the good additional a have a bit on some opportunity to RIA in of which business of pretty we've over drive year opportunities

example. So I'll give an

model on platform. is utilize has that One that that of trusts the a a over XXX contracts that provider we signed last quarter bank

that working dealer might that you to there. of substantial. their is offer to in delivery and in with be the across of model able ability we're asset look going drive point flexibility on to vehicles program is advisor the the one direction basis equity to midst that whatever So work when is placement they based distribution class. domestic And broker be those, to be especially certainly for the of The the flow our still is of fairly partners

be potential portfolios a semi-transparent, for ability with still out a it's couple the a flow. focused sure ETF marketplace active to structures, to spaces that fully the of certainly of or it's garnering standpoint, might kind think there partner in; as in at we we're current decision transparent acquisition that making I -- talent vehicles a when to our potential launch taking of make. that from discussion us or or add whether paying newer us and focus areas. product that series attention then the and we're look capabilities addition we could incubator you development in And Certainly, a ETFs we're a well. have for But other

PhilipSanders

do have Ben the We line. back Mike. on

respect the to any him market asked sell-off. add I to So, with add, perspective short-term the your and might given different profitability question just

BenClouse

Good morning.

Sorry I context. my technical be would difficulty. here to about just would hear that, give answer Back I apologize. Michael. I didn't the

and asset management As a wealth. reminder, lines business we of operate two

you're at margin. So, a of blended looking course,

term floor long make on And the on we've As same we're with pursuing or have at and enhance identified and we that a we have number in our we're talked very of quarter, savings improvement. margin. to drive about a think initiatives we the very continue any initiatives margin as team investments that. and we time, things aligned we the number focused about of first board talked we I business. in to as a much clearly particular are much the our to don't before, management But

I So, duplicative, that that's helps. that if apologize hopefully but

Operator

go with from question KBW. is Robert next The Please ahead. Lee

RobertLee

is we Hi, couple next my good into get for taking a morning. question for next question. guided, if some my year. quarters, just the think in first I the trying the the around guess the expense guidance of controllable beyond couple comments and quarters feel Thanks expense of next to

Now investments you're obviously, even make. in the headquarters process that to moving understanding of

you any up into or like piece technology that that to follow see spend, move we feel start otherwise as we ease maybe or of of spent there is to So rate XXXX at of right making this kind kind is this inflation run point, normal good kind is really Or are there? and a right now of growth of here? or kind you

PhilipSanders

Ben, Okay, you Robert. question address that? thanks do for to the want

BenClouse

your be. that can the out, a with look, precise proxy growth. we farther the Obviously, inflation Yes. Good agree expense is Robert. we morning, less for premise I good

I course, regard investments making into the continue wealth referenced Of to that 'XX, through the the of we're In And that will management particular efficiency to for look in first to least there efforts. in to technology at will 'XX. business. part we offset spend, our continue

you ongoing have concluded the which areas once in in remind we're into and we of investments of drive adviser of also efficiencies improvement some would fully some transition, ultimately, also client that will us end workflow margin I year to our real for by experience XXXX. estate will this result better on-boarding technology drive those largely things implemented. will are doing that a and and of Some

RobertLee

moderated kind and more maybe over pretty ability of the here are wealth of has on seems in more breakeven kind just be the us in you your maybe there of now? that for faring your what's Can expectation new existing party products business. just are more sales as and product how may products Ivy allocate in Waddell a budget Okay, a great third there kind in example sales time you of management bring seeing follow in our are so their products sell to fine just Waddell even like and advisor, or retention so channel to you and observation sales wealth is advisors deal to update kind rates management up of as relates

PhilipSanders

a you take at to crack Yes. one? Shawn, do want that

ShawnMihal

Yes, the may I'll at management want of prior with to or start at and was maybe wealth and off Ben, about was regard comment inside Amy as well. the to funds just our ratio others certainly look this and affiliated about We business, XX.X%, overall XX.X%. quarter

a much ratios not this at back XX.X%. But between further, changed look time when So the the little we about last quarters. year was

new regard are sales So architecture what with really the seeing that sales is forward we've a new going to product going we're opened as is into broader set.

opportunities having that are the of space as So that with means advisors, going advisors products well legacy broader to are joining that advisors, broader as a sales there. organization new existing

So, going to continue what sales we know affiliated that of are to new those do some in to the going forward. architecture the are look sales platform. reduce expectations we spaces on at with reasonably But regard for open funds those regard sales

shift. continue rates wealth that So, do we to to that management on see side, expect

side. that will might to Ivy And forward to product seen in going over lead assets over last here. we've talk the that course of on time minor to it new sales to dispersion just fun will primarily turn going based to that the As new affiliated we've Ben course last I the seen here least over about some the the a migration be or sales just likely more of year, at mix. there But broader products forward, of Amy

AmyScupham

their share Amy. go advisory make on more market selection and which I within that that agree products here. manager ahead everything Yes, they're Hi, advisors the Shawn is a have wealth using. we would is of with particular, range this have as the depending a I'll In couple said comments across platform. of

funds less being unaffiliated I of would unaffiliated continued shifts base. expect see utilized a inside And of more that so, mix or to

does to to well. you're market in that it advisors, My that where products move compete grow similar very wealth in be, acquisitions, expectation competitive the of ability XX% our can there. we manager base looks recruit However, up to advisor potential open as a partners from to as continues would more and what new have to XX% it would in inside fully that would the we and bring architecture, unaffiliated down share do

product within dependent our that. So, it individual wealth would just on really using and be of then of inside manager, competitiveness they're which strategies the the

BenClouse

and our those the and over would I point, periods as those on firm model are but which our done a during wealth stability business more term, assets has work longer helped bit resilient we've management already that revenue last certainly wealth to dynamics. balance greater seen add business provides in overall of and transitioning of One we've certainly the the volatility

So that well. another of that's as aspect

Operator

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

Philip Sanders

through services the manager a the gives our couple power apologies state as quite as of last institutional transformation comfortable and one unique our over to grow And of capital positioned well our our respect our of technical of continuing of and be in days confidence in evolved. invest that the but wealth of ability model a over Okay, to future. thank quite caliber the functions of you. terms combination model really my it's you to for manager, in manager years, start is us. and And asset world time the undergone to we've call. manager an Appreciate these business in everybody now with can supported difficulties again asset wealth given business a model ability the that lot out the the bit the joining shared industry both at us as build and the But strong the to by a grow with really how really feel see, position; of

again, So everybody, will have and and a with conclude great day. thanks that, you. I just Thank

Operator

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

You may now disconnect.