Waddell & Reed Financial Inc
Q1 2017 Earnings Call Transcript

Published: 2 May 2017

[Operator:]

Good morning, everyone, and welcome to Waddell & Reed's First Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to CEO, Mr. Phil Sanders. Sir, please go ahead.

[Philip James Sanders:]

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

[Nicole McIntosh-Russell:]

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

[Philip James Sanders:]

Okay. Thanks, Nicole, and once again, good morning, and thanks for joining us. This morning, we reported net income of $33 million or $0.39 per share compared to $22 million or $0.27 per share last quarter. Last year's fourth quarter, you will recall, included approximately $25 million or $15.5 million net of taxes in non-cash items for a pension charge and the impairment of an intangible asset. If you add back these items, costs were largely unchanged sequentially. Assets under management finished the quarter at $81 billion, up slightly from year-end and as of this morning, stood at $80.7 billion. Brent will provide more details on our financial results later. We continue to work diligently toward a strategy that better positions our firm in a rapidly changing industry. In the fall of 2016, we outlined four key priorities, comply with the DOL's fiduciary rule, execute on technology initiatives, improve investment performance and reinvigorate sales. While there is still lot of work to do, we have made and continue to make progress on all of these initiatives. Let me provide you with a brief update on each strategic priority. On April 7, the Department of Labor published a 60-day delay of its fiduciary rule until June 9. Following that announcement, we evaluated the delay in relation to existing projects and the pre-established contingency plan developed in anticipation of the delay. We are continuing our efforts to complete projects established for full compliance on January 1, 2018, including enhancements to projects already completed for the original April 10 applicability date. Our efforts associated with the new rule have touched nearly every business unit and required significant lift from our employees and business leaders, whose commitment remains strong as we continue to work towards full implementation by early 2018. Our technology initiatives focus mostly on evolving and modernizing our broker-dealer with our Project E work. As you know, Project E is a collection of initiatives aimed at improving the value and competitiveness of our broker-dealer. The long-term benefits of these changes will result in more choices for our clients, a better value proposition for financial advisors, and ultimately lead to a more sustainable business model for our firm. We understand that the changes we are implementing will cause short-term pressure on flows and assets in our broker-dealer channel, but standing still is not a viable option. During the quarter, investment performance generally held steady for the overall complex. Looking back over the last several quarters, however, clear progress has been made. Although, performance remains challenged in a few key Funds, several areas of strength are emerging. As referenced last quarter, the array of strategies with competitive track records continues to broaden. We are focused on continued improvement here and recent results are encouraging. Our firm has a longstanding heritage of strong investment performance, and I'm confident that we'll get back to where we needed to be. With respect to sales, several strategies are gaining traction and have positive flows year-to-date. As we emerge from a period of significant outflows, our asset base has become much more diversified. In June of 2014, when assets peaked, our three largest strategies accounted for 53% of firm-wide assets. Today, our three largest strategies account for 29% of assets. Asset Strategy, once our largest product, was 33% of firm-wide assets in June of 2014. Today, the strategy is less than 10% of total assets. This improved balance makes us less susceptible to being disrupted by performance challenges in any particular product. Additionally, it means that products gaining sales traction have the opportunity to make a positive impact. Underpinning all of these objectives is our continued push toward a more institutionalized mindset, which is essential in today's marketplace. It is imperative to have tight integration between our investment and sales and marketing personnel as it relates to understanding and communicating our investment philosophies and processes. As such, we are committed to investing in the people and resources necessary to be successful in this objective. Finally, in addition to these strategic initiatives, we will continue to focus on organizational and operational efficiency. To be clear, while cost management is important, it will not come at the expense of funding future growth. We will continue investing in our business to ensure its competitiveness. I will now turn the call over to Tom. Tom?

[Thomas W. Butch:]

Thanks, Phil, and good morning. Wholesale outflows moderated for a fifth consecutive quarter. Outflows of $1.7 billion were down 44% from the prior quarter's $3 billion, and were less than a third of the $5.4 billion recorded a year ago. The decrease was driven by slowing redemptions and, for the first time in many quarters, a meaningful increase in gross sales, which were up 31% from the prior quarter. A number of Funds, led by International Core Equity and Emerging Markets Equity, recorded positive net flows, while outflows in the Asset Strategy Fund, which, of course, has been the largest source of redemptions over many quarters, continued to dissipate. These trends are continuing in April and provide encouragement as we seek to stabilize our flows outlook. And this, of course, is supported by the investment performance referenced earlier by Phil. Channel AUM at March 31 was $30.2 billion, effectively unchanged from $30.3 billion at December 31. Institutional channel results for the quarter remained subdued, as no new mandates were sourced. The pipeline at present remains similarly soft. In April, an institutional client notified us of its intent to redeem its $800 million position in our domestic large cap core strategy. About $520 million already has been redeemed, and the balance will redeem before year-end, and this redemption is incorporated in the April AUM number Phil cited earlier. At quarter end, channel AUM remained steady, at $7.8 billion versus $7.9 billion at the end of the prior quarter. In our broker-dealer, proprietary sales softened and outflows increased. Still, the redemption rate stood at 15% versus an estimated 25% for the industry. We believe the increase in outflows related principally to the loss of some advisors in the fourth and first quarters, and their subsequent reorienting of their assets to unaffiliated fund companies. Quarter-end channel AUM was up slightly, at $43.1 billion versus $42.3 billion at December 31. As we continue to evolve the broker-dealer and broaden our architecture beyond its current state, we believe assets under administration, comprising both our own and unaffiliated assets, will become an increasingly important measure. At March 31, channel AUA was $53.6 billion versus $51.7 billion at the end of the prior quarter. Broker-dealer proprietary outflows have moderated in April. That said, as noted previously, the introduction of a broader advisory program architecture in our Classic business, slated for introduction later this month, will alter the proprietary flow dynamics of our broker-dealer. Advisory assets in our Classic channel represent about a third of the $43-point-billion of proprietary AUM in the broker-dealer. We expect that a portion of this asset base will likely participate in the new platform. We further believe that whatever migration takes place will do so over many months, and we should have initial visibility into the actual flow patterns by the time of our next earnings call. More broadly, these changes to our Classic Advisory Programs were, as you recall, part of Project E, which is, as Phil noted earlier, intended to evolve our broker-dealer's platform, product, brand and programs and services, with the goal of building a more fully competitive sustainable and attractive business. Platform, product, and brand initiatives have been implemented, or will be shortly. Changes to our programs and services will unbundle and customize our service offering to advisors, thus creating greater comparability in our payout. Project E is not an endpoint for the broker-dealer. We will continue to evolve in a manner that focuses on competitive advisor production and attractive value proposition, including competitive payout platforms and services and efficiencies in our footprint, focusing all the while on remaining true to the culture which has characterized our firm for 80 years. Let me now turn it over to Brent.

[Brent K. Bloss:]

Thank you, Tom, and good morning. As Phil noted earlier, earnings per share were $0.39 compared to $0.27 per share in the prior quarter. Sequential quarterly trends were obscured by a number of non-cash charges that occurred during the fourth quarter and to a lesser degree a non-cash charge that occurred in the current quarter. As a reminder, the fourth quarter included non-cash charges of approximately $25 million for the payout of pension benefits to terminated, vested participants and the write-off of a fund adoption intangible tied to our international distribution. This year's first quarter included a non-cash charge of $600,000 to recognize the impairment of an intangible asset due to a decline in sub-advised assets under management resulting from net outflows. Sequential revenues were down slightly around 2% due to the impact of fewer days in the current quarter. Average assets under management declined less than 1% and the effective fee rate improved slightly. The sequential decline in expenses is solely due to the non-cash items I just outlined. Careful cost control is central to our operating plan. In 2016, we successfully implemented an expense reduction plan aimed at reducing our fixed costs. Expenses were in line with our forecast, which call for fixed cost to remain flat with the second half of 2016's run rate. The current quarter included approximately $2.7 million for our preparation ahead of the new DOL fiduciary rule and an additional $700,000 related to Project E. A new accounting standard, which became effective January 1, impacts the recognition of tax expenses and/or benefits recorded to the income statement upon the vesting of employee equity awards. Differences in tax triggered by a decrease in the value of an award between the grant date and the vesting date were previously recorded as a decrease to equity. Under this new standard, differences are recorded directly to the income statement. Given the decline and the value of awards vesting in our second quarter, we expect to record an additional $10 million in tax expense. This expense will be partly offset by a tax benefit estimated to be $1 million for dividend scheduled to be paid in May. At the end of the first quarter, our cash and investment balances totaled approximately $870 million. During the quarter, we returned $47 million to stockholders through a combination of regular quarterly dividend and share repurchases. As we've indicated in the past, our strong balance sheet and history of conservative capital management allow us flexibility around our dividend during this transition period. Assuming normal markets and decelerating outflows, we feel comfortable in our ability to pay the dividend at the current level and fund share buybacks to manage dilution from equity grants. As is always the case, however, we continuously monitor our company's financial outlook to ensure it supports our plan for return of capital over the long term. With that, I would like to turn it over to Phil for closing comments. Phil?

[Philip James Sanders:]

Thanks, Brent. Although we have made solid progress toward our strategic initiatives, we continue to fight the same headwinds that challenge our industry; fee pressure, regulatory changes, and a very challenging competitive environment. While this informs and shapes our thinking, we continue to believe there is a valuable role for active management and our firm's unique ability to deliver value to client portfolios. As Brent noted, we have a strong balance sheet which provides us with flexibility as we manage through this difficult period, ultimately emerging in a stronger competitive position. Throughout this process, our most valuable asset is the dedicated employee base committed to meeting these challenges. With that, operator, we would like to open the call to questions.

[Operator:]

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

[Glenn Schorr:]

Hi. Thanks very much. I want to get a little more color if you could, the number of advisors in the broker-dealer channel fell close to 7% in the quarter. You mentioned that as part – one of the contributors towards the higher redemptions in the channel. Could we just talk about how much of that was planned versus not planned, and if that movement's ahead of some of the coming changes on the platforms? Just curious to get a little more color on that.

[Thomas W. Butch:]

I think you rightly point out, Glenn, two different things that were going on. The unplanned, if you will, resulted, in our view, in the asset attrition in the channel, and concentrated itself around the relatively small set of advisors who left and then reoriented their book. We had a January where a sizeable amount of AUA left. The second and separate point, I think, is that we are consciously reducing our recruitment of people new to the industry which heretofore had been the largest part of our recruiting effort. And by far the overwhelming portion of that decrease is represented in people leaving who were very much at the low end of production, and who did not meet production thresholds. What's happening, of course, is you're not having a backfill of those by bringing new people in to sort of moderate that number. So, you rightly identified that there were two discrete things happening.

[Glenn Schorr:]

I appreciate that. Maybe just one other one. There seemed to be a shift on balance sheet out (18

[Brent K. Bloss:]

Glenn, this is Brent. No, we have private placement notes that come due in early 2018. So, that's the first tranche at (18

[Glenn Schorr:]

Okay. I appreciate it. Thank you.

[Operator:]

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

[Robert Lee:]

Yeah, hi. Maybe first a follow-up to Glenn's question, with the $95 million of debt, the current expectation is that you're just going to pay that off, or look to refinance it.

[Thomas W. Butch:]

Rob, our current plans are to pay that off.

[Robert Lee:]

Okay, great. And then maybe just going back to advisor channel, and could you talk a little bit – I mean, one of the goals with the Project E and revamping that is to make it a more attractive home to I guess more experienced advisors. Could you – is it just too early in the process of revamping that to have much success or going out and trying to bring in those experienced advisors? And is there – or is there just – just hard to get people to move just maybe not as willing to pay some upfront cost to bring them onboard. Just trying to get a feel for where you are on the recruiting goals.

[Thomas W. Butch:]

Rob, it's still very early days in that regard as you suggested. Our recruiting was consciously subdued towards the end and towards the early part of this year, we were really very much meshed in (20

[Robert Lee:]

Great. Then maybe just one last question, if I could. I mean, you called out the emerging markets, and I guess the international – I think it was core strategy is having inflows. Can you maybe just bring us up to speed and also on other strategies where you're seeing traction? I think last quarter, you had specifically talked about the sub-advised product with Apollo, and I think maybe even talked about there may be being some potentially larger wins around that. So could you just update us on where there is some other traction?

[Thomas W. Butch:]

Sure. For the quarter – and again, I think these are substantially reflective of what's carrying forward into April – the two that you point out, and that Phil mentioned, were the largest sources of inflow. The two Apollo Funds were in inflow as well, and since that time have enjoyed additional placements on platforms. Their relative newness has been an inhibitor towards even greater growth. It wasn't really that Fund to which I tied an expectation of inflow of substance. We really didn't identify the Fund, but we did get a sizeable inflow into the Pictet Targeted Return Bond Fund, which is another – it's sort of an absolute return fixed income strategy which had a positive quarter as well. We have traction in our Small Cap Value Fund. Our Energy Fund sort of waxes and wanes with the price of oil, but is a leading Fund in that category. We had pretty good market share of active flow in many of those categories as well, which is as important as just the result itself. And certainly, if you look at the quarter's flows, they really reflected a strong fixed income bias, and we are really working hard to take forward those fixed income strategies, which we think can be relevant and helpful in the market. But that, I think, is a reasonably good synopsis of the strategies that we're focused on.

[Robert Lee:]

Great. Thanks for taking my questions.

[Operator:]

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

[Daniel Thomas Fannon:]

Thanks. Good morning. I guess to follow up on the advisor trends and kind of the movement or the pickup in redemption rates that we've seen and are likely to see kind of pick up, is there any offset from an economic perspective within the U&D line? Obviously, we get the outflows, the management fees going lower. But are there other changes within the income statement as you start to see – or offsets that we could see as – that maybe aren't – that aren't being – that we can't model today?

[Thomas W. Butch:]

Well, sort of the first partial offset, tin, to (24

[Daniel Thomas Fannon:]

Okay. That's helpful. And I guess, in terms of the DOL implementation, have you guys paused on anything in terms of your original mapping or outline? It seems like you're continuing to push forward for – but if – given the delay, was there any changes to your plans or pullback on some of the spend in any kind of sub-categories or...?

[Thomas W. Butch:]

No, I think it's substantially in place, the stuff that we have to have ready in advance of June 9. We're continuing and enhancing our efforts on things like, IRA roll-over forms and compliance procedures relating specifically to DOL and related disclosures. And, of course, you have to have the drafting bit ready for 118 (26

[Daniel Thomas Fannon:]

Okay. Thank you.

[Operator:]

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

[Michael Roger Carrier:]

Hi, thanks a lot. Hey, Brent, maybe just on the expenses, you mentioned kind of given some of the expense initiatives to be looking at a run rate similar to second half 2016. Just wanted to make sure, like when we look at 1Q, besides some of the things you've pointed out on DOL and Project E, the current run rate should be pretty good. And then just seasonally on comp, anything that was more unusual than typical?

[Brent K. Bloss:]

No, outside of the DOL and Project E cost, I can't think of anything unusual. We did push our – Michael, our restricted stock grants up into the first quarter this year, and got away from granting employee awards in the April timeframe, which contributed to a larger comp expense in the first quarter, but that's kind of a one-time item. Also, restrict the – we did some restricted stock units as part of that grant, which the dividend equivalence have to go through the income statement now, so that also pushed the comp line up a bit. But we stand by our guidance that, that second half run rate, we will keep our fixed expenses flat with the prior year. And I think our plan around that is coming together and I think we can manage that going forward.

[Michael Roger Carrier:]

Okay. That's helpful. And then just the second thing, I guess, one on the broker-dealer and then on the unaffiliated. Just on the broker-dealer, when we look at the decline in advisors, is that more pronounced? I would think maybe it's a little bit more pronounced 4Q to 1Q versus what we should expect kind of throughout the year. And then second I guess on the unaffiliated, Tom, you mentioned some of the projects that are in demand and you're seeing some good traction. Just want to get a sense when you look at like pricing of products, is there much conversations on where things stand or in the products that seeing the flows, are things pretty competitive versus the peers?

[Thomas W. Butch:]

Thank you. Yes. First, the question relative to seasonality, we've really tried to take seasonality out of the equation to the degree you used to see it in the past. And if this were a few years ago, I think the seasonality question would have been more relevant because we usually did have a significant washing, if you will, in the first quarter. But the way we have built qualification, it really takes the seasonality out of it. So I don't want to give an impression that this was a one-time thing, and it will see a bump backup. I think it's more a strategic change in the way we are recruiting. And so, my guidance would be that we would probably be looking at a similar kind of pattern first (30

[Michael Roger Carrier:]

Okay. Thanks a lot.

[Operator:]

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

[William Raymond Katz:]

Okay. Thank you very much. Just going back to the affiliated channel for a moment, you may have said this in your prepared remarks and I apologize if you did, what was the percent of sales into Waddell product versus third-party product this quarter?

[Thomas W. Butch:]

We'll have to – roughly...

[Nicole McIntosh-Russell:]

How many report, Tom...(31

[Thomas W. Butch:]

I know what we've given – let it – can we get back to you on that, Bill.

[William Raymond Katz:]

Yeah, of course. Thanks.

[Thomas W. Butch:]

I can tell you that they've been substantially changed from past experience. Again, the advent of the new advisory program incorporating unaffiliated funds is not reflected in the quarter's results, and that is still on the come. And so I would expect them to have been substantially similar to past experience.

[William Raymond Katz:]

Okay. Thank you. Second question is just going back to positioning in the industry. I think you guys mentioned in your prepared remarks about the pressure on pricing. As I look at your franchise versus some of the publicly traded asset management, I know they're not all comping any two (32

[Philip James Sanders:]

Okay. Hey, Bill, this is Phil. I'll start and then maybe Tom or Brent might add. I think performance is a big thing clearly where we have strong performance in some of the products we've called out; International Core, Emerging Markets, and some of the Small Cap franchises, we're starting to get traction, so I think clients and investors are reacting to that. So, that's a big part of it. Pricing is also important and is something we review on a periodic basis and we have made adjustments over time in some of those strategies. So, I think in my mind, it's really a two-fold process, and both aspects have to be in line to get client acceptance, strong performance and competitive pricing. I don't know, Tom, if you want to add anything to that, but... Okay.

[William Raymond Katz:]

Okay. And just one last one from me, thanks for taking a lot of questions this morning. I appreciate your commentary about keeping the dividend stable. But if I look at the differential between your GAAP earnings and your dividend, that continues to widen out pretty significantly. And it sounds like second quarter maybe a bit worse than the first quarter, and now you have the debt coming due. How do you think about buyback here versus the sustainability of the dividend? Just trying to understand the counter-balance between incremental return on invested capital versus the yield here. Thank you.

[Philip James Sanders:]

Yeah. Bill, this is Phil. I think there is really not much change from what we've said in the past. I think we acknowledge that we're – the next few quarters, we are undergoing a transition period here with the broadening of the architecture within the broker-dealer. Fortunately, the financial strength of the company is very, very solid. So, as we've indicated in the past, both the dividend and share buybacks are important parts of our capital return plan. Currently, we don't – we're not under any financial stress by paying the dividend, and we can make – we'll see how this transition period unfolds as we – we'll get early reads on that into the next quarter and after that. We've also committed to repurchasing stock to at least offset dilution for restricted share grants that are granted over time. So, that's really how we see this. Obviously, we can continue to assess this as we move forward in the second half. And also, as we've indicated in the past, if we come to the conclusion that longer-term earnings power won't support the current dividend payout, then we can obviously make adjustments accordingly. The board reviews this on an ongoing basis and we'll continue to monitor it going forward.

[William Raymond Katz:]

Okay. Thank you very much for taking my questions this morning.

[Philip James Sanders:]

You're welcome.

[Operator:]

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

[Michael J. Cyprys:]

Hi, good morning. Thanks for taking the question. Just curious if you can talk about some of the new product initiatives that you have going on, and maybe you could update us on where the seed capital portfolio is today, and how much you've been putting to work in terms of new products?

[Brent K. Bloss:]

Yeah, in terms of the seed capital we're putting to work, I mean, we have over $300 million in seed capital on the balance sheet. I would say, of that $300 million, about $100 million of it has been deployed over the last couple of years to seed new products. The rest of that capital – as you know, we've had a capital loss carryforward, so really our only source of capital gain, so we've kept that seed balance fairly high over the last few years as we've worked that capital loss down. And we're – currently have a valuation allowance of about $3 million, I believe, on a net tax basis left to cover from that capital loss carryforward. But there is about $100 million of it that's probably deployed actively today. Tom, did you have...

[Thomas W. Butch:]

I'll just provide – I am not sure whether your question was geared entirely to that. And if it was, forgive my also going backward, but you were talking about sort of the structure of the portfolio as well. And it has been a time of significant product initiative, owing to many factors, not the least of which is the introduction of this new advisory program. So, as you know, we recently launched five passive strategies with ProShares as our sub-advisory partner. In that effort, we launched the new Crossover Credit Fund, which is managed in our own shop and toggles between high quality and high income or junk status funds. And we also launched a new International Small Cap Fund, and we have in registration two other funds that are particular to the need of this new platform. And so, it's been a time, and remains a time, of very active product development. And one of the advantages of the broker-dealer, of course, is it gives us the capacity to get products moving, get some capital in them, get them track records, which certainly enhances our long-term ability to then take them out into third-parity distribution, where they are often (38

[Michael J. Cyprys:]

Great, thanks. So just one last question here, just a clean-up question. Can you just update us on terms of some of the costs that we can see in the coming quarters in terms of how much is left on Project E and also DOL implementation related cost as well?

[Brent K. Bloss:]

Yeah. In terms of Project E, I think we've come to the end of kind of our one-time implementation cost on that front. The rest will be recurring type items. As I've talked about in the past, it'll be covered by higher revenues from our advisory programs and other things to recover that, that cost around Project E. In terms of DOL, as we noted in the press release, we had about $2.7 million in costs related to DOL in the first quarter that are one-time in nature, as we really ramp that effort up in the first quarter. I've given you a range in the past of around $8 million to $12 million. Our estimate right now is, we'll come in at the lower end of that range as we work through the rest of the year.

[Michael J. Cyprys:]

So that $8 million to $12 million is for the full year, of which $2.7 million is in the first quarter and you're thinking you'd be at the low end, is that right?

[Brent K. Bloss:]

Right. So, another $6 million – $5 million, $6 million on DOL.

[Michael J. Cyprys:]

Got it. Okay. And anything on the impairment charges? I know you had one in the quarter, is there anything else that we should be kind of thinking about, kind of what's the risk from here as we move forward?

[Brent K. Bloss:]

No, I think the risk is minimal (40

[Michael J. Cyprys:]

Great. Thanks so much for taking my questions.

[Operator:]

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

[Macrae Sykes:]

Well, good morning, everyone. Could you expand more on how the retail unaffiliated distribution has evolved over the last two years in terms of approach to selling Waddell funds and how it will continue to do so? Obviously, the firm has had some unique dynamics, but also the industry has changed in terms of demand for different products, solutions and using technology for marketing and risk assessment. Thanks.

[Thomas W. Butch:]

Well, sort of starting at the end and going backwards, obviously, the funds which had been those which had created sales momentum over about a decade have certainly not been as critical to the new found opportunities that we have created. And so, I think, Phil in his remarks talked about the overall diversification of the asset base. We obviously would rather have gotten there by everything selling, but the retreat of certain of the funds has sort of changed the composition of the asset base and has provided us the opportunity to sort of tilt to strategies which had not gathered the attention that they otherwise might have in the context of having a couple of funds that were really doing extremely well. I think the rest of your question relates to the way that selling in the environment is evolving. And I think there's a couple of things that we've done relative to that. Phil mentioned and has mentioned in a number of our last calls what we believe to be the institutionalization of the business. One to mention of which is the blurring of lines between institutional and retail due diligence processes and all of the things attaching to that. And we talked before about the fact that we have really put together our wholesale and institutional infrastructures, if you will, to try to take an institutional approach to all of our markets, be an institutional consultant RIA (43

[Macrae Sykes:]

Thank you.

[Operator:]

And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

[Thomas W. Butch:]

Hey, Bill, it's Tom. We sourced your number. There was a 1% change sequentially in the amount of proprietary as a portion of the total in the advisors – or broker-dealer channel from $92 million to $91 million 4Q to 1Q.

[Philip James Sanders:]

Okay. With that, we appreciate everybody's time and attention, and we look forward to catching up with you down the road. Thank you.

[Operator:]

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your lines.