EX-99.1 2 a19-9083_1ex99d1.htm EX-99.1

Exhibit 99.1

 

 

News Release

 

Waddell & Reed Financial, Inc. Reports First Quarter Results

 

Overland Park, KS, Apr. 30, 2019 — Waddell & Reed Financial, Inc. (NYSE: WDR) today reported first quarter 2019 net income1 of $32.1 million, or $0.42 per diluted share, compared to net income of $46.5 million, or $0.60 per diluted share, during the prior quarter and net income of $46.3 million, or $0.56 per diluted share, during the first quarter of 2018.

 

Revenues of $259.4 million during the quarter decreased $12.8 million and $38.2 million compared to the fourth and first quarters of 2018, respectively.  Operating expenses of $223.9 million declined $3.9 million compared to the prior quarter and declined $13.8 million compared to the same quarter in 2018.  The operating margin was 13.7% during the current quarter, compared to 16.3% and 20.1% during the fourth and first quarters of 2018, respectively.

 

Assets under management ended the quarter at $71.7 billion, a 9% increase compared to the prior quarter and a decrease of 11% compared to the first quarter of 2018.  Net outflows of $1.8 billion during the current quarter improved compared to net outflows of $3.8 billion in the fourth quarter of 2018 and were higher than the first quarter of 2018.  Sales of $2.5 billion during the current quarter declined 8% and 34% compared to the prior quarter and the first quarter of 2018, respectively. Sales for the quarter were challenged, in part by carryover effects from volatility experienced in the fourth quarter of 2018 and investors’ preference for short duration fixed income products over equity products.  Redemption rates improved 12% compared to the prior quarter as redemptions in our unaffiliated channel improved meaningfully. Redemption rates were relatively comparable with the first quarter of 2018, improving 1%.

 

Wealth management assets under administration ended the quarter at $56.1 billion, a 9% increase compared to the fourth quarter of 2018, due to market appreciation. Compared to the same quarter in 2018, assets under administration decreased slightly as outflows from non-advisory assets were only partially offset by net new advisory assets and market appreciation. Average productivity per associated independent financial advisor (“Advisor”), measured as average trailing twelve-month revenue per Advisor, was $400 thousand for the current quarter, rising 6% compared to the prior quarter and 40% compared to the same quarter in the prior year.

 


“Despite a challenging market environment as we began 2019, our team remained focused on executing our plans through improved investment performance, ongoing product development and the continued evolution of our wealth management platform.  We made progress in each of these areas during the quarter, as we continued to improve short- and intermediate-term investment performance rankings across the complex, introduced a new investment vehicle for our existing strategies and made further progress on our commitment to improved technology and practice development for our Advisors, “ said Philip J. Sanders, Chief Executive Officer of Waddell & Reed Financial, Inc.

 

Mr. Sanders continued, “While we were encouraged by the rebound in markets after the volatile end to last year, the sales environment is challenging. Nevertheless, we remain steadfast in our commitment towards improving our Company’s long-term competitive positioning.”

 

Revenues Analysis

 

Investment management fees declined $4.8 million, or 4%, compared to the fourth quarter of 2018, primarily due to two fewer days in the quarter and lower average assets under management. The effective management fee rate of 63.5 basis points was consistent with the prior quarter. Compared to the first quarter of 2018, investment management fees declined

 

1  Net income represents net income attributable to Waddell & Reed Financial, Inc.

 

 

$23.9 million, or 18%, due to lower average assets under management and a lower effective management fee rate. The effective management fee rate was approximately 2 basis points lower due to previously announced fee reductions in selected mutual funds, consistent with the expected reduction. Average assets under management were $70.1 billion during the current quarter, compared to $71.6 billion during the prior quarter and $82.4 billion during the first quarter of 2018.

 

Underwriting and distribution fees decreased $7.5 million, or 6% sequentially, primarily due to two fewer days in the quarter and a reduction in average assets under administration during the period. The lower asset levels early in the quarter were a result of market declines in the fourth quarter of 2018. In addition, sales of insurance-related products were lower across the comparative periods.  Compared to the same quarter in 2018, fees decreased $11.8 million, or 9%, due to lower service and distribution fees and lower sales of insurance-related products.

 

Shareholder service fees declined $0.5 million, or 2%, compared to the fourth quarter of 2018 due to two fewer days in the quarter and a slight decrease in average assets. Compared to the first quarter of 2018, shareholder service fees declined $2.5 million, or 10%, primarily due to a 9% decrease in average assets.

 

Operating Expenses Analysis

 

Distribution expenses decreased $1.7 million, or 1%, compared to the prior quarter and decreased $4.7 million, or 4%, compared to the first quarter of 2018. For both comparative periods, distribution expenses decreased primarily due to the decrease in underwriting and distribution revenues and were partially offset by an increase in the compensation grid for  Advisors, effective January 1, 2019.

 

Compensation and benefits expenses increased $0.7 million, or 1%, compared to the prior quarter. Share-based compensation increased $3.7 million primarily due to mark-to-market adjustments of cash-settled restricted stock unit awards, lower forfeiture activity and a shifting of the grant date from April to January in 2017. The increase was largely offset by a decrease in severance charges and lower incentive compensation.  Compared to the first quarter of 2018, expenses improved $3.9 million, or 6%, due to lower share-based compensation costs and lower base salary costs due to lower headcount.

 

General and administrative expenses improved $2.7 million, or 16%, compared to the fourth quarter of 2018 primarily due to lower consulting, legal and travel costs. Compared to the first quarter in 2018, expenses improved $4.8 million, or 25%, due to lower contractor, legal and consulting costs as significant projects were completed in early 2018.

 

Occupancy expenses increased $0.6 million, or 10%, compared to the fourth quarter of 2018 due to early lease termination charges related to the ongoing transition of Advisors to personal branch offices. Compared to the first quarter of 2018, expenses improved $0.2 million, or 4%,  as we realized cost savings from field offices closed during 2018.

 

Depreciation expense declined slightly from the prior quarter and increased $0.7 million, or 13%, compared to the first quarter of 2018 primarily due to an adjustment in the useful life on certain internally developed software assets.

 

Investment and other income decreased $7.9 million compared to the prior quarter primarily due to a $16.1 million pension-related gain in the fourth quarter of 2018, which was partially offset by market appreciation on our investment portfolio during the current period.  Compared to the first quarter of 2018, investment and other income increased $6.6 million primarily due market appreciation of our investment portfolio and increased interest income from our corporate investment portfolio.

 

 

Assets Under Management

(in millions)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

Prior Qtr.

 

Year-over-Year Qtr.

 

 

 

2019

 

2018

 

2018

 

Change

 

%

 

Change

 

%

 

Unaffiliated 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

24,977

 

$

31,172

 

$

31,133

 

$

(6,195

)

(20

)%

$

(6,156

)

(20

)%

Sales 2

 

1,593

 

1,673

 

2,245

 

(80

)

(5

)%

(652

)

(29

)%

Redemptions

 

(2,306

)

(3,637

)

(2,692

)

1,331

 

37

%

386

 

14

%

Net exchanges

 

276

 

(131

)

247

 

407

 

311

%

29

 

12

%

Net Flows

 

(437

)

(2,095

)

(200

)

1,658

 

79

%

(237

)

(119

)%

Market action

 

2,966

 

(4,100

)

122

 

7,066

 

172

%

2,844

 

2,331

%

Ending assets

 

$

27,506

 

$

24,977

 

$

31,055

 

$

2,529

 

10

%

$

(3,549

)

(11

)%

Annualized organic growth rate

 

(7.0

)%

(26.9

)%

(2.6

)%

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

35.7

%

53.8

%

35.8

%

 

 

 

 

 

 

 

 

Institutional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

3,655

 

$

5,187

 

$

6,289

 

$

(1,532

)

(30

)%

$

(2,634

)

(42

)%

Sales 2

 

141

 

85

 

552

 

56

 

66

%

(411

)

(74

)%

Redemptions

 

(357

)

(1,316

)

(604

)

959

 

73

%

247

 

41

%

Net exchanges

 

—

 

511

 

—

 

(511

)

(100

)%

—

 

NM

 

Net Flows

 

(216

)

(720

)

(52

)

504

 

70

%

(164

)

(315

)%

Market action

 

614

 

(812

)

212

 

1,426

 

176

%

402

 

190

%

Ending assets

 

$

4,053

 

$

3,655

 

$

6,449

 

$

398

 

11

%

$

(2,396

)

(37

)%

Annualized organic growth rate

 

(23.6

)%

(55.5

)%

(3.3

)%

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

36.6

%

117.3

%

37.8

%

 

 

 

 

 

 

 

 

Broker-Dealer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

37,177

 

$

43,183

 

$

43,660

 

$

(6,006

)

(14

)%

$

(6,483

)

(15

)%

Sales 2

 

754

 

958

 

1,001

 

(204

)

(21

)%

(247

)

(25

)%

Redemptions

 

(1,626

)

(1,547

)

(1,958

)

(79

)

(5

)%

332

 

17

%

Net exchanges

 

(276

)

(380

)

(247

)

104

 

27

%

(29

)

(12

)%

Net Flows

 

(1,148

)

(969

)

(1,204

)

(179

)

(18

)%

56

 

5

%

Market action

 

4,066

 

(5,037

)

251

 

9,103

 

181

%

3,815

 

1,520

%

Ending assets

 

$

40,095

 

$

37,177

 

$

42,707

 

$

2,918

 

8

%

$

(2,612

)

(6

)%

Annualized organic growth rate

 

(12.4

)%

(9.0

)%

(11.0

)%

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

14.5

%

13.1

%

15.1

%

 

 

 

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

65,809

 

$

79,542

 

$

81,082

 

$

(13,733

)

(17

)%

$

(15,273

)

(19

)%

Sales 2

 

2,488

 

2,716

 

3,798

 

(228

)

(8

)%

(1,310

)

(34

)%

Redemptions

 

(4,289

)

(6,500

)

(5,254

)

2,211

 

34

%

965

 

18

%

Net exchanges

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

Net Flows

 

(1,801

)

(3,784

)

(1,456

)

1,983

 

52

%

(345

)

(24

)%

Market action

 

7,646

 

(9,949

)

585

 

17,595

 

177

%

7,061

 

1,207

%

Ending assets

 

$

71,654

 

$

65,809

 

$

80,211

 

$

5,845

 

9

%

$

(8,557

)

(11

)%

Annualized organic growth rate

 

(10.9

)%

(19.0

)%

(7.2

)%

 

 

 

 

 

 

 

 

Annualized redemption rate 3

 

23.9

%

35.4

%

24.8

%

 

 

 

 

 

 

 

 

 

(1)         Unaffiliated includes National channel (home office and wholesale), Defined Contribution Investment Only “DCIO”,  Registered Investment Advisor “RIA” and Variable Annuity “VA”.

(2)         Sales is primarily gross sales (net of sales commissions).  This amount also includes net reinvested dividends and capital gains, and investment income.

(3)         Excludes Money Market.

 

 

MorningStar Fund Rankings 1

 

1 Year

 

3 Years

 

5 Years

 

Funds ranked in top half

 

59

%

37

%

34

%

Assets ranked in top half

 

59

%

46

%

54

%

 

MorningStar Ratings 1

 

Overall

 

3 Years

 

5 Years

 

Funds with 4/5 stars

 

29

%

29

%

28

%

Assets with 4/5 stars

 

39

%

39

%

30

%

 

(1)         Based on class I share, which reflects sales and asset concentrations.

 

 

 

Three Months Ended

 

 

 

 

 

Year-over-Year

 

Wealth Management

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

Prior Qtr.

 

Qtr.

 

(in millions)

 

2019

 

2018

 

2018

 

Change

 

%

 

Change

 

%

 

Assets under administration (AUA)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory assets

 

$

23,671

 

$

21,207

 

$

22,050

 

$

2,464

 

12

%

$

1,621

 

7

%

Non-advisory assets

 

32,418

 

30,059

 

34,216

 

2,359

 

8

%

(1,798

)

(5

)%

Total assets under administration

 

56,089

 

51,266

 

56,266

 

4,823

 

9

%

(177

)

—

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net new advisory assets 1

 

$

220

 

$

(45

)

$

392

 

$

265

 

588

%

$

(172

)

(44

)%

Net new non-advisory assets 1, 2

 

(820

)

(840

)

(983

)

20

 

2

%

163

 

17

%

Total net new AUA 1, 2

 

(600

)

(885

)

(591

)

285

 

32

%

(9

)

(2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Annualized advisory AUA growth 3

 

4.2

%

(0.8

)%

7.3

%

 

 

 

 

 

 

 

 

Annualized AUA growth 3

 

(4.7

)%

(6.1

)%

(4.2

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisors and advisor associates

 

1,367

 

1,403

 

1,497

 

(36

)

(3

)%

(130

)

(9

)%

Avg. trailing 12-month revenue per advisor 4 (in thousands)

 

$

400

 

$

378

 

$

285

 

$

22

 

6

%

$

115

 

40

%

 

(1)         Net new assets are calculated as total client deposits and net transfers less client withdrawals.

(2)         Excludes activity related to products held outside of our wealth management platform.  These assets represent less than 10% of total AUA.

(3)         Annualized growth is calculated as annualized quarterly net new assets divided by beginning assets under administration.

(4)         Production per Advisor is calculated as trailing 12- month Total underwriting and distribution fees less “other” underwriting and distribution fees divided by the average number of Advisors.  “Other” underwriting and distribution fees predominantly includes fees paid by Advisors for programs and services.

 

 

Unaudited Consolidated Statements of Income

(in thousands, except per share data and margin)

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

Prior Qtr.

 

Year-over-Year Qtr.

 

 

 

2019

 

2018

 

2018

 

Change

 

%

 

Change

 

%

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

109,762

 

$

114,521

 

$

133,692

 

$

(4,759

)

(4

)%

$

(23,930

)

(18

)%

Underwriting and distribution fees

 

126,245

 

133,788

 

138,041

 

(7,543

)

(6

)%

(11,796

)

(9

)%

Shareholder service fees

 

23,403

 

23,921

 

25,882

 

(518

)

(2

)%

(2,479

)

(10

)%

Total

 

259,410

 

272,230

 

297,615

 

(12,820

)

(5

)%

(38,205

)

(13

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distribution 1

 

109,794

 

111,456

 

114,470

 

(1,662

)

(1

)%

(4,676

)

(4

)%

Compensation and benefits (including share-based compensation of $12,693, $9,039 and $14,768, respectively)

 

64,843

 

64,155

 

68,785

 

688

 

1

%

(3,942

)

(6

)%

General and administrative

 

14,704

 

17,403

 

19,538

 

(2,699

)

(16

)%

(4,834

)

(25

)%

Technology

 

16,308

 

15,982

 

16,644

 

326

 

2

%

(336

)

(2

)%

Occupancy

 

6,715

 

6,116

 

6,964

 

599

 

10

%

(249

)

(4

)%

Marketing and advertising

 

1,964

 

2,685

 

2,281

 

(721

)

(27

)%

(317

)

(14

)%

Depreciation

 

6,001

 

6,387

 

5,302

 

(386

)

(6

)%

699

 

13

%

Subadvisory fees

 

3,557

 

3,647

 

3,708

 

(90

)

(2

)%

(151

)

(4

)%

Total

 

223,886

 

227,831

 

237,692

 

(3,945

)

(2

)%

(13,806

)

(6

)%

Operating income

 

35,524

 

44,399

 

59,923

 

(8,875

)

(20

)%

(24,399

)

(41

)%

Investment and other income

 

9,453

 

17,351

 

2,816

 

(7,898

)

(46

)%

6,637

 

236

%

Interest expense

 

(1,548

)

(1,553

)

(1,802

)

5

 

0

%

254

 

14

%

Income before provision for income taxes

 

43,429

 

60,197

 

60,937

 

(16,768

)

(28

)%

(17,508

)

(29

)%

Provision for income taxes

 

10,671

 

14,125

 

14,966

 

(3,454

)

(24

)%

(4,295

)

(29

)%

Net income

 

32,758

 

46,072

 

45,971

 

(13,314

)

(29

)%

(13,213

)

(29

)%

Net income (loss) attributable to redeemable noncontrolling interests

 

705

 

(396

)

(366

)

1,101

 

278

%

1,071

 

293

%

Net income attributable to Waddell & Reed Financial, Inc.

 

$

32,053

 

$

46,468

 

$

46,337

 

$

(14,415

)

(31

)%

$

(14,284

)

(31

)%

Net income per share, basic and diluted:

 

$

0.42

 

$

0.60

 

$

0.56

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding - basic and diluted

 

76,299

 

77,786

 

83,111

 

 

 

 

 

 

 

 

 

Operating margin

 

13.7

%

16.3

%

20.1

%

 

 

 

 

 

 

 

 

 

(1) Distribution expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaffiliated

 

23,300

 

25,406

 

30,354

 

 

 

 

 

 

 

 

 

Broker-dealer

 

86,494

 

86,050

 

84,116

 

 

 

 

 

 

 

 

 

 

 

$

109,794

 

$

111,456

 

$

114,470

 

 

 

 

 

 

 

 

 

 

 

Underwriting and distribution fees

(in thousands)

 

 

 

For the three months ended Mar. 31, 2019

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

—

 

$

65,230

 

$

65,230

 

Rule 12b-1 service and distribution fees

 

16,182

 

15,688

 

31,870

 

Sales commissions on front-end load mutual funds and variable annuity products

 

438

 

12,020

 

12,458

 

Sales commissions on other products

 

—

 

7,606

 

7,606

 

Other revenues

 

92

 

8,989

 

9,081

 

Total underwriting and distribution fees

 

$

16,712

 

$

109,533

 

$

126,245

 

 

 

 

For the three months ended Dec. 31, 2018

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

—

 

$

67,504

 

$

67,504

 

Rule 12b-1 service and distribution fees

 

17,307

 

16,347

 

33,654

 

Sales commissions on front-end load mutual funds and variable annuity products

 

468

 

12,994

 

13,462

 

Sales commissions on other products

 

—

 

9,533

 

9,533

 

Other revenues

 

109

 

9,526

 

9,635

 

Total underwriting and distribution fees

 

$

17,884

 

$

115,904

 

$

133,788

 

 

 

 

For the three months ended Mar. 31, 2018

 

 

 

Unaffiliated

 

Broker-Dealer

 

Total

 

Fee-based asset allocation product revenues

 

$

—

 

$

65,516

 

$

65,516

 

Rule 12b-1 service and distribution fees

 

20,976

 

18,377

 

39,353

 

Sales commissions on front-end load mutual funds and variable annuity products

 

470

 

14,427

 

14,897

 

Sales commissions on other products

 

—

 

8,422

 

8,422

 

Other revenues

 

185

 

9,668

 

9,853

 

Total underwriting and distribution fees

 

$

21,631

 

$

116,410

 

$

138,041

 

 

Unaudited Condensed Balance Sheet

(in thousands)

 

 

 

Mar. 31,

 

Dec. 31,

 

 

 

2019

 

2018

 

Assets

 

 

 

 

 

Cash & cash equivalents (unrestricted)

 

$

177,611

 

$

231,997

 

Investment securities

 

649,052

 

617,135

 

Other assets

 

197,158

 

285,649

 

Property and equipment, net

 

58,773

 

63,429

 

Goodwill and intangible assets

 

145,869

 

145,869

 

Total assets

 

$

1,228,463

 

$

1,344,079

 

Liabilities, redeemable noncontrolling interests and equity

 

 

 

 

 

Long-term debt

 

94,872

 

94,854

 

Other liabilities

 

252,051

 

354,312

 

Redeemable noncontrolling interests

 

12,936

 

11,463

 

Total stockholders’ equity

 

868,604

 

883,450

 

Liabilities, redeemable noncontrolling interests and equity

 

$

1,228,463

 

$

1,344,079

 

Shares outstanding

 

75,679

 

76,790

 

 

 

Unaudited Condensed Cash Flow

(in thousands)

 

 

 

Three Months Ended

 

 

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

 

 

2019

 

2018

 

2018

 

Cash (used in) provided by:

 

 

 

 

 

 

 

Operating activities

 

$

(17,497

)

$

93,278

 

$

50,265

 

Investing activities

 

(13,933

)

(32,224

)

56,272

 

Financing activities

 

(59,513

)

(69,152

)

(131,948

)

Net change during period

 

$

(90,943

)

$

(8,098

)

$

(25,411

)

 

 

 

Three Months Ended

 

 

 

Mar. 31,

 

Dec. 31,

 

Mar. 31,

 

(in thousands, except number of shares)

 

2019

 

2018

 

2018

 

Shares repurchased

 

 

 

 

 

 

 

Number of shares

 

2,226,325

 

2,443,723

 

996,309

 

Total cost

 

$

39,139

 

$

46,873

 

$

20,507

 

Dividend paid

 

 

 

 

 

 

 

Rate per share

 

$

0.25

 

$

0.25

 

$

0.25

 

Total paid

 

$

19,348

 

$

19,684

 

$

20,890

 

Capital returned to stockholders

 

$

58,487

 

$

66,557

 

$

41,397

 

 

 

Earnings Conference Call

 

Stockholders, members of the investment community and the general public are invited to listen to a live Web cast of our earnings release conference call today at 10:00 a.m. Eastern. During this call, Philip J. Sanders, CEO and CIO, will review our quarterly results. Live access to the teleconference will be available on the “Investor Relations” section of our Web site at ir.waddell.com. A Web cast replay will be made available shortly after the conclusion of the call and accessible for seven days.

 

Web Site Resources

 

We invite you to visit the Investor Relations section of our Web site at ir.waddell.com. Under the “Investor Information” tab you will find a link to presentations as well as to data tables, which include supplemental information schedules.

 

Contacts

 

Investor Contact:

 

Mike Daley, Vice President — Corporate Controller & Investor Relations, (913) 236-1795, mdaley1@waddell.com

 

Mutual Fund Investor Contact:

 

Call (888) WADDELL, or visit www.waddell.com or www.ivyfunds.com.

 

Past performance is no guarantee of future results. Please invest carefully.

 

About the Company

 

Through its subsidiaries, Waddell & Reed Financial, Inc. has provided investment management and financial planning services to clients throughout the United States since 1937.  Today, we distribute our investment products through the unaffiliated channel (encompassing broker/dealer, retirement, and registered investment advisors), our broker-dealer channel (through independent financial advisors), and our Institutional channel (including defined benefit plans, pension plans, endowments and subadvisory relationships).  For more information, visit ir.waddell.com.

 

Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the current views and assumptions of management with respect to future events regarding our business and industry in general. These forward-looking statements include all statements, other than statements of historical fact, regarding our financial position, business strategy and other plans and objectives for future operations, including statements with respect to revenues and earnings, the amount and composition of assets under management, distribution sources, expense levels, redemption rates, stock repurchases and the financial markets and other conditions. These statements are generally identified by the use of such words as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “forecast,” “estimate,” “expect,” “intend,” “plan,” “project,” “outlook,” “will,” “potential” and similar statements of a future or forward-looking nature. Readers are cautioned that any forward-looking information provided by us or on our behalf is not a guarantee of future performance. Actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including but not limited to those discussed below. If one or more events related to these or other risks, contingencies or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from those forecasted or expected. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2018, which include, without limitation:

 

·                  The loss of existing distribution relationships or inability to access new distribution relationships;

 

·                  A reduction in assets under our management on short notice, through increased redemptions in our distribution channels or our Funds, particularly those Funds with a high concentration of assets, or investors terminating their relationship with us or shifting their funds to other types of accounts with different rate structures;

 

 

·                  The adverse ruling or resolution of any litigation, regulatory investigations and proceedings, or securities arbitrations by a federal or state court or regulatory body;

 

·                  Changes in our business model, operations and procedures, including our methods of distributing our proprietary products, as a result of evolving fiduciary standards;

 

·                  The introduction of legislative or regulatory proposals or judicial rulings that change the independent contractor classification of our financial advisors at the federal or state level for employment tax or other employee benefit purposes;

 

·                  A decline in the securities markets or in the relative investment performance of our Funds and other investment portfolios and products as compared to competing funds;

 

·                  Our inability to reduce expenses rapidly enough to align with declines in our revenues due to various factors, including fee pressure, the level of our assets under management or our business environment;

 

·                  Non-compliance with applicable laws or regulations and changes in current legal, regulatory, accounting, tax or compliance requirements or governmental policies;

 

·                  Our inability to attract and retain senior executive management and other key personnel to conduct our broker-dealer, fund management and investment advisory business;

 

·                  A failure in, or breach of, our operational or security systems or our technology infrastructure, or those of third parties on which we rely; and

 

·                  Our inability to implement new information technology and systems, or our inability to complete such implementation in a timely or cost effective manner.

 

The foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports and filings we make with the Securities and Exchange Commission, including the information in Item 1 “Business” and Item 1A “Risk Factors” of Part I and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10- K for the year ended December 31, 2018 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2019. All forward-looking statements speak only as of the date on which they are made and we undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by law.