Jeff Schmitz

Jeff Schmidt asked about the financial impact of the workforce reductions on underlying expenses, particularly the run rate impact by segment, given the changes occurred late in the quarter. He also questioned the IMS business margin, asking if the 40% margin (adjusted for the revenue accrual true-up) was a sustainable run rate, considering prior guidance of lower margins due to investments.

Answer

CFO Sean Denham stated that the decrease in compensation from the workforce reduction would largely offset annual compensation increases, resulting in a 'flattish' impact on expenses. Phil McCabe, President of Investment Manager Services, clarified that the IMS margin benefited from a $3 million revenue accrual true-up and other one-time items totaling about $5 million, which, if excluded, would show a 5% quarter-over-quarter growth rate. Sean Denham added that SEI is continuing to hire in IMS and other business units in anticipation of Q1 opportunities, suggesting that expenses would increase in Q1, potentially impacting future margins.

Jeff Schmitz asked about the integrated cash program, specifically if SEI is earning near the Fed funds rate, if any portion is fixed-rate, and how potential Fed easing might impact it. He also questioned the recent higher expense growth in private banking, asking if it was due to talent investments and if offshoring would reduce future growth.

Answer

Paul Klauder (EVP and Head of Independent Advisors Solutions Unit) explained that SEI earns about 370 basis points on integrated cash, yielding 55 basis points to investors, and outlined how investor yield would be adjusted with rate changes. Ryan Hicke (CEO) and Sanjay Sharma (EVP, CEO, and Global Head of Private Banking and Wealth Management) stated that private banking expense growth was primarily due to investments in talent and onboarding backlog for new clients, with no unusual trends, and that successful delivery is paramount.