Specialist
Former executive at SEI Investments Co
Agenda
- Operating environment for SEI (NASDAQ: SEIC), noting how market conditions impact underlying business and TAMP (turnkey asset management programme) overview
- Competitive dynamics across Envestnet (NYSE: ENV), AssetMarket (NYSE: AMK), Orion Advisor Solutions, LPL Financial (NASDAQ: LPLA) and others across segments
- SEI’s ability to drive additional organic growth despite potential fee compression
- Outlook for H2 2022 and beyond, including long-term growth drivers
Questions
1.
What are your thoughts on the operating environment for SEI’s TAMP [turnkey asset management programme] product offering, pulling out 2-3 key trends or drivers we should be paying attention to?
2.
What does the open architecture concept mean as far as specific types of investment products and maybe it focuses on a larger group of advisors?
3.
As SEI moves into the open architecture structure, it’s obviously not getting money from the expense fees American Funds is charging for its mutual funds, so how does it get compensated by providing these? Does the company charge the clients or American Funds a fee? How does it generate the money?
4.
How would you expect TAMPs and SEI specifically to perform if we enter into a recessionary environment, regarding outflows or client approval?
5.
Has there been more customer churn during downturns because clients are not satisfied with the performance and expect outperformance in all types of markets? Or is the TAMP product sticky and once you have a client base, they understand there will be ups and downs in the investment market?
6.
How much of SEI’s AUM [assets under management] or AUA [assets under administration] are in the equity vs the fixed-income products? As there’s been such a difference in performance, does one have a larger market share?
7.
How could passive indexing impact the TAMP industry? Obviously the fees are lower and there’s not as much need for active managers when it’s just a passive investment. How would you look at the future of the TAMP industry as passive indexing continues to increase and gain market share?
8.
You mentioned SEI has the smart beta exchange-traded funds, one perhaps geared towards momentum. That’s a quantitative strategy that could be automated. How much automation does the company have in its investment process, or is this something it’s focusing on to reduce the costs that you mentioned?
9.
Circling back to the direct indexing conversation, it sounds as if there’s some customisation involved based on what the client wants. Are these higher-fee products due to the required customisation, as SEI is not just selling the same product to everyone? Or how should we look at fees and margins for the direct indexing aspects?
10.
How would you differentiate SEI’s TAMP business and investment expertise with middle- and back-office support vs that of a broker-dealer such as LPL? What are the differences between their models or offerings?
11.
You mentioned some competitors have caught up to SEI. Which competitors do you think caught up and would be the biggest threats or competitors to SEI moving forward?
12.
You mentioned you’ve lost some business occasionally to a Charles Schwab or a TD. If a client was going to leave SEI, what feedback were you receiving around what made it feel SEI wasn’t the best option for it?
13.
Following up on client service being a strength of SEI, how should we look at client relationships being a strength that requires employees, costs and labour vs the company trying to lower its manufacturing cost, as it were? Is this the last thing it would cut, or will it start pulling back on client services?
14.
What competition could we see from broker-dealers creating an in-house TAMP rather than outsourcing to a company such as SEI? If it’s low, why wouldn’t they bring those products in-house?
15.
How would you say clients have looked at their TAMP providers? Do they give all their business to one provider or sprinkle it across multiple TAMPs?
16.
Do you think SEI is missing any significant features in its TAMP that it couldn’t develop internally and might need to acquire something to build inorganically?
17.
You mentioned SEI’s software that could perform better for its clients. How would you compare it to the software of a more tech-forward such as Envestnet? Could SEI close the gap on Envestnet? Is it trying to?
18.
Fee compression seems to be a big trend. What could SEI possibly do to defend its high margins? Could it add additional services or offer more customisation?
19.
Do you know what percentage of advisors use a TAMP for their investment services?
20.
There seems to be a gap with older advisors beginning to retire, and there are not many younger advisors or even advisors in general. Do you think the decelerating amount of advisors in the industry could accelerate people using a TAMP because it outsources to someone who can handle that, so they could focus more on their client side?
21.
What’s your outlook of the TAMP industry or specifically SEI? Is there anything we did not discuss that you feel would be worth noting?
