SEI Investments Company Earnings Call Nuggets: NorthStar, LSV

On Wednesday, SEI Investments Company (NASDAQ:SEIC) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.


J. Jeffrey Hopson – Stifel Nicolaus: In terms of new business, can you tell us in terms of what NorthStar brings to you, and then how far away would you say we are from this business line generating higher revenues? When is it commercially viable I guess?

Dennis J. McGonigle – CFO: The acquisition of NorthStar as you probably saw in the press release was an asset pursued. I’d say that’s not just in the structure of the transaction, but what we are really interested was the (access) of the Company, which is really their technology. We were interested in that for a couple of reasons. One, it was solid technology that we thought could further extend our capabilities and offering into the front office of our clients in the advisory business, the wealth management business and the Bank GWP Global Wealth Services offering. NorthStar gave us some components that we had not build out in Global Wealth Platform and we’ll enhance that platform more richly in the front office, which as we’ve worked in the market over the past few years, there is keen interest on the part of the market in improving front office execution capabilities, efficiency, compliance and sales quality. So the technical functionality is what we are after versus the business of NorthStar itself. Secondly, the NorthStar capabilities, although some of the capabilities we have actually already built in GWP. There are some overlaps, it further extends also straight through processing nature of our offerings direct from that client sales interaction all the way through to client implementation and transaction processing. Joe and Wayne who – we expect those businesses for sure will benefit from that increased functional capability once we sort through the integration issues with Global Wealth Platform can speak to more directly. I wouldn’t say that we are in the business – we are not in – we didn’t take NorthStar as a business and are now trying to grow the NorthStar business as it existed prior to acquisition. There are some other applications in NorthStar we are looking at independent of the Global Wealth Platform. For example, it’s potential integration with TRUST 3000 as that exists, it’s potential integration with other third-party custody platforms that we may come across in our global services are trust retails and client relationships, but that’s – I’d say, I put that in the R&D category of things we’re investigating further. NorthStar really didn’t have much of a P&L, if you will, when we bought them.


Robert Lee – Keefe, Bruyette & Woods, Inc.: Just two questions, well, first one is just on the LSV. Are other strategies or main strategies still open at this point to new investors?

Dennis J. McGonigle – CFO: The simplest to say is, the larger cap strategies are open. The smaller cap or more niche global market type products, I would say, for the most part are closed. There are some of those that are still open as well, but their core products are still open.

Robert Lee – Keefe, Bruyette & Woods, Inc.: The second question I have is just kind of and I don’t know if this is something Dennis to ask you ask all the segment heads, but I guess I will start by asking you. I believe towards the end of last year, heading into this year, as a firm, I think, you had taken some initiatives to look at the expense base, see how you are doing some things, see how you can maybe drive some efficiencies and I am sure that’s ongoing. Can you maybe update us more broadly, are at a point where you can look and say, gee, no, we think we could take $5 million, $10 million or something out the expense base with some of the initiatives we have or any way of providing some roadmap or guidelines on how you are thinking about some of the initiatives you are taking?

Dennis J. McGonigle – CFO: I am sure my peers would want me to answer this question, because my answer might be different than theirs.

Robert Lee – Keefe, Bruyette & Woods, Inc.: You are breaking up.

Dennis J. McGonigle – CFO: Rob, I really think it’s best at the unit – in each unit, because unit is a different spot. So Joe, certainly will talk about expenses and then kind of the transition of expenses and some of the things we’ve done working on operationally, but also on the sales and marketing client implementation side. The good news there is that we certainly expect to have more sales, grow our clients that will need some cost to support, it takes – the investment management services business, Steve Meyer’s business, a growing business, it’s not in a profit pressure, cost pressure mode, it’s in a growth absorption mode, if anything. Institutional; well the leverage and scale in that business with revenue growth and similarly in advisor business asset growth can be very productive for us profit-wise, even though Wayne also will have certainly some expense management to work through as he rolls out the Global Wealth Services and Global Wealth Platform to his advisory clients and begins the transition in his business off of the existing infrastructure to the new infrastructure. So, I really think it’s unit by unit.

Robert Lee – Keefe, Bruyette & Woods, Inc.: I guess now all the guys know what questions are coming.

Dennis J. McGonigle – CFO: Yes. That’s why I spoke so long to (indiscernible)