SEI Investments Company Stock

Greetings. Welcome to SEI Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Brad Burke, Head of Investor Relations Treasurer. Thank you, sir. You may begin.

Thank you, and welcome, everyone, to SEI's Second Quarter 2026 Earnings Call. We appreciate you joining us today. On the call, we have Ryan Hicke, SEI's Chief Executive Officer; Sean Denham, our Chief Financial and Chief Operating Officer; and members of our executive management team, including Michael Lane, Phil McCabe, Mike Peterson, Sneha Shah, Sanjay Sharma and Amy Sliwinski.

Before we begin, I'd like to point out that our earnings press release and the presentation accompanying today's call can be found under the Investor Relations section of our website at ice.com. This call is being webcast live, and a replay will be available on the Events and Webcast page of our website.

With that, I'll now turn the call over to Ryan. Ryan?

Thank you, Brad, and good afternoon, everyone. I assume most of you have reviewed the numbers by now. SEI had an outstanding second quarter. Compared to the prior year, revenue increased 15%. Adjusted operating profit increased 36%, and adjusted earnings per share increased 38%. All 3 represent [ clarity ] records for SEI.

This quarter is less about what happened during the last 3 months and more a reflection of the changes that we have made over the past few years. We are more disciplined in how we allocate capital across both investments and talent. We have evolved our value proposition and how we operate as an enterprise. It also reflects the continued activation and execution of the strategic goals we announced during our Investor Day. You are seeing those efforts translate into financial results. And perhaps most important to us, we're achieving those results while investing in the future of our business. Several of these investments have been funded, initiated and launched within the last 12 months. They contribute little to our financial results today, but we're already seeing signs of traction and believe they can become meaningful contributors to SEI's next phase of growth.

I'd like to touch on a few of them. First, the continued expansion of private markets into retail and retirement channels. We believe this trend remains in the early innings and plays directly to SEI's strengths, specifically our ability to execute at scale. As private markets move into wealth and retirement channels, Managers need administration, transfer agency, investor servicing, compliance and scalable operational infrastructure, capabilities SEI has spent decades building. The recent expansion of our [ SEC ] registered answer agency is an important milestone. Combined with our fund admin platform and our trust company, the [ TA ] gives [ SCIA ] full stack capability. We're also seeing growing interest in bringing private market exposure into retirement plans, especially through collective investment trusts. SEI has one of the only scaled independent trust platforms in the industry, making us the natural partner for investment managers, bringing private asset solutions to the retirement space.

When we look at the growth of retail alternatives, the expansion of private markets into retirement plans and SEI's outstanding competitive position. We believe these initiatives have the potential to grow into a business generating more than $100 million of annual run rate revenue in 5 years. This represents one of the most compelling growth opportunities for SEI and our position is the connective tissue of modern financial services shines through here.

Second, executing on our asset management strategy. We have moved beyond reimagining the business and into execution. We're seeing momentum in ETFs, expanding our private market capabilities and advancing a growing product pipeline that includes new ETF launches, enhanced model capabilities and strategic partnerships. Last week, we launched our latest active factor ETF [ SEUS ], bringing our total ETF lineup to 10 funds. Over the last 12 months, the ETF business at SEI has grown $3 billion to over $8 billion. We're also making progress in private markets through initiatives like our recently announced partnership with Carlyle, combines Carlyle's origination expertise, distribution and trusted brand with SEI's breadth of capabilities. This is the type of innovation we want to see more consistently. Product development that's tied to market opportunity. supported by multiple enterprise capabilities and delivered in a way that strengthens our competitive position.

Turning to Stratos, there is growing interest from SEI advisers seeking succession, liquidity and solutions without leaving our ecosystem. That interest includes several of our longest tenured adviser relationships many of whom historically may have looked to third-party acquirers. By providing an alternative path, Stratos helps these firms remain within SEI while creating additional opportunities for us to participate in their future growth. We believe this validates one of our core strategic objectives. We also have a healthy pipeline of non-SEI acquisition opportunities at attractive valuations, which represents an excellent use of capital.

While there's still work ahead, we're building a stronger and more competitive asset management business every day, and I am confident in the strategic and tactical direction of the asset management platform.

The last of the investments I'll highlight is the application of technology, data, automation and AI to improve both client experience and the scalability of our business. Recent enhancements to SEI Data Cloud and our IMS platform are helping clients gain faster access to information, simplify integrations, reduce operational complexity and make better use of their data. A significant part of that effort is the digitization of core operating process. We're digitizing [ NAV ] delivery, creating automated data flows between SEI and our investment manager clients with a very clear objective, eliminate friction, simplify operations and help find [ redirect ] more time, capacity and capital towards their growth. Our approach to AI is straightforward. We're focused on embedding AI into workflows to improve service, automate routine processes, accelerate onboarding, enhanced access to data and help clients operate more efficiently.

Before concluding, I'd like to briefly address sales events. Sales events totaled $43 million during the quarter, following the record $67 million we reported in Q1. It was one of the strongest quarters in the history of SEI. The breadth of this activity is extremely encouraging. IMS generated more than $32 million of sales events driven by a healthy mix of new client wins and expanded relationships with existing clients. The activity was also broadly distributed across the business rather than concentrated in any one client or opportunity.

I was on the road with many clients and prospects this quarter. I can only emphasize that the engagement we are getting at the C level of these large organizations is better than I have ever seen in my 28 years in the business.

Private Banking delivered more than [ $13 million ] of sales events, and we also saw encouraging activity from asset management and newer growth initiatives. Many of these opportunities are becoming larger more strategic and more enterprise-wide in nature. Clients are engaging with SEI across multiple capabilities rather than a single service or solution.

Over the last several quarters, we've emphasized that the quality of sales events is every bit as important to us as the quantity. The results we're reporting today validate that point. We're winning opportunities that leverage existing capabilities, require less incremental investment and contribute more quickly to our financial results. This is a key driver of the strong growth and profitability we're seeing across the enterprise.

As we look ahead, our pipeline remains outstanding. Activity levels are high. The opportunity set is broad-based, and we're seeing continued engagement from many of the largest and most sophisticated firm in our target markets. But none of this happens without the incredible focus and execution of our workforce. And I thank them for another amazing quarter and for their energy and passion to lead SEI every day and delight our clients.

With that, I will turn the call over to Sean.

Thank you, Ryan. Let's start on Slide 4. Ryan highlighted the outcome. I'd like to spend a few minutes on what's driving it. The results this quarter were not the product of a single event. They reflect strength across the business, the continued conversion of prior sales success into revenue and the operating leverage that comes with sustained growth and disciplined expense management.

The 38% increase in adjusted EPS from the second quarter of last year was driven primarily by core operating performance. Mid-teens revenue growth, 500 basis points of margin expansion and a 3% reduction in share count. The quarter also benefited from a handful of investment-related gains. Most notably, our consolidated co-investment in an LSV hedge fund contributed $7.5 million during the quarter through the net gain on [ VIE's ] line item. We invested $50 million in that strategy last year, and it has generated over $12 million of gains in the last 12 months after excluding noncontrolling interests. It's off to a good start. We also recognized nearly $4 million of mark-to-market gains across several other co-investments during the quarter.

Turning to Slide 5. We Revenue and operating profit increased across most of our businesses. And I think it's worth noting the strongest operating profit growth is coming from businesses that see little benefit from market appreciation. In other words, the growth is being driven by strong underlying business performance. IMS generated revenue growth of 17%, reflecting the conversion of prior sales success into revenue. Private Banking revenue increased 11%, driven by growth within the existing client base. [ Advisors ] revenue increased 30%, which did benefit from higher market values and the contribution from Stratos. Operating profit growth was broad-based, reflecting both revenue growth and continued operating discipline. Institutional was the exception with operating profit roughly flat with last year as we continue to invest in the asset management initiatives Ryan discussed earlier.

This quarter's performance reinforces the point Ryan made earlier. The quality of sales events is just as important as the quantity. Over the last 2 years, we have seen meaningful improvement in both. New business is converting into revenue more quickly, implementations are generally shorter and less expensive and the economics of those wins are margin-accretive. Result is stronger revenue growth and improved profitability.

Moving to Slide 6. Adjusted operating margins increased 500 basis points compared to the second quarter of 2025 and 30 basis points compared to the first quarter. Compared to last year, revenue increased by $82 million, while expenses increased by $34 million. Importantly, margin expansion came while we continue to invest in future growth across the business. We added resources in key areas, invested in product development and funded a number of strategic initiatives while continuing to actively manage our overall cost base. Compared to Q1, margin improvement was led by IMS and lower corporate overhead.

Private Banking margins declined modestly from the first quarter due to several significant client implementations continued investment in leadership and sales resources. Even with those investments, Private Banking margins were more than 4 percentage points higher than the second quarter of last year. In Advisers, Stratos contributed $21 million of revenue, up 11% from Q1, reflecting a full quarter of contribution from several smaller transactions completed late in the first quarter. Stratos generated $2 million of operating profit before noncontrolling interests. Excluding acquisition-related intangible amortization, Stratos EBITDA exceeded $9 million in the quarter. Excluding Stratos, Advisearnings margins were essentially flat with the first quarter and more than 3 percentage points higher than the second quarter of last year. IMS margins improved both year-over-year and sequentially reflecting continued revenue growth and operating leverage.

Finally, the sequential decline in corporate overhead was primarily attributable to approximately $3 million less severance-related expense than the first quarter.

Turning to Slide 7. The sales success we discussed over the last several quarters continued in Q2, providing further support for our confidence in future growth. Second quarter sales events totaled $43 million, bringing the year-to-date total to $110 million. For perspective, just a few years ago, $110 million would have been a record for an entire year. IMS led the quarter with $32 million of sales events. Approximately half came from new client wins, including continued contribution from the 2 large relationships announced last quarter. The remainder was driven by expanded relationships with existing clients and professional services activity associated with the several significant wins announced over the last year. By asset type, approximately 3/4 of IMS sales events came from alternative investments. This underscores our commentary regarding the durability and growth in the demand for alternatives.

Ryan mentioned his level of C-suite engagement, but he wasn't the only one racking up airline miles this quarter. I personally met with executives from several of our largest IMS clients and prospects. I can tell you that SEI's enterprise position is resonating. The conversations were constructive, engager levels are high, and there is growing interest in expanding these relationships.

Private Banking sales activity was driven by new regional banking flying wins, the conversion of existing clients from [ Trust 3000 ] to [ SWP ] and strong client demand for professional services, including SEI Data Cloud. Private Banking also continued to have success with recontracting activity, executing contract renewals representing $13 million of annualized revenue during the quarter, building on the $34 million achieved in Q1. Across advisers and institutional, net sales events were modestly negative during the quarter. We continue to see demand for newer offerings, including ETFs and SMEs though those products generally carry lower fee rates than traditional mutual funds.

Turning to Slide 8. Quarter end assets finished substantially higher than where they began in the quarter, driven by strong market appreciation. Assets under administration increased 5% driven by the funding of alternative mandates and market appreciation within traditional. LSV generated net inflows of approximately $2 billion during the quarter, a notable reversal from recent trends. Inflows were driven by the funding of a new large new mandate that was awarded following an extensive diligence process and strong long-term investment performance. Combined with market appreciation, total LSV assets increased by nearly $17 billion during the quarter. LSV's investment performance also remained outstanding. Several non-U.S. strategies, including global large cap and emerging markets continue to outperform their benchmarks, translating into nearly $17 million of performance fees during the quarter of which $6.5 million was attributable to SEI.

Income from LSV was partially offset by a onetime charge. Excluding this charge, SEI share of LSV earnings would have totaled approximately $43 million during the quarter. Within SEI's asset management businesses, net flows were relatively flat, with modest inflows in advisers, offset by outflows in institutional. New products are gaining traction. Distribution capabilities continue to improve and client engagement has increased. Those developments are not yet fully reflected in our financial results, but they represent measurable progress from where we were a few years ago.

Turning to Slide 9. We ended the quarter with nearly $400 million of cash while continuing to invest in the business and return capital to shareholders. During the quarter, we repurchased $112 million of stock at an average price of $87. Repurchase activity was lower than the first quarter, which was driven by the significant opportunity we saw during the market volatility earlier this year. Given our cash flow outlook, we would expect repurchase activity to increase from second quarter levels.

In closing, the second quarter highlights the earning power of SEI's business model. The strength of the quarter was broad-based, with growth across nearly all of our businesses and continued evidence that the sales momentum we've discussed over the last several quarters is translating into financial performance.

With that, operator, let's open the call for questions.

[Operator Instructions] Our first question is from Jeff Schmitt with William Blair.

The Private Bank margins have improved, I think, more quickly than you originally thought. And I know you've pointed to them returning to the historical kind of 25% to 30% range. Could there be upside to that and over what time period?

So thank you, Jeff, for your question. If you recall our Investor Day presentation, we talked about a [ 5-gram ] strategy for Private Banking margin improvement we are executing that strategy. That is -- it's a 2-pronged strategy [indiscernible] we are focusing on growth initiatives. And second set of initiatives are around efficiency improvement. And so what you're seeing over the last 5, 6 quarters that we are improving our margin, we are going right [indiscernible] that's the outcome of that strategy execution.

We will be judicious in terms of where we need to invest so that we can continue to deliver our backlog and also continue to invest in our new products as needed for our clients to grow their business. So it will be a balance between our growth initiatives as well as margin expense and [indiscernible] improvement. Ryan, Sean, do you want to add anything?

I mean the only thing I would add there is really with all new wind sales events, we are seeing an increase in professional services in essentially every single new deal. In those new deals, professional services has essentially exceeds what our historical margin of 20% is, which is leading and contributing to higher margins, and we expect that to continue.

Okay. That makes sense. And then maybe more broadly, are you seeing demand for outsourcing, just kind of increase in general across your businesses, just thinking of companies wanting to modernize and use AI? And I guess, are your AI capabilities kind of far enough along to help you capture some of that? Or is that what the IBM partnership may help you with?

Yes, Jeff, it's Ryan. I would start by saying at the highest level, the answer to your question is an emphatic, yes. So we are seeing a demand for outsourcing across almost all of our segments. And I think that's driven by 2 major trends. One is I think organizations really are -- the value proposition we have about helping organizations more intelligently deploy their capital towards growth is absolutely resonating. And then you combine that with the breadth of our capabilities and the referenceability of our clients in the market, it's a pretty powerful combination.

If you take that down to a sub level and talk about areas around technology modernization and AI, I'll turn to Sneha to maybe give some color on the progress we've made in AI and some of the demand we're seeing from clients.

Yes, absolutely. So it's really interesting for me from our clients is that they're all coming to us because they're going through the same operating model change that we are. And as they're looking at their own operating model, they're questioning where does that competitive advantage fit and where can they leverage partners more. And since we're a trusted partner in so much of their business, the first question now asking us is what more can you do for us?

So we're starting with just sharing the learnings of our journey and how we're deploying it, what we're seeing. We're now getting a lot of demand for our Data Cloud services and our Professional Services around the AI readiness. And so that's becoming an increasing area of client conversation and demand. And we think that, that's going to lead into even more services that will help them figure out their new operating model as we go.

And Jeff, one other thing I would add there, it's Sean. The reason -- really the primary reason for the IBM relationship, we do have a lot of labor-intensive processes. IBM is really supporting us in that automation journey, helping us co-create agents with us. And it's really -- it's so important to the business because we need to scale. The demand for our services and for our products has gotten to a point where we need to be able to scale quicker to meet that market demand and support our clients in their growth efforts.

Our next question is from Ryan Kenny with Morgan Stanley.

Just want to follow up on that last question on Private Banks and AI. You've had strong revenue growth for a while, $10 million of sales events in private banks. So is the increased demand mostly coming from AI? Or is there something broader going on that's driving outsourcing? And then just to clarify, is the IBM relationship mostly focused on the Private Bank segment? Or does it span across the company?

So first, I'd say that we'll go around here. When you look at the banking segment, as Sanjay mentioned around the call around margin expansion, the primary growth driver is still core operating platform investment processing, the SEI Wealth Platform and our back-office services. The expansion of professional services, we've talked about I would say, Data Cloud is probably the #1 demand over AI right now because without a data strategy and the right infrastructure around data, you don't have an AI strategy. So that has resonated extremely well, Ryan.

But I think the core of what we do in banking continues to remain and Sanjay has done a brilliant job of kind of expanding the segment in terms of capabilities and solution set. And I'll let Sanjay provide some color on that. But IBM is an enterprise. Everything we do here Ryan is enterprise-wide. IBM is an enterprise-wide strategy. We're starting with IMS, Michael's businesses are participating next, and then we will look at the back office services, the middle office that support banking. But every part of SEI will be participating in the IBM project.

Got it. That's helpful. And then just shifting gears to IMS. So it was noted that 3 quarters of the sales events came from alternative investments, and you've been clearly a leader in the alt space for some time. So can you just walk us through what's differentiated about the alts platform and what's driving the demand for a outsourcing and alts?

Yes, happy to answer that. So I would say right now, we have with all of the activity that Ryan and Sean spoke about and help from Sanjay and Michael, we're having many, many enterprise-level C-level conversations. And those conversations are really leading towards large alternative managers looking for transformation and trying to transform their back office. So we are in the middle of several large conversations with managers that are looking to move from insourcing to outsourcing. So we have a stronger pipeline than pretty much we've ever seen before, and we're seeing really, really good traction. And any of those large conversations could turn into massive relationships, just any single firm in and of themselves.

And then what I would add to that, Ryan, is I would say when you look at what differentiates SEI relative to the competitive set, we have an unbelievable set of people from an operational perspective. Our ability to handle sophistication and complexity we believe, is second to none. But to the point I made earlier, it's one thing to handle complexity and sophistication, but you have to do it at scale. It's got to be right every single time. These are the world's largest brands. And our delivery experience has been phenomenal, and we focus intently on that.

And I'd say the last few years, our expansion of investments into technology has allowed us to expand some of those capability sets in terms of information delivery. I mentioned in my script around digitization of the NAVs onboarding. So we're always focused on what more should we be riding in the platform. And I would say another secular trend that's kind of working in our favor, and I think we see this across Michael's business, Phil's business and Sanjay's. This firms want to do more with fewer. They do not want to continue to add more partners to their stable, but the criteria to be part of that nucleus is really around the ability to continue to innate, continue to deliver, but deliver at scale and try to stay ahead of the curve.

We've also added 2 new solutions that are going to add meaningful revenue over the course of the next several years or so. We talked about them both in Investor Day. One was alternatives and retirement and the other one is retail off. On the [ Alton ] retirement side, we signed up 5 household names over the course of the last quarter or so, and we expect similar progress in Q3. So we're making tremendous traction there.

And on the retail side, we launched our transfer agency. The first client goes live on August 3. So we're finally going to be in the retail interval evergreen bun space, which we've been just sort of on the fringes up before. So we expect both of those new solutions that differentiate us in the future. So we're looking forward to great things.

Our next question is from Crispin Love with Piper Sandler.

Great. Just on revenue growth, it's accelerated that the past few quarters was up 15% year-on-year in this most recent quarter. When you look at the back half of the year and into 2027, how do you think about revenue growth? Are current levels in that low to mid-teens range sustainable just given all of the strong sales events you've had in recent quarters as they continue to flow through?

Yes. Thanks for the question. As you know, we don't give guidance, but we will talk about pipeline. Our pipeline, as Phil mentioned in IMS, Sanjay seeing the same thing I think we're seeing momentum, as you heard in my script and Michael Lane's business and asset management. So our pipelines are strong as they've ever been.

So when we look at pipelines, we think about second half revenue, we're encouraged with what we're seeing.

Great. And then just one follow-up on just your most -- the answer you just gave on kind of the retail and retirement channels. Can you just kind of dig into a little bit more kind of why you weren't in that area already? I think is it true that you exposure in the retail [ all ] semi liquid products is, what did you say, coming live August 3? And is the opportunity there mostly going to be within clients you already have relationships with some of the larger [ salts ] out there?

Yes, that's a great question. I mean, Phil and I tag team this one. The honest answer, Crispin, it goes back to kind of scale. And I mean I think we don't launch something unless we believe it is world-class. So maybe we were a little bit late to the party but we do things pretty deliberately and thoughtfully to ensure that when it goes live, it's going to meet the standards that our clients expect, and you know the brands that our clients are, we won't do anything unless we truly believe it is going to be best-in-class. So maybe it was 18 months late, but we wanted to make sure it was truly going to be market-ready for the types of clients that we expect to see.

Phil, if you want to give a little bit of color to second part?

So the only thing I'll add is [ Alton ] Retirement is a brand-new category. So that category didn't even exist up until about 6 months ago, and we expect to see that hockey stick up over some period of time as the DOL issues new guidance to protect the alternative managers. So that's brand new. And we're 1 of 2 competitors in the space. So literally, we are practically cornering that market right now.

On the retail aAlightside, we always did private BDCs and other types of products like that. But until we had a real bulletproof like Ryan said, registered transfer agency, we weren't in a position to kind of do that and do that right. We are hoping to take away larger funds from competitors because no one likes their transfer agent. So right now, there are probably 20 or 30 large funds that are $10 billion or $15 billion or $20 billion that we're going to target. So we could sell tons of hundred thousand dollar funds, but we really want to go after the larger ones. So I think we're in a good position to do that.

And then if you just -- just to kind of switch gears a little bit to stay in kind of the same lane, if you look at some of the things that Sean and I highlighted in the script about what's going on in some of Michael Lane's businesses, those things might be at earlier stages, but the same thought process. When we think about our product lineup with Michael and the team have done with ETFs or the partnership with Carlyle, we're really thoughtful in terms of saying, okay, let's get these new solutions out to market, but let's make sure when they are launched, these are things that we believe the market really wants and believe that we're actually going to satisfy a different need.

So we're really excited about some of the early indications that we highlighted in the script around that area.

Our next question is from Alex Bond and with KBW.

You called out the Data Cloud offering as a driver of some of the strong recent Professional Services sales. Can you maybe just expand upon why this -- or the recent enhancements there have been particularly value added for clients? And then also looking at the investment in other businesses lines, it looks like revenues were higher there again quarter-over-quarter. Can you just expand upon what's driving the revenue expansion and I'm thinking it's probably spear, but any other color there would be helpful as well.

Sanjay, you want to take Data Cloud?

Yes, sure. So if you look at Data Cloud, you should think about that capability as a foundation for any data modernization information delivery modernization data [indiscernible] enterprise. That is the foundation for any AI initiative for banking finance services industry. And that was the major reason why we jumped on creating that capability. And we are seeing really good traction with both existing clients and any new client we are signing through our platforms. And now we're seeing that traction in IMS business as well. So this is -- again, we are leading that as a more of an enterprise capability.

And with Data Cloud solutions, I'll think about for a banking client, the bank is not just a wealth [indiscernible] business. They also have core banking, combine banking, insurance, other segments. We are providing capability to carbonize that entire data together and then provide information delivery and intelligence on top of that. So that's why that is resonating really well. And so it's not just SEI Data Cloud Solution, but good professional services opportunity as well with both new clients as soon as our existing client base.

And on the second half of your question, Alex, the investment in new business, you're spot on. It's [ spear ]. It's increased revenue in [ sphere ], which that's where it sits.

Okay. Got it. That's helpful. And then just a follow-up on some of the earlier IMS questions and particularly the 50-50 split there between sales coming from new clients and existing clients. And I think Phil touched on this a little bit, but just trying to determine how we should be thinking about the forward pipeline here in the sense of new logos versus expanding existing relationships? Is that 50-50 split something you think is -- can continue? Or is that going to depend on quarter to quarter? Just trying to figure out how we should think about the composition of the forward pipeline there?

I think 50-50 is probably a reasonable expectation. I think the thing that is out of our control, which is a good problem to have is the blast radius of some of the announcements we have made in the last couple of quarters are pretty wide. So the inbound interest we have gotten in the last 90 to 100 days from other organizations it's probably exceeding a norm. That's a good problem to have. But Phil, do you think 50-50 is probably fair moving forward?

It is now. I think a while ago, we were 60-40 more cross-sells than new names. But with the amount of activity we're having a lot more new names. And the interesting thing is with the 2 large clients that we announced not that long ago, not much of that revenue has matriculated yet. So we expect to see a fair amount more of that come online in early '27. But we have some of the funds are going live now and those both of those projects are tracking really well.

Our next question is from Alex Kramm with UBS.

Let's been asked. Maybe just quickly, I don't think you've talked about Stratos in much detail. You've had it for, I don't know, 7 months or so now. So just maybe just provide a quick update on cross-sell initiatives or other things that you're seeing? I think you touched a little bit on M&A as well. So yes, just give us a quick update, please.

Sure. So Alex, good to hear from you. So EBITDA, as I mentioned in the script, we were about $9 million in EBITDA this quarter. There's another call a little north of $1 million of integration costs. I think for the quarter, a little over $10 million in EBITDA at times that by 4 run rate. We're about right on the bar from where we would expect to be through Q2. We were there as well coming out of Q1, if you kind of normalize some of the timing of the deals. So we're right on point.

This is being run well. As you can imagine, 7 quarters in, we're getting to know them much better. They're getting to know us. We're working really well with thinking about what our inorganic growth strategy are, what our organic growth strategies, Ryan?

No, I was just saying, I mean, Michael, you were just -- you and Jeff just had some of the largest Stratos advisers on the campus, if you want to provide.

Yes. The good news is Stratos we are literally -- our pipeline is a record high for Stratos across both M&A opportunities as well as recruiting opportunities. So those are almost 50-50 split right now. And very significant pipelines. So we feel good about that. We closed the [ EBP ] deal. Those are on board now. Those are now W-2 advisers within the Stratos system. And we are implementing a series of other -- both infrastructure capabilities. We launched a new CTO within the Stratos business that is helping with the integration of several of the different technology needs to onboard clients faster so we can scale that business even quicker and improve the customer experience as well as we are working together with them, and we have launched with over 30 advisers and [ OCIO ] initiative to become a lead generation source for our [ OCIO ] business as well as that is a growth opportunity for those Stratos advisers.

Okay. Good. And then maybe secondarily, and hopefully, this is not so nitpicky, but there -- there was recently, I think, a few weeks ago, the benchmark capital sale from [ shorters ] to, I guess, [ Soderberg ]. I know you have a technology or a relationship there. Not sure what exactly you do there, but I know there's existing technology. So just wondering, I know sometimes these things can take a long time to play out. But maybe can you just dimensionalize what you do for them, how relevant that is. And how you feel about retaining kind of like your services there?

So Benchmark has been a long-standing SWP client, Alex, in the U.K. So [ Schroders ] continues to be a large client for SEI globally. And Sanjay and I have a meeting with the partners at [ Soderberg ] in the next couple of weeks to expand more about what SEI's capabilities are and to get a better understanding of their long-term strategic objectives with Benchmark Capital.

[Operator Instructions] Our next question is from Patrick O'Shaughnessy with Raymond James.

So you mentioned likely ramping up your share repurchase activity in the back half of the year, but you also spoke to a healthy M&A pipeline. How are you thinking about balancing the ramping up of repurchases versus keeping powder dry for M&A?

So yes, so we would expect probably second half of the year to be more in line with Q1. As far as keeping the powder dry, we've got a $600 million or so line of credit revolver that is essentially untouched. We have plenty of powder to support any of the M&A activity regarding Stratos. So no concerns there from a return of capital to shareholders either through the dividend or through stock buyback.

Got it. Appreciate that. And then a question about investment advisers and maybe just about the broader RIA custody space or adviser custody space. Are you guys currently offering or contemplating offering the building for advisers to utilize long short tax-efficient SMAs at [ Schwab and Fidelity ] our offering via their custodians?

Thanks, Patrick. We as a trust-based custody platform cannot actually hold long short strategies and offer loans or strategies on our platform. So we do not, at this time, being that we're not a bank have any plans to include those on the platform.

This concludes our question-and-answer session. I would like to turn the floor back over to Ryan Hicke for closing comments.

Well, thank you all for the discussion today. We really appreciate it. We're encouraged by the execution and progress we've seen so far this year. I think the reminder we give ourselves as leaders and a management team is to stay humble during the highs, have courage through the lows and maintain perspective and integrity throughout the whole process. I hope everybody has a great evening.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.

Alright. So we are pleased to have with us Sean Denham, Executive Vice President and Chief Financial and Chief Operating Officer at SEI. Sean, thanks for joining us today.

My pleasure. Nice to be here.

So last year, the story for SEI seems to be about inflecting sales momentum. And this year, it's very clear that SEI is executing. Conversation seems more about durability. What gives you the confidence that SEI can sustain this higher level of sales momentum that we've been seeing?

Yes. So it's -- first off, it's always great to be here. Thanks for inviting me. Yes, we're really confident in the sales momentum mainly because we have insight into what our pipelines look like. And so we've talked on multiple of our earnings calls about that we're confident where the pipeline sits. We're coming off Q1 where we won really 2 of the largest wins in SEI history. We won 2 large mandates in our IMS business, where those managers were historical in-sourcers of fund admin work, et cetera. They decided to move to an outsourced model.

So that was a huge stake in the ground moment, one of the best quarters in SEI history, record sales events. We do see that momentum continuing, not just in our IMS business. Our private banking business has shown significant momentum. That business is a little choppier from quarter-to-quarter. We typically win 10 to 12 new deals a year. Those can bunch in a given quarter. You saw that in 2025, where we actually in PB and our private banking business or in that unit had a really large Q4. But the momentum really is because we're executing incredibly well.

Our sales teams are laser-focused. Our business unit leaders have our sales teams really focused -- and we have a lot of momentum. And we have -- we're now selling really the entire ecosystem. We have a lot of additional solutions like professional services that has created a large momentum in the market.

And what's specifically the driver of new sales? Is it more aggressive sales culture? Is it better cross-selling? Is it demand increasing, product improving? What's the biggest driver?

Obviously, the easy answer is all of the above. But if you take them one by one, there is large market demand. So -- and again, you -- as I just mentioned, we saw that in Q1. I think as businesses continue to look at what their core business is, those recent 2 mandates, I think, will -- we expect to be a trend. So I think as firms are looking at what is core to their business. So in the investment manager space, -- they've got into the business to raise capital and deploy capital.

They didn't necessarily get into doing fund administration. And where we play in the highest parts of the market, those managers are looking to scale and having to scale the administration piece of their business as opposed to outsourcing that. I think a lot of those managers that have been classic in-sourcers are waking up and saying, do I really want to keep up with the technology, the hiring needs? And also, do I really want to be focusing my attention where focus is needed in things like AI. They're relying on us as in that outsourced model to be making those investments for them.

And are you seeing larger transformational mandates? Or are clients still taking a more modular approach to outsourcing?

Yes. It really depends on the business unit and just -- it really depends on where we're playing in the market. So -- in that IMS business where we play, those are really large mandates, and we've enjoyed to be the beneficiary of that. In our private banking space, whether someone is acquiring or investing in our SWP platform or in our tech and ops space, those are, again, transformational wins for us.

They're also transformational for those companies or our now clients. There's also a little tuck-ins here and there like around professional services. So whether we're selling professional services as a package in our private banking business unit or we're having one-off wins around selling Data Cloud into our IMS clients. So it really depends, but it kind of spans across the business and whether they're large mandates or just little deals.

So on the IMS side, alts have been a major growth engine. And what do you view as the differentiator on SEI services versus some of the other competitors out there? What's driving the mandate wins?

Yes. So honestly, it's really execution. So where we play, we focus our attention on the more complex parts of the market. So 70% of our IMS business is in the alternative space, 30% on the traditional. And then inside that alternative space, those can be the more difficult, whether striking NAVs or everything that goes along with that work around fund admin. We're really good at that. And case in point, again, I don't want to keep bringing up those 2 wins, but I think they're a really, really good example of those are probably 2 of the largest wins that have been out in the market over the last few years.

And in each of those cases, SEI is the first phone call. And we're going to be in those RFP situations. They're going to be competitive. But in each of those, we were one of the winners of both of those large wins. And that's because of the execution of how we go to market. We pride ourselves. A lot of people can say it. It's actually hard to do, but we actually provide really strong white glove service. I was actually with one of our clients yesterday who brought that up.

And some of the things that we're doing around AI and automation, the question was how, if at all, will that affect the white glove service we've you sold us on? And will that change at all? And the answer clearly is no. And the way we construct our teams, the way we support our clients, we believe, is a differentiator in the market.

And then what's driving the demand for outsourcing? What are some of the biggest pain points that you are solving for alternative asset managers?

Yes. I think it's a couple of things that I said. And so as the largest managers in the world continue to launch new funds, as they continue to scale, as they have larger capital to deploy, they did not get in the business to do that. So do they really want to be scaling the headcount as we sat here today, maybe less today than a year ago with the advent and increasing rise of AI and the role that plays in the administration business.

They don't necessarily want to be using their capital to focus on the technology that's required, the headcount that is needed to scale at least where it was and all the investments they need to make in AI. They're staying on top of it. The -- each of these managers have really strong governance systems where they call us, they want to understand as their outsourcer, what we're doing and how we're thinking about disruption, how we're thinking about investment, where AI is going to play a significant role, where automation is playing a large role. And then what is our governance that surrounds that. So while they -- while they are outsourcing in a meaningful way to us, they still have those same process controls that you would expect from them.

Let's shift to private banking. So private banking margins have remarkably improved over the last several quarters. What is structurally driving that improvement?

Yes. So number one, number two and number three is great leadership. So Sanjay Sharma, who took over that business 4 years ago, has an engineers' mindset, who approached the business in that way. And so when Sanjay took over, we were anywhere from maybe slightly negative margins depending on the quarter to 0 margins. And he really just instilled a level of discipline from an overall cost standpoint, how we think about technology spend, et cetera. He did a really amazing job there, rightsizing that technology team, the workforce, et cetera.

On top of that, as you can increase revenue the way we have in that space, you're going to improve margins. And so being able to scale PB and how he did that, our previous focus was really focused on the largest institutions in the U.S., which about half of those are our clients. Moving down market was really critical and integral to the success of not just revenue growth, sales events but also margin improvement. So that's number two.

Number three, the advent or the newly launched professional services that has been really successful in our private banking space that's now starting to drip in other parts of the business. That was huge. So if you rewind 2 years ago, we were winning great work, selling our SWP platform, our technology and operations together. We are doing implementation work, which you would -- which we characterize as professional services. But we've actually identified 15 to 20 additional services where those margins are closer to 30% to 40%. And so every new deal that we're doing has 3 or 4, 5, 6, 7 different professional services that are going along with our technology and our classic ops platform. That's been huge for us.

So when you can add our historical margin rates on those technology and operations, add on top of that 5 or 6 professional services. So where a deal maybe was $2 million to $3 million a few years ago, those deals now are $7 million, $8 million with much higher margins, that's where you're seeing the margin improvement. And the next question we often get is, okay, can that continue? And so we've gone from 0 maybe 4 years ago in margins. We've touched in Q1, 20% margins. Sanjay, when he took over the role with Ryan Hickey, our CEO, said we expect margins to be able to get back to historicals. As a reminder, historical margins were somewhere in the 25% to 30% margin rates. We still see an opportunity to go further there.

And is that a multiyear story?

Yes. It's -- I don't think you're going to necessarily see linear growth up to the right there. We're probably a little further along than what we expected 4 years ago when we built out the 5- or 6-year plan to get there. I wouldn't say probably we're definitely ahead of schedule there. But that's actually not how we run the business. So we're not looking quarter-to-quarter, hey, it was 20% last quarter, how do we get to 21% next quarter. You may see a little choppiness. You may see 20% down to 19%, back up to 20-ish, but that's kind of our run rate right now, and that's where we're focused. Yes, so that's how I would think about it.

And how do you manage margin expansion goals against needing to invest for growth?

Yes. So that's the hardest part about being a public company is SEI, we have a very strong balance sheet where we are -- we have no debt, et cetera. So capital really is not the issue for us. It's where we can make the right investments to maximize that I call it expense versus capital, how we can maximize the expense of those investments with future needs, et cetera, versus what we can really afford from managing our own internal expectations and what the Street's expectations may be.

I think we're doing a lot better job today than we were doing a couple of years ago. We've instilled a lot of processes, accountability controls to make sure every dollar spent is really in a fashion where we are going to have the maximum return on that invested capital.

All right. Let's talk about the transition underway in asset management. So there has been an improvement in net flows. What is SEI doing in product development, distribution and marketing to continue this improvement?

Yes. So Michael Lane has been with SEI, former BlackRock, led the iShares program at BlackRock, came to SEI as a reminder, a little less than 2 years ago. At Investor Day, we talked about Michael's vision of reimagining asset management. And he's done that. I think we are moving from the phase of reimagining asset management to now executing on a lot of the bullets he laid out there. But it's really refocusing on the ecosystem sale, where historically, we may have led in that space with trying to sell custody against Schwab or Fidelity just on a one-on-one basis.

We're probably not going to necessarily win that deal. But when we couple it with when we couple it with our technology, our asset management, some of the other services that we can provide, especially as we move upmarket, we're finding that, that story and that sale becomes a lot easier story to tell, and it's resonating with the market.

Over the last, I would say, a couple of quarters or definitely over the last year, we've had some of the largest wins in SEI history in that space or in Michael's business. And it's a result of kind of changing the mindset of leading with custody, how we package custody with our asset management product, building out our investment capabilities, reducing our reliance on sub-advisers, what we should be doing in-house versus externally. We've upgraded our distribution talent. We've been investing significantly in upgrading our talent in Michael's business. We've been expanding our alts positioning in partnerships like our recently announced partnership with Carlyle. So there's a number of things that we're -- that Michael is launching, and that's, I think, a big driver of the -- where you're seeing the increase in flows.

And then in the investment advisers business, how does the opportunity for SEI change as the wealth management industry consolidates? You're seeing RIAs simultaneously getting larger, more sophisticated. How do you adapt to that environment?

Yes. I mean we see ourselves as a beneficiary as we see consolidation. As RIAs continue to consolidate, you see more of that. They're much more receptive to what I just mentioned of the buying into an integrated ecosystem. We still have -- we still sell individual capabilities. You can still buy custody, you can still buy our asset management products. But when we can tell an ecosystem story, we become the beneficiary. So as we see consolidation, we really just become a beneficiary. They're looking for a complete platform, and we're really one of the only firms that sells that complete platform.

What about Stratos? What's the long-term vision for the Stratos platform?

Yes. So Stratos was a really important transaction or deal for us. And just to remind, the reason why we felt we needed to do the Stratos deal, Hickey -- Ryan Hickey, our CEO, probably 3 or 4 years ago said, he talked about 2 areas where we would expect some inorganic growth. One of them was in the U.S. RIA. And the reason for that was multifold.

The first was we felt we needed to be closer into the advice space. Stratos, Stratos did that for us. And so where you'll see margin compression, you'll see pricing pressure on different parts of the business or inside that -- inside the financial service industry. The one component that has been relatively untouched is the advice base. So whether an adviser charges 80 to 100 basis points for advice 10 years ago versus today, it's been relatively unchanged. So we felt we needed to be closer to the advice base.

On top of that, over the last few years, we had seen without having an RIA, we felt we weren't providing our adviser base who have been with us a very long time with an opportunity to potentially monetize their business. So as they were maybe thinking about an exit, we were seeing some outflows, not that they weren't happy with SEI. They really loved our offerings, our platform, et cetera, but we didn't have an answer for it.

So there was a little bit of a defensive position in order to making sure we had an RIA, so our advisers had a home to land in if they got to the point around monetization. So those were 2 key areas. The third was the obvious 1 plus 1 equals 3. So now having an adviser channel where we can sell -- provide our custody platform, our asset management platform into those advisers has been critically important. And I think a third thing that has been -- was a little bit of a surprise where we didn't have as much of a focus, at least in our original thesis was in our institutional business. So as we've educated the Stratos network advisers on our capabilities, including what we do around OCIO, in foundations, et cetera, there has been a lot of curiosity from the advisers.

And just as a reminder, we only closed the Stratos deal maybe 6 months ago, almost to the day. I think it was around December 1 or 2 or somewhere around there. So sitting here June 6, it's been about 6 months. But we've had a lot of interest. So we're continuing to educate that market. We feel like we've now just expanded our sales force, not just in institutional, but across the adviser network in our investment advisers business unit from a sizable team, but to a much more scaled team across the country. And so that's been a really nice added benefit.

But that's kind of the thesis for Stratos. And what early returns have been is through Q1, it's -- as we mentioned at our -- when we did earnings, it's met up to all of our expectations, including the cultural fit, which was really important to Jeff Concepcion, the founder of Stratos and really important to us.

All right. Let's talk about AI. So a lot of opportunities for you. Before we get to that, the market narrative has shifted in the last few quarters from opportunities to risks. And how do you view AI changing barriers to entry in the servicing businesses? What are the risks that you worry about? And how should investors think about SEI protecting the moat that's been built?

Yes. So obviously, we can't do a session without talking about AI. As we think about it, first off, in our business, we do believe we've built some moats. What -- how we think about it, AI lowers the barriers for point solutions, but not necessarily for integrated regulated platforms. And that's really what we have. We have integrated regulated platforms.

Our client base looks at us in a way where they entrust us with their outsource models and we obviously take that very seriously. So having -- it's not just one solution that we provide. We built moats around technology operations and that regulated infrastructure. So we think about AI from a risk standpoint like a brick wall, and we've said this now a few times publicly.

We don't believe that there -- the brick wall necessarily has the opportunity to be completely disrupted, but we do see there could be bricks in that wall that have the opportunity to be disrupted. And that's really kind of those point solutions. So there's a number of things that we're doing.

Number one, we've -- a number of years ago, we created a Ventures Committee. That Ventures committee is led by Sneha Shah. Today, we actually announced elevated her role to the Head of AI for the company, someone who wakes up every day thinking about artificial intelligence and the role we play from a governance, et cetera, technology and everything that goes along with it. So that's one thing we do.

So the Ventures committee spends a lot of time working with the venture capital groups from around the country, identifying is Jane Doe, John Doe sitting in a garage trying to disrupt certain parts of our business. And so making sure we understand what is out there, is there investments we want to make, and we've done that in the past. We've made investments into companies to get closer, have a front row seat to certain things we want to be smarter about. So that's in the Ventures committee, that's in the PE community, et cetera. That's number one.

We've also classically, as a lot of companies are doing today, have an internal disruption team, and we've identified areas of our business that we think are ripe for disruption. And so that team all day long has a very handsome budget and are helping -- are creating agents and brainstorming with our business units on the opportunity for disruption. So trying to disrupt ourselves before there's opportunities for others to do so.

So that's number two. And I think those are probably the 2 largest areas where we're focused. And then just everything else that we're doing around creating the right levels of budget for our technology teams. We've announced the partnership a few months ago with IBM. IBM has been a great partner over the last 4 or 5 months, doing a full assessment of the organization.

And that's really to make sure we're using agents that classically in our fund admin business and other parts of our business has been very labor-intensive. So how do we think about automation at scale? How do we think about where the right spot for agents are at scale. And so those are the 3 areas that we think about from a risk. But we feel and I think our clients feel that we're doing all the right things today.

So it sounds like you are very proactive in thinking through risk on AI.

Yes. Look, we're humble enough and not arrogant to think that we have not -- that we have figured it out because we have it, no one has figured it out. But I think we're doing a lot of things that other companies are doing. We're putting the right tools in the right hands, creating the right budgets, putting the right governance controls around everything I just said.

So I think we are thinking about it the right way. I don't feel the million-dollar question that I think companies always ask themselves, are we behind? Are we on par or are we slightly ahead? I don't think we're behind. And so I'm really comfortable where we are. Again, I think we have the right process controls in place right now. And I think the 3 or 4 things that we're doing has put our clients at ease and -- but again, we're not being lackadaisical.

And what about opportunities? Clearly, there are a lot of opportunities for AI to enhance the SEI business model, maybe enhance margins. What do you see as the biggest positive use cases for?

Yes. I think the same things I just talked about from a risk are really the opportunities for us as well. I had mentioned 3 or 4 times at the opening of this that as companies have in our IMS business classically thought of themselves as in-sourcers I think those folks with the rise of AI are thinking, do we really want to be making those same financial investments, time investments in order to get up the learning curve on AI? Or should we be relying on third-party partners to support us in that. That is an opportunity.

There still are, I don't know, 20 to 30 large insources of fund admin that I think with the announcement in Q1 of those 2 large insourcers to outsourcers that have become client of SEIs. I think they're starting to ask themselves questions of everything I just said. Is this really the right business model for us in early days, but we've had some additional conversations with those folks. I think with the kind of the blip in the market in Q1 around when the market stepped around when the Street kind of woke up and said, "Hey, how are we thinking about AI? What are the firms that are ripe for disruption? We had already been thinking about the scaling of the automation with IBM and creating agents alongside of them. So that's not new. That's been in the works for a while now. Yes. So that's kind of how we're thinking through it.

Turning to capital allocation. SEI continues to generate significant free cash flow. Historically, SEI has operated with very little to no leverage depending on the period, sometimes negative leverage. And then you made the Stratos deal. So looking forward, how has your framework around capital allocation changed over the last year or so?

Yes. So it has changed modestly. At Investor Day, we spoke about moving from a negative 1x leverage model to maybe somewhere in the future maybe to a one time positive. And so that is still directionally where we're headed. And I think the uses of capital, we've said publicly, we will continue to do this. We expect to still return 90% to 100% of free cash flow back to our investors. That will be in the form of dividends and the remaining will be stock buyback.

I think in Q1, we purchased back about $200 million of our company stock. We saw a little bit of an opportunity there with the drop in stock price related to some of the things that happen in the market around AI. That's proved to be beneficial. But so our strategy really hasn't changed. I think where you will see an opportunity for us to move from that negative onetime to closer to 0 or maybe even positive we own 57.5% of Stratos. There are markers over the next 7 years where we will acquire the remaining portion of that. And so that is where we would expect to take on some debt really for the first time in many, many years or at least take on debt and not immediately repay it back.

As we think about other inorganic opportunities for us. Historically, we've talked about 2 things, again, the one was U.S. RIA. We checked the box there. We made that acquisition. We talked about European fund admin. And so I think our thinking has changed a little bit there. I think we had thought about over the last couple of years, whether we needed to do a big bang, something to scale our IMS business overseas. I think we've stepped away from that a little bit. You may see small tuck-ins to support some maybe missing solutions in our overall solutions deck in IMS. And so -- but I wouldn't expect anything significant other than repurchasing the remaining options that we have on Stratos over the next 7 years.

And valuations across fintech and wealth tech have reset meaningfully from peak levels. So is that an opportunity for you?

Yes. We are trying to stay pretty vigilant in our strategy. So I talked about being strategic on a couple of things, the U.S. RIA, maybe something in the European fund admin space. We do get inbounds a lot. We evaluate those inbounds. Those are more opportunistic than strategic. I think we've been pretty steadfast when those inbounds come in. Yes, we'll take a look. We'll understand, is there anything we want to rethink. We have an M&A committee as all firms do. And so we'll visit those, but we're really trying to stay down the middle of the fairway on our strategy as opposed to be more opportunistic.

Let's talk a little bit about culture. So SEI has always had reputation for innovation, from your roots and an entrepreneurial culture despite now you're now a much larger company. So how do you preserve that culture as the business scales?

We talk about that all the time. Ryan talks about that all the time, whether it's in a town hall, whether it's with the leadership team, but it's -- if anyone's ever been to Oaks, if you walk around the campus, it's a beautiful campus. The way we -- where Al West, our founder, constructed the campus was very intentional to spur that entrepreneurial spirit. And I think making sure we never lose that is so critical.

I think if you look at even some of the things we've done over the last few years, we talked about some of them just now, striking that, hey, where are we missing? What do we want to invest in? We talk a lot about on-campus best idea wins. We've had a lot -- we have contests around best idea wins. It's not just a term, but it's something we take to heart. And there's a lot -- I won't go into them, but there's a lot of things we've deployed by using the best idea wins concept.

Some of the more meaningful wins or opportunities around striking -- keeping that entrepreneurial spirit alive was really the creation of professional services practice. So that came through truly be an entrepreneur. When Sanjay took a look at the private banking space, and it wasn't just all him, it was his team. We started looking around everything that third parties were selling to support the implementation of the SWP platform. It could be an assessment of pre-RFP, it could be the change management or the sunsetting of the current technology, it could be the transformation, the origin of our Sphere platform, which you can think about that as our cybersecurity platform that we're now selling into the market.

That was all born through the classic SEI model. We had built a world-class cybersecurity. We built it for ourselves. We built our cybersecurity platform ourselves for ourselves, for our technology. And as a result, it became so strong, we started saying, "Hey, is this something we should be marketing outside? And that's actually how that was created. A number of our businesses that we have today were created because we were actually doing it for ourselves. We did it really, really well.

And clients were asking us, "Hey, that's really interesting. Would you mind talking us about that, and we ended up creating services. That's how professional services were born. So striking that balance of how Al founded the company, it got to a certain size and scale, and we did have to adapt. We couldn't run the company exactly the way we were in order to get where we needed to go. And I think Ryan has done an amazing job of striking that balance about keeping that entrepreneurial spirit alive but also advancing the company forward at the exact same time.

So to wrap up, when you look across SEI today, where do you think the company is still underappreciated by investors?

Yes. I love that. That's my favorite question, and it's one that actually most of our analysts and investors ask first. I think in a couple of areas. I think our asset management business is -- the market hasn't built into the opportunity that we have in front of us. And by the way, rightfully so, I think people are watching. I think they understand the reimagination of asset management. I think they understand the 4 or 5 areas where we're building out product or we're investing in our technology platforms. I think they understand why we acquired Stratos. And I think they understand that.

I think they're waiting and seeing how we execute across that. I think another huge one is we have a massive opportunity in selling asset management into banks. We've done a little bit of that, but I don't think we've done that at scale. We're putting a lot of new leadership roles in place in order to make sure the right level of attention. So I would say those 2 areas are probably the area that the market hasn't priced in quite yet.

Great. Well, Sean, thank you so much for your time today.

Thank you, Ryan. Thanks for having me.

Go ahead and get started here, everyone. Good afternoon, and thank you for coming. My name is Jeff Schmitt. I cover wealth management and capital market stocks here at William Blair. I would like to introduce SEI Investments. They provide outsourced technology and investment solutions to banks, financial advisers and asset managers. We're pleased to have with us Sean Denham. He is the CFO and COO of the company. He'll discuss the business. So thank you, Sean, for joining us. And then just one quick note, just go to our website williamblair.com for a complete list of disclosures. So with that, I will turn it to you, Sean.

Thank you, Jeff. Is this -- can you hear -- yes hear me okay? Great. So nice to see everyone. I recognize a lot of faces, really excited for the faces I don't know. I've been in the chair -- in this chair for a little over 2 years now, having a lot of different investor and analyst conversations. And the thing I get the most about individuals that are considering new coverage or potentially thinking about investing in SEI is, "man, you guys are really complex and difficult company to understand." I disagree. We do have 4 different -- we have 4 segments right now. But what I find is the investors or the analysts that really covers well and make the effort to really dive down and do the research and have the conversations with us all agree, we're actually not that complex of a company.

There's many more complex companies out there than us. I think the struggle historically for folks that are looking at us is that there's not one market comp, which can be a struggle. So what I'm going to do today is walk through for those who don't know us, our 4 different businesses. There is a lot of overlap. There's a lot of synergies across the businesses. So I will start there. So first off, our Investment Manager Services business, or IMS business, is our largest business. It's our fastest-growing. We have really strong margins. But really what that business does is fund administration for traditional and alternative investment managers. Again, really strong, great growth rates. We'll unpack some of the financials in each of these businesses in a moment. But we have a lot of tailwinds in the business right now, including thinking about in-sourcers, classic in-sourcers fund administration that have moved to an outsourced model, and we are their first phone call.

Our second business is our Private Banking business. This is SEI's legacy business. We've been in operations for 58 years. This is the business AL West founded the company on. We provide in our Private Banking business, front office, middle office and back office technology through our SWP platform. So our SEI Wealth platform and outsourcing operations to the wealth management arms of banks.

Third is our Institutional Investors business. That is essentially an outsourced CIO business for primarily endowments and foundations. We also performed a lot of work around defined benefit plans. So CIO services around benefit plans and pension schemes.

And fourth is our Investment Advisors business. So that's a full-service platform for investment advisers. We used to call that our TAMP business, so our turnkey asset management platform, but we've really stopped using that term because some of the things we've done have kind of outweighed and have gone beyond a classic TAM business. And included in the Investment Advisors business is the acquisition we made back in December of 2025, so just a few months ago of Stratos. Stratos was a -- or is a $450 million initial acquisition, where we took a majority stake in that business. That is an RIA platform, which has been an incredibly strong cultural fit.

Performance has been good and has met our expectations through one quarter. We see a lot of synergies between our classic or historical asset management business, including our custody platform where we're really, really excited about. So that's at the highest level of where SEI sits. And again, you'll see there are some of our clients there, and you'll see our competitors. And what you'll notice is there's not really one competitor that sits across all four of those business units or segments, which again, leads to sometimes the term, hey, you're really difficult to comp in the market and at times difficult to understand. But again, I think if you look at the individual businesses, you'll see that we're actually not too complex to understand.

Okay. Let's talk about performance for a moment. So we've had incredibly strong performance over the last 4 years. And that really starts with in 2022 when we announced Ryan Hicke as our new CEO. Ryan is the second CEO in SEI history after the founder, AL West, turned over the reins to Ryan after a great 50-year run by AL, created something really beautiful in SEI, but the performance has been outstanding really across all 4 of our key indicators. So you'll see revenue growth there. You'll see our huge growth in net sales events. We can unpack that a little bit as we go into the performance of each of the business. You can see the vast improvement in our margins and our EPS growth.

So we're really, really proud of what we've accomplished over the last 4 years, I think prior, and I was on stage here a year ago. And last year, we talked about the history of SEI from the original concept by AL all the way through where we were in 2025, now we're in 2026, but we've had really great momentum over the last 4 years. A lot of that credit goes to Ryan, his vision as CEO. We feel differently at SEI today than we probably did 4 or 5 years ago. There's been a massive tone change. We have certain leaders of the business, Phil McCabe in our IMS business is legacy SEI; Sanjay Sharma, who was our Chief Technology Officer, Ryan, on his very first day as CEO, named Sanjay as the Head of Private Banking. We brought Michael Lane in from the outside. Michael is ex BlackRock, who led the iShares program for many years at BlackRock. I came from the outside.

And so what you'll -- what may be a trend you see is that bring some new outside-in thinking really has done wonders for SEI. I often say one of the greatest strengths of SEI has been over the last 50-some years is that no one ever leaves. It's a really strong culture and people love working at SEI. I think one of the weaknesses of SEI is that nobody ever left SEI.

So I think bringing in some of that outside in and blending that with the current leadership team that's been there for a while has been a really good recipe. And what Ryan does really well is leading the executive team and working well with the Board, bringing in different thinking and what we have done over the last couple of years is move and I think some of the results can be characterized in this way. We've really shifted the business from a horizontal model -- I'm sorry, from a vertical model to a horizontal model.

So SEI prior to probably 2 years ago, those 4 business units represented here, they were almost run as 4 completely distinct businesses with very low synergies across the business. So think about our IMS business having a complete opportunity of that leadership team to run their complete tech stack, complete the way they think about marketing, the way they set compensation. Those were really truly 4 distinct companies. And moving from a vertical to a horizontal model has really, really served us well. And so I think if Ryan was sitting up here, he would say that the executive team is operating more cohesively than we have in a few decades.

And I think some of that results in what you see here. So the next question, which is the obvious question is, can we continue the great results that we've been enjoying? And I think the answer to that is yes. I think that we're coming off -- Q1 was our greatest quarter in SEI history. Our largest sales event quarter, our largest earnings per share quarter. Margins have improved dramatically. So we're really well positioned to continue that momentum. But really what it comes down to is execution. And so we have -- this is a slide we used at Investor Day back in September. So it was our first Investor Day we had done in 3 years, the first Investor Day we had done since Ryan became CEO.

And there's really 5 focus areas of the organization right now. And by the way, we came up with these our own. We didn't have to go hire McKinsey or Bain to come help us create this strategy. So we saved a few dollars there. But we do think there's really 5 key areas where we're excited for our path going forward. In no particular order, really reimagining asset management.

That started with bringing Michael Lane in from BlackRock 19, 20 months ago. He's not quite -- somewhere around there. He's not quite on his 2-year anniversary yet. I think when Michael got here not too dissimilar from when I joined SEI, we had a lot of what I uneloquently say, we had a beautiful -- we lived in a beautiful neighborhood. We had great bones to the house, great bones, but we had a lot of broken windows that we had to fix. And over the last 2 years, we started fixing those broken windows. I think where we are in our journey, and Michael experienced that as well, I'll get into asset management in a second.

But we had to pull those in, first off, identify all the broken windows. We pulled them out and we started systematically replacing those windows. A lot of that went to the move from vertical to horizontal. But what Michael has done an amazing job of is really coming in, looking at where we were in the market, where we are playing in our TAM. And honestly, the way I think about revenue growth or revenue in general. There's 4 drivers of revenue. That's all there is. There's greenfield, new logos, white space, pricing and retention. Really, where we were focused on asset management was retaining the smallest advisers, our smallest advisers, clients, probably not the best strategy for growth.

And so Michael came in and had a -- I won't go into it, you can look at the Investor Day, but he had a 5- or 6-point plan. As all great leaders do, you have to have a 5- or 6-point plan when you come into a new organization and he systematically has been working on each of these points. That's including kind of reimagining our asset management product portfolio. We brought -- he brought Bob Hum with him from BlackRock. He's been amazing, but really reimagining what we're doing in asset management. I think that was early days. That was more of September.

I think now we're executing on that asset management story. I'll talk more about that in a little bit. Enterprise excellence, huge one. So from a CFO standpoint, I had that hat originally. It was always kind of the design I would take on the COO hat. So we spent a lot of time operationalizing the business in a meaningful way. I think that's led to dramatic margin improvement.

The third is strategic capital allocation. I'll speak to that in a minute. And then also boosting international returns. International is a great growth area for us right now. We've been in U.K., we've been in Dublin. We've been in Lux for a number of years. But I think thinking about what our go-to-market strategy specifically is across the business units is something that we were maybe falling down on it. We weren't spending enough attention on that. So we put Sanjay Sharma who I mentioned earlier, he's a great, great, great, great executor. He's got an engineer mindset. So we asked him just a few months ago to take on in addition to his private banking responsibility to really focus on international, and Sanjay has been spending a lot of time there. And then really just investing in improving growth engines like our IMS business.

Okay. So let's unpack a little of the performance of each of the businesses now just more a bit more. So in our Investment Managers business, again, really, really well positioned right now. So there are incredible strong market tailwinds, especially where we play where we specialize -- while we're in traditional, really kind of across, we do fund administration across the entire portfolio of everything we can do from traditionals, mutual funds, et cetera, into our alternative platforms, real estate, infrastructure, private credit and private equity, et cetera.

We are the #1 fund administrator in the world in private credit. There's been a lot of tailwinds in growing alts. We're really well positioned there. We are the first phone call, and it's something we talk about internally. We strive for us to be that first phone call in IMS, in our IMS business when a new fund launch is occurring. In Q1, when we talk about the shift from in-sourcing to outsourcing. In Q1, we announced 2 really large wins. So that would be in our sales events numbers of approximately the fifth largest and the 15th largest investment manager in the world that had decided to make a move from in-sourcing and outsourcing. We were in that RFP. It's been about an 18-month process of going through that and we won that mandate.

Now inside that mandate for each of those new wins for us, from a risk profile, the mandate included 2 fund administrators. And so we were one of those, really proud of that and excited for that. In saying that it's not a 50-50 split. And this goes out to how we are executing it really well. We are, in my opinion, the best fund administrator in the world, especially in private credit, private equity and some alternatives in the alternative world. So that -- just because we won those mandates, it isn't just they split it 50-50. We're winning the lion's share of that mandate, which I think is a testament to how well we're performing in that space.

And then you'll just see the '22, '23, '24 and '25 growth. We're growing it across both all pieces of business, both across traditional alternatives and global. So doing extremely well there. The pipeline remains strong. The sales events numbers that we announced in Q1 was in all of them. We will continue to bring on additional funds through those 2 new large mandates in addition to our normal growth of our business. But again, definitely our fastest-growing and most profitable business right now.

Shifting over to our Private Banking business. When I first came to my first investment conference for SEI and every analyst call I ever had. Out of 20 questions, 19 were around when are you going to improve private banking margins. We've done that. And again, Sanjay gets really all the credit for that. So we were enjoying 0 to negative margins for a number of years in private banking. Our historical margins rate for 25% to 30%. And when Sanjay took over, he said, we have a path forward to get back to historical rates. Well, in Q1 of this year, we passed 20%, really far advancing the speed of which Sanjay, I thought I think initially thought we would get there.

And there's a few reasons why we're doing that. Number one, really cost discipline, making sure we're investing in the right areas of our SWP platform, rightsizing really our headcount. So everything you would expect from a demanding engineered-type thinker, Sanjay is the best. He also increased our TAM. So we were really focused on the largest of the large. So our SWP platform currently or -- currently, we look at the market, there's about 20 of the largest banks in the United States. We have about half of those banks are on our SWP platform, and we do the front office, middle office and back office services for them. We were really focused in that for a very long time. Those are -- those come about very rarely every 7 to 10 years. Those RFPs might come around and we spend a lot of time focused there. Well, Sanjay went actually went down market. When Michael Lane went upmarket, Sanjay went down market. It was really -- it turned out to be really profitable for us.

And so moving to the regional community and the community bank space, specifically the community bank space, where SWP is more plug and play, we can install our platform much quicker. There's a quicker return, lower cost of delivery, et cetera, it's really profitable for us. What Sanjay also did over the last couple of years, which has been really, really exciting for SEI, I'm very bullish on this was the advent of professional services.

So he took a look around the private banking space and said we're installing our platform. We're doing all the operations and then they're hiring third parties to come in to various services around our offerings. And Sanjay said, we can do that. And so we've started over the last couple of years to develop some professional services that have paid off really, really well. So 2 to 3 years ago, 4 years ago, when we would announce a win in the private banking space on our SWP in ops platform. That was it. So those might be $2 million to $3 million deals, $4 million deals.

Now those deals are now $10 million deals because we're selling other offerings like our Sphere offering, which is kind of surrounds our cybersecurity platform. There's other things like change management services, our data platform, which has been a big seller for us. So there -- all of a sudden, we're starting to bring the whole firm to bear. In one area which I'm also excited about, which we really haven't dug into too much, and I think it's an opportunity for us in selling asset management to private banks. So being on our platform, we know where every single penny and dollar is, every single penny and dollar is for about 120 banks across the United States and globally. And we know whether those banks in their asset management product inventory, how much is in alts, how much is in traditional, where it is. And we've really done very little with that, and we have sold very little of our own product into those banks.

So we see that as an opportunity. We recently announced the hiring of the national leader for selling asset management to banks. I'm not exactly sure what her title is going to be. So anyway, really strong momentum in private banks. We do believe margins will continue to prove at what rate, not exactly sure, but we've made steady progress there, which we're really proud of.

This is an interesting chart. This encompasses both our institutional and investment advisers business. So in Q3 this year, we will go from 4 segments. I think Q3, hopefully, if everything works out right, from moving from 4 segments to 3 segments. So we'll combine the institutional investor segment and the advisory segment together. But I think just looking at the graphic at a very high level, you can see over the last few years of the improvement of what we've done and why I'm really excited about this business unit.

So we've really been able to increase flows really across both of our businesses. The advisers business has been very successful, as I mentioned, under Michael's leadership, a lot more room to grow. Again, as you're building a massive ship like Michael is right now in asset management, it takes a little time. He's been, again, in the seat for about 18 months. But I do think over the next year, we're going to see even larger improvement, including hopefully more adoption of our own products that we've created. We've curated about 8 new ETFs over the last couple of quarters.

We have an inventory plan of additional launches going forward. So the opportunity to take a look at the model portfolios that we curate with our clients and for our -- for instance, in our institutional business, do we have the ability to take some of our own products. We have fiduciary responsibilities that go along with that, you can't just take out certain products and put our products in, but we have an investment manager unit that looks at all that. So -- but do we have an opportunity to take some of our own curated products and put those into some of those models, I think there's an opportunity there is just one example.

Okay. So what do we do with all of our capital that we have. So we have committed and we have returned and committed to return about 90% to 100% of our free cash flow back to our investors. And that's obviously in the form of dividends. We have a very strong buyback program. I think, Brad, last year, we -- in trailing 12, we purchased back about 7% of our own shares. Brad is nodding, Brad is Head of Investor Relations for SEI. If you don't know, Brad, he's great.

And what you'll see there is an incredibly strong balance sheet, probably too strong of a balance sheet. At Investor Day, we talked about moving -- right now, we're at about a negative 1x leverage model. It's probably not the best model. We've historically worn that balance sheet as a badge of honor. I don't necessarily have that same take. I think we should be using the balance sheet in maybe a more, I don't want to say an aggressive way, a different way. And so we have spoken about at Investor Day and since then of taking on more debt, but doing it in a very smart way. And so we're not going to just go do deals for the sake of doing deals.

We want the right deals. Stratos deal for us was a good deal. We're really happy in what those returns are. But when you just take a look at this and the amount of buybacks I think we're relatively unique. There are companies that do buybacks, but the amount of free cash flow we use in those buybacks, you may consider unique.

So that is kind of SEI in a nutshell in 25 minutes. Jeff, happy to -- I know we have a session right after this, if there's any questions in a breakout session, but I'm happy to take any questions right now. And Jeff always has a ton of tough questions for me so if ...

No, but please feel free if anyone has a question. Or else I will. I have a question on IMS. So your fund administration clearly, your strongest growth driver of the business. Could you maybe discuss like how are you differentiated what stands out there? And what gives you comments you can kind of maintain, I mean you probably averaged double-digit revenue growth for a while?

So I mentioned it, but honestly, it's execution. And so I said probably everyone sits up here and says they're the world's best at certain execution. But we really believe we are. And so -- and that comes in the form of -- these are -- don't quote me on these numbers, but when there's closed-end funds, that fund closes and they launch a new fund, industry averages for fund administration of renewals of that same administrator is high 70%, low 80%. We're in the kind of mid- to low 90%. I think that's a really good indicator of our performance. I mentioned the 2 large insourcers to outsource model or investment managers have changed their model.

We won both of those mandates, 2 really large ones. They don't come to market that frequently and the fact that we won both of them, and we're winning the lion's share of that work, I think it's a good indicator of really what our performance is, especially in the alternative space.

How many have the type of global capabilities you really have there?

Yes. Great question. So we recently -- I don't want to say announced, but we spoke about it. We are opening a Singapore office, and that's not because we, at SEI like to plant flags all over the globe. We've had some of the largest managers in the world have come to us and asked us, "Hey, we want to use you overseas, specifically in that Pacific Rim area like Singapore. And so we've announced we're opening an office in Singapore. That's based off of demand. And so when our -- the largest managers in the world say, "Hey, we want to use you there, but you need a presence there. That's exciting for us. So again, we're not here to plant flags and really extend cost. We try to be as efficient as we can, but that -- I think that's a good indicator from what our global footprint is.

We also publicly had talked about, Ryan did our CEO a few years ago about where are the 2 inorganic growth areas where we may be thinking about. One was the U.S. RIA. We just did that deal. We -- Stratos is the perfect one for us, great footprint, great one to kind of build off of, not that we're necessarily thinking about #2 there. And -- but the second inorganic growth area was a European fund admin. Do we want to expand or do something significant there? There's always the classic buy versus build analysis that's done.

We put some of our best U.S. talent overseas in Europe and really found out that we could actually build something and create great momentum just from a build standpoint. There are certain pieces of our admin business. If you look at the total pie of every single thing a fund administrator can do for a client, we probably do 96% -- we currently have about probably 96% out of 100% of the things somebody would buy. There may be certain tuck-ins that maybe we want to buy to round out and complement the rest of our IMS business or fund admin business that we still need to do. But that's how we think -- are thinking about our global footprint.

[indiscernible]

So we'll take private banking for a moment. So we have asset management that sits kind of in our investment advisers. Classically, those investment products that we sold into the adviser or in our model portfolios for our OCIO business has really sat there by itself in a vertical. We can sell those same products into private banks. So they have investment product portfolios. We think -- so I think that's probably the most obvious synergy. Also from a professional services standpoint, we are selling 99% of our professional services right now, our consulting services inside our private banking space. We see opportunities in our IMS business and actually in our asset management business as well. So there are -- there is some overlap. But historically, asset management has sat over here. We don't jump over the fence to other parts of the business. The kind of lived in silos. So breaking down those silos and moving to the horizontal model, there are things we can sell across the platform.

[indiscernible]

Yes, we had and so I had mentioned that we were bringing in someone to lead who has done -- been there, done that before, who has led asset management and selling directly into banks. So that person is going to be coming on board here in the next, I don't know, month or so. And we are upgrading all of our people who have historically -- not all, but our sales force who have historically sold technology and ops. I know technology and ops. I know technology and ops. I can't sell asset management. They now have gotten their Series 7. So now they have the opportunity to go sell into those relationships. So that's just some of the thinking. It's a couple of examples.

I think we're out of time here. So Sean, thank you.

Thank you very much, Jeff. Appreciate it.

Thank you all.

Hello, and thank you for standing by. Welcome to SEI First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to Brad Burke. You may begin.

Thank you, and welcome, everyone, to SEI's First Quarter 2026 Earnings Call. We appreciate you joining us today. On the call, we have Ryan Hicke, SEI's Chief Executive Officer; Sean Denham, our Chief Financial and Chief Operating Officer; and members of our executive management team, including Michael Lane, Phil McCabe, Mike Peterson, Sneha Shah, Sanjay Sharma and Amy Sliwinski.

Before we begin, I'd like to point out that our earnings press release and the presentation accompanying today's call can be found under the Investor Relations section of our website at seic.com. This call is being webcast live, and a replay will be available on the Events and Webcast page of our website.

With that, I'll now turn the call over to Ryan. Ryan?

Thank you, Brad, and good afternoon, everyone. This was a defining quarter for SEI. Q1 was not simply a strong start to the year. We believe it is emphatic evidence that the strategic and operating changes we have made set a new standard for what SEI is capable of delivering on a sustained basis.

Q1 adjusted EPS totaled $1.44. That's more than a 20% increase from last year, driven by both top line growth and margin expansion. We also delivered $67 million of net sales events in Q1, including $57 million of recurring revenue and $10 million of professional services. This is an outstanding outcome. It exceeds our prior quarterly record by more than 40%. The scale and quality of these sales events reflect demonstrable progress in our core growth engines rather than a single market tailwind or discrete event. This distinction matters. It gives us confidence that what we delivered in Q1 is not an anomaly.

During our Investor Day last fall, we outlined 5 strategic pillars that guide how we run the company, how we allocate capital and how we show up for clients. Q1 was decisive validation of that strategy and our ability to consistently execute against it. Let me walk through those pillars, how they showed up in Q1 and why do we feel good about the trajectory ahead.

First, we invest in proven great engines, most notably alternative investment managers and professional services. In IMS, demand for outsourcing remains strong, particularly among larger and more complex alternative managers. First quarter sales events reflect the initial phase of multiple enterprise-level mandates with first-time outsourcers, the "big deals" we've been talking about. These relationships are designed to expand over time as the clients deepen their partnership with SEI and as their fundraising and new product launches progress. These relationships also have the potential to grow into some of SEI's largest overall clients. The momentum in this business is incredible, giving us confidence that what we saw in Q1 is a starting point, not an end point.

Professional services also continues to support growth. Clients are engaging SEI earlier and more strategically across a broader set of needs, which is improving win rates and increasing durability of relationships as evidenced by the previously announced Huntington Bank win.

Second, reimagining asset management. I think we're actually now past the reimagining stage, and we are executing against our evolve strategy at pace. The strategy is showing meaningful results. Q1 represented our best quarter in several years with the improvement in flows that built through 2025 continuing into 2026. We saw progress across both the RIA and IBD channels where our strategy of delivering a broader SEI ecosystem to more scaled advisers is showing results. Engagement is improving every day, particularly with larger firms that value integrated solutions. Stratos integration is also well underway with multiple work streams focused on scalable infrastructure and building a centralized investment hub. We are encouraged by strong inbound interest from advisers seeking a long-term capital partner like Stratos. And in our institutional business, we remain on track towards net positive flows later this year while maintaining discipline around client fit and flow quality.

Third is enterprise excellence. The partnership we recently announced with IBM reinforces and accelerates the direction we are taking around infrastructure modernization, automation and responsible AI deployment. As I have said in the past several earnings calls, we are applying AI and automation where it creates real impact, reduces friction, lowering unit costs and expanding capabilities and services for clients and employees. These initiatives are translating into margin expansion with Q1 delivering higher margins at the consolidated level. Enterprise excellence is about running the company smarter, not just tighter and with increased accountability. Our margin expansion reflects real progress against that priority. We view AI as a force multiplier of time, and our execution of these programs will create additional capacity and opportunity for our employee base.

Fourth, we continue to focus on boosting international returns. We are taking a more disciplined approach to how we operate outside the U.S. with clear accountability for growth, margins and capital deployment. In Q1, we began to see traction across both Professional Services and Asset Management with more than 1/3 of Professional Services sales events generated internationally this quarter. We also continue to build out our Singapore presence as part of our global expansion priority. This remains an important opportunity as we apply a more integrated enterprise-wide operating model across our international platform.

Fifth is strategic capital allocation. In Q1, we repurchased over $200 million of SEI stock. Given the strength of our operating performance and long-term growth outlook, we believe our shares represent an attractive use of capital at current levels. Share repurchases will remain a meaningful lever within our capital allocation strategy, especially when market pricing does not, in our view, reflect the trajectory of our business.

Beyond share repurchases, we also activated several investments targeted for later in the year, which are reflected in Q1 results. This was also our first full quarter with Stratos, which is deepening SEI's participation in the advice value chain and strengthening the overall reach and relevance of our platforms. We remain committed to disciplined capital deployment that balances reinvestment, M&A and consistent returns of capital to shareholders.

Before turning the call over to Sean, a brief word on AI. We believe AI strengthens our value proposition and supports continued margin expansion and growth. It is a clear positive and accelerant for SEI. Our combination of regulated infrastructure, proprietary data, mission-critical processes and talent positions us well to apply AI in ways that can improve client outcomes and productivity. We have been proactive, investing over the past 2 years in AI native capabilities, automation and AI-enabled expansions and extensions across our platforms. In parallel, we are selectively experimenting with more disruptive ideas that have the potentially to substantially expand our addressable markets that we can serve. Importantly, clients are increasingly turning to SEI as a partner to help them think through responsible, scalable AI adoption in complex regulated environments.

Stepping back, we believe Q1 represents a statement quarter for SEI. The quarter reinforces our confidence in the scalability of our business and the demand for our capabilities. But finally, I want to thank SEI employees for an outstanding quarter. The results reflect their focus, execution and daily and unwavering commitment to our clients.

With that, I'll turn the call over to Sean.

Thank you, Ryan. I'll begin on Slide 4 and to reiterate Ryan's comments, SEI delivered an outstanding first quarter. On a GAAP basis, EPS increased by 20% and operating profit increased 21% versus Q1 of last year. On an adjusted basis, EPS increased 21% year-over-year. The sequential decline in adjusted EPS from Q4 was expected and reflects items we discussed last quarter. Most notably, a higher effective tax rate and lower investment income and performance fees from LSV, which tend to be seasonal in nature. In total, our tax rate, LSV and other below-the-line items drove a combined $0.15 headwind to EPS relative to Q4 last year.

Adjusted operating income, which excludes these items, increased by 6% from the fourth quarter. This quarter also marks our first period reporting adjusted financial metrics. We believe this enhanced disclosure aligns our reporting more closely with market practice and provides investors with a more effective basis for compares. For additional context, we have also included historical quarterly disclosures on an adjusted basis at the end of our press release.

Turning to Slide 5. SEI's adjusted operating profit increased 6% sequentially and by 24% year-over-year. Performance was strong across the enterprise. Private Banking delivered a notable increase in revenue and more impactfully, operating margins. This reflects continued execution in deeper client engagement as banks increasingly partner with SEI earlier and across a broader set of strategic and operational needs, not just investment processing. For example, we are now playing a more active role in client implementations, resulting in less lag time between contract wins and revenue recognition. In addition, we were pleased to announce the Huntington win during the quarter, which underscores our relevance and credibility in the regional community bank market, especially at the higher end of that segment.

Our Advisors segment had a healthy start to the year, but the first full quarter of our Stratos partnership reflected in the Advisors segment makes comparison with prior periods challenging. Given our 57.5% ownership, Stratos is fully consolidated in our results. Stratos contributed nearly $20 million of revenue and $3 million of operating profit to advisers in Q1 before considering noncontrolling interests. Excluding depreciation and amortization, primarily acquired intangible amortization, Stratos generated $8 million of EBITDA at the consolidated level. Several planned transactions also closed during the quarter, so the underlying run rate contribution is modestly higher than reflected in Q1 results. Excluding the impact of Stratos, all of SEI's businesses delivered year-over-year revenue growth, operating profit growth and margin expansion. This performance reflects execution against the strategic priorities Ryan outlined earlier, so I will not reiterate those themes here.

Turning to Slide 6. Consolidated operating margins were very strong, continuing the improvement trend we've seen over the past several years. At a segment level, the improvement in Private Banking margins, both year-over-year and sequentially reflects continued execution against the 5-Point Plan Sanjay discussed during our Investor Day. Key contributors include Professional Services growth, increased adoption of our Asset Management offerings internationally and operating leverage against deeper engagement with our clients.

For our IMS business, the modest sequential decline in margins versus Q4 was expected and primarily driven by the absence of the revenue accrual true-up we referenced last quarter, which accounted for approximately 150 basis points of the decline. The balance reflects onboarding costs associated with the substantial sales events delivered in the quarter. Advisors margins declined due to the inclusion of Stratos, which was weighed down by intangible amortization, as I just discussed. Absent the impact of Stratos, Advisors margins increased approximately 50 basis points relative to Q1 last year. At the consolidated level, adjusted operating profit margins improved versus both the prior quarter and the prior year on both a GAAP and adjusted basis.

Slide 7 summarizes our sales events for the quarter. We debated opening the presentation with this slide, but decided it was best to remain consistent. Sales activity in the quarter was exceptional. Investment Manager Services led the business with more than $50 million of net sales events driven by the large enterprise mandates Ryan discussed earlier. Together, portions of these wins accounted for just over half of total IMS sales events. As Ryan noted, we expect these relationships to continue contributing to sales activity in IMS over the coming quarters and years.

Before moving on from IMS, a brief comment on private credit and a broader market commentary. We are not seeing any slowdown in IMS demand. Our exposure to retail private credit, including public BDCs, currently remains limited and the vast majority of our private credit exposure is institutional. We continue to see strong pipeline activity across existing and prospective clients and with the launch of our registered transfer agency in Q3, we would expect our retail exposure to increase with evergreen fund launches. IMS led the quarter, but the strength of those results should not diminish the continued progress we have seen in both Private Banking and Asset Management.

While the magnitudes differ, all 3 businesses are contributing positively to growth. Asset Management delivered its strongest sales events quarter in several years, driven by growing demand for ETFs, SMAs and our custody-only platform offerings. We are encouraged by the momentum in this business and expected continued progress as we expand our product lineup and distribution capabilities.

Investments in new businesses generated approximately $4 million of net sales events, including engagements won in conjunction with Private Banking. This is another example of how our investment in Professional Services is supporting growth across the enterprise. Additionally, while not reflected in sales events, we successfully recontracted 8 Private Banking clients, renewing an average contract term of approximately 4 years and retaining $34 million of recurring revenue with no material impact to run rate profitability.

Turning to Slide 8. We saw continued asset momentum during the quarter. In Asset Management, growth was led by the Advisors Business. Last quarter, Ryan mentioned that we're accelerating Investment Management product launches in ETF, SMAs, models and alts. This quarter, we are seeing progress against those initiatives, driving approximately $1.5 billion of net inflows.

Institutional investors experienced less than $1 billion of net outflows, almost entirely attributable to a large defined benefit client annuitization following the achievement of funding objectives. This outflow is a result of SEI advising a client to successfully meet their long-term investment objectives. Based on current pipeline visibility, we expect improved flow performance in this business over the balance of the year.

Regarding market impact. SEI's portfolios remain highly diversified across equities, fixed income, alternatives, cash and geographies with a relatively higher weighting towards value which mitigated market headwinds during March. And as you may have noticed, market performance in April has been pretty encouraging to put it lightly. LSV had a strong start to the year with key products in Global and U.S. Large Cap outperforming benchmarks by single-digit percentages in Q1, more than offsetting market weakness in March and approximately $2 billion of net outflows in the quarter. Assets under administration and on platform increased 4%, driven by strong new business wins and lower mark-to-market sensitivity.

Turning to Slide 9 and building on Ryan's comments on capital allocation. In Q1, we repurchased $208 million of SEI shares. While repurchase activity was elevated during the quarter, we continue to maintain significant capacity intend to remain active buyers. We ended the quarter with $363 million of cash on the balance sheet and substantial financial flexibility. This balance sheet strength provides ample capacity to continue investing in the business while maintaining a disciplined and opportunistic approach to capital returns.

Stepping back, the first quarter represents an amazing start to the year for SEI. We delivered meaningful earnings growth, improved margins and exceptional sales activity while continuing to invest to support the opportunities we are seeing across the business. The quality of our results reflect disciplined execution against the strategic priorities we outlined at Investor Day, and it reinforces our confidence on the path ahead. There are a lot of exciting things happening right now at SEI, and there's more to come.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Alex Kramm with UBS.

Just maybe starting with the strong sales in IMS. I was hoping you can give a little bit more color around, I think you said multiple first-time deals, so maybe a little bit more about how competitive these wins were? And then most importantly, you said the pipeline remains very strong. So is this a run rate that we should be expecting in terms of new sales? Or is this going to be lumpy? Yes, just a little bit more color on how this year could shape up here given the recent strength here.

Sure, Alex. It's Ryan here. Thanks for the question. I think we'll turn that one to Phil. And then, Phil, if you want to kind of unpack them in a couple of different ways, we can add on.

All right, that sounds great. Thank you for the question. A couple of quick highlights. So by every measure, we had a phenomenal quarter. We won 2 of the largest and most complex alternative managers in the entire industry. It was an extremely competitive bake-off that lasted over a period of a full year. Both of those managers who are moving from in-sourcing to outsourcing, one of them is in the top 5 globally and the other is in the top 15 globally alternative managers. So we believe there's meaningful room to land and expand, like we always do over the course of the next several years. Both of these clients will be in our top 5. But these deals are in addition to what we would normally sell on a quarterly basis.

So from a pipeline perspective, we're really strong. We are supported by the enterprise mindset from Ryan and Michael and Sanjay, we're all out in the market selling together and we're probably talking to 20 of the top 50 alternative managers right now. So we expect sales events to continue to trend up year-over-year. And one last fun fact. We're actually now we are the third largest fund administrator in North America. So we're moving up the league tables.

Ryan, anything to add? Anything I missed?

No. I think you nailed it. I think the appetite for outsourcing increases literally daily and the more effective we have been in helping our firms deploy capital in different areas for their growth acceleration, it has just increased the partnership and deepened our relationship. So as you said, I think if you're looking, Alex, from kind of an average quarterly basis of sales, we would expect those numbers to continue to grow. Some quarters will be a little bit lumpier than others based on size of deals and timing, but the pipeline and the market and our positioning in this space is extremely strong.

Okay. And then maybe staying on the same topic, and you already addressed this somewhat proactively in terms of what's going on in private credit and private equity right now. But maybe we can go a little bit deeper there and not to lead the witness here too much, but we've seen in the past, for example, during the financial crisis on the hedge fund side, in particular, and made off, there was a lot of outsourcing demand that already all of a sudden came out of some of that stress and some scrutiny around that space.

So again, not trying to paint to rosy of a picture here, but just curious how the discussions have changed given what's going on? Do you think this could actually be maybe an accelerant to saying, "Hey we need to open the kimono a little bit, and this will be maybe one of the ways to do it." So yes, just curious about what you're hearing live?

So just to answer that real quick, this is Phil, the 3 of our largest clients are looking at launching flagship products this year. So we're not seeing any slowdown in demand, especially on the institutional side. And I do think as if the market was ever to get a little bit more interesting or challenged, we're playing in the very, very large end of the market, and these clients are really, really good at what they do. So -- and I know in the script, Sean said that we're a little lighter on the retail side of the market, but we expect that to pick up when we launch our registered transfer agency solution over the course of the next couple of months.

I think it's also really important to distinguish, when we talk about this business, 70% of IMS is driven by exposure to alternatives and 25% of that 70% is private credit.

Ladies and gentlemen please standby. All right we'll move on to the next person. Our next question person -- our next question comes the line of Jeff Schmitt with William Blair.

So in private banks, I know the margin can jump around, but it was up to 21% in the quarter. Professional Services growth is obviously helping. But how much of that was driven by the reduction in the workforce? Or were there any other onetime items that were in there?

So Jeff, can you hear me? It's Ryan.

Yes, I can.

Okay. So I'll open up here for Sanjay. The reduction in workforce had little to no impact really specifically in banking. That was across the enterprise. That really was part of a Q4 initiative as we talked about. I mean, Sanjay can talk about, I mean, the execution against the 5 specific things that we discussed in New York in September, and we've been talking about the last couple of years, he literally continues to execute against that quarter-over-quarter. But Sanjay, do you want to highlight some of the specific things that drove kind of the increased margin this quarter?

Yes, absolutely. That's a clearly good question. If you look at the 5 pillar strategy we talked about on September 18, 2025, 2 of those 4 pillars were Professional Services, was one of them. And then second was how we're going to market with the new logos. Professional Services events, we have significant events in third quarter and fourth quarter, and as you could see that our revenue realization is much faster for those kind of deals. And in Q1, that's a good reflection that, yes, we sold new Professional Services in third quarter, fourth quarter, and we realized that. And that is one dimension of it.

Second is we are very judicious how we're going to market and the new contracts we are signing, they are coming with a higher margin. So it's a combination of those. Thus, of course, our GCC initiative is playing big role here. We are leveraging GCC. We talked about be judicious about our Software-as-a-Service expenses. So when you combine all those things together, you would see that -- and you will see in the coming quarters as well. We are continuously making progress on all those 5 pillars.

Okay. Great. And then it sounds like transaction multiples for RIAs have been on the rise. Is that the case? Are you seeing that in the market? And do you think that would be -- do you see that as being a hindrance for your roll-up strategy for Stratos? Or are there still good opportunities out there?

Michael, did you hear the question?

I didn't.

Jeff said, it seems like EBITDA multiples are rising for RIAs or IBD roll-ups. Do we think that's impairing our strategy with Stratos and their M&A strategy?

No, not at all. We do see that the multiples on the high end definitely have been increasing. And if you look at the scaled firms, there was a report recently came out that the typical multiple would be between 22 and 24. And remember, we acquired Stratos that are much less multiple than that. And so you do see it at the very high end in the scale players. But when you go into the marketplace where you're looking at the $100 million RIAs up to about $1 billion RIAs, you still have a very reasonable multiple arbitrage opportunity between what you buy them at versus what they would then reprice at when they become part of the scale player. So we're not seeing any slowdown at all right now.

Our next question comes from the line of Crispin Love with Piper Sandler.

I had some feedback issues earlier in the call. Just one follow-up on the IMS sales wins, you mentioned 2 of the largest and most complex alts being part of those wins. Can you discuss any concentration on the wins in the quarter? I mean how much of the $51 million came from those 2 or just any other concentrations worth calling out from the sales?

I can take it. Crispin, this is Phil. Those 2 deals were less than 50% of the concentration for the quarter. So not even -- and we expect a lot more later.

Perfect. And then just on margins, 32% core margins in the quarter, commentary seems to be very positive. Can you just discuss the outlook for margins still expecting -- are you still expecting high 20s range? Or could there be a new run rate here, maybe high 20s to low 30s. And then just if there's anything onetime that impacted the core margin in the first quarter that's out of the ordinary?

Crispin, it's Sean. Thanks for the question. So the main driver for overall margin improvement really just the fact that revenue growth is up 2%. We're doing a much better job of managing our expense. We had nice sequential improvements in PB and institutional but primarily, it was driven from revenue growth. And so as we have large or improvement in revenue and sales and revenue growth, we expect margins to improve. So our fixed costs are pretty well fixed. There are some variable costs. But for the most part, you're seeing the appreciation of margin due to revenue.

Our next question comes from the line of Ryan Kenny with Morgan Stanley.

Can you hear me? .

Yes.

All right. Great. So on the AI theme, you touched on it in the opening remarks a little bit, but can you just dig in a little bit deeper because I think there is a perception in the market that some of the businesses that you operate in, like fund administration maybe could be at risk of disruption or maybe you could see fee rates come down over time if you're expected to pass on efficiencies that you gain. So could you just dive a little deeper on how you view yourself as more protected from AI disintermediation?

Yes. I mean, we'll answer that in a few ways. Ryan, I hope you're doing well, and then I think Sneha's in the room if she wants to provide some color. I mean, the second half of your question, I think we really need to also continue to focus on continued productivity and efficiency through leveraging technology and process engineering has always been part of our strategy and has always been part of how we pass on and maintain margin expansion or pricing levels relative to the competitive market. So AI will definitely be a bit of an accelerant to that.

But if you think about how we're looking at it right now, and I mentioned this a little bit earlier in the call, we really see this right now as a significant positive for SEI. And we're not naive. We know that there's disruptive possibilities out there. But when we look at our ability to provide a full suite of capabilities and platforms to our clients. Our clients are looking to SEI to figure out how to harness these capabilities to expand our services, potentially drive more scale and productivity, so we definitely see it as a positive. And when you look at the suite of capabilities that we provide, certainly, there will be organizations firms that try to go displace that brick by brick, if you will. And it's our job to maintain that positioning for that whole wall of our services.

But right now, and just Sneha you can weigh in, we're really excited about what we see. And we definitely are excited, Ryan, around the engagement we have with clients looking to SEI to partner with them around how to harness and drive more growth here.

Yes. I'll just add, Ryan, thank you for that. But I think that there's 2 elements of this. The one is the ability for us to do more with like the amount of resources that we have, which we're actively driving. We've got AI-enabled employee base, and they're using it actively in their database jobs. We're also seeing the way to deliver growth more efficiently. So [ Astil ] is winning, he is doing it without adding more cost, which I think is really helpful, which is why you're seeing a little bit of a margin expansion.

And then we're seeing this adaptability of not just us but our client base as they become more efficient and we become more efficient, discovering new areas of growth. And so we're seeing, for example, in the banking client base a lot of interest in us helping them become more AI native. And so doing work with data cloud and professional services and helping secure their data through our security services. And on the IMS side, we're seeing a lot of interest to say what additional services can we provide those same clients as their growing that we wouldn't have done naturally because now AI is making that possible. So we see it really as a net driver of growth and both for our people and for our businesses and our clients.

And we get the question a lot on fee rate impact from AI. But as you mix shift into areas like alts, could your reported aggregate fee rate actually go up or stable? How should we think about fee rate in the various businesses?

Right now, we've seen a tremendous amount of stability in our fee rates, been able to continue to win new business at premium prices and deliver a premium service. So I don't know, anybody else wants to add anything to that? We just -- we haven't seen yet, Ryan. I mean we're certainly aware there's a tremendous amount of change happening in the market. We actually are excited about that. I mean if you think about our cultural posture, and the position that we have around leaning more into accelerating good ideas for good outcomes. That's just the way we think right now.

I'm full of quotes that Sean likes to listen to, but a ship is safe in the harbor. That's not what ships were built for. So we are being aggressive with experimentation. We're being aggressive with innovation, and that's just the kind of mindset we want to bring here. But right now, specific to your fee rate question, we're actually really excited about our current position, and we don't plan to kind of lessen our focus and let that position get diminished or deteriorated?

Phil, do you want...

From an IMS perspective, we're not seeing a lot of fee pressure at all. But what we do expect from AI is faster NAVs, higher quality, adjacent markets that we're getting into. So our clients are expecting that from us. And they're -- again, we're in the higher end of the market and they just want things better, faster and perfect.

Our next question comes from the line of Alex Bond with KBW.

Another follow-up on the wins in the IMS segment this quarter and just the impact on the margin. In the past, you've spoken to the fact that through the onboarding processes for large wins like this, the IMS margin may dip slightly before reaching the full run rate once the implementations are completed. Can you just help us size up the timing and magnitude of these processes or processes on the IMS margin over the next few quarters?

Sure. I'd love to. We're going to convert these clients in a few different tranches over the next year or so. We expect the revenue, it's going to increase more and more quarter-over-quarter over the next 15 months. From an event perspective, we're going to continue to land and expand as we always do. This year, revenue and expense will be flattish for those 2 deals, but we're going to get back to normal margins for those 2 deals in mid-2027, and we're going to start to see pretty significant revenue in that time frame as well.

Got it. Great. That's very helpful. And then maybe just moving to the Professional Services suite. I think you all also made reference there previously to expanding that offering within other areas of the business like IMS and certainly appreciate the new breakout there this quarter. But can you maybe help us think about the opportunity set within IMS or other areas of business for the Professional Services offering maybe relative to -- within private banks where you've seen the majority of sales for Professional Services to date.

And then also maybe just how sizable the international opportunities for Professional Services given the strength that you all noted there this quarter as well?

Yes, you're welcome. That's a great question. So I think if you think about kind of the breadth of the capabilities in Professional Services, some of the things that have the most momentum in demand right now across all the client bases. And some of this is early in some of the segments. But the AI-enabled data cloud platform is probably one of the most attractive capabilities we have, where we help our clients really harmonize ingest and create business intelligence off of their data sets off of our data cloud platform and Sanjay and his team really pioneered that really in the banking segment, but it absolutely has applicability in Phil's segment and as well as Michael Lane's when you're looking at larger RIAs and also kind of the more enterprise scale organizations.

I would say integration services continues to have significant demand. Sean called that out around kind of truncating if you will, some of the lag time between signing and implementation because we're taking on more responsibility for other integration services and workflows, if you will, as part of the implementation. And I would say, coming back to, Alex question that Ryan had just asked a couple minutes ago, we're also starting to see demand for firms that want to think about how do they become more AI-enabled. How do they become an AI-native organization. So there are a variety of ways that we are able to add value from professional services. And we also had a tremendous quarter with our cybersecurity capabilities with SEI Sphere in there as well.

So that's just some color. I mean, Sanjay you're a little bit closer to it, especially on the banking side, but also it's the -- Alex's question around international.

Yes. So first of all, a great question. I really appreciate asking this question. On Professional Services side, Ryan and Sean, they also called out, but we are engaging with our prospects very early now. And we are changing our playbook a bit rather than just leading with our platform change initiatives. Now we are leading with enterprise capabilities, and that is creating a different growth opportunities for us.

I would think about how many banks or institutions are looking for platform change every year, not many, but almost every financial institutions is looking for some professional services so that they can keep pace with the change. And that presents significant opportunity for SEI. And we are seeing that opportunity not just in here in the U.S. market but in the international market as well. That's like 1/3 of our Professional Services wins, they came in the U.K. market for last quarter. And we are seeing that momentum building up. And that's where I'm partnering with Michael Lane and Phil in terms of how we can continue to expand that at the enterprise level.

Our next question comes from the line of Patrick O'Shaughnessy with Raymond James.

Another AI question for you. How are you guys thinking about AI potentially disrupting the wealth management advice industry broadly in terms of disintermediating your clients, whether it's AI native software or something else?

Michael, do you want to take that one?

Sure. Good to talk to you, Patrick. So that -- it's interesting. This has been a topic of conversation that dates back 25 years from when the first robo-adviser came to play where they thought that coming out with a robotic advice to offer up the advice for 25 basis points or something in that ballpark that would disrupt the financial adviser business. And what they found over time was that the robo advice marketplace didn't work. It wasn't a good B2C. It needed to actually be a B2B fill or a B2C2B or whatever, but it was it didn't actually do what people expected it to do, which was to take over the financial adviser business.

AI will supplement and make advisers more efficient. It will enable advisers to have I think, a greater ability to serve more clients in a more efficient way. And when you look at the statistics about what's happening in the wealth marketplace where there's going to be a shortage of financial advisers, we're going to need AI in order to be more efficient in the wealth space to serve more people. The demand for advice is increasing, the number of advisers is decreasing. And so we have to actually use AI in the wealth marketplace to serve more.

So I don't see it disintermediating. I've been involved in that question for a long, long time. I think that at the end of the day, when people start to achieve a reasonable amount of wealth, they want to talk to a human being. It will supplement the advice that's given though.

All right. Very helpful. And then institutional investors, it sounds like you guys are incrementally more optimistic there. Can you just give a little bit more color on kind of what sort of sales are in your pipeline there? And also kind of how to think about the fee rate impact as you get those new wins on board?

Institutional investors. Just your view on kind of the pipeline there, fee rates moving forward?

Yes. The thing that I love about the institutional business that we saw the first quarter, although you saw a negative revenue from the institutional business. It was driven by the fact that we helped -- as Sean said, we helped a significant client achieve a funding status that enabled them to derisk the portfolio and take it off to the books. I mean that's what we do in the institutional business on the defined benefits play is we -- if we're successful, we help firms actually achieve their goals that they can derisk. So largely, the first quarter, the event was a result of a single plan that derisked.

When you look forward, where we're spending a considerable amount of time and energy is continuing to deepen our penetration in areas where there are demographical shifts that will grow the area of OCIO, for instance, endowment and foundation. With a great wealth transfer, not a portion of those assets that will transfer now the estimates are over $100 trillion. When that $100 trillion continues to transition from generation to generation, a portion of that is going to go to not-for-profits, it's going to go to foundation. That's going to grow that part of the business that's going to result in the need for more outsourcing of investment management. And so we are leading more and more into that space.

And so we feel strongly that over the next few quarters, that the business -- our institutional business has growth opportunities. We will start to see a rising pipeline in areas like endowment and foundation, health care, and where we have an occasional defined benefit that derisks like we should be celebrating those wins as helping clients achieve their goals. They're going to happen once in a while in the DB space. But we feel good about where the market is going, the demographics are going and where we're positioned as one of the largest OCIO providers.

Our next question comes from Alex Kramm. We have a follow-up question from him. He's with UBS.

Just a very quick follow-up. I don't think this has come up, but can you just give a quick view on your integrated cash programs? I mean there's been a little bit more noise around brokers, investment managers and some of their cash programs and new offerings, some large banks have talked about this like optimizing cash program. So just wondering if you could outline? I know it's a relatively new program for you over the last few years, but how sticky do you think there is? And if there's any risk from those assets going out or that cash going out of the door at some point?

Absolutely. We have been reading the same headlines that you have about a certain large bank who came out and talked about how they were going to be looking to optimize cash across different programs. And so we are very aware of the cash management programs and the pressures on cash management programs, both from what's happened over the last couple of years -- last year in the reduction of interest rates and the reduction of yields to the firms that have these cash management programs.

As you said, we -- ours is relatively young. It's only about 2.5 years old. Ours was structured differently than many of the competitors that are being discussed in the media. Ours was structured as a 1% operational [indiscernible] cash, which was meant to cover operational expenses. It wasn't a percentage of a portfolio. It wasn't a percentage of a model. It wasn't something that was more of a fiduciary percentage of somebody's portfolio. That's a huge differentiator.

And from our perspective, what's very different as well is when you look at a lot of the different players in the custody business, their cash positions tend to be significantly higher. The average balance is being up to 4%, whereas if you look at our cash balances with a minimum of 1%, the aggregate in totality is still less than 2% that we tend to see across the entirety of our book. And when you also then look at because of being a diversified business, the total cash revenue from our suite programs is 3% of the gross revenue of SEI. Even in the Advisor business, it's still only 12% of the total revenues.

And so from our perspective, yes, there is pressure that will come on those. It's not new. There are several companies out there that already have cash optimization programs. where they will take anything above the minimum required to be held and they'll sweep that into higher-yielding investments. So that's existed for years. I think we got a lot of news out of that because there was a large bank that came out and said they were going to use that. I think because AI was put in front of it, also signals something. But at the end of the day, it's been algorithmic for quite a while, and we haven't seen any impact on that.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Ryan for closing remarks.

Thank you again for the discussion today. We appreciate and we are encouraged by the execution and progress we've seen early in the year. Have a great evening.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Next, we have SEI investments. And on their behalf, we have CEO, Ryan Hicke. Ryan is going to run through a few slides. And if we have time left at end, I'll ask a few questions. So with that, Ryan, thanks for joining us.

Thanks, Patrick. Thanks for the invite down. I appreciate you having us. Welcome, everybody. As Patrick said, I have about 10 slides, which we'll go through probably in about 15 to 18 minutes and provide some time for questions or some time for some extra sunshine. That's Brad's slide.

So for anybody in the room that is not familiar with SEI, the way that we think about the organization is we believe that we have world-class pillars and world-class platforms in 3 primary areas of wealth management. Asset management, administration and recently with the acquisition of Stratos last year, we expanded that footprint into advice. And we incorporate those platforms and services, and we go to a variety of markets. So those markets tend to be large investment managers, banks, intermediaries, including RIAs, both globally and inside the U.S. And we package those platforms in a variety of different forms to help those organizations truly drive their strategic growth.

So if you think about SEI and you're not familiar with the company, we have an investment managers services unit where we are taking our administration platforms, which is operational capabilities, combined with technology to deliver fund administration to alternative and traditional investment managers.

In the banking business, we take our technology capabilities around investment processing, combine those with back-office capabilities in our trust company, take that out to large global banks, but also predominantly focused on regional and community banks inside the U.S. and private client investment managers in the U.K. and other areas. And then on the asset management side, historically, we have taken that out to 2 markets directly to the institutional space, defined benefit schemes, foundations, endowments with our OCIO capabilities and then also leveraging that asset management expertise with investment processing to the intermediary adviser broker-dealer community inside the U.S.

So that's really kind of the footprint and how we go to market as a grounding. I took over responsibility as CEO April of 2022. I'm coming up to 4 years. But my entire career has been at SEI. I started with SEI in 1998. This slide, though, is really exciting evidence of how the changes in strategy and changes in positioning over the last few years are starting to bear themselves out in results. So if you can see on the left-hand side of the slide, the company has always done well.

We've always had a really robust balance sheet, tremendous cash flow been really significant in the markets in which we operate and have always had a tremendous appetite to continue to reinvest in our businesses for future growth. I think over the last 3 or 4 years, that deployment of capital, the addition of talent and a little bit of some changes to our operating model have really translated into differentiated results that you can see in the middle -- and then where do we expect that momentum to continue.

We did an Investor Day in September. That presentation is available on our website. It goes into significant detail, both corporately and unit by unit of how do we expect to continue to accelerate these results, deliver these results, not just at the enterprise level, but also at the unit level. But when we think about where we are today and what I'm going to focus on maybe for the next 10 minutes is really we're grounded right now strategically in 5 key areas that we believe are going to be our major accelerants to continued growth.

And I'm going to spend probably 1 minute or 90 seconds on each one and just try to unpack what are we doing and what does it mean? And how is that differentiated? So when we talk about reimagining asset management, think about that, though, in the context of how I described the company a few minutes ago of how we have gone to market historically in our adviser business, domestically and our institutional business has really been oriented on what we would define as turnkey asset management and we have evolved and graduated from that over the last, I'd say, 7 to 8 years to really open up more of the architecture for advisers to move upmarket in terms of larger advisers.

Today, we have about 8,000 advisers across the U.S. who are SEI clients, both broker-dealer affiliated and pure RIA about, I'd say 80% of those are consuming SEI asset management as well as our custody and administration capabilities. The remaining are just taking the custody platform but there is a significant market opportunity for us to expand that foundation and expand that core.

So we've increased investments in our go-to-market strategy, more salespeople. We brought in a new leader of that business 18 months ago. But we've also coupled that when you think about moving up market and moving into that larger RIA space, moving into more of the consolidators and aggregators, we've had to expand the investment management lineup.

So we have invested in more products, more capabilities beyond just mutual fund portfolios. We've introduced more ETFs into our lineup, more SMAs, more direct indexing and also brought in some third-party technology capabilities around unified managed household and direct indexing to really expand that aperture for us to not only be able to service larger clients, but to give firms more choice in that space.

And then when we talk about growing the wealth management capability, we felt strongly as an executive team a few years ago that we needed a strategic foothold in the [indiscernible] space, that there seems to be a clear enduring and durable value to the willingness for private clients to pay for really strong fee-based objective advice. That was the thesis behind us taking the investment in Stratos and the idea behind Stratos was really twofold. How does SEI expand its footprint into that advice space so that we can start participating differently in that revenue stream moving forward but also how do we now have real-time interaction with advisers and end clients to really help inform how we're developing our solutions and capabilities to drive more growth in all of our intermediary businesses.

The second talks about boosting international returns. And the slide is probably a little bit more dramatic in terms of when you see the delta between our domestic margins and our non-U.S. margins. Just for some context, about 85% of SEI's revenue comes out of the U.S., 15% is non-U.S. But you can see a significant difference, obviously in the margin profile.

We made a decision about 6 months ago to send one of our existing executives, Sanjay Sharma, who runs hiking business. He will continue to run that banking business. He's going to run our international business. And the idea there and the strategy there is to create a more unified strategy and growth profile for our non-U.S. businesses.

Today, we operate in Dublin. We operate in Luxembourg, we operate in Asia, Canada, we have a big footprint in the U.K. But there isn't a very unified cohesive strategy in terms of how do we go to market, how do we actually leverage our workforce, how are we thinking about margin appreciation? And how are we deploying capital in the areas that we believe will have the greatest return on investment. So do I expect the right-hand side of this slide for the black to get to the green? No, I don't. Do I expect a gradual continued improvement in those international margins? I absolutely do. And it's an area that actually will be very accretive to SEI's overall margin profile and our ability to expand our own earnings corporately.

This slide is probably the area where we spend the most time as a leadership team right now and probably the biggest difference from how we ran the company a few years ago. for right or wrong, I think that SEI historically would try to invest in each of its businesses to give each of them an equal opportunity to succeed. And I never really thought that made a tremendous amount of sense.

I think we needed to drive more data-driven decisions in terms of which markets had the biggest opportunity, what was the competitive landscape, where was the longevity of our ability to continue to win, so we made some strategic bets and pivots a few years ago in terms of allocation of R&D dollars, new talent, new investments and started to make more of a bet on specific segments and solutions that we really believe that we could win and repeatedly win. And you're seeing this bear itself out in results.

So if you start on the top left, we didn't have a professional services business 2.5 years ago. But when Sanjay took over banking, he had a clear mandate that he had to get those margins expanded from low single digits back into the historical range of kind of 25%, 30% margins over time. And we had a threefold strategy that we talked openly with The Street about.

Remember, Patrick around that and said, first things first, you have to stop losing clients. We needed a real significant strong focus on client retention. The second thing is we had to be really disciplined on what segments did we believe that we could sell our operational and technology capabilities in that would actually value those capabilities that we could accelerate growth and what additional services could we bring to bear.

So Sanjay has done a great job on the first 2, but it's really hit the ball out of the park with the third with the introduction of more professional services and to give some of that some kind of clarity we have an SEI data cloud offering. We take that data cloud offering out to a lot of our banking clients that allow them to ingest and harmonize more of the data that they have across multiple platforms, make business decisions, drive business intelligence off of that. That's a repeatable service that we think that we can not only sell to existing clients but prospective clients.

We've gotten more discipline around charging for the work we do around implementation and integration in cyber. So that professional services, you hear us talk about that on the calls. But it's something we're going to start to delineate a little bit more clearly around what is truly onetime revenue around implementation? And what do we think and can we prove that it's repeatable?

He also pivoted us really to the regional and community bank space. And it isn't as though that we departed our focus on the largest banks. But inside the U.S., there is a tremendous opportunity for regional and community banks who want to compete in wealth. And they don't want to build those capabilities themselves. They don't tend to have the capital to be able to compete on an ongoing basis with those types of investments in infrastructure and SEI is so well positioned to be able to deliver technology, investment processing and in some cases, asset management to the regional and community bank space. And that's an area that has really borne itself out in a lot of our sales results in the last 24 months.

And also the key for us there is they're clients that we know that we can sell and install in a reasonable amount of time and make sure that they are extremely referenceable and satisfied. So it just gets more referenceability in sales, the more effective and successful we are in that segment.

I mentioned earlier the move up to kind of more of the enterprise RIAs. So that $5 billion, $50 billion, $500 billion RIA. We have a great conversation to have with those organizations. The breadth of capabilities that we can bring to bear for those firms to really start to institutionalize their operating model, really think about how they grow scale, especially the consolidators and aggregators that need to be thinking about that as they're on the acquisition trail. That's definitely been an area that Michael Lane has been focused and you'll continue to see SEI invest and continue to win there.

And then probably our largest area of success the last few years and continue to be global alternative investment managers. I say this pretty much in every meeting but the appetite for large alternative investment managers to in-source operations and technology is lower than when we started this presentation. It dissipates at a very, very rapid rate right now. They want to deploy their capital on product creation, alpha generation, distribution, sales.

They want to be partnering though with proven credible, scalable organizations that will make sure that the fund operations, that the technology and the delivery of their services every day go off without a hitch. And this is complex stuff, right? We're not dealing with just traditional assets here. We are dealing with very complex global brands that have clients across the world in very, very different types of sophisticated fund structures.

SEI is extremely well positioned here. We continue to win more business from existing clients and as insourcers continue to look to outsourcing, we feel really strongly that we will be able to continue to win more of our share of that new business in that space. Brad and I talk about this slide a lot because it looks like your classic, this slide tells me nothing. And in some cases, you could be right, Bruce. It's not true. I know you wouldn't.

But really, one of the biggest changes we made as an organization in the last few years is thinking about how do we integrate our workforce and operating systems across SEI. For right or wrong, SEI was running as a collection of verticals a few years ago. And it served us well. And we can tell ourselves that it gave us speed and focus and clarity. And I think in some cases, it did but it negated the opportunity for us to really drive leverage across the organization and our operating model.

It also was mitigating our ability to tell the story we want it to tell to the market. The market was only really assessing SEI for the vertical with which they interacted and was not appreciating kind of the breadth of the capabilities or the size of the types of clients we were operating with in other segments. So this whole continuum here is around how are we continuing to change the organization and leverage more enterprise-wide capabilities both externally and internally. So when we think about automation, we think about AI, we have a single technology unit that runs across SEI now.

We are doing things more at the company level and then adjusting where needed at the unit level, given their specific needs and it has actually been one of the biggest drivers to the earnings expansion that you've seen from SEI, especially over the last 8 to 12 quarters. And as Brad and I talked about with [ Sean Denim ] and others in New York, we expect that margin expansion to continue and some of that is going to be driven by continued leverage in operating model and some of it will be -- continue to be driven by the right type of top line revenue growth.

And then you have capital allocation. And SEI is in a very fortunate position oftentimes with this conversation. The company has an extremely strong balance sheet, we generate a tremendous amount of cash flow every year. We think about how do we return that cash flow to shareholders. Our first and primary use of that capital is always to reinvest in the business and think about how do we use those R&D dollars to drive more growth for our existing footprint and think about new capabilities and solutions. And that's a beautiful thing as CEO of this organization that, that's just embedded in our DNA.

Like we're always thinking first about where can we invest how do we actually make sure we're not accruing technical debt? How do we stay modern, how are we expanding the suite of services and capabilities? It's already liberating. And then that's our primary use of capital. And then the secondary and tertiary uses of capital historically were really just share buybacks and the dividend.

And I would say over the last few years, we have really thought about maybe a little bit of a tier in between that primary and secondary around how are we investing in venture opportunities? How are we using some of that capital for M&A, at least we did with Stratos. So R&D doesn't always have to be just SCI homegrown solutions, how are we integrating more world-class capabilities. So one example you talked about is we did an investment in December with the firm called [ Avantos ] of [ Avantos ], is an AI-native onboarding workflow platform. We will incorporate some of those capabilities into our front office suite for our banking and adviser clients and leverage some of that workflow capability in [indiscernible].

But instead of us, I feel like a few years ago, we would have tried to build a lot of that ourselves. We're now we're also looking around and saying, "Hey, if there's a great opportunity out there, and we can own part of that company, and we can get access to their talent and we are thinking differently around how do we -- Actually integrate more of our workforce through externships, it's a big differentiator for us. So you can see there that for us, it's -- it's more just about where are we spending we're always thinking about how are we maximizing that total shareholder return, but setting SEI up for longevity to make sure that we're well positioned not just in 2 weeks, but in 2 years and 5 years. And then it's odd. We had 12 back-to-back meetings today, and nobody has brought up AI. So I'm hoping somebody would bring it up here.

And I just think this world has changed and it be ignorant for us not to proactively talk about it. And I can give you like our take on this is a little bit varied. So luckily for SEI, we had started a lot of this stuff about 24 months ago. We made an investment in a firm called [ Tiffin]. Which is an AI only business. So we saw some of these things coming and we knew that we needed to be able to get more access and we needed to be able to integrate more of those capabilities.

I already mentioned the [ Avanos ], we added more capabilities internally at SEI, but we certainly are constantly challenging ourselves to think about where are these going to be accelerants to SEI and where can they be disruptive? I think where we sit right now, based on the fact that the majority of our capabilities are technology, combined with services and people and solutions. We feel like our ability to incorporate and harness AI is much more of an opportunity in accelerant than it would be a deterrent to SEI. That doesn't mean we have our head in the sand. It doesn't mean we're not watching what could happen in certain areas. And it doesn't mean every one of our businesses is insulated from this.

But Brad and I were having this conversation on the plane and also today is that if the anthropic release had happened 2 weeks ago and you didn't have a ticker in front of you, I would have thought that as great news for the SEI of the world because I would see SEI and a lot of our peers as the firms that are capable of figuring out how to integrate some of those solutions and build more of that talent in-house to drive more scale and productivity. And the one thing we're probably doing differently over the last couple of weeks,

we had 3 streams going inside SEI at the end of last year. We had one AI initiative going on around automation, around scale, productivity and how do we drive more throughput. We had another initiative going on around how are we incorporating more AI-enabled solutions into our platforms. I don't like the phrase plug-ins but more of these extensions to our capability set.

And then we had started down the path of setting up a little unit to really think disruptively around what new businesses could we launch with where could we leverage AI to disrupt SEI. I think in the last few weeks, the only thing that has fundamentally changed in our thinking is how do we create that in a more cohesive easy-to-understand story, not just for the external community but for ourselves and the Board to say, these investments we're making around AI, automation, where do we see risks, where do we see opportunity.

But for right now, we remain very excited about our ability to actually drive continued growth. And what I would say is color commentary, our clients are looking to SEI to figure out how to leverage this as opposed to their thinking right now about how do they leverage it to displace us. We may not occupy that position forever, but that's where we are right now. And it's been good for us that we've been proactive at the end of 2025 with a lot of our clients talking about what we were doing in a lot of these spaces, which I think gives them comfort that we're constantly innovating.

We're constantly thinking about how are we leveraging and harnessing whether it's tokenization, AI, automation and other capabilities that are out there to bring better services or easier to use platforms available for our client base. So I kept that to 21 minutes exactly, but more than happy to answer questions. I mean that is a 30,000-foot flyby of SEI because we are a pretty diversified business. So it's not the easiest firm just to get down to a level of granularity in 21 minutes. I did the best I could.

It's a great overview. I appreciate it and surprised that AI came up. Maybe just to dig in there. You kind of talked about how you guys are combined technology and service and software provider? How do you see like that bundled solution that you're providing as maybe being differentiated unless at risk versus some other solutions that might be out there?

Yes. So I think, Patrick, when you look at -- let's take 2 of our businesses, let's take IMS as an example. So when we're doing all the fund accounting, we're doing the NAV, the waterfall calculations, everything for some of these large organizations. The precision required for that is extreme, right? The cost of failure is significant. So it's got to be right.

That doesn't mean that AI can't be an enabler to some of that. But there is -- you and I aren't going to be able to be code a platform that's going to displace that process overnight. So I think the combination of what we're doing with the people and the technology there is really hard just to replicate with technology alone. I think the flip side to that, and we're not seeing this, but if somebody believes that they could write their own code through AI for a principal and income accounting platform. And that would displace Trust 3000 and SWP.

They would still then need the back office, they would still need the trust company they would still need all the regulated infrastructure that we have. So I'm certainly not ignorant or suggesting that the speed at which this moving will accelerate. But also, I think sometimes people lose sight of the mine to the buyer. And what I mean by that is the size and scale of the organizations that we work with are extremely careful and protective of their brand and reputation.

So they are also not going to be just jumping in feet to things that aren't proven, aren't credible aren't scalable, which is why I was saying to you that the last couple of weeks, we've had more -- and I would say, very friendly positive inbounds from the heads of a lot of our clients in banking and IMS just saying, if you guys are available, can you guys come up and talk to us about what you're doing with AI, they want to be able to answer to their boards about what they're doing, which puts us in a really good spot as partners as long Patrick, as we stay aggressive and continue to execute and show progress, which I'm confident we will.

And you said you don't like the term plug-ins, but extensions.

It's kind of a is a great one.

Is there an opportunity for you to monetize those extensions?

Absolutely. I absolutely think we can because I think there's 2 areas we can do that. One is, I think, as we think about expanding our footprint inside of some of these organizations, the ease at which we can deliver -- like our platform sometimes in certain areas aren't the easiest to use. And I think the simplicity is going to win at the end of the day.

So some of those extensions are making that interface between the adviser and the end investor and the portfolio manager a lot easier. So some of that will get monetized through true new growth. And in some of these cases, they are absolutely willing, Patrick, to pay for a new product or a new platform that could actually stand alone if we're willing to incorporate that into our solution. So we can certainly see that as an upsell possibility.

Got it. Another current event, I think, is the private credit markets, and there's growing concern, hey, always starting to see cracks in part of that market. Yes. yet your investment managers business has continued to do really well. It sounds like your pipeline is in great shape. So what are you seeing right now in investment managers?

So I think the pipeline and investment managers is extremely strong. And I think that was back to what I was starting to unpack a little bit 10 minutes ago around the direction of travel and the speed of travel for firms that want to outsource Patrick is extremely high right now.

Specific to a product space, we have -- we are one of the largest private credit administrators across the globe, if not the largest, as you know, but the one thing I think that -- maybe there's 2 nuances that people need to understand about SEI. One is our revenue and business model is on committed capital, not mark-to-market.

So it doesn't insulate us from everything, but it's very different than, I think, some other organizations. I think the other thing is we are still predominantly and almost exclusively on the institutional side of private credit, -- we didn't have the TA capabilities and some of the other capabilities for some of the retail BDCs and private credit funds. We will have more of those capabilities in Q2.

So I'm not saying that completely insulates us from that I actually think if there was a significant unraveling private credit and some global catastrophic implosion that would manifest itself less in our day-to-day run rate in IMS. It would manifest itself way more in our new business sales in our pipeline and our ability to continue to drive kind of the sales growth that you've been seeing there. But we talked about this in a couple of meetings today.

We did about $150 million of sales last year. IMS was a significant portion of that. Private credit wasn't the majority of that in CITs are doing really well. infrastructure, real estate. So we're still pretty diversified across the suite.

Got it. And then maybe just talk a little bit about why you're winning in the IMS space? Like -- it seems like it's relatively crowded. We'll have SS&C here tomorrow. There's a lot of big brand names that compete but you seem to be winning more than your fair share of the market share.

Yes. I mean I think SS&C do a really nice job. I think [indiscernible] does a really nice job -- but in that alternative space, as I mentioned, the complexity. There's just -- and including those firms in this, the firms that are able to handle that level of complexity and scale is not a large number of firms. I think our continued investment, Patrick, as you know, in people, process and technology, and [ it sounds ] trite and I'm sure everybody sits up here and says it, but we do it. And we are constantly investing in that business and in people and in the service side. And the third thing I would tell you is right now, and there's hopefully some wood around, our clients are extremely referenceable.

And at the end of the day, these are large global brands, but they all know each other. They know each other pretty well. So the firms that are thinking about outsourcing are calling their peers that are SEI clients that have outsourced and they're hearing really good things and we need to protect that we need to continue. So I could say white glove service, but it is a big part of it. And I think we're in front of those clients having different conversations a lot of times, Patrick.

I mentioned this earlier, but the value proposition for IMS has really moved from ops for the fund to ops for the firm. we are getting asked to do much different things around data, technology and operational deliveries beyond just can you do our capital calls and make sure the NAVs are correct. And we're just well equipped for that. But I mean, it's something we are extremely aware of and sensitive to and not a position that we will yield.

Got it. Makes a lot of sense. Maybe time for one more question. So you mentioned on the slide at the end, you guys are starting to broaden the aperture in terms of uses of your capital, and Stratos was a relatively major use in recent quarters. What have you learned from that deal so far that validates your thesis in buying that company or investing in that company?

So I think a couple of things we've learned from that. So I mean, it was about our market cap or not -- we bet the bank, right? I think the diligence that we went through, Patrick, to make sure that what we were looking for in a partner lined up with what that partner was looking for as well. I think we did a really nice job of that because we have learned, I think, even in the first 90 days that the ability to let that team go continue to do what they're doing well but their openness to where SEI could help them really think about scaling the investment management side and scaling the investment processing side.

And I think there was a natural nervousness. I did a dinner early on with the top Stratos advisers. And I think there was a natural nervousness that we were going to come in and say, now here are all the things you have to do, and we were talking earlier, I think they're big [ LPL ] clients strategy. Great. Cool. We're totally fine with that.

And we've got a good relationship with [ LPL ]. So I think our ability to actually be deliberate and thoughtful but patient and say, what can we do incrementally and consistently to help [ Jeff ] and that team build a much, much more scalable consolidator. The receptivity of that is really high. And I think now that we're over the early anxiousness that we were going to come in and just tell them this is what we going to do -- and also, I think we had some anxiousness that they were going to say, no, we're just going to run this business.

Right now, it's on really strong footing. But they're very good, Patrick, at identifying, acquiring and integrating the right type of adviser into their ecosystem and they're disciplined about the operating model that they want those advisers to adopt if the adviser wants to go do his or her own thing, Jeff and the team are pretty convicted to say then you're probably not the right fit for us.

And as we bring more SEI capabilities into their centralized investment solution and as well as offer SWP as more of a platform, I think that will actually continue to actually show more in the bottom line in the financials.

All right. Perfect. Well, we will wrap it up there, but we'll have a breakout session downstairs. Thanks, everybody.

All right. Welcome back. Hello, everyone. I'm Alex Kramm, senior research analyst at UBS covering the exchanges and business services companies. Excited to have a new addition here this year on stage, Sean Denham, EVP and CFO and Operating Officer of SEIC. Thanks for joining us this year.

Thanks for having me.

Look, why don't we just jump in. Since I just mentioned it's the first time for you guys to present at this conference, for everybody's benefit, why don't you actually just start by giving us a quick overview about the company?

Yes. At the highest level, we like to refer to ourselves as the connective tissue, like that, of the financial services industry. So really, what we do, we provide world-class administration platforms, world-class asset management platforms. And with the acquisition of Stratos, a large RIA greatly expanded our footprint in advice. We think about the 3 drivers of revenue in financial services: administration, asset management, and advice. So the acquisition of Stratos really rounds out all 3 of those a's for us.

Okay. Well, I'm sure we're going to jump in all of those items. So look, why don't we start with the IMS business. I think a lot of people, and I've only covered the company for less than a week now, but a lot of people view the IMS business as a crown jewel within the company, very steady double-digit growth over the last few years. So can you talk a little bit about the medium-term outlook here and really what's driving the underlying strength in that business?

Yes. I will say, Alex, your first report on us was spot on. The executive team, the Board thought really, you really hit us really well. So I really appreciate that. So IMS, I'm glad Phil McCabe, who leads our IMS business isn't here. His head gets swan when we call it the crown jewel of SEI, but it really has been over the last number of years.

So we are really well positioned as a global fund administrator for the largest managers really in the world. Our client base really are the crown jewels, whether it's traditional or alternatives. We are a top 5 global fund admin. We're really well positioned. We have the best competitive position in our opinion, in the best part of the market, and that's really around alts.

If you go back 5 or 6 years ago, I won't have the numbers exactly right, about 70% of our business was more on the traditional side, 30% on alts. That's really done an inverse in the last year or so, where about 70% is in the alts space, 30% traditional. But we are seeing the convergence of private and public markets. So classic alternative managers have really started to move into traditional space and vice versa traditionals are looking into the alts space.

We think we've got a really good position with those managers. I think classically, we've been thought about operations for the fund, and we've really -- I think, position ourselves differently as a platform for the firm. We're seeing managers trying to do more with less.

No one is really looking to add vendors. They're looking to consolidate vendors. When there's a new fund launch, especially with the largest of the large, we are that first phone call. So again, really well positioned. And so really excited where we are.

We have an incredibly strong pipeline, as strong a pipeline as we've ever had in our 58-year history. Over the last couple of quarters, we've more than indicated some different moves in the market. You see a lot of now classic insourcers of fund administration or doing their own fund administration moving to an outsourced model. We're really excited. We haven't announced anything, no press releases, but we're excited in Q1 to really unpack some of those new potential wins that we have on the horizon.

Being well positioned has really not just positioned IMS, but the company for really the success we've driven over the last couple of years.

I just want to come back to the last point because, yes, on the last earnings call, you did talk about some of these outsourcing deals really in the near term. And I know you haven't announced anything, although this is a [ regular SDE ] event, so you can say whatever you want. But can you go a little bit deeper, like why the confidence all of a sudden, are these deals that you actually already have signed and you're just trying to define the exact scope with those funds? Or what gives you that confidence that you're really going to have something to say here soon?

Well, we've been talking to these managers. These deals don't happen overnight. A decision to move from an insourcer to an outsourcer, these managers don't take lightly. There's a heavy lift in doing those transitions. So we're -- I'm not here to announce anything today. We would love to, but probably not. I know we're under [ SDE ], but not the right form. I think at the next earnings release, we'll be in a better position. Phil will be on the call to really talk about what those -- what the impact to our financials would look like. This is not necessarily completely revolutionizing our business, but they're meaningful. These are going to be impactful for the business, impactful wins. We're really excited to be partnering with these new managers.

Yes. In line with that, you also talked about maybe some margin pressure in that business coming as you, I guess, get ready for those implementations. So can you size up that impact a little bit more? And then also, if these are basically investments ahead of implementation, how quickly do you kind of recoup that, make sure that you have a good return on those investments? Like how do you think about it?

Yes. Over the last few quarters, I have talked about near-term margin pressure, not -- it has not always come to fruition. In my role, I never want to get ahead of us. So I'd rather be conservative in nature than trying to get too far out over my skis or over our skis. So Q1, typically for us, there typically is some margin compression in Q1.

Usually, we have raises. We had some -- we did have a riff in Q4. We had some severance. So some of that severance cost or reduction in headcount should offset some of the raises that we typically give on January 1. So we will continue to hire when -- and not just in IMS, but really across the businesses, including Private Banking.

As we see new work coming online, we are a relatively large labor-intensive business. These new large mandates do require more manpower, although there are some interesting things that we're doing around automation. Maybe we can touch on that a little later. But some of the potential margin pressure, we do have certain investments that we're continuing to make.

We've made investments over the last couple of years, specifically in IMS in order to continue to -- as we scale our revenue, we needed to scale some of our platforms to support that work. We do need to -- and we have -- we've been hiring up to get in front of some of the work that I just alluded to with some of these new fund managers coming on board and some new fund launches. So there is some upfront capital.

In addition, we do have some technology investments, other investments we are making -- when I mentioned the technology platform, the upgrade that we had in the IMS business, some amortization will come online in Q1. So noncash but still some P&L expense for Q1.

So we expect to see a little bit of margin pressure, but we're not talking about going from, I don't know where we ended Q4 in IMS around 39%, 40%, somewhere around 40%. We're not talking about dropping 200 basis points, but I do like to -- when the Street sees progressive quarter-over-quarter margin growth, just like to sometimes pump the brakes a little bit, so not to expect that continual march forward.

So like I said, we are doing things in our IMS business, making investments around things like, for instance, NAV visualization, really, really important for our business. Fund administrators, if you're not aware, they will do shadow accounting. And so we'll strike NAVs. We'll do a lot of the administration work. Even though you're an outsourcer, there is a certain amount of work that's still done internally to compare NAVs, et cetera. Some of the technology that we're investing in may allow these managers to no longer have to do some of that shadowing. So really all good stuff, really to set us up for future success.

Sounds good. Thanks for unpacking that. Switching gears a little bit to the Private Banks business. It's been a decent performer over the last couple of years, actually improved a decent amount, right? So good to see that. But recently, one thing that stood out a little bit is that pickup in the nonrecurring professional sales events, I guess, you would call it. So can you talk a little bit more what's going on here? And are these, I guess, professional fees actually becoming a little bit more of a recurring thing because it seems to -- they seem to be getting bigger and more recurring to -- for lack of a better word. So -- and where do you really see this business being in the next couple of years? Like what kind of evolution are we going through here?

Yes. So that's something we're incredibly excited about. So -- and just to back up a couple of years. So when Sanjay Sharma, who is our Chief Technology Officer, when Ryan Hicke became our CEO, literally the first thing Ryan did was move Sanjay from being our CTO to taking over private banking. And he's really done a truly amazing job.

Looking back, our margins depending on the quarter were flat or not flat, but 0. So even in certain quarters, I think we had some negative margins. At that time, we gave a little bit of a runway to how to get margins back to historical margins. Part of that was looking at our total addressable market, understanding our client base, understanding what -- if we were to implement our asset management platform, SWP, that's what was being acquired. Typically, we were just selling the SWP platform with some operations services that would support that.

What we did was is take a look at all the other services that our clients were buying that supported that. That may be looking at their total tech stack, what is the right course to sunset certain technologies as SWP comes on board, even ahead of the RFP process, doing an assessment of their tech stack, which obviously puts us in a really good position if we're bidding on some of that work.

Tremendous amount of change management when these implementations happen and there's a change from one platform to another platform, there's tremendous change management professional services that they were buying from other third parties. So we took a look at that and said, well, we should be creating these services that surround our platform in some of these implementations. It's been really successful.

And by the way, those margins are much higher than our classic. I think our margins right now in PB sit around 18%-ish. Historical margins were probably around 25%. Some of these professional services margins are more in that 40% range, so definitely accretive. I've now used the word professional services probably 25 times.

We've been using -- but what we've been using the moniker, and we've been thoughtful about it over the last couple of years is we use this term nonrecurring services. That's not exactly true. We've historically used that, but we've received some feedback even as recently as the last quarter from some of the analysts and our investors to start unpacking what are some of those nonrecurring.

Are they truly nonrecurring? When you think about a company like Accenture or even where I came from -- I used to work at Grant Thornton. I was a partner there, about 1/3 of Grant Thornton's business was advisory services. Every year, Grant Thornton had to resell 60% of that. And by the way, revenue grew every year. So Grant Thornton was -- or Accenture does replace that work with other work. It might not be the same exact SOW, but clients still buy from their vendors and SEI does as well.

So I think going forward, you'll see us doing -- having a better terminology than nonrecurring, but those truly are professional services. Some of the questions that we get are in those nonrecurring sales, sales events, what's in there? So as I mentioned, there's other advisory services. Yes, there are some implementation fees. But in this past quarter, we had about $23 million in sales events related strictly to professional services. Less than half, probably about maybe 25%, 30% of that was implementation fees. And the rest was truly, truly these other advisory services that we really weren't serving and selling 2 years ago.

And I think the opportunity there is that we haven't done a lot of that work in IMS. We see an opportunity in our IMS business to take a page out of Sanjay's book, what are some of those things that managers are buying. It might be services around data. We spent some money around technology to make sure we're supporting those needs. And there's various other services we've identified.

And if you look at our total sales events for the past 12 months or for calendar year '25, fiscal '25, we had $150 million in sales events in '25. $50 million were these nonrecurring or professional services. Going back 2 or 3 years, the number was 0. So while the revenue portion compared to $2.3 billion, $2.4 billion in revenue is relatively small, the ramp-up of what portion we're selling compared to our total sales events is actually increasing, and those are really nice margins.

Okay. That's -- I guess we'll keep on watching that develop even further. I want to -- staying on the Private Banks business, I do want to come back to the truly recurring business because the sales in that business have been a little bit weaker or were a little bit weaker last year. So can you talk about the pipeline here? How confident are you in that sales picking up again in 2026? And anything we should be aware of on the retention side because, quite frankly, there's also been some cancellations.

Yes. Well, so we -- so sales events in PB were actually incredibly strong last year. But when we net them out, we had one loss, we did. So -- and there was facts and circumstances related to that one loss. So in Q3, part of our policy, we were informed that one of our clients that was on the platform had given us notification that they were potentially not renewing. There was a couple of caveats in there. And that was about, I think, $15 million or so, which net-net would pull it down. That was really -- that was the only loss we've had in Private Banking over the last couple of years, at least of any significance. Really, it broke Sanjay's heart, who was really disappointed about that as we all were.

But the -- just to unpack that a little bit, these conversions take years. These aren't, a, we're giving -- we're putting you on notice part of our contract, we have to give you notice by a certain date. The notice was given. These could take -- some of these conversions can take 3 years, 4 years, 5 years. And when you look at the margins, you look at a $15 million negative sales events as we net. The P&L impact could be $1 million, $2 million in totality 5 years from now. So we want to -- we tried to put that in perspective.

From a pipeline standpoint, our pipeline in PB IMS has literally in our history, has never been more robust and stronger. Again, we had a great win in Q4. That was not just -- that was not just professional services. That was another large mandate that we had won, and we will implement that over the next couple of years. But the pipeline in PB is as strong as it's ever been.

As a reminder, about 3 years ago, when Sanjay -- 4 years ago when Sanjay took over, we were primarily focused on the largest institutions. And we -- about -- I think the number is around 12 now or so. 12 of the largest 20 U.S. institutions are on our platform. That was a big focus, where we've seen margin improvement, increase in sales events, increase in revenue and profitability has really come from the regional and the community bank space. And we weren't really focused on the community bank space.

And why we're so excited about this. There's obviously many more banks, those decisions could be made more fluidly and quicker by the smaller banks compared to the behemoth. Those sometimes can take 3 or 4 years to make a decision if a conversion is going to take place. And it's been -- it served us incredibly well, including with professional services. So while, yes, we did have one announced loss, you have to put it into perspective of kind of in the magnitude of how successful that business has been.

No, fair enough. And you explained it well. I just -- we look at the numbers and the numbers don't sometimes tell the full story, right? So moving on then, though, to a business which I think you will agree with me, you still have some more work to do.

We do.

And that's asset management, which has been softish, in particular, when you take out the really favorable markets that we've had over the last few years. So new management in that business. So maybe just give us an update what they're doing there. And then maybe more importantly, any proof points you're seeing that some of the new initiatives are actually working?

Yes. So that is a business that Ryan and I and the rest of the executive team, I would argue, is really the most exciting and the hugest opportunity for us. So IMS is a machine. You used the word crown jewel. We hear that a lot. We agree with that statement. We believe IMS is going to continue to run and have a great trajectory.

Sanjay took over PB a couple of years -- 4 years ago, negative margins, as I mentioned, flat sales events, almost negative depending on the quarter. And I think that turnaround has been evident. The third of our verticals and when we say asset management, we use that as a catch-all for our investment advisers business and our Institutional business.

Not unlike some of our legacy businesses that needed some turnaround, that business definitely needed a turnaround. We brought in new leadership led by Michael Lane. Michael is former BlackRock. One of our key tenets on Investor Day back in September, 1 of the, I think, 5 was the reimagination of asset management. It can be a really catchy term to use, but it truly is we have reimagined asset management.

And there's been early successes. I think in Q1 or Q2, we announced like a $200 million positive inflows, which seems like nothing. But when you had $5 billion of negative flows the year before, it actually is somewhat significant. So we have seen momentum. There are a number of things that Michael has instituted. He's brought in new talent. He brought in Bob Hum, who essentially leads our -- is our Chief Product Officer, if you will, for asset management.

We've launched and are launching a number of new ETFs. I think the number is around 7 or 8 for '26. There's a lot of opportunity there. If you know our business, we do a lot around model portfolios. The majority of those -- the product inside those model portfolios are not SEI products. There's a little bit, but not much. I think there's an opportunity for -- especially for some of our ETF products to be infused into those model portfolios.

In '25 we won under Michael's leadership in kind of new direction before I give that little nugget. There was a tremendous amount of work that needed to be done. There had to be kind of reconfidence blown into the sales team, the leadership team of the Choate Hall that we refer to as asset management.

What Michael has done and one of the main thing he did is said, hey, we're -- the majority -- or some of our strategy was really retention in the smallest parts of the market, retaining some of our smaller advisers. We still serve them very well, but we also knew that we needed to move upmarket. Michael has done that very well.

A proof point of that is just in 2025, we won 2 of our biggest ever asset management engagements in the history of SEI. And to be honest, we never even would have pursued that in prior years. It wouldn't have even been on our radar. So that's really exciting. We had $1.4 billion in total ETF flows in 2025, far outweighing any other historical point for our ETF flows. So there are nuggets that we are seeing in little buds here and there, especially with some of the leadership changes that he's made there. We're going to continue to expand our ETF lineup. So yes, so that's kind of why we're pumped, and that's where we see some of the runway coming from.

Excellent. And since we were just talking about the asset management business, maybe a good time to also go back to the Stratos acquisition, which you mentioned at the first question. So look, you just closed it a couple of months ago. So the question really is any early learnings? Anything you're more excited about? And then, of course, maybe just lay out or remind us about the strategy here because it's a little bit of a departure from what the company was doing before.

It is. Yes. And I'll repeat, right, there's 3 -- in our opinion, there's 3 drivers. There's 3 a's in financial services: administration, asset management, and advice. There's -- if you look at administration and asset management, there are pricing pressures. Somehow, the advisers have done an amazing job of maintaining the advice lack of pricing pressure. So if in 10 years ago, advice was 80 to 100 basis points, advice today is 80 to 100 basis points, where you'll see mutual funds have had pressure. The cost of those have resulted in moving from active to passive, even ETFs have gone down, even fees around custody have been pressured down and in some cases, have gone away.

So we felt we needed to be closer to the advice space. And so we looked at a lot of different opportunities. And Stratos was and is an incredible RIA platform, incredible leadership. Jeff Concepcion is the President and CEO of Stratos. First time we met him fit really well into our culture, his vision, his acquisition strategy, the way he looks at deals, his reputation in the market, a lot of inbounds come into Stratos. And so it just really was a natural fit for us.

One of the questions on the day we announced, we got on the phone with some analysts and investors and people wanted to understand the rationale. To your point, it's not something we necessarily dove deep into. Although when Ryan took over 4 years ago, probably 2 to 3 years ago, in his M&A conversation, there was 2 areas that he had discussed.

One was doing something with the U.S. RIA, now known as Stratos. So we delivered on that. And then two was, do we need to do something around European fund administration? Do we need to buy something there in order to kind of scale quicker the EMEA admin area.

So getting back to Stratos, so it should never have been a surprise. We had been giving indications every single quarter that we think we need to be closer to the advice base. The question we received the day of the deal was, hey, help me understand what those -- classic question, where are the synergies coming from? We paused there a little bit. We didn't really want to dive too deeply into where we thought the synergies could come from.

As we sit here 60 days later, we're seeing early indications from advisers that they want to know more about SEI and the opportunities that we can provide, whether that's investment products, whether it's our custody platform, whatever it may be. We also talked about when the acquisition happened, we got a question whether we would force march any of their advisers onto our platform. The answer to that is no, it's still no. We want to be able to earn that business and not force any advisers into doing anything that they choose not to at any of their businesses.

So early days have been really successful. We've had an adviser conference down here actually in Marco Island, I think, in maybe December, somewhere around there. Really successful. The feedback was incredible. The advisers there were really excited about the transaction, learning more about us. And it's not just custody platform, it's really all of our products. So we're moving from a sales -- a relatively mild sales force, for instance, in our Institutional business around OCIO or co-CIO opportunities.

Now we have a sales force of RIA advisers across the country that have said, hey, I have certain connections in certain companies that look like your client base. Can we help with an introduction? And by the way, what does that look like for me? And so we've already had early conversations for even our Institutional business that we would not have had otherwise.

So I don't think the synergies are necessarily from a cost takeout. Actually, I know they're not. It's more about, right, just classic, what is 1 plus 1 equal 3 and how do we make that happen? So early days, Q4's numbers had 1 month of revenue as part of the deal in early January, there were some put calls part of the deal. And so we did consummate the rest of the anticipated transaction outside of NSC, which is the Mexico entity that has not been completed yet. So anyway, early days has been really, really positive. We'll have more to share after Q1.

Okay. Sounds great. And then let me maybe move on to some more company-wide questions. The first topic here, AI.

I haven't had that question yet.

This is day 2 of the conference, and I can tell you, AI has been a frequent topic. So look, your business in some areas seems fairly labor-intensive. So naturally, I would think AI can probably help there. So anything you're already doing? What's on the road map? And then on the same topic, what about the other side of the coin? I mean some of the companies in my coverage over the last month, over the last week. And again, today, are getting caught up in this AI narrative in terms of disruption. So again, maybe you can talk about this, maybe you've even been caught up in that as well. So what are -- where are you seeing risks? Are there risks? And why do you not -- how can you fight back, I guess, is the question?

Yes. So the value of software is not declining. The barrier to creating the software is that barrier is becoming less and less of a barrier. So yes, we do have, obviously, technology part of our platforms. But just to put it in context, so let's take SWP, for instance. We believe we built a relatively large moat.

From an overall revenue standpoint, we have 2. We wish we had more, but we have 2 SaaS clients that are really only using the platform where we sell our service in the majority of our revenue, specifically in Private Banking, for instance, is really a full suite of services. So it's not just software sales for software sales. We're providing front, middle and back-office services to our client base. That is a -- there is a labor component to that.

There is a tremendous amount of regulatory issues around, obviously, as you know, from the banking space, and we are as well. So I don't think the barrier -- I don't think the entry from software and technology, specifically in some of the things that we do are going to be really in the front of the line versus maybe the back of the line of where people may think about it.

From an overall revenue standpoint, it's -- we actually spend more on technology than we actually pay -- that we actually receive from a revenue standpoint just from a SaaS standpoint. So we actually see this as an opportunity for us. We spend a tremendous amount of third -- with third-party vendors from a technology standpoint. So we're actually hoping the use of AI with some of our current vendors and are there new entrants coming in.

Our technology spend is expensive. And every year, year-over-year, it's actually a very expensive proposition with increasing pricing. We see this as a really interesting opportunity in order from an expense and cost standpoint to actually help the business.

You asked the question, so what are we specifically doing? So over the last few years, we have a ventures group. Sneha Shah leads that. She's outstanding. The group is outstanding. We have been making investments in AI. Classic SEI, we try to -- we always historically try to build everything ourselves. This is not an area where you can build yourself, so you need to be partnering. We made an investment in TIFIN a number of years ago. That is not our solution. But getting closer in a front row seats to some of these AI platforms like TIFIN has really helped us tremendously.

We've made investments around Data Cloud. That is part of our professional services. There are AI components inside our Data Cloud offering in professional services to PB. We announced an investment in of Avantos, so part of our ventures group, which is an AI-native organization, which is helping in form and we're embedding that into some of our platforms. So there is a lot of things that we're doing.

Our legacy platform before SWP was actually built on COBOL in the '70s. And so no one has come by and tried to disrupt COBOL for the last 50 years. And so we believe the moat is there, but we're not also ignorant to the point that it can't happen. There are a lot of barriers to entry, specifically around regulatory environments. So we're keeping a close eye on it.

But there's a number of other things from an AI standpoint that we are doing. We haven't announced it publicly yet. So I'm not going to necessarily do it today. But we -- even yesterday at 9:00 a.m. in our offices, we signed an SOW, a couple of weeks ago around automation for the organization.

We are, as I mentioned, very labor-intensive. We have a tremendous amount of manual processes. So bringing in a well-known global third party to partner with us of thinking about how we can use automation and specifically AI on top of that automation, I think, is going to continue to help with margin improvement and really just kind of get our workforce leaner, so we can continue to make those other investments in things, not just AI, but all things investments, which would include AI. I know.

It's a lot.

It is a lot. It's a big question.

No, it's -- there's a lot going on, and it changes every day. Look, shifting gears again, one of the things I should have probably asked or talked about or asked about earlier is that SEIC over the last few years has been this company in transition, a lot of management coming in, including yourself. I want to talk about margins in a minute, but maybe before that, just -- can you just talk about how the company has changed? What this meant from a go-to-market strategy perspective, what it means financially, obviously? And to what degree do you think it's changed the perception of your company -- from clients?

Yes. When I joined 2 years ago, my anniversary is coming up here next month. And I guess when Ryan took over almost 4 years ago now, I think SEI had lost its mojo a bit. We were viewed more as a sleepy company. People weren't seeing us show up in the market like we are today, definitely like we were 10 years prior to a number of years ago. So I think under Ryan's leadership, bringing in kind of new ideas, new strategies, identifying all the broken windows, and we had a bunch of them. We had a lot of broken windows that we had to fix, including some of the ones we already spoke about.

But I think -- and very trendy to say, but moving from a product organization to an enterprise solution, which we can -- which we have demonstrated and we talked about in Private Banking. Companies, clients, firm want to do more with less. They're not looking to add vendors, they're looking to consolidate vendors.

And I think we've done a really, really good job of being that thought leader along with whether it's a large national bank, whether it is some of the largest fund managers in the world of moving from simply providing one administrative service to being a platform for the organization, we've been really successful. And it's honestly just the way we show up and think about the business differently.

The old SEI of making excuses of why we're losing as opposed to where the opportunities lie, that has really been under Ryan's leadership, and he's changed that mindset. So I do think infusing outside-in talent, that's not to pat myself on the back. We have a lot of great outside new leaders, including Michael Lane, has just helped us rethink.

If you've ever been to on-campus in Oaks, we have a beautiful campus in Oaks, Pennsylvania. It's huge. It's like a college campus. There is a [ PEP ] and everyone's step now. People are excited to be showing up where I think we -- maybe we lost that for a number of years. So it's really nothing more than how we're showing up, and I think the results are showing that.

Okay. Two more things to go through. Let's see if we can make it happen. I'm looking at the time. But I promise I will get to the margins. Nice level of improvement there, but it does seem like if I look at the number and where you were in the past, there's more to go. So maybe just quickly, what are you focused on in particular? How quickly do you think you can drive change? And then, of course, how do you balance that with investing as we talked about earlier?

Yes. So all right. So let's unpack this a little bit, and I know we have 3 minutes here. I mean I think last year, in '25, I think margins improved about 140 basis points, somewhere around there. So we're really proud of that. As you mentioned, we do have more room to go. And I made the comment at Investor Day that we're looking to improve year-over-year basis points by 25 to 50 basis points per year, which one of our analysts said that seems low. I'm not saying it's low or not, but I would say I try to be a little more conservative in some of the financials we give out. But we're doing a lot. And I mentioned the automation project.

We talk a lot at the executive committee and at the Board level. As we scale revenue, if we have to scale heads, we failed. And so the automation project, how we're leveraging and laying in AI over top of it all is a big portion of where we're going to drive margin appreciation. So -- and as I walk around SEI, I just feel there's $1 million here, there's $1 million under you turn over every chair. There's just tons of opportunities where we are very manual intensive and the opportunity to get automated more and be able to scale is something we really haven't spent a lot of time focused on.

So I think that's where it's going to be a portion where it comes from. And then just on -- and then anything from an asset management. If we can get investment product, asset management moving, some of those margins compared to our expenses, right, they can scale very, very quickly. So we are excited where the margins can move to.

Okay. Excellent. All right. With 1.5 minutes left, I obviously need to go into capital allocation. We did already talk about a few things there as well. But more recently, you've been active buyer of your stock, $600 million last year. You did the Stratos acquisition. So a, how do we think about buybacks going forward? And then, of course, where do you think the business could be complemented through M&A? And very quickly, how does leverage fit in? Because, quite frankly, you used a lot of cash for Stratos, but you had previously said you would also maybe tap the debt market. You didn't. I don't know why you didn't. So maybe talk about that for a second.

So we historically have been very conservative with our leverage. We historically have used that as a -- prior to me joining SEI. I think we use that as a badge of honor, and I think that the investor community would say maybe that's not the smartest strategy. So at Investor Day, we did talk about moving from a negative onetime to maybe getting to 0 to maybe 1 time in the future.

We're not going to be doing acquisitions for acquisition's sake. We did state and we stand by this. We're looking to return 90% to 100% of free cash flow back to our shareholders. We are not afraid of debt. We -- I think you can expect when we're making future investments, I don't think that's necessarily in the terms of M&A. There may be some tuck-ins with the Stratos to continue to support that, as Jeff and others, and we want to continue to bring on new advisers. So I think there's an opportunity that's where we're going to leverage some of the debt. But I wouldn't expect us to go from negative onetime to onetime overnight.

And any particular areas in terms of M&A that you're spending time on?

Yes. When we -- I think it's going to be in the short term, it's going to be more to support the Stratos acquisition as opposed to anything else.

Okay. Very good. All right. Why don't we stop here. Thank you very much for all the insights and hope to have you back here in a year.

Yes. I appreciate it. Thank you. Thanks.

Hello, and thank you for standing by. Welcome to SEI Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Brad Burke, Head of Investor Relations. You may begin.

Thank you, and welcome, everyone. We appreciate you joining us today for SEI's Fourth Quarter 2025 Earnings Call. On the call, we have Ryan Hicke, SEI's Chief Executive Officer; Sean Denham, Chief Financial Officer and Chief Operating Officer; and members of our executive management team, including Michael Lane, Phil McCabe, Mike Peterson, Sneha Shah, Sanjay Sharma and Amy Sliwinski.

Before we begin, I'd like to point out that our earnings press release and the presentation accompanying today's call can be found under the Investor Relations section of our website at seic.com. This call is being webcast live, and a replay will be available on the Events and Webcast page of our website.

With that, I'll now turn the call over to Ryan. Ryan?

Thank you, Brad, and good afternoon, everyone. I'm pleased to report that SEI ended the year with an exceptional quarter, capping off one of the strongest years in our 58-year history. Earnings per share totaled $1.38 for the quarter. After accounting for some of the noise items that Sean will walk through, Q4 represents our highest ever quarterly earnings performance.

What's most exciting is that these results were impressively broad-based, driven by revenue growth and margin expansion across almost all business segments. This was a total SEI effort, not driven by a single business or a one-off event. It's a testament to the power of our integrated approach and the relentless execution from teams across the globe.

We also sprinted to the finish line with our sales events posting a total of $44 million, one of our highest ever quarterly results and capping off our strongest year ever for sales events. Notably, Private Banking delivered a standout performance, posting $28 million in net sales events.

As we discussed on our last earnings call, we were confident in the strength of our private banking pipeline, and I'm pleased to report that we're doing exactly what we said we would, translating that pipeline into meaningful results. This quarter's success is the result of disciplined execution against the clear strategy. My expectation is that the sales momentum we generated in Q4 will carry into 2026. And it's not just banking. Asset management is building traction and IMS continues to benefit from structural demand for outsourcing, especially amongst large alternative managers.

We've been signaling for several quarters that we're working with some of the largest global alternative asset managers, including first-time outsourcers, and I expect we'll have some meaningful developments to announce by the April earnings call.

During the quarter, we also achieved a major milestone with the first close of our Stratos partnership. Stratos brings a proven adviser and client-centric model that's a strong cultural fit with SEI. It also gives us deeper insight into the needs of end clients, strengthening our appreciation of how advisers and intermediaries run their businesses. We're already seeing tangible benefits including greater awareness of SEI across the RIA and broker-dealer channels and renewed inbound interest in our capabilities.

Our focus now is on integrating our technology and investment management strengths with Stratos' platform and continuing to learn from their team as we scale together. This is a long-term strategic partnership, and we're focused on adding value in ways that support rather than disrupt their impressive organic growth.

Stepping back from the numbers, it's important to focus on what's driving SEI's success. These outcomes are rooted in deliberate choices and a deep understanding of where our strengths align with the most attractive opportunities in the industry. specifically the growing demand for outsourcing, especially from alternative managers and the continued convergence of public and private markets as well as the enduring demand for advice from end clients.

These themes are intensifying, and we have leaned into these secular tailwinds with intentional investments over the last several years, and these are translating into repeatable performance. For example, we commercialized our private banking professional services, data cloud and SaaS offering, strengthening client retention and unlocking new growth opportunities. We added new leadership and talent across the organization driving sharper execution, infusing fresh ideas and increasing accountability.

We laid the foundation for our global capability center, which we expect will help us scale operations more efficiently as we continue to grow. And through the Stratos partnership, we expanded our reach in the adviser channel, positioning SEI to capture new flows and deliver greater client value. As we look to 2026, we intend to double down on what's working. We're accelerating investment management product launches in ETFs, SMAs, models and select alternative products where we have an edge.

These launches build on our early traction, including more than $1 billion of net inflows into ETFs this year for SEI. We're continuing to evolve the operating model of our IMS business, transitioning from fund-by-fund operations to platform-level services, with shared tooling, workflow automation and data services, so we can onboard and expand with large investment managers more efficiently.

We are leveraging automation and AI to lower unit costs and expand access to our solutions, supporting entry into underserved segments while maintaining client experience at scale. For instance, in the fourth quarter, we made a strategic investment in Avantos, an AI-native operating system for client onboarding. It's a great example of SEI's commitment to creating a more connected scalable and intelligent experience across our platforms. And as always, we'll pursue these priorities with discipline, holding ourselves accountable for maximizing the enterprise value of SEI.

You've heard us be ultra-transparent for the last several quarters and at our Investor Day about our strategy and how we're running the company differently. The team is in place, our priorities are clear and 2026 is about focus and execution on the road map we've laid out together. Against that backdrop, our job in 2026 is actually simple: Go execute.

With that, Sean will take us through the quarterly results in more debt. Sean?

Thank you, Ryan. Starting with Slide 4. And to reiterate Ryan's commentary, SEI had an outstanding fourth quarter, both including and excluding unusual items impacting results, which collectively reduced EPS by approximately $0.08. Those items included $20 million of elevated corporate overhead expense related to severance and M&A fees incurred in the quarter. This was partially offset by a $3 million tax benefit from purchased energy credits and a $3 million revenue accrual true-up benefit captured within IMS.

We always have accrual adjustments based on actuals versus estimates, but in the fourth quarter, that adjustment was more pronounced than normal. We also had some items that, while not unusual, did go our way in the quarter. notably, LSV performance fees that were more than $3 million above the prior year at SEI share and the $4 million gain on VIEs attributable to the LSV hedge fund seed investment we discussed last quarter. Also, while Stratos formally closed in the fourth quarter, we only owned the business for a few weeks, and many of the planned adviser roll-ups were finalized in early January. Given this timing, Stratos' financial impact was not meaningful to fourth quarter results, we will provide a fuller and more substantive update next quarter.

On a GAAP basis, EPS increased 16% year-over-year and 6% sequentially. And excluding unusual items from the current and prior periods EPS would have been at an all-time record, exceeding the prior record achieved in Q4 of last year. Overall, 2025 represents an excellent year for SEI with double-digit earnings growth in more than a full percentage point of operating margin expansion.

Slide 5 summarizes performance by business segment. Like Ryan mentioned, strong Q4 performance was broad-based with positive contributions from each business segment, both revenue and operating profit when measured against both the prior year and prior quarter. Private banking revenue benefited from recent professional services wins, which convert into revenue more quickly than we've historically reported as recurring sales events.

Margins also increased due to cost leverage on revenue growth and the fact that these new professional services wins are overall margin accretive benefited from a $3 million revenue accrual true-up I mentioned earlier. Even excluding this benefit, revenue and margins increased meaningfully from both the prior year and prior quarter, driven by recent wins coming online and a modest contribution from market appreciation in our traditional business.

Our 2 asset management segments like sequential growth, which was driven by market appreciation and healthy flows in our Advisors business, which offset the impact of client losses in the institutional segment and the continued pressure on mutual fund outflows across the asset management industry. Our integrated cash program is reflected in both the prior year and prior quarter comparison. In the fourth quarter, this program contributed $21 million to revenue, matching the levels achieved in the prior quarter and prior year.

Slide 6 illustrates our consolidated margin, which, as we've discussed with this group before, is something we are increasingly focused on as a management team, more so than the individual margins achieved in a single business segment, certainly in any given quarter. Consolidated operating margins were weighed down by severance and M&A costs captured in corporate overhead. Excluding these costs, consolidated operating margin significantly increased on both a year-over-year and sequential basis.

Turning to sales events on Slide 7. Private Banking led the quarter with $28 million of net sales events. Results were driven by 2 significant new mandates. In the largest of these, SEI will provide SWP Software-as-a-Service implementation services and ongoing enterprise-wide professional services. This represents our second SWP SaaS client, demonstrating the underlying demand for our SaaS delivery model. This engagement began with advisory work on strategy and system design and the expanded award reflects the client's decision to have SEI execute the full program.

This underscores an emerging trend in private banking. We are increasingly partnering with clients in an advisory capacity, which may lead to larger and longer-duration professional services engagements. While we're very pleased with this momentum, we would also remind you that these large engagements can create variability in quarterly sales results, and the fourth quarter represents a strong outcome that should not be extrapolated as a run rate. IMS realized net sales events of $20 million, with just over 2/3 coming from U.S.-based alternative managers and with no single win accounting for a significant percentage of the total.

Our Advisors segment net events were flattish in Q4. A key highlight was positive flow into SEI managed ETFs from off-platform investors. We talked about the strategic opportunity to distribute SEI investment products through third-party models and the fourth quarter showed encouraging early progress on that initiative, offsetting the continued pressure from mutual fund outflows. Negative institutional segment sales events primarily reflect client losses in the U.K. During the quarter, we continued to streamline leadership and reset the cost structure to position this business for improved economics.

Turning to our asset performance on Slide 8. SEI achieved both AUM and AUA growth, both sequentially and year-over-year. A growth of 3% was supported by strong win momentum and to a lesser extent, market appreciation. AUM growth of 2% is attributable to market appreciation, which offset modest outflows in the quarter, primarily in the institutional business.

With that said, focusing only on AUM growth understates some meaningful progress, especially within advisers. Over the past year, we moved further up market, increasing the average size of advisers we're winning, and we're beginning to see early success selling the full SEI ecosystem, such as our tax management and overlay capabilities. which drove an additional $2 billion of net new assets on the platform.

As a result, Advisors delivered their best net inflow year in over a decade, signaling tangible momentum behind our upmarket strategy and broader ecosystem approach. LSV assets under management increased 3.5% versus Q3 due to strong underlying fund performance and market appreciation, which offset $3 billion of net outflows in the fourth quarter. Underlying LSV performance remains solid as evidenced by the $22 million of performance fees in Q4 or $8 million at SEI share.

Turning to capital allocation on Slide 9. During the fourth quarter, we repurchased $101 million of shares, bringing full share repurchases to $616 million, representing nearly 6% of total shares outstanding from the end of 2024. We also completed the largest component of Stratos acquisition entirely with balance sheet cash, ending the year with $400 million of cash and no debt. We remain committed to returning 90% and 100% of free cash flow to shareholders in the form of both dividends and share repurchases.

Before concluding, I want to spend a minute talking about our forward expectations. SEI has never provided an earnings guidance. and that is a practice we intend to continue. However, there are a handful of items to keep in mind, especially towards the beginning of 2026. Some of these items are normal seasonality. Our tax rate is typically the lowest in Q4. Performance fees from LSV are typically highest in Q4 and lowest in Q1. The first quarter has 2 fewer days than the fourth quarter. The gains on our LSV investment are unlikely to repeat at Q4 levels, and we implement annual compensation increases effective January 1. Most of this impact is below the line, not operating income.

Beyond these lumpier items, we are also advancing the accelerated investments Ryan discussed. We are hiring to support our strong pipeline and major wins across business lines. and we expect depreciation and amortization to step up next quarter due to placing certain large investments into service. We recognize that these investments must be balanced through thoughtful resource reallocation and ongoing cost efficiency efforts.

As part of this discipline, we implemented a targeted reduction in force in December, affecting approximately 3% of our global workforce. This action, which drove the severance charges I referenced earlier, reflects our commitment to ensuring that the cost of future-focused investments is supported by a more efficient and scalable operating model. These actions support what we communicated during our Investor Day regarding our goal of long-term double-digit earnings growth and consistent margin expansion.

Stepping back, the fourth quarter cat in an outstanding year for SEI, one marked by broad-based financial strength, record sales performance and meaningful strategic progress across the enterprise. As Ryan highlighted, we are excited about the opportunities ahead and believe SEI is exceptionally well positioned entering 2026. We look forward to building on this progress and continue to deliver long-term value for our clients employees and shareholders.

With that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Crispin Love with Piper Sandler.

First, more than 2/3 of your sales men came from alts in the quarter. Can you just give a little more color there? Was that primarily from new wins or expanding relationships with current clients? And then you also made a comment, Ryan, I think early in your comments about momentum in sales and you expect positive announcements during April earnings or something like that. Does that relate to any specific activity in so far in 2026 or just good visibility?

So I'll answer the first one -- or your second one first, Crispin. Happy New Year, man. Yes, we like what we see on the sales momentum front, which is consistent with previous quarters, but we thought we would call out because there's been conversations that we talked about last year about some opportunities we have with just some -- with a couple of larger organizations that predominantly have in-sourced. We make good progress there. So we expect to have some more tangible update on the April earnings call about that. That's specifically in the IMS business. I'll kick the fill on your first question. I believe, Chris, in your question was specifically about 2/3 of the sales events in IMS?

Yes. Just where is that coming from? Is it new wins? Or is it expanding relationships within your current split?

Phil?

Sure. Crispin, this is Phil. I'll start by saying for the quarter. The quarter, it was about $20 million. It's normally a little bit seasonably low in Q4. Nothing was necessarily that notable to call out. It was a combination of new business and cross-sells around the globe. What I'd say is the pipeline is really strong. We're looking forward to a great 2026. And as far as the larger wins are concerned, we're going to cover that a lot more with the Q1 results.

And as Ryan said, we have a great track record with these large enterprise clients moving to outsourcing. And some of these deals are household names, and it's going to take a lot of work to get them in through the pipeline and execute it and into the run rate. So a lot of that depends on how much invested capital we get, and we're actively working on defining the magnitude and the scope.

Great. And then just also on sales events in the quarter, a fairly wide gap between the net recurring and nonrecurring. Can you discuss some of the drivers there? Is that due to the professional services aspect that you mentioned, Sean, or anything else to call out?

Absolutely, Crispin. I mean it's definitely driven by the continued growth of the professional services strategy that Sanjay has deployed. And I think as we try to call out here, some of these, we believe, have kind of a more repeatable or longer tail element to them, but we continue to characterize them under the onetime professional services kind of banner, if you will. A lot of those are with existing clients and also some new names. But Sanjay, you want to expand a little bit on that?

Yes, sure. So if you look at the professional services, you could look at it in 2 different buckets. And now services, which we are providing before even the clients that are engaging with us through SWP on our platforms. So we have started engaging with our prospects and clients very earlier in advisory capacity, and that it reflects our fourth quarter results as well.

And the second part is that since we are engaging at that early stages, we are able to influence the overall strategy we are able to define the note star for the clients in terms of okay, how their overall technology landscape is they do change how their operating model is going to change. And then we are participating in that journey, how that the transformation we can make happen. And that's the reflection of the overall professional services strategy, and that is reflected in our fourth quarter results.

And I think what's really important, Crispin, is from a value proposition perspective, we're really seeing a distinct transition in the market. When you look at Phil's market where we historically maybe have been characterized as ops for the fund we have really evolved more into a platform for the firm from our clients' perspective. And Sanjay's business, maybe additionally was investment processing and technology for the fiduciary business, they're now being seen more as a technology and platform partner in the C-suite of these organizations. We're really excited about the expansion, not just of our sales capabilities, but the expansion of SEI's footprint in the mind of the buyer and the clients in these organizations with these changes.

Our next question comes from the line of Alex Bond with KBW.

This is [ Natalie Knoll ] on for Alex Bond. On the Private Bank segment, the margin there stepped up sequentially on a stronger sales quarter, but thinking about the margin in the context of professional services offering. Can the margin for the segment maybe stay in the high teens range on the back of stronger professional services? Or is the step-up this quarter somewhat episodic, and we should anticipate a return closer to the mid-teens in near term with upside potential if professional services sales are strong?

Yes. So thanks for your question. I think if you look over the last probably 8 quarters or so, you've seen steady increase in the margins in PB. We would expect margins to be in that area. They've been choppy over the last couple of quarters. Sometimes they're a little lower, sometimes they go a little higher depending on the mix how much professional services in there. Professional services margins typically are higher than our platform, the SWP services in our operating revenue as well. So we don't really give too much guidance around future margins, but I think you can expect it to be within spitting distance of that range.

Okay. Perfect. And maybe if you could also provide any color on the larger 2 mandate wins called out for the Private Bank segment?

Yes, sure. I can talk about that. This Sanjay here. So as I mentioned that now we are engaging with our prospects as early as before even they are issuing RFPs sometimes. And in that process, we are helping them to define their overall transformation agenda, and then we are helping them how to achieve that. So with these 2 prospects, we started working almost 18-plus months ago. And in that process, we engaged with them in advisory capacity, create an overall blueprint for transformation. So this win is a good combination of our core platform, SEI enterprise capabilities and professional services.

And I think what's great as well, Alex, to add some color. One is a pretty meaningfully sized regional and community bank in the U.S. and the other I would consider to be a large kind of private wealth manager both were outsourcers on competitive platforms and really to see the overall value not just in SWP, but as shown in sub-mention around kind of the broader suite of capabilities for the long term for their strategic growth.

And then if I could add another point. Out of these 2, one of the large clients we have signed is our second software-as-a-service client. And that reflects our focus and attention to that strategy as well.

Our next question comes from the line of Jeff Schmitt with William Blair.

How much were the underlying expenses down from the workforce reductions. It sounds like those changes were made sort of late in the quarter. So just wondering how we should think about kind of the run rate impact by segment going forward?

Yes. This is Sean. I would say that you could think about the decrease in compensation related to the RIF at a relatively equal amount of compensation increases in rates for the year. So typically, we'll have -- you can go back and look kind of at the history, but consistent level of raises starting in January. You can kind of think about the reduction in the compensation to, for the most part, match those races.

Okay. Okay. So kind of flattish, okay. And then in the IMS business, it looks like the margin was around 40% if you adjust for that revenue accrual true-up. And I think you've been guiding to that even 39% or even less, you've been investing in that business. So I was curious, is that just from kind of a strong operating leverage in the quarter -- and is 40% sort of the right run rate to think about going forward there?

Okay. I'll take it, Jeff. We did have that revenue accrual true-up, which was a little bit over $3 million. We also had a couple of other one-times for conversion fees and professional services. And some other one-times, probably about $2 million. So that total was about $5 million or so. Without that $5 million, we'd be right in the 5% quarter-over-quarter growth rate. In addition, it was relatively strong just from converting new business.

Sean, is there anything you would add?

Yes. I would add, we've alluded to some Q1 opportunities for us that we'll talk about further in April. We are continuing to hire up in anticipation of those. So if you're thinking about run rate on margin, specifically in IMS. As we said in prior quarters, we are continuing to make investments inside IMS and our other business units and continuing to hire in anticipation, specifically in private banking and IMS. So whether margins continue at that rate? I would expect certain expenses to start hitting a little more in Q1.

Our next question comes from the line of Connell Schmitz with Morgan Stanley.

So on Stratos, how should we think about the run rate impact of the acquisition to the Investment Advisors segment once it gets fully consolidated at the moment, we can only see the NCI related to it for a little bit less than 1/3 of the quarter. And then on that topic, when would you expect to have an updated time line related to like the planned resegmentation that we heard about at Investor Day?

Yes. So thanks for the question. So we're not going to give guidance on the run rate into '26 around Stratos. I can give a little color on Q4. So we had about $5 million in revenue related, which would sit in the Advisors segment. We had just about under $1 million of operating income, which included nearly $2 million of amortization expense on the acquired intangibles. That's a 100% share since we consolidate, and there's about 300,000 of NCI or the 42.5% that we don't know.

And again, we'll have more information in Q1 as we have a full quarter under our belt.

Got it. And then just sticking with Stratos the go-forward strategy, like during the integration phase, is it still continuing to pursue acquisitions or those paused during the integration?

No. In fact, in early January, we had -- so part of the strategy was, as you know, acquiring additional entities providing capital to Stratos to roll them up. So nothing has changed from that plan that we spoke about previously. In early January, Stratos completed the acquiring additional interest in some of the entities that they had my large interest in. And there also in January, there will be some additional acquisitions that were planned as part of the kind of diligence process and expectation as we acquired that.

[Operator Instructions] Our next question comes from the line of Patrick O'Shaughnessy with Raymond James.

Coming back to the topic of those 2 big nonrecurring sales events and private banks in the quarter. From a modeling perspective, how do we think about the revenue recognition impact of those sales events over the coming quarters?

Just real quick, Patrick, the 2 wins we're talking about are recurring. So the 2 firms that Sanjay and I were referencing with some color, there are traditional recurring revenue SWP wins. The rest were professional services, some of those extensions from those existing firms and some of those existing clients and non-SWP clients. So I just want to make sure you were clear on that.

Got you. I appreciate the clarification.

Okay. And then your question is the professional services backlog?

Yes. So $23 million sales event quarter, do we think about that hitting in the next 2 quarters? Is it next 8? Like is there a general time frame you guys have in mind that, that is going to be realized?

See, that's what I like about professional services, that's something we can start realizing immediately. And some of these complex projects, they run over 12 months, 18 months, and that's how these associated professional services are spread as well. And many of them, they will continue after going live as well.

Helpful. And then in institutional investors, you mentioned that the negative sales event in the quarter was tied to some U.K. client losses. Just curious like how strategically important is the U.K. market to that business?

Michael, do you want to take that one, Michael? .

Yes. The institutional business in the U.K. is a fraction of the overall OCI and institutional business. It's important to us, and we're continuing to grow that with the addition of Sanjay taking on the role he has on the international side of the business. So we continue to grow that business, and it's an important part of our business. Some of the movement in that is also where we added additional assets into SEI products within some of those. But the way that we credit those, it doesn't actually show up in revenue. So there's transaction activity that took place in that end of the business in the institutional space within the U.K. as well.

But strategically, we do believe that the institutional business is a growth business for us, and we have made quite a few changes including with Sean's notes on the RIF in December, we've made quite a few changes in terms of the leadership of the institutional business. And we now have put that in the hands of Kevin Matthews, who has a long successful track record in that space. And so he, along with the rest of the team, we are working on an improved operating model and strategy that we will -- that we are starting to execute today.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to CEO, Ryan Hicke, for closing remarks.

Thank you, and thank you, everybody, for the great questions and your continued engagement with SEI. We're really excited about the path ahead. Look forward to speaking with you again next quarter.

And quickly a little sidebar Paul Klauder is in the room as many people will know, Paul is a longtime executive of SEI who will be retiring in February after 30 glorious years at the company. Paul, Phil McCabe and I actually all joined the Executive Committee about 10 years ago today at the same time. Paul has been a great friend, a great leader, but an ambassador to our clients and our employees for the brand of what SEI stands for. So you'll hear some clapping in the room here why we close the call and congratulate Paul.

Thank you. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and welcome to the Q3 2025 SEI Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Brad Burke, Head of Investor Relations. Please go ahead.

Thank you, and welcome, everyone. We appreciate you joining us today for SEI's Third Quarter 2025 Earnings Call. On the call, we have Ryan Hicke, SEI's Chief Executive Officer; Sean Denham, Chief Financial Officer and Chief Operating Officer; and members of our executive management team, including J. Cipriano, Paul Klauder, Michael Lane, Bill McCabe, Mike Peterson, Sneha Shah and Sanjay Sharma.

Before we begin, I'd like to point out that our earnings press release and the presentation accompanying today's call can be found under the Investor Relations section of our website at seic.com. This call is being webcast live, and a replay will be available on the Events and Webcast page of our website. With that, I'll now turn the call over to Ryan. Ryan?

Thank you, Brad, and good afternoon, everyone. We appreciate your time today, especially since we recently spent nearly 3 hours together during our Investor Day just 5 weeks ago. First, let me express our gratitude for the overwhelmingly positive feedback we've received since Investor Day. Many of you highlighted the energy, enthusiasm and clarity of our long-term vision as standout themes, and that affirmation reinforces our strategic confidence. We are committed to disciplined execution transparent communication and creating long-term value for our clients and shareholders. Turning to the quarter's results. We delivered outstanding performance with EPS reaching $1.30. Excluding onetime items, that's an all-time high for SEI. Earnings growth was robust, both sequentially and year-over-year, driven by strong revenue growth and margin expansion. This is the kind of consistent performance we have been messaging over the past few years. Net sales events totaled $31 million with our Investment Managers business leading the way. IMS posted a record sales quarter reflecting surging demand for outsourcing and client expansions.

This is a testament to the strength of our sector, our competitive position in that sector and our continued investment in future capabilities. As we said at Investor Day, we believe the growth runway here is exceptional. Congratulations to Phil and his team. IMS sales activity was notable for its broad-based nature with no single client driving the performance. Approximately 2/3 of our sales events were tied to client expansions, increasing our wallet share. Additionally, 2/3 of the events came from alternative managers. This level of diversification and momentum across client types, both new and existing, reinforces our conviction in the durability of our growth strategy. We also continue to engage with large well-known alternative asset managers who are new to exploring outsourcing fund administration. We believe we are well positioned in these processes, given our best-in-class capabilities track record of execution and client referenceability. Due to the size and complexity of these opportunities, the contracting process tends to be longer, and we expect to be able to provide more clarity on the nature of these opportunities in our pipeline in early 2026.

Switching units. Sales activity in our asset management business was highlighted by the single largest mandate win in our institutional segment to date, a multibillion dollar fixed income assignment for a state government client. We believe this win reflects the early impact of Michael Lane and the entire teams of Bob's approach, introduced to this audience last month. We are delivering targeted solutions in areas where SEI has deep expertise, while complementing our established OCIO offering. It also reinforces our ability to compete successfully for specialized mandates and demonstrates our capacity to meet the growing demand for tailored investment strategies from large clients. Private Banking secured a $13 million win this quarter, partnering with a leading super regional U.S. bank on a comprehensive transformation initiative across all business lines. This engagement is strategically significant, encompassing technology, outsourced operations and a substantial professional services component.

Our multiyear engagement with this firm to help them define their targeted operating model and build the business case was instrumental in winning the business. This win is an enormous affirmation of the pivot we made a few years ago to be the market leader in the regional bank segment. We anticipate the projects will involve extensive work to retire the client's legacy systems execute complex data conversions and integrate new platforms. Importantly, SEI is uniquely positioned to support our clients throughout the transition with our professional services offering representing an incremental opportunity that is not reflected in Q3 sales results. Our strong wins this quarter were offset by a contract loss in private banking, which drove lower net sales for the segment. We've noted since 2022 that this client was at risk due to a strategic shift away from their bank trust model, and we received formal notice at the very end of September. This is our only notable loss year-to-date in private banking.

The financial impact should be modest as deconversions typically occur over multiple years. Importantly, we're confident that recent and future wins will more than offset this loss supported by a healthy diversified pipeline of opportunities nearing the finish line. Net sales would have approached $47 million for the quarter, excluding this single client loss. Even with the loss posting $31 million in net sales events is a strong result, especially as our new wins are well aligned with SEI's long-term strategic direction. Stepping back, SEI's net sales events have surpassed $100 million year-to-date, a record for SEI through the third quarter. And as we sit here today, we have more confidence in our sales pipelines when compared to Q3 last year. Building on this momentum, our confidence in the strata's partnership has only grown since the July announcement. Although we have not yet closed, we are already seeing tangible benefits. Awareness of SEI is increasing across both broker-dealer and RIA channels, and we are receiving renewed inbound interest in our capabilities as a result of the announcement. That enthusiasm was on display at the Stratos national meeting in mid-September where advisers consistently asked how they could do more with SEI. And earlier this month, Stratos leadership, including CEO, Jeff [indiscernible], joined us at our annual SEI Advisor Summit on Marco Island, which saw record client attendance.

Our SEI advisers responded very positively to the partnership and the expanded opportunities it creates. We are on track towards the initial closing, which is expected in late 2025 or early 2026. As we said in New York, we are allocating capital to the highest return opportunities and driving margin expansion through cost optimization and targeted investments in technology, automation and talent. We're in the early innings of AI and tokenization at SEI. Internally, adoption is encouraging, and we're implying AI to real workflows. Externally, we're advancing tokenization pilots with partners. We expect these initiatives to support efficiency and scalability over time. But near term, our focus is on use case validation and a disciplined rollout.

In summary, our year-to-date sales events record EPS and expanding pipeline reflects SEI's continued momentum, underpinned by disciplined execution and a clear enterprise strategy. Our integrated approach is breaking down silos and enabling us to scale across segments, capture wallet share and deliver consistent repeatable growth. We are laser-focused on value creation measured by operating margin, EPS growth and total shareholder return. Significant opportunity is ahead and our confidence in SEI's ability to execute and outperform is stronger than ever. And with that, I'll turn it over to Sean.

Thank you, Ryan. Turning to Slide 4. SEI delivered an excellent quarter. Let me start by calling out the unusual items that impacted our Q3 earnings. We recognized the benefit of approximately $0.03 from insurance proceeds related to a 2023 claim into other income, an additional $0.01 from an earn-out true-up in our advisers business. These gains were offset by $0.02 of M&A expense tied to our planned acquisition of Stratos and $0.02 of severance expense related to cost optimization initiatives. For context, unusual items benefited EPS by $0.58 last quarter and $0.08 in Q3 of last year. Excluding these items, EPS grew meaningfully up 8% sequentially and 17% year-over-year. It's worth repeating. Q3 represents an all-time record level of EPS for a quarter, excluding unusual items like the significant gain on sale realized last quarter.

Let's take a closer look at how each of the business units performed on Slide 5. Private Banking saw a 4% increase in revenue year-over-year, thanks in large part to healthy growth on our SWP platform. Our Investment Managers segment delivered another standout performance, posting double-digit revenue and operating profit growth. We continue to see robust growth in alternatives across both the U.S. and EMEA. Traditional revenue in IMS also grew at a healthy pace, benefiting in part from favorable market appreciation. Turning to Advisors. This business posted the highest year-over-year revenue growth among all of our segments. We're seeing growth driven by market appreciation, the contribution from our integrated cash program and improving momentum in the underlying business. Institutional revenue and operating profit were essentially flat for the quarter, reflecting lower equity exposure and less benefit from market appreciation compared to our advisers business. On a sequential basis, both revenue and operating profit increased across all business units with especially strong margin expansion in investment managers and advisers, as you'll see on Slide 6.

Margins were solid in Q3 with meaningful improvement both year-over-year and sequentially. The year-over-year decline in private banking margin was due to onetime items that benefited last year's results. If we exclude those, private banking margins would have increased by approximately 60 basis points. Institutional margins declined sequentially and mainly due to a handful of choppier items in both the current and prior periods. None of these were individually material, but the impact is more pronounced given the lower revenue base in this segment. For investment managers, margins came in ahead of what we communicated last quarter, supported by revenue growth that exceeded 25% annualized from Q2 to Q3. This growth was fueled by factors that are inherently difficult to forecast such as market appreciation in the traditional business and the timing of capital deployment in the alternatives business. Advisors margin growth reflected strong revenue growth and a $2 million earnout true-up, contributing about 120 basis points to Q3 margin. Margin improvement also benefited from our integrated cash program, which added $10 million to operating profit versus the prior year.

Finally, we incurred severance costs of nearly $4 million this quarter reflecting our commitment to supporting employees through transitions as we continue to evolve our business. The impact was spread across all business units and most notably, corporate overhead. Excluding severance and approximately $3 million of M&A costs related to Stratos, corporate overhead came in at $38.5 million for the quarter.

Turning to sales events on Slide 7. Ryan discussed the most notable items in the quarter, including strong wins in investment managers, our large regional bank win in private banking and a significant institutional win with a new government client. In Asset Management, this quarter's wins offset client departures, most notably in our institutional business. While losses were previously the only story in this segment, we are now seeing growth elsewhere that offset these headwinds, a promising sign for the trajectory of our asset management businesses.

Turning to Slide 8. SEI delivered strong asset growth, both sequentially and year-over-year. Growth in assets under administration was broad-based across CITs, alternatives and traditional funds. While CITs and traditional funds received some benefit from market appreciation, the majority of the AUA growth was driven by alternatives. Assets under management also increased with modestly positive net flows in advisers, driven by accelerating growth in ETFs and SMEs, which offset continued pressure on traditional mutual funds. Institutional flows were essentially flat, reflecting offsetting sales events. While overall net flows were modest, this trend marks a clear improvement over prior years and supports our evolving asset management strategy. LSV assets under management increased over 4% from Q2, driven by strong market performance and outstanding performance relative to benchmarks. Market appreciation was only partially offset by nearly $3 billion of net outflows, similar to the pace realized in the first half of this year. LSV performance against relative benchmarks is supporting continued strength in performance fees, which totaled $8 million or $3 million at SEI share in Q3.

Turning to capital allocation on Slide 9. We ended the quarter with $793 million of cash and no net debt. We are maintaining an excess cash balance in anticipation of funding the first Stratos close with the balance sheet cash. Share repurchases represented a primary use of capital. totaling $142 million in Q3 and $775 million for the trailing 12 months. That represents SEI repurchasing more than 7% of shares outstanding just over the last year. At the same time, we're deploying incremental capital to strategic investments that support long-term growth. This quarter, we made a $50 million anchor investment in LSV's market-neutral hedge fund. Our early commitment adds credibility to the new strategy and is expected to support future fundraising from institutional investors. Our investment had a strong start, contributing $1.5 million to Q3 results before taxes which has captured a net gain on variable interest entities.

In summary, SEI's third quarter results reflect continued progress across our core businesses. We are focused on driving growth optimizing margins and deploying capital to maximize shareholder value. With that, operator, please open the call for questions.

[Operator Instructions] And our first question will come from the line of Crispin Love with Piper Sandler.

Ryan, you mentioned that 2/3 of your sales events were from alternatives. I don't recall you ever making a comment quite like that as it pertains to sales events. First, are those 2/3 similar to recent quarters, give or take? And then second, when you look at those sales events, the recent ones on the vast majority from the largest alternative players out there, such as the ones that you called out on a slide at Investor Day being clients? Or are they smaller nonpublic alts as well that make up a good portion of those wins?

Crispin, it's a great question. I'll go kind of high level and then kick to Phil. So again, I think it's just an opportunity for us to offer continued transparency into sort of where we're seeing growth and as we touched on in the Investor Day, when you look at alternatives in that overall space and the surging demand for outsourcing that I mentioned, we're just kind of calling that out and trying to give a little bit more transparency and granularity. But when you go to Phil, if you want to chime in here, I think to Christa's question is, is it a lot of the same names that we highlighted that day or new names were a little bit of both.

Thanks, Crispin. This is Phil. Actually, it's a mixture of everything, large clients, small clients, but no single event was greater than 10% of the overall number. So it really is a mixture of things anywhere from private credit to insourcers moving to outsourcing to retail alts to pretty much across the board. We're seeing a lot of alternatives in CITs, but it really was a mix. We expect some other announcements probably early next year to talk a little bit more about some of the larger managers that are moving from insourcing to outsourcing.

Great. I appreciate that and definitely good news there. Second question, can you just give any color on the known contract loss in private banking was a longtime client? Any details on the loss is a merger or competitor takeaways? Just any color would be great.

Sanjay?

Yes, I can answer that question. So first of all, this want to highlight, this is a one-off loss in the last 3-plus years since I took over the responsibility -- and this is something, as Ian mentioned, we knew about it since 2022. This was a major operating model change for this client. And so we should not read this like trend. This is one-off scenario. We have worked with the client. And as you could see, these kind of convergence, they take long time. The onboarding takes time, the deconversion also takes longer time. But as Ryan has mentioned and Sean has got out to be on safer side, we took the hit and announced it in one go. Ryan, do you want to add anything?

I do. I think, Crispin, it's really important to note, and we try to call this out specifically in the script we got the notice literally at the very end of September. And it's a firm that we have known a long time. We have been actively engaged in trying to help them think through their future operating model. But as Sanjay just highlighted there, -- we got the notice. We took the entire loss. I don't think we have full transparency into the entire deconversion schedule and exactly what will go in. So we're definitely erring on the side of conservative here. And I think it's really important to emphasize Sanjay's point, that this is a one-off event. This is absolutely not a trend and it can't be ignored the win that we also have in this quarter as well. But certainly not one, we don't like losses. We worked really hard with this firm. We will support the firm actively as a great partner through their transition to a new operating model. And as you know, I always live in a world of optimism. I think there's always going to be more opportunity for us when we treat the client right on the way out, they will probably find a way back to SEI in other ways.

One moment for our next question. And that will come from the line of Jeff Schmitt with William Blair.

For the Integrated CAF program, you're running close to the Fed funds rate on that cash with a little spread. Is Internet getting a fixed rate? Or are you considering allocating some of that to fixed rates now that the Fed is easing again? Or how should we think about that?

This is Paul, Jeff. So on that, we're earning about 370 basis points presently, and we're giving the investor about 55 basis points yield which is pretty attractive versus our competitors. So we'll continue to look at that investor yield as rates come down. Typically, when a rate comes down 25 basis points, we usually impact the investor by 15, and then we would impact ourselves some point, we'll get to a floor, but that's kind of the current program and the current affairs on the integrated cash.

I think one thing to note when it comes to the integrated cash is to also note that we have 20x the amount in integrated cash and fixed income portfolios. And so when you see a decline in rates, you typically are going to see over time an increase in price. And so some of that, if you look at it in isolation, it will have an impact. But overall, it will be muted by the amount of fixed income we have in our portfolio.

And then in private banks, just looking at the expense growth there, it's running a little bit higher over the last quarter than we had seen in the previous really a year, is that mainly investments in talent that you've been calling out recently? Or what's driving that? And then how should we think about the offshoring with the new service center, would that bring growth down over time?

Jeff, I don't think there's anything unusual to call out here with banking as Sanjay wants to provide color. Some of it is just, as Sean mentioned, investments we make to kind of onboard the backlog make sure that we're kind of set up to really successfully create the experience that we want with these clients. But I don't think there's anything you should read into that. Sanjay?

I would act the same. I think for us, the #1 most important thing is backlog delivery. The signing a new client is a great thing. Yes, we all celebrate but successfully delivering and onboarding those clients is equally important. And that's why you would see sometimes that yes, and that could be for professional services delivery or it would be converting new clients.

And that will come from the line of Alex pond with KBW.

Just wanted to start with the IMS business. Obviously, a strong quarter there. And I know you mentioned the growth there was in part driven by market appreciation and the deployment timing. But just trying to size up if the 3Q margin level is the right way to think about the margin for this business on a forward basis considering adults deployment? And then also just how the margin here might be impacted sequentially by the ongoing investments you're making? And just trying to see if there will be any impact there from a timing perspective, just in terms of a higher expected investment level in 1 quarter or the other.

Sure. So this is Sean. So as I indicated last quarter, we were actually kind of given some light guidance to -- the Street that the margin improvement, we were anticipating good margins going forward, but we do know we need to make certain investments whether it's anticipation of new clients coming on board and us hiring ahead of those clients. Again, as I mentioned in my remarks, the Q3 improvement in margins did take us a little bit by surprise. Some of that, as Phil mentioned, was due to market appreciation. I mentioned that in my comments. That margin or market appreciation, obviously is not tied to cost -- so when -- with the market appreciation, you're going to have higher margins than expected. On your -- the second part of your question on what we expect in the future, we're still expecting strong margins when I give -- like guidance, I would call it, light guidance on what we may expect or what you can expect from margins going forward, I'm really giving more guidance over a period of time as opposed to quarter-over-quarter. So we do have for Q4 going into Q1 into next year, we will continue to be making investments into the platform. There are certain things that in Phil's business, we need to invest in front of, whether that's hiring talent in order to support future growth, whether that is certain parts of our technology base. So in a broad brush, we would expect margins to be relatively flat, if not a downtick, especially as we move into 2026.

I think the other thing is I think it's important to add to that, though, that though and I think we try to continue to emphasize this message. When we think about how we run the company, we're not trying to run the company on a unit-by-unit basis and get too focused on the individual margins in the unit. So if we saw -- and I'm not forecasting or foreshadowing anything. I'm just saying what we see, as Phil talked about in New York, what we see with that pipeline and what we see with that client base right now, we are going to maximize that opportunity. And if that required us to take the margins down a little bit in IMS, we would be more focused on SEI's margins and what we would do in other units to make sure SEI's margins continue to grow and expand, as Sean talked about in New York, but I mean, Phil, I think, is really consistent as he was in New York and here, we are really, really enthusiastic about what we see right now with our existing client base and pipeline in and where we're positioned competitively, we will not let that window pass a bit.

Got it. Understood. No, that's helpful. And then maybe just 1 more. Just wondering if you could speak to the sales mix between U.S. and international this quarter and also maybe how that's tracking year-to-date relative to last year. I know it's still early days on the revamp for that area of the business. But maybe additionally, if you could just walk us through maybe what we should be looking for over the coming months and quarters as it relates to just tracking the progress you're making on the international front.

Yes. This is Sanjay here. So on the international front, as I said on the Investor Day, we are in the early phases of defining our go-to-market strategy, and as I said at that time, we are going to focus on maximizing our presence in the jurisdiction since we already have presence. So for example, U.K., Taplin or Luxembourg at those jurisdictions how we continue to expand our presence there. And we are in the process of defining our strategy. And the other part, you're looking at, okay, how we maximize our opportunities through existing clients. The clients we already had in U.S. market, and they have processed in those jurisdictions. So that's what our focus would be. Ryan, Sean, do you want to add anything?

Yes. I'll just -- this is Sean. I'll just echo what Sanjay said. Coming off the heels of Investor Day just a few weeks ago, kind of letting everyone there know that we are looking at the difference between domestic and international. I would actual what Sanjay said, a little bit early days. So I don't think, as we sit here today, we're ready to start giving color around revenue mix between international, that will come more as we realign our segments as we start disclosing our segments and with anticipation that at that time, we'll give more breakdown between international growth versus domestic growth.

One moment for our next question. And that will come from the line of Ryan Kenny with Morgan Stanley.

Can you unpack a little bit more how you're thinking about the pace of buyback you did 1.6 million shares in the quarter. Is that the right pace going forward? Or should we expect a slowdown as the Stratos acquisition moves forward?

The way I would answer that is very similar to the way I answered at Investor Day. So we are expecting that free cash flow on a forward-looking 12-month run rate would be we would be returning that 90% to 100% through dividends or buyback. So that's the way I'm looking at it. So the cash build, as I mentioned, is anticipation of drawing that cash down through the Stratos -- consummation of the Stratos deal. And then going forward, I think you can expect whatever our free cash flow that we generate, we're going to be returning that somewhere between 90% and 100% back to the shareholders either through dividends, but primarily through buybacks.

That's helpful. And then separately, we've seen some modest credit fears in the market with a few bankruptcies and you're a big private credit servicer. So are you seeing any impact at all in your private credit servicing pipeline? It sounds like no, all good, but would be helpful to clarify.

Sure, Ryan. This is Bill McCabe. I would start by saying that IMS business is really, really diversified by product, by jurisdiction, by type of client. So -- but we have spoken to a lot of our private credit managers. They literally are the best of the best in the industry, and they really know how to manage credit risk. They tell us that they're not concerned at all. They're still launching products aggressively. And collectively, they do say that there could be a new manager that entered the space on the smaller side, and there could be some struggles in the future. But that's in a part of the market that we really don't play in. We're on the higher end of the market. They're doing really well. The one interesting fact on top of all of that is that we really get paid for the most part with private credit based on invested capital. So we're not subject to mark-to-market or NAV. So we don't really -- as of right now, we don't see any real risk for the business.

[Operator Instructions] And our next question will come from the line of Patrick O'Shaughnessy with Raymond James.

So I understand, I heard you when you said that we should not read today's chunky client loss that you spoke about in private banks as a trend going forward. But to what extent are there other high-risk relationships in your existing private bank client portfolio that you're keeping an eye on at this point?

Patrick, that's a great question. As of today, -- we are not aware of any such large client or any such losses 1 example. Early this month, we hosted all of our clients here in Oak campus. The engagement was the best engagement over the last 3 years. So I don't see that as a trend or a big risk. Brian, Sean?

I completely agree with you. I mean there's -- we are always got to be vigilant in front of our clients, engage with our clients. But relative to where we are here a few years ago, we feel extremely confident that we are in the right place with our clients in the banking business.

Sorry to interrupt. So -- and then for my follow-up question, -- with the divestiture of the Archway family offices business from the investment in new businesses segment, can you just remind us what's left in that investment in new business segment and the strategic importance of that for SEI?

So included in ventures, there's really 2 main revenue streams, although albeit they're not large. One is our sphere business and other the other pieces are private Wealth Management business. And those, as I mentioned on Investor Day, if and when we resegment the organization, that segment from a revenue standpoint or even from a segment standpoint, will cease to exist that revenue will then follow the client and the related other segment that it pertains to.

And we do have a follow-up question, and I believe that will come from the line of Ryan Kenny with Morgan Stanley.

Can you quantify how much margin suppression there's been from accelerated investment, any numbers or quantification we can think about?

Yes, Ryan, this is Sean. I don't think I could quantify that. That's actually not really the way we think about the business. It's a great question, but I could not sit here and quantify that for you.

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Ryan Hicke for any closing remarks.

Thank you all for your questions and for joining us today. As we close the quarter, I want to emphasize that SEI is executing on a strategy that positions us for long-term success. But I think it's important as we close the call, we reflect a little bit on the results this quarter. We delivered record earnings per share. The IMS unit had a record sales quarter. We had an important strategic win in the banking business and I know we didn't touch on this in much of the Q&A, but there are some really good leading indicators and lagging indicators when we start to unpack what's going on in the asset management businesses at -- and for those reasons, we're confident in our ability to capitalize on opportunities ahead, deliver for our clients and create value for our shareholders. But thanks again, everybody, for your time and interest in SEI, and we look forward to updating you next quarter.

This concludes today's program. Thank you all for participating. You may now disconnect.

All right. Good morning, everyone. Thank you for joining us, whether you're here in New York or whether you're joining us on our webcast, we appreciate you coming. We're going to get started in just a minute. People could find their seats, would appreciate it. Before we get started, I want to go over the legal statement. It's very important. I promise I'm not going to read this to everyone, but this is also posted on our website. We have a packed agenda for today. We're going to be taking a break around the halfway point, and then we're going to be leaving plenty of time for your questions at the end of the presentation. To get us started, I want to introduce our CEO, Ryan Hicke. Ryan?

Thanks, Brad. Welcome, everybody. Excited to have you here. It's fun to do something different, do it up in Manhattan. It's been 3 years since we've done this. I think it's fair to say a lot has changed in the last few years. I think when you focus on what we're trying to get out of the next few hours, we want you to leave with a few things. Clarity about our vision. We are really clear about where we're going and why. We want you to be convicted about SEI, about our leadership team, about why we're going to win. I want you to be a little bit enthusiastic, I have a little bit of fun. It's really exciting. We were in a very different spot 3 years ago than we were today.

And I think it's really important sometimes to kind of stop and reflect. There's an investor, a mentor, a person I even consider a friend in the back of the room. I won't call him out. But he likes to remind me that in the short term, the stock market is a voting machine. In the long term, the stock market is a weighing machine. And if you think about that, what I really want you to focus on for the next few hours is we are building mass. We are building things that are truly differentiated, that are sustainable. We're not trying to maximize the return of SEI over 6 months to 9 months. We're trying to do repeatable growth in areas where we think we can continuously win and differentiate. So let's pause for a second and reflect on the last few years.

3 years ago, I was a lot younger. I was less grey and somebody said, get up there and say double the revenue. I said, "Oh, no, that's a terrible idea. And I was like, no, we said double sales events. And I was like, "Oh, right. But if you go from left to right here, sales events are the lifeblood. It starts everything. And what we have done, and Phil McCabe is up here later, IMS has led the charge. But what we have done in reigniting sales events, we are on an unbelievable trajectory there. Three of the largest sales event quarters in the history of SEI have been in the last 6 quarters.

We're establishing a different baseline. We are getting contributions from multiple different engines. When we get the right sales events, and believe me, we are not just focused on quantity. We focus on quality of sales events. Winning a $50 million deal that has $60 million of development, we don't celebrate that. What we are really focused on is repeatable wins that when they get installed, we have happy clients and those sales events are accretive to the bottom line. And as you know, we really run the company with 2 metrics, the sales events and then earnings per share. But we focus on those operating margins because it provides discipline around where we can drive more leverage, where we can actually get more out of what we're doing, but also invest in areas that we think can expand our footprint and expand our margins.

I hope when we're doing a 2027 or 2028 Investor Day, we're repeating these type of results, if not accelerating them. I can tell you for sure, the opportunity is there, the clarity of what we're doing is there and our ability as a leadership team to execute is real. So how have we done it the last few years? This looks like a standard blue [indiscernible] slide. It's not. I'm going to unpack each of these things. Client engagement. Our client engagement prior to 2022 was not good enough, except I would say in IMS. But in our other units, we just weren't out there. We were not in front of our clients. We were not at the right level of our clients, and that has fundamentally changed. For any SEI people watching on the webcast, get off your webcast and go out and see a client. It's about collecting the dots. You can't connect the dots if you don't collect the dots. And we are out there every day collecting the dots. It is super important, and we have barely scratched the surface of what we're going to do there.

Business leadership. It really starts and ends with leadership. We made a lot of changes in leadership. I'm going to touch on that a little bit later. We have infused new talent. We have unleashed that talent to go do different things across the organization. We have approached it with humility. We don't know everything about how to do these things. You look at the acquisition of Stratos. We're not going to tell Jeff Concepcion every day how to run Stratos. We're going to learn from that executive team, and we're going to teach them how we have enabled other advisers and firms to scale. It's a partnership, but it requires leadership. We're not going to stop here. We're going to go find more talent. We're going to put that talent in the organization, and we're going to unleash that talent.

And then clarity of vision. I know that sounds simplistic, but there are people I came up here a few years ago to meet in New York and just get some feedback about SEI. And I will tell you, one of the consistent points of feedback was great company, but we really don't understand where you're going. We don't understand why you're going to be differentiated and where you're placing your bets. You won't leave here at 12:00 not understanding where we're placing our bets. They say a picture is worth a thousand words. This one is worth about $250 million of revenue. We did our first ever global client executive event in March. Pause and think about that for a second. We've been around 57 years, but we always operated these events in the verticals. We would have adviser events and IMS events and banking events.

This time, we went horizontal, whoever's idea that was at SEI, it was brilliant because what it did is it allowed us to actually step back. The clients all saw each other and literally didn't understand why other people were in the room. So Chip, somebody would say, why is [ Bruce Kennedy ] here and we'd say, [ Bruce Kennedy ] is a client. He would say, why are they a client? They're an investment manager. But everybody only knew SEI for the vertical which with they interacted. We had CEOs of some of the largest alternative investment managers. We had global RIAs. We had institutional clients. We had trustees. It was unbelievable. And it made SEI and all the SEI-ers really proud because we are the connective tissue that brings all of this together.

And these types of events, I am telling you, fundamentally change the perception these firms have about SEI, fundamentally changes it because they see the blast radius of where we operate and what we can do. And how has it paid off? It's paid off in some of these logos. So as I mentioned around client engagement, we are really focused on our existing client relationships and growing those. But you'll hear this phrase over and over again, whether we say the phrase enterprise, whether we use the word horizontal, changing the positioning with the executives in these organizations has actually allowed us to expand our footprint. What we do with CIBC, they're a client in 3 different SEI units now. What we do with PIMCO, client in 2 different SEI units. U.S. Bank, huge client, one of our longest-standing clients. We are expanding our footprint with these clients because they don't just see us as a single threaded provider anymore. And then you look on the right, you look at some of the new logos we've added. You're going to hear a lot about this today in terms of collaboration across the executive team.

We are winning these deals by partnering with each other like a team. You look at TrinityBridge in the U.K., I think 1, 2, 3, 4, 5 of the executives in this room have been to London to meet with TrinityBridge . Nobody owns TrinityBridge. It's an SEI client. It's our client. I will tell you one of the coolest examples on this slide is Vanguard. So Vanguard is about 6 miles away from SEI, has never been a client of SEI's. I never understood why. Everybody would say, well, they do their own principal and income accounting or why would they want to talk to us or they launch their own funds.

And I would say, "Hey, why don't we take a ride down the street and find out. We have a lot of momentum right now. They're not going to be a massive global client for us. They're right in our backyard. We redistribute Vanguard portfolios to our advisers. They're a partner. But I'll tell you something unbelievably cool happened this week. Vanguard posted a job for a strategic enterprise relationship manager. And in the job description, they called out SEI as one of the clients as an example of who that individual will be working with. We weren't even on Vanguard's radar 3 years ago.

And as you guys know me, I operate with a tremendous amount of humility. That is how I'm built. I have literally been with the CEOs of almost every single firm on this chart, not selling. I just had dinner with Salim from Vanguard the other night. Michael Lane and I just had dinner with the CEO of [ WSFS ]. Sanjay and I had dinner with the CEO of TrinityBridge, we are everywhere right now, and it is changing the momentum and it's permeating through the organization. But as I said, it all starts and ends with leadership. And I'm super proud of the leadership team we have built. And I'm not going to lie. It's been hard. Sometimes I think I'm a full-time therapist.

But you're bringing in world-class talent that have big ideas and tons of experience. Sean was running a huge business for Grant Thornton, and Michael was running a huge business for BlackRock. Sneha was is running a huge business for Thomson Reuters. And then we have our internal folks. Phil McCabe has been killing it in IMS for years. Sanjay went from CTO to running banking. Sandy switched roles and took family office services, got it rolling, cleaned it up, great transaction for us, great deal for Aquiline. Everybody is clicking.

But I will tell you, it's cultural. We really operate with a first team concept. It is company team self. That's how we think. That's how we operate as a leadership team. Don't underestimate the impact that's going to have. When you hear people talk today about how much they are interacting with each other, I hate to admit it that just wasn't happening at SEI years ago. Everybody got along. We just weren't collaborating and connecting in the way that we should have been. That's gone. That's gone. And that is down multiple levels right now. We have broken down the artificial and true walls inside this organization.

All right. Let's switch to a little bit of strategy. I believe there's 3 ways to make money in wealth management, advice, asset management and administration. And we can come up with 100 others, and I could force fit them probably under one of those 3 umbrellas. We have built a 57-year world-class organization, Carmen, with administration and asset management platforms, predominantly enabling, in many cases, a more effective delivery and execution of advice. We believe as a leadership team and the Board was extremely supportive that we needed to expand our footprint and have a strategic hold in that advice space as well.

And that was the thesis behind the acquisition of Stratos. How can we actually have an SEI asset and vehicle in that advice space while we continue to heavily invest in asset management and administration. And if we can pull those things together and if we can get that flywheel really spinning and if we are humble enough to listen and learn about what is working in all these areas and bring that knowledge back into that ecosystem, it's really powerful. You think our sales events are strong now. We get this right, it's going to significantly accelerate because don't ignore the black circles. We have the scale. These businesses are hard. You can't just wake up tomorrow and say, I want to be in the fund admin business, good luck. You can't just wake up tomorrow and say I want to build SWP. I hope you have $1 billion. These things require real scale, real infrastructure and real investment, but it requires some innovation.

And Sneha is going to come up here later and talk about how we're trying to create more space and focus around the next generation of SEI and where we harness more technologies and bring that in here. But we have a foothold now in all 3 As, and I think that is differentiated, and I think that's powerful. Okay. I'm halfway done. I'm going to stay at 10,000 feet here because each of the subsequent leaders are going to unpack this in more detail. There are five clear areas where we believe we're going to drive more growth. They're all not created equal, but they are at different stages of maturity. But if you go first, reimagine asset management. And we put this in air quotes because our asset management businesses have changed.

Michael Lane is going to talk about opening up the whole ecosystem, but we've got to grow the core. We have an enormous client base. We need to grow that client base. We need to add more energy and get more momentum from them. We've got to move upmarket. The enterprise RIA space is a huge opportunity for us, huge. But we have to grow our wealth management capability. The shift from mutual funds to ETFs, the introduction of alts, we have to accelerate our positioning here. We've got to get more products in the hands of our intermediaries to drive asset management growth. Michael is going to go through in a lot of detail about that.

We're going to reset international. Sanjay Sharma, new CEO of International, also going to continue to run banking. He knows he has margin expansion to do. But if you look at our margin opportunity here and you look at the revenue opportunity, we've been at about 15% revenue outside the U.S. for probably the last 15 years. But we haven't taken a different approach around how we want to run it. When you think about how we run the company today, we don't run the company better. We run the company differently.

We think about EVA. We think about return on invested capital. We think about where we're going to deploy our assets and where we're going to deploy our capital and what's the return profile going to be. And when you look at international, we have a great footprint in the U.K., a great footprint in Dublin, a great footprint in Ireland or Luxembourg, but it's not integrated. There's no integrated cohesive strategy around what we're trying to achieve and going to market. And I will tell you culturally, as most people know, I spent 12 years in my career in London. We put an executive committee member on the ground in London. It will change the culture overnight. People will feel that those offices are more important. People will feel more connected to Oaks, and they will feel that this is critical to our growth trajectory in the future. I would say the asset management is further down the path. Michael's got a lot of detail about what's in flight. Sanjay has been at this for about 7 days. I expect a lot more out of him in the next 2 weeks. Big opportunity for us here.

I would say this slide is a great example of how SEI has changed. For right or wrong, I think we used to spread the peanut butter in terms of capital allocation. Everybody was mildly disappointed. Just enough, just enough to not make everybody too upset. We don't do that anymore. We really talk openly. We use data. We look at total addressable markets. We look at win rates. Sean has brought in a totally different discipline around how we think about revenue. It's not personal. We have four enormous opportunities on this slide. Professional services.

A few years ago, I asked Sanjay to go deliver a certain sales event number. He said, I got you. He came back the next day and said, I can't get there, not just with SWP. We need more momentum. I got to get out to the clients. We have some kind of leaky holes. He said, but I can launch professional services. He's going to unpack this in a little bit more detail. Our ability to turn professional services, which is today in a vertical and run that more horizontally, really big opportunity for us. It has differentiated less in the minds of the clients.

They don't think of us just as a custody platform. They think of us as a technology partner. It has allowed us to increase our ability to leverage AI and automation in things like our SEI Data Cloud. It's got a tremendous, tremendous opportunity ahead. Then you look at regional community banks, a great strategic pivot for us a few years ago. We were trying to sell to a lot of different markets. Sanjay got the group focused on regional community banks. We continue to win. We expand our footprint there. We have an awesome pipeline, but it is a segment that's pretty deep, that don't want to build their own infrastructure that need to compete in wealth, and they see us as the perfect partner.

But again, our ability to add different services and capabilities into this segment just increases the value and increases the stickiness of the clients. Enterprise RIAs, Michael is going to go into a lot of detail on this. I'll also say, "Hey, we're learning things. We won the Summit deal, and we have some learning from the Summit deal. Our ability to just quickly install and move $3 billion of assets off of Schwab is not the same as moving $3 billion of assets off of a different custody platform. It's different user experiences required. It's different training required. And we're learning, we're reacting, and we're going to adopt and adapt. It's great opportunity for us. Enterprise RIAs and regional community banks are actually starting to get a little grey. What those firms need to compete are pretty similar. We are uniquely positioned, uniquely positioned to win in that space.

And then you guys might have heard alternatives are kind of hot right now in the market. If you go outside, there's a few firms doing pretty well. Phil is going to talk a lot about the growth of alts. We are going to double down. We have an unbelievable moat from operational delivery to alternative and traditional investment managers. We're really good at it. We spend a lot of money on it. We put a lot of talent against it, and we service the hell out of these clients. Phil and I are on the road a lot together, and we have very happy referenceable clients that are growing pretty quickly. We're going to add more focus on the technology side. We're going to add other services that we think can help those firms grow. We are going to expand our moat in this space.

Enterprise excellence. I've been trying to tell Sean for 15 months, stop indexing to yourself. He doesn't want to listen. But I think that's what we were doing from SEI for a long time. We were comparing ourselves to ourselves. And enterprise excellence is truly having the courage to run the company differently. And we care passionately about our culture. And care is a word that we use a lot with our culture. We care about our employees. We care about our clients, but we need to drive more accountability. We have to have more courage and change is hard.

And we are in a relentless cycle of change right now. It's hard. I get the word exhausting text it to me about 4 times a week. It's hard. We're doing hard things. And every time people are trying to drive change, there's always passive aggressive behavior that tries to slow that down, and that's where leadership needs to knock those walls down. But when you think about the intersection of what we can do with our talent footprint, Sean is going to talk a little bit about the GCC. The GCC is not just a labor arbitrage strategy. It's a workforce strategy that not only are we going to focus on white glove service and delivery, we're going to focus on culture. But everything we're doing is to drive growth. Growth in our employees, growth of our clients, growth for our shareholders. That is where all of this comes together around changing the way we run this company.

And then strategic capital allocation. I've heard from many, many people in this room over the years, are you guys ever going to do anything different than share buybacks and dividends? Well, that's been a great way to return capital to shareholders. And depending on what lens we want to use and what time frame we want to use, sometimes that's the optimal way for us to deploy our capital. But with the Board's support and the executive team support, we obviously just made a pretty big decision and deviation from that with the acquisition of Stratos. You understand why we did that. Michael will talk more about that. M&A and internal investment.

So it's not just about buying things for buying things sake. It's about actually using the balance sheet to accelerate areas where we believe we can drive growth. Sneha is going to talk about ventures and partnerships. We have a lot of really good things happening there that don't require a big investment off the balance sheet or out of our cash flow. We have this unbelievable company, what AI and everybody have built for 57 years. We have this amazing balance sheet, an ecosystem of clients that is unrivaled, cash flow. And we have to think differently about where do we want to deploy that capital and how are we setting SEI up, not just for the short term, but more importantly, for the medium to long term so that we weigh more.

So with 2 minutes to go. I'm really excited about where we are. I'm convicted. I'm enthusiastic. I hope that comes across. But I will tell you, what I believe pretty passionately is SEI is back. Our competitors don't want to see us right now. They weren't even worried about us a few years ago. You can feel it. You can see it in the interactions we had with executives. And we're not playing for bronze. We're not playing for silver. We're playing for gold. We have a different mindset across the organization. We are very focused on how we run this organization and run this company. We are extremely client-centric and growth-oriented, and we are willing to do things differently to drive different outcomes.

The next leader that's coming up has been in the middle of the epicenter of a lot of this change. I know it's been extremely enjoyable for you the last 15 months. Sean, I appreciate everything you and the rest of the leadership team has done. I appreciate everybody in this room. We'll be back up from Q&A. You're going to see a lot of amazing content and a lot of excitement and enthusiasm over the next 2 hours. Sean?

Okay. So Ryan said everything that was a 100% true other than one thing. I'm not sure it was him who says we have to stop indexing to ourselves. I don't know who it was. I'm not exactly sure, but it might not have been, Ryan. Although we have adopted that theory throughout the organization. So I have been with SEI exactly 1 year and 6 months today, exactly. I started on March 18 last year. So today, September 18. So we don't normally celebrate half birthdays in my household, but I'm celebrating my half birthday today or at least at SEI.

Okay. So I want to start off with a debt of gratitude. So when I came into this role, I had a lot to learn. I had a lot to learn about SEI. I actually had a lot to learn about the financial communities and the way analysts look at businesses. The folks in this room, I see a lot of folks I've worked with over the last 18 months. You guys have done an amazing job, I think, of first off, educating me on how you think about our business, and it also has allowed me to understand how I should frame my thinking about the business. So I wanted to start with a debt of gratitude. Okay. So I know what you're thinking right now. You are thinking that is the greatest CEO opening of an Investor Day of all time. And yes, the enthusiasm was there. But you're also thinking great. So -- but can you -- I need to understand what that means for our financial performance. And that's where I'm going to jump off.

So I am going to jump off of one of Ryan's later slides, and I'm going to put -- start putting some financial context around it. So the five areas that we're going to talk about today, I'm going to start with number one, we're investing in our growth engines, namely IMS. It's been our strongest growth engine. We are really, really well positioned in the market. Phil is going to talk at length about this, so I'm going to just touch on it a bit. Over 2/3 of our revenue comes from the alternative asset classes. And we expect that trend to continue. I think everyone in this room expects that trend to continue.

Inside that alternative asset class, we have carved out an expertise in the fastest-growing part of the asset class, and that's private credit. We do this really, really well. In addition to that, over the last 6 to 12 months, the largest alternative managers in the world are rethinking how they should be deploying their capital. Should they continue to be in-sourcers or should they move to outsourcing. We're starting to see a trend in moving to outsourcing in some of the largest of the large that have yet to make that move. And we are really, really well positioned here. Because of those two, you could say we're lucky, you could say we're good, but we're really at the epicenter of this shift. So as a result of that, we expect to have double-digit growth in our IMS business.

Number two, we are reimagining our asset management business, led by Michael Lane. Many of you know, when it comes to asset management as a whole, we've been very, very slow to pivot, especially in some of the structural market changes we've been seeing, the move from active to passive. Michael has been here about a year, and he is pivoting us very, very quickly. He's doing -- I mean, the guy is tireless. He's relentless. He's got some back pain today, probably because of, he feels like he's carrying the firm on his back, but he's done an amazing job. So we expect high digit single -- high single-digit annualized AUM growth. Yes, some of that will come from the markets, but a lot of that is going to come in our expectation from organic AUM inflows.

Number three, we are going to boost international returns. So we have spent a lot of time. I've spent a lot of time analyzing the numbers, looking at our financials. And what we have noticed, what I've noticed or what the executive team has noticed is our international business has been less than stellar compared to other parts of our business. And when we started to really think about it, we actually realized that our international business looks a lot like private banking did 3.5 years ago, a lot. So what happened 3.5 years ago? We put Sanjay Sharma in charge. You know where we are in private banking today for those who know us. And we said, who would be better to help us lead us through some of this change that needs to come than Sanjay.

Our margins aren't ideal, just like private banking. Our growth has been less than stellar, just like private banking. Our cost structure needs some work, just like private banking. So Sanjay, we believe, is the ideal person to lead us forward. So I want to unpack a slide that Ryan went to. So this is new information for you. I'm going to focus on the right side of the slide that Ryan put up earlier. The margins in North America are about 4x higher than our international margins. There is substantial opportunity for us from a margin standpoint and a bottom line standpoint.

While 15% of our revenue comes from outside North America, the contribution to operating profit is significantly smaller because of the margin differential. So Sanjay has two mandates, two, very similar to what he did in PB. He's going to look to expand the aperture of how we view our total addressable market, including the geographies we serve. We're not here to plant flags everywhere, but we are going to look at the geographies we currently serve and where we should serve. He also has a mandate to grow the revenue and put a hard focus on cost and cost control.

We are really, really excited to see what Sanjay is going to do with this business, and we are all here to support that. He's going to be working with Phil. He's going to be working with Michael Lane. He's going to be working with me. He's going to be working with Sneha, Mike Peterson, our entire leadership team and Ryan. So this is not on Sanjay, this is on us. But again, really excited to see where Sanjay is taking us. Okay. Number four, spent a lot of my time here, a lot of my time here. Enterprise excellence and expense optimization. A big part of improving our operating margins will come from the global capability center or the GCC.

We opened that in May of 2025 in Hyderabad, India. This is a big part of our talent strategy. Another area for improvement is in SEI is instilling discipline. Ryan mentioned this. We need to instill discipline in the organization to spend the money, SEI's money like it's your own money. I think we, for a period of time, lost that a bit. I think over the last couple of years, we've kind of really developed that muscle again and that discipline. Maybe historically, that was led by a few. We're now instilling that should be led by all. Really, really important. We believe through disciplined cost optimization, expense management, including the GCC that we can improve operating margins by 25 to 50 basis points per year.

Lastly, capital allocation. I'm not going to go into that much now. I'm going to talk about that more in just a bit, but we have rethought the way we think about leverage. Actually, some of you have helped inform some of that thinking. We're going to -- we are rethinking the way we look at leverage, the sources of capital and the amount of debt we would be comfortable maintaining, including how we would deploy that capital if we had that additional capital available to us.

All right. So what's the punchline? If we can achieve these five initiatives, we can achieve double-digit annualized total shareholder return now through 2030. Okay. So let's talk about how we're shifting the operating model to effectuate these changes. This -- the next 2 slides isn't going to look like a lot. It's a lot. It is a lot. So historically, SEI has lived in silos. We have our business units. You're aware of them. Each of those over the last 55 years out of 57 years, I would say, they almost ran as independent companies tech, marketing, investment decisions, even basic things like compensation lived inside those verticals. It served us well for many, many years, but it will not serve us well going forward.

This sentence is the big one. We have taken a hard shift from vertical to horizontal. That is not an ease -- those 5, 6 words, it's not easy to do, but we have done it and we are actively doing it. Mainly in our functional areas, but it's more than our functional areas. The first team concept that we talk about frequently in the boardroom is not just words. Phil is working closely with Michael Lane. Michael Lane is bringing opportunities to Phil. Sanjay and Michael Lane talk about asset management weekly. This is not just functional areas, but it goes well beyond that. We are really operating as a cohesive unit. So remember this slide, and this is what we are looking like today, right? So you'll see the verticals, you'll see the move to horizontal. It doesn't -- just 3 lines or a couple of lines. It's a lot. This shift is serving us really, really well right now, and it's going to serve us well in the future. I'm going to talk about a few examples.

So I mentioned things like compensation. Every -- the majority of companies that look like just in the world, public companies, they have a horizontal compensation strategy. I know that sounds really basic. We did not. They lived in verticals. Our marketing, marketing almost autonomously lived inside the verticals. How we thought about marketing was driven by the leader of those business units. That has shifted. Again, it doesn't seem huge. It is big. The fact that we now are developing an enterprise story to tell our story is really, really important. We did not have an enterprise story. The offerings that our clients bought from us were the only offerings they knew.

Ryan had gave a really good example about the enterprise conference, our client conference that we had earlier in the year. That was the first one in the history of SEI. Historically, those client conferences were inside verticals. So just being able to tell a story, a different story about how we're bringing our whole selves into the marketplace. We're a very unique company, maybe one of the most unique companies in the financial services space that serves all parts of the market. Michael Lane and Phil and Sanjay will talk more about that later.

Technology. Technology lived almost autonomously inside a vertical. All priorities were thought about of what those business units needs. Not a lot of attention was thought about how we can maximize our return on those investments. It was based off of the verticals. As a result of living in those verticals, we have developed a significant amount of redundant technology. So technologies that are in each of the business units, we, over the next few years, will be sunsetting those technologies and having one technology depending on what it is. User experience, that varied on platforms depending on which business unit we're in.

So again, having a horizontal technology allows us to really understand the overall user experience as opposed to the user experience that sits inside the verticals. You're seeing a theme here. Procurement, I'm going to give you a good story on procurement. Procurement was decentralized. SOWs were signed with various vendors inside each vertical. We have shifted that. We are in the early days. Centralized procurement function has been stood up in the last -- less than a year. But I want to share a very good example of as we move from vertical to horizontal.

In the last month, our technology solution and operational teams were brought together, led by procurement, centralized procurement. And we talked about one vendor in particular. Here's the punch line. After a couple of weeks of working with the vendor and looking at the various SOWs and recontracting with that vendor, we were able to save $18 million over the next 7 years by recontracting, by bringing the enterprise together where they historically lived in verticals. We have 1,000 vendors. I'm not suggesting we're going to save $18 million, don't write that one down. But again, you can kind of see when we talk about running the company differently. Ryan says not necessarily better. I would argue, I think this is better, but we are running the company differently.

The GCC, that's new on this slide versus this slide. I'll speak to that in a minute. AI and automation, huge, huge opportunity for us. We're probably only in the second or third inning, but automation and AI, Sneha and I work very, very closely on this. It's a massive opportunity for the organization. We have a lot of manual processes and a lot of room to reduce costs. And really, I get sometimes criticized a little bit that Sean Denham is about expense reduction, expense reduction, expense reduction. I am not. I am about optimization, optimization, optimization. There's a big difference.

Okay. So as we think about AI and especially automation, it's a good lead into our global talent strategy. And let's talk about that talent strategy. We have 5,200 employees, as you know. We also have 2,000 consultants, pretty much full-time consultants. So when we think about a 5,200 number that's reported in our K, what we don't -- also don't always talk about is the other 2,000 consultants. Many of us have worked for SEI for the consulting firms for 30 years, and we've paid that premium.

From 2018 to 2023, including both employees and consultants, our headcount was outpacing our revenue growth. That is an unsustainable model, as you know. We had a lack of discipline in our hiring and our use of contractors. We have gotten better over the last 2 years, putting discipline into the process. If we or when we double revenue, not giving the time line, but when we double revenue and if we were to double headcount, we have failed. We have failed.

So the use of AI and automation is going to be key to our success. Sneha will speak about our AI journey in a little bit. I want to speak about our offshore strategy, which is, again, a big part of our talent strategy. In my first 1.5 years at SEI, I often got the -- still get at times the following question. What is the #1 thing that has surprised me the most about SEI? And it came on day 2, and nothing has stopped it. We are a labor-intensive organization, we are, and we did not have an offshore strategy other than consultants. That was it, for the most part.

In a vertically led strategy, it would have been nearly impossible to stand up a GCC, nearly impossible. In a horizontal model, it is still going to be challenging, but it is actually very doable. I've done this in my previous employee. We will be shifting technology consultants to employees, not in a light switch, but in a very thoughtful, meaningful way. We will evaluate all new operational hires as to whether they should be onshore or offshore.

There's obvious benefits to this. Number one, most obvious is salary arbitrage. Number two, equally important is access to talent, especially as we start thinking about AI and automation and other things. We need that access to talent. We believe by employing this GCC offshore strategy over the next 5 years, we'll be able to save about $40 million. The key to this, though, is we cannot affect our quality and the white glove service that our clients have become to know us for, critically important. Phil would kill me if any of that happened. So that will not take place.

Let's move to our balance sheet. On this slide, you'll see how SEI compares to our peer group. You see peer A, you see peer B, you see peer C. We have taken the names out to protect the innocent. You will see that SEI is an outlier by a comfortable margin. In fact, we have a negative 1x net debt-to-EBITDA ratio. How is that's calculated? We have about $700 million of cash on our balance sheet at any given time, somewhere around there, plus or minus, and we have 0 debt. Our leverage ratio is conservative, probably too conservative. It doesn't allow us to tap into low cost of capital and limits our ability to invest and produce higher returns to our shareholders. We are targeting a positive 1x leverage.

This will not compromise our fortress balance sheet, which is important to all of you, our investors, our shareholders. It's also really important to our executive team, our leadership team. It's also really important to our Board of Directors. So we are not jeopardizing that fortress balance sheet. But this does allow us to put incremental capital to work. I want to emphasize, this is a long-term target, and we anticipate it's going to take a while. But it's also contingent upon us finding attractive M&A or other external investments, including things of what Sneha does. Sneha's job, she will come up here, but we also make other investments, small investments, relatively small investments, but in future-looking interesting things, but I won't steal her thunder.

This is not about forcing money out the door to achieve a leverage target. It is not. But going from negative 1x to positive 1x gives us an ability to leverage more capital. So what are we going to do with that capital? Before we go there, let's talk about what we've done in the past. You can see from this graphic that essentially all of our investments over the years from 2017 to 2022 have been funded with free cash flow, no debt. The majority of capital was returned to shareholders in the form -- as you know, as a form of stock buyback or dividends. We used a tiny, tiny, tiny sliver for M&A, all the while increasing our cash balances or cash position.

Going forward, it will be more balanced, more balanced with our sources of capital and more balanced with our uses of capital. We anticipate taking the balance -- our cash balances down from about $700 million where it has floated around recently to about $300 million, and I believe we can go lower than that. Possibly using a small amount of capital for debt to get to the target I was speaking about earlier. So what are the uses of cash? We still expect to take 90% to 100% of the free cash flow and return it to shareholders. That will be mainly through repurchases. We will also continue to pay a dividend as we always have, probably with modest increases in that dividend. The incremental capital is M&A and investments.

Stratos is a component of that. The biggest future component will be for Stratos as it relates to the options that we anticipate exercising over the next 6 years, which will increase our ownership interest to 100%. To a much lesser degree, we will use some capital for Stratos to roll up new advisers. They are very acquisitive. Stratos is very acquisitive. We want them to continue those acquisitions, and we will help support that. We anticipate that we could go farther -- further with our investments beyond Stratos. But I want to be very, very clear, very candid. We are 100% focused right now on the Stratos integration. We have nothing significant in the hopper as we sit here today. But if we do find attractive, sizable accretive M&A, it is possible if we do not find that, it's very possible that we do not approach that 1x leverage target that I had mentioned. This is simply a base case.

Okay. Shifting to financial reporting. In my CFO role, again, especially in early days, I heard quite often from this group. I've heard it from investors and maybe more equally important from prospective investors that SEI is really difficult to understand. I agree because when I was thinking about coming to SEI, I read the 10-K 2 dozen times, 3 dozen times, and I couldn't get it. So our job, my job is help to simplify how we speak about ourselves, how we are digestible to the Street.

Today, we are announcing a change in our segments. We are moving from 5 segments to 3 segments. Caveat, still subject to KPMG signing off on that, but I think we will get there. We are collapsing our Institutional segment and our Investment Advisors segment under one segment, which continue to be led by Michael Lane. Private Banking is getting a name change to better describe this segment that will continue to be led by Sanjay. Investment Managers is now Investment Manager Services continue to be led by Phil. New business ventures will disappear. The revenue that lived in ventures will now follow the client and the respective business unit.

Why are we doing this? Well, number one, this is how we are going to run the business. It is also much simpler. It will allow, I believe, for us to be more easily digestible by the Street and especially prospective investors. Also, Ryan Hicke is our CEO. He's also our chief operating decision maker. That is a GAAP term, but the way he looks at the company is the way this will align. Yes, we will give you plenty of time to digest this. We will have all the required filings and you have a lot of time for you to update your models. We don't -- we would expect these changes to go into effect somewhere around 2026. As I conclude, I thought this is a really good slide for my part to end on.

For those who have followed us, SEI for a while, you can appreciate there was a period of time where the performance of the business was not bad, but it was also not exciting either. We had modest success, but it did not always translate to the greatest returns for our shareholders. And for those who've followed us a while, I think you'd agree, there has been real tangible, measurable improvement over the last 2 to 3 years, like coincidentally, coincides with Ryan as CEO. The response from the investing community is one of excitement. And I will tell you, we are equally excited. Someone asked me today about this, how are you feeling? This is fun.

Do you know why it's fun because we have a lot of fun things going on. We're not sitting up here giving reasons why we're not doing this, we're not doing this. We have a lot of great momentum. It's palpable. It's palpable for our -- I think, our investors. It's definitely with our executive team. It definitely is with the Board. And you know who else, our employees. We have 5,200 employees, not just in Oaks. There was a buzz. There was an excitement. Everyone wants to be with following a winner like the Philadelphia Phillies, my team.

A lot of excitement, a lot of excitement and people have a little pep in their step. That's exciting for us. The ability to maintain what we've accomplished, the ability to deploy capital at very attractive returns and ultimately be able to drive double-digit annualized returns for our shareholders for the foreseeable future. A big part of our success has come from the IMS business. One analyst, not here today, we have a lot of analysts comes to Oaks. A lot of you have been with us in Oaks. This was tough for me, but said, IMS is the crown jewel of SEI.

And unfortunately, Phil was in the room to hear that, and I have to live with that every single day now. But you also noticed on the leadership slide that Ryan put up there earlier, one person who's not going to -- who's speaking today was not up there, that's Phil, Phil McCabe. That's because Phil was a leader under Al West. So he's the kind of the loan holder for the most part from the business units. So you did not get to see Phil's handsome photo up there. He's done an amazing job, amazing job of leading IMS, and it truly has been the crown jewel. Sanjay and Michael are going to fight to rival that crown jewel. But at this point, I'd like to bring up Phil McCabe.

Thank you. Apparently, I have a face for radio, right? So anyway, start by saying thank you to the team, right? Really happy to be here. We could never be successful in IMS without all of my teammates. So Ryan is our best salesperson. Literally, I've been to 25 CEO meetings with him this year up in New York. He goes out there. He's genuine. He's on fire, he crushes it, right? Michael Lane is awesome. He'll talk a little bit about being in the front office side of these alternative managers. They all want to talk to him about wealth and getting an allocation from our funds, and he's really, really helpful.

Sneha is helpful with the futures. I couldn't be out on the road doing all these things, trying to close this business without a lot of help from a lot of people. And last but not least, Michael Lane. I mean, I'm sorry, Sean Denham. Now Sean loves to tweak me with the crown jewel story, and it gives me anxiety, right? And I think in my mind, heavy lies the head that wears the crown. And I don't even know what that means. But what I do know is that we have a tremendous responsibility for our shareholders to continue to grow this business at a double-digit pace, whether it's revenue, profit, it's really, really, really important, and we take it very seriously.

All right. Let's get over here. All right. So excited to be here. We very rarely get an opportunity to spend 15 minutes talking about the business, right? On an earnings call, we'll get one question. We sit there, we prepare, we wait, but nobody ask us too many questions. We have 12 slides to go through today. The first 3 are just going to level set. Where are we today? How did we get there? So we're going to start there. The next 9 are about growth, growth, growth, growth and growth. So 3 main areas that we're going to cover. The third one is like a 3A and 3B, but these are the things that are going to help us sustain that double-digit growth for years to come. And start by saying the business is extremely healthy. The clients are very happy. They're referenceable. The products and solutions are resonating in the market around the world. Our sales are great around the world. And our pipeline really has never ever, ever been bigger. So we're -- the business is in an incredible spot.

So let's take a little bit of a step back in history. If you look at the slide on the left, from 2022 to 2024, revenue grew 21% and profit in that same period of time grew 26%. If you stay on the left-hand side, those numbers were driven by $250 million in net new sales from the beginning of January in 2022 all the way through June 30, 2024. So we say net, not gross. That's net of any fund launches -- I'm sorry, fund closures, liquidations if people shut down a product. So the gross number is even bigger.

A new disclosure for Brad on the right, that's the breakdown of traditional alternatives and global. We have never shared that in the past. If you look on the left-hand side -- I'm sorry, the right-hand side, but the black part of the traditional sales, those sales have gone down over the last 3 years. Here's the good news. We have a new leader in place there. We have new people. We're reenergizing that business, and I expect it to go up and up and up and up. The most fun part is the global piece in the middle, the grey. Those sales started here, they're going here, they're going to here. And with Sanjay over there, we think they're going to keep growing and explode, and we're really, really excited to have him there.

The blue side, the alternatives book, it just keeps going up and up and up. It's the gift that keeps on giving. Like Ryan said, Sean said, we service the crap out of these clients, and it really, really is paying off. And some of our clients are literally the best of the best. So global is growing the fastest. I look at the global business as being alternatives. The vast majority of it is alternatives. When you add all of those pieces together between the blue and the grey, it's over 70% of our entire book, and it's growing, and it's been growing every single year for years and years.

We expect those percentages to grow and grow, right? So that's the first of 3 in the look back. Second, we're in a great position from a competitive perspective. Far left, Blackstone, Morgan Stanley, Fortress, Blue Owl, PIMCO, StepStone, Carlyle, those are the ones that we have permission to put in writing. If you want to know who the clients are, buy convergence data, right? Spend the money, you'll find out exactly who they are, how big our relationship is with them. You can track it year-over-year and see how we're doing.

45 of the top 100 managers, that thing said 43, 6 months ago. I wanted to say 50 or 60 or 70. 10, I think we're almost to 11 publicly traded managers. These managers are hard, right? They need -- their deliverables are super tight time frames. They expect us to be flawless, right? We can't have a single mistake and they love us. #1 in private credit globally, #1 independent third-party trust company. We'll talk about why that matters a lot later. And we're #5 global admin in the league tables. So let's move to the middle column.

The middle column, if you take a look at the blue, in-sourcers are moving to outsourcing. We have 2 recent wins in the top 25. We have one in the top 5 that we're working on papering now, and we have another one in the top 25. Those clients chose us because they wanted a long-term partner, and that partner will help them scale and grow their business, right? All of these deals are bake-offs. They start with 20 or 30 admins. They get down to 5, then you do a proof of concept, they get down to 2 and then with a little bit of luck, you win it. If we can get clients to Oaks, Pennsylvania and they take a look at the team and they get to see the culture and the people, we win the vast majority of those deals.

So our goal is to get them to Oaks and then we win it. So large managers are embracing outsourcing and market share, the far right-hand side, over the last several years, we've gone from about 6% to 8%. It's a pretty fragmented market. And a lot of the ones that are bigger than us have grown through inorganic growth. Everything we've done has been organically, right? We did it the hard way, right, one brick at a time. So -- and again, #4 in North America in the convergence league tables in fund admin, #5 globally, #1 in private credit globally, and we're just in a really, really good competitive position.

All right. The thing on the right is an eye chart. You might not really care about it, but we really care about it. It's a fund structure chart. The more complex a fund is, the better we have a chance of outshining the competition and winning. So we'll dive a little bit deeper. We specialize in large complex multi-strategy managers. A lot of them are publicly traded, as I said, with tight deliverables. So if you have private equity, real estate, private credit, ventures, infrastructure, any other type -- if you have all of those funds together, that's our bread and butter. So our top 20 or 30 clients are absolutely massive, and we only have a fraction of their wallet share, and we are fighting every day to win more -- to earn more and more of that.

Those clients are incredibly sticky. Once we have them, they tend to never go. They spend a long time picking a partner and then we continue to grow with them. We have the clients that are big and have distribution. We have medium-sized clients and small ones as well, but the big ones are really growing. We all know that LPs have not been -- had capital return to them that much over the course of the last few years or so. We're still winning and closing a lot of deals, even though on the institutional side of the business, it's been a tiny little bit slower, but not with the clients we have and not with, how well we service them.

Our reputation is impeccable. It's stellar. If somebody wants to do business with us, the first thing they do is call their friend down the street, they call everybody, right? It does -- that's half the battle. The second half of the battle is winning by way of doing a proof of concept and proving you can do the work. We recently won the most complex mandate in the industry. They did a bake-off. We were the only one that could handle it. Plenty of other fund administrators said that they couldn't -- that they could handle it. We proved that we could handle it. So when it's complex, when it's really, really hard, that's where we shine the most, and that's why we're gaining market share.

All right. So next 9 slides, let's talk a little bit about where we're going, right? Three primary areas. We're going to dive deeper in all 3 of them. So Sean signed us up for double-digit growth for the rest of my life. This is how we're going to get there, right? I'm going to go through them quickly here, and then we'll go deeper. International expansion. It is the smallest part of our business, less than 10% of our revenue with the largest opportunity. It's an absolutely huge, huge total addressable market. We'll go into more detail on that. Growth from land and expand.

All of these large clients, the top 30 clients, we get one fund. I'm only going to say this one time. We kick the door open. We service the hell out of them. I think yesterday, I said it 4x. So if I say it, somebody please raise their hand, so I don't say it again. And -- but we get in there, we shine. We do a good job. We work really hard for them. We invest in that business, and we'll talk more about that. And then there's a massive convergence of public and private markets. All of the alternative managers want access to the traditional retail clients. All of the traditional clients are trying to buy alternative managers. The businesses are coming together incredibly quickly, and we see it in retail alts. It's only been big in the last year or so, and we're seeing it even more with private assets in 401(k) or retirement plans. So that's in the last 6 months, that's been on fire, too. So those were the three primary areas.

All right. So next, international, 1/3 of all private assets are held outside of North America. So -- and think about -- it's less than 10% of our revenue, and we only have a fraction of a fraction of the opportunity over there. And so international, we entered the Lux market, which is the second largest jurisdiction for launching private funds about 4 or 5 years ago. We started from a base of 0. We are the sixth largest fund admin in Lux right now in private assets. We're incredibly proud of that. We built that one brick at a time, right?

Here's another story. Saturday, I go on the world's largest -- longest, sorry, commercial flight to Singapore, 19 hours. I don't like to be alone for 15 minutes. I have no idea what I'm going to do for 19 hours. But I'm going with Bryan Astheimer, who's had the success over in Europe, who's going to be partnered with Sanjay. And Bryan and I have 15 prospect meetings set up centers, prospects, existing clients. Our clients, our largest clients have said CFOs of massive organizations, Phil, please open an office in Singapore, right? We need you, we want a single global operating model that flexes from Lux to India to Dublin to the U.S., right? They've been asking us to do it. Now we're doing it. So we're really excited about that.

We hope that Singapore looks a lot like Lux from the success perspective in the next few years. So there are great things to come. This is my last flight to Singapore. My friend Sanjay, right, he is going to be on that flight hopefully, every other Saturday. And he -- and the difference between Sanjay and I used to work 7 days a week, I only work like 5.5 now. Sanjay works 7 days a week. So we're incredibly excited about it. So it should be good for all the shareholders.

All right. Next, land and expand. So one fun, we do a great job. The largest clients have functionalized teams. Everything is done for the client within one team. It's our secret sauce. Nobody else does it that way. Those teams are super high quality. They're super low turnover. We've had competitors that are in the top 10 that have 50% turnover. Our turnover is a 11%, right? It's ridiculously low. Our people grow up with our clients' people. So our CFOs and controllers grow up with their controllers and they stay with them for 10 years. Then we get lucky if they go to another firm. And then we say, please, please hire us, and they usually do.

So land and expand, huge opportunity. If you look on the right-hand side, out of the top 20 clients, we only have 28% wallet share in the dark blue. We don't have any more than that. We're looking to take share from in-house accounting teams, and we want to take share from third-party competitors. And so in my opinion, we do the math, it's hundreds of millions of dollars of wallet share expansion and cross-sell opportunity. It's literally the gift that keeps on giving. It's what has helped make us super successful, and it's going to continue to take us into the future.

So next, we're going to go through a detailed example on land and expand and what happens when it's done the right way. So this is a perfect example. And there are some really smart analysts in this room and a couple of them could figure out who this is. Please don't blurred out the name. But it could literally be 1 of 5 clients, okay? It's literally -- we changed all the names to protect the innocent to steal Sean's term over there. But 2017, three funds. We started with one. But what really happened is in 2016, 2015 and 2014, we called on them 15 times, and we said, Mr. CFO, and I won't say the name, can you please give us a fund? And he said, Phil, you can't handle our business. And I'm like, just try us out, give us one fund. And then finally, in 2017, something happened. We called them and he said, okay, we'll give you one fund. That year, we got three funds.

Between that period of time and 2025, the client grew 300%. We grew within our existing wallet share as well as getting more of the funds when they grew, right? So it kind of was the gift that kept on giving. And if you look at the blue boxes, we expanded in all around the world in a bunch of different capabilities. And this was the client that asked us to open the Singapore office, right? So -- and if you look on the three grey boxes at the right, we hope to win all of that Asia business. We're really excited about that, right? We want to win all of that business, and we want to be a bigger and better partner for that client.

And they pick us -- and they picked us because we deliver and we execute and we help them scale and we keep up with their growth. So there was an analyst here that knows this particular CFO, and he said something nice and he said, "Oh, yes, we really like SEI. And I said, "Oh, great. He said, our other admin is a tornado of ours, right? So that was the comment, and we wear that like a badge of honor. We just want to do what we say we're going to do. We say we're going to deliver something on time, we want to deliver it. That's kind of what we do. It's really simple, right? Just be honorable and it pays off. So this shows the benefit of doing work with a really great alternatives manager. So it's pretty exciting. We've been working on it for years. We expect a long runway to continue for years.

All right. This is motherhood and apple pie. We all know that the alternatives business is growing from the bottom left to the upper right. It's growing significantly. What you might not know is the green box -- on the green box, that's the fastest-growing part of the whole entire alternative space, private equity and private credit. It's where we excel. It's over 70% of our business. So we target every private credit manager globally. We just landed a few of them globally. So for the first time globally, we have an opportunity to cross-sell into large clients, and we were never able to do that. We didn't have enough big clients. So we're looking forward to that, too. So the segments are growing the fastest, and we're really well positioned for the future. So we'll tie back to this in a little while.

Okay. Here's 3, this is 3A and then we're going to have a 3B. So retails alts, 70% growth over a 5-year period of time. That's awesome. What's even better is the right-hand side, the vehicles of choice are BDCs, business development companies and interval funds. We don't see that many tender offer funds, but those are the vehicles of choice. We see tremendous demand in our client base to launch these BDCs. We are upgrading our products to be a retail transfer agency to allow us to pick up more interval funds. That business is growing 250% over a 5-year period of time, and we expect great things to come from it.

The best part of this, if you take away nothing else is that it's permanent capital. These are evergreen funds. They are the gift that keeps on giving. When we sell a closed-end product, a drawdown fund, they go like this, year 3, 4, 5, 6, and they sort of go like down the other side over some period of time. Permanent capital, we love. We pay our salespeople more money for closing those deals. Those funds go like this, right? And if it's a household name, the big distributors are going to win, right? The large names, whoever it is BlackRock, all the big names are definitely going to win here because they have brand cache and they're a household name. So -- they also look a lot -- these retail semi-liquid products look a lot like mutual funds.

We've been cutting NAVs for mutual funds for 30 years. This is the part where the traditional business is actually coming together with the alternative business in a great way, right? So it's something that we're really, really good at and really, really proud of. So we're upgrading our capabilities. We're really well positioned. This is the first part on the retail alts. We expect that to sort of grow and go like this over some period of time. And we follow it closely in the market, and we want to win every single deal in this space because we want to win them now and watch them grow over a period of time. All right.

The next slide is 3B. Think about retirement plans, think about your 401(k). SEI doesn't have alternatives in their 401(k) plans yet, but we hope to add them soon. As that happens around the world, there's hardly any alternatives in that $13 trillion. Right now, there's about $150 billion. If that grows to 5%, that's $650 billion of assets under administration potential for us, the wrapper of choice is a CIT, a collective investment trust. We have been in the CIT business for 30 years. We have a state chartered trust company. We have $350 billion in assets there, mostly institutional, not retail. And those assets continue to grow and grow and grow. We are the largest independent third-party trust company. Everyone else is owned by Vanguard or somebody like Merrill Lynch or whatever -- whoever it is. So we're independent. We do not have a lot of competition in this space.

You don't see Citco in it, you don't see State Street, you don't see SS&C, right? They're not really in that space. We have a different couple of few competitors and we have a sales campaign where we're talking to every single large manager out there. And we're 4 for 4 right now trying to launch products with managers over $100 billion. Again, evergreen, permanent capital [indiscernible] of that. And we think it's just going to trend up over some longer period of time as it becomes more adopted out in the market. So one of the ones -- one of the four that we just won was a large publicly traded private credit shop. We could never get in on the fund admin side. And now they're talking to us, we got into the back office with the CFO.

And now we're going to try to sell them fund admin on seven different funds. So we have two ways to make money. One is on the CIT fund admin itself, right? And the second one is maybe getting lucky or getting good or getting into the back office and being a fund admin for those other funds. So we are extremely excited about this business. I don't think it really existed 6 months ago, right? It's kind of brand new for us. We have a targeted sales campaign, and we're on it. So -- to wrap up, net-net, we think we're in a really, really good position to continue to grow and expand and grow double digits for a long, long time. The runway is awesome from in-sourcing to outsourcing with land and expand, retail alternatives, alts and 401(k)s and last but not least, international expansion, new products, new services, new leadership. We're just really super excited. So we love where we are. We're really, really, really excited about the future. We're very, very bullish. So thank you for the opportunity. Really appreciate it. And Brad, what is next?

Yes. We're going to take a short break. We're almost perfectly on time. If we can get everyone back into the room at 10:20 a.m., we'll stay on track. Thank you.

[Break]

All right. Welcome back. I'm going to keep moving along. Next up, we have Sanjay Sharma, Global Head of the Private Banking business and as of about a 1.5 weeks ago, CEO of SEI International. Sanjay?

All right. Thank you. Good morning. My name is Sanjay Sharma, responsible for Global Private Banking business as well as the newly minted CEO of SEI International Business, just 7 days old. So today, I'm going to talk about 2 topics. The first one is our progress since 2022, last 3 years, what we have accomplished. And then second part would be what's our plan for future growth, okay?

So let me start with the first one. Back in 2022, when I talked to a lot of you at that time, you highlighted a lot of issues with the business. The state of business was a bit challenging. We had issues at that time with our backlog delivery. We had signed implementations, which were not getting delivered on time. We had challenges with our margin. And we also had client retention issue. So that was starting into more of a leaky bucket. So client retention was higher than our gross sales. So that those -- that was a state of the business when I took over at that time.

I can very proudly say the work we have done over the last 3-plus years. I'm very, very thankful to the executive team in the room for one, for trusting me with this responsibility where we were and Ryan asked us that, hey, can you go and fix it? And then also turn this into a growth engine for the company. I said, okay, what I'm signing for here.

So we took a step back and one by one, we have addressed all those challenges. And in that process, we have created a really, really good foundation for future growth. I'll walk you through how we have done it. But I'm really, really thankful to all my colleagues back home in [ Rakes ] as well as other locations. It has been a tremendous team effort. It would not have been possible without their help. So thank you. So let's talk about how we reached here. What were the key steps, the key strategies which we executed, which really helped us to achieve these results. Number one issue we talked about was the client engagement. So when I said that we had the leaky bucket, the leaky bucket issue was because of the client engagement.

So Ryan and I, we were on the role. First 6 months or so, we met with every single client of ours, and that was like a listening to us, listen to the clients and understand what was really happening. We went back to some of the clients in that leaky bucket side, and we went back to them asking them why either they left or why they had given us notices that why they're leaving. In that process, we're not only able to retain some of those clients, but we were also able to bring back some of those lost clients. But that gave us a really good insight that unless until we align with our existing clients, unless until we have that strong foundation, we will not be able to grow this business.

So there was a tremendous learning. In that process, we also allocated capital so that we are helping our existing clients to grow their business and improve their operating efficiency. It sounds simple, but think about it, if your clients are happy, they are referenceable, they will buy more services from you, and they will also talk about you positively with other prospects. And in that, yes, we will be able to win more businesses. So that was one of the major strategy we worked on. The second was the -- the backlog delivery.

At that time, even in my first earnings call, the first question was, okay, so what you're going to do with the backlog delivery issue. Again, we talked to all of our clients, which were in that change management cycle. Again, Ryan and I, we were -- we had a lot of good conversations with those clients. The one thing which we learned was that when the clients they were signing those contracts, the platform change contracts, they were starting that journey, they were not only signing a contract with SEI, but they were also signing other contracts, somebody to help them with operations change management, somebody to help them with the technology transformation. And in that process, what was happening, the new third-party consulting companies were coming in the mix, okay?

They were learning about SEI's business, SEI's platform. They were learning about the clients' business. And that was -- those kind of learning curves were delaying the project. And at times, because that's the third-party consulting companies, their interests were not always aligned. So that's where that was a major genesis of launching the professional services. Ryan I, we thought, okay, we need to take control of the old the complete change management program.

We need to help our clients. You think about when the clients they sign the contract, their journey to transformation doesn't start at that time. Their journey to transformation and realizing the benefit of that change program starts only after they go live, only when they are on the other side. And that's where we realize and our revenue is the same way. Our recurring revenue starts when they are on the other side.

So we had to fix that problem. And I can very proudly say, in the last 3-plus years, we have delivered 32 such implementation events. And last 2 years, every one of them, they have been on time, within budget with very high quality. I guess very proudly say again that, that team, which we have created now for the backlog delivery is fantastic. And professional services is a very good outcome of that exercise. Through those learnings, interactions with our clients in different segments, interactions during the change managed program execution. Other thing which we learned was that our go-to-market strategy was a bit flawed.

Our go-to-market strategy was one strategy fit for all the segments, irrespective whether it is a U.K. market, irrespective whether it is U.S. market, irrespective based on the size and complexity of the businesses. And that's where we really narrowed down our focus, okay, what do we need to do for each of the segments? And we created segment-specific go-to-market strategy. And that was not just a sales strategy. That was not calling the prospects. That was end-to-end, right from the first call with the prospect to the delivery and supporting those clients after going live. So we looked at the entire supply chain, entire assembly line that how we are going to work with those prospects and clients. One simple example is working with Mike Peterson, our General Counsel, that how we are going to contract with these clients. We can't have one contract process with everybody. So working with Mike and I, we spend a lot of time in standardizing the contracting process as simple as that.

Back in 2022, maybe we signed 4 or 5 contracts. Today, I'm signing at least 50 to 70 SOWs and contracts. So we had to scale that process. But then again, we standardized the whole process at the segment level. You could see the result of that. In private client investment managers in U.K. or in the regional community bank segment, over the last 2-plus years, we have about $60-plus million of net new sales and also provided professional services to these clients. And some of the logos you could see, they have been fantastic wins through this strategy. And in that process, we have also created a very strong pipeline in our large segment. And you will see the results in coming quarters.

So we are very proud of what we have done through this strategy. And so you could see that the previous slides, the numbers, they speak for themselves. And our go-to-market strategy, segment-specific focus, I strongly believe that we have created a really good foundation based on which we can grow further. Let me walk you through one a quick case study, which is a good win, good example of strategy in action for regional community space. WSFS Bank is a Pennsylvania-based bank. We have been working with them through our earlier platform as well. WSFS Bank, they have grown through acquisitions. So if you look at the history of how they have been growing, they have been acquiring other banks.

With the Bryn Mawr Trust acquisition, they were looking at how they can consolidate and streamline their overall operating model. So technology landscape rationalization, rationalizing all the operating models they had. And they were looking for a partner who can bring all those heterogeneous operating models together and also help them with the change journey. After a very rigorous process, they selected SEI and we implemented SWP.

SWP is a highly scalable, highly configurable platform, which can bring in different operating models, different platforms together and provide a seamless experience, seamless experience to the bank staff, middle office, front office as well as the end client. So in that process, now WSFS is very well positioned for their future growth. And we also took over the complete responsibility of oral change management program. And in that process, now we are their trusted partner for even future professional services. So this is a really, really good win for -- not just for the platform, but for other services as well.

So with that kind of strong foundation, now let's talk about what we are going to do next, how we are going to set ourselves for the future growth. what we have done. In past, we have improved our client engagement. So our client relationships are solid, okay? We have a good foundation and capabilities in terms of backlog delivery. So now we're going to focus on, okay, how we can continue to grow with our existing clients. When you look at our existing clients, our strategy was, okay, once they have signed contract with us, SWP, okay? That's it. The journey is over.

We will talk to them when the next recontract cycle comes in. That was the mindset earlier. But now we are going with enterprise mindset. What are the other services which those banks or the wealth managers they are procuring, which SEI can provide. So I strongly believe that the growth through existing clients, that would be a major pillar for growth. The second part is expanding our solutions and segments to not only continue to help our clients to grow as well as how we can win in the new segments. I'll share some examples here. So think about we have been playing in regional community bank space, PCIMs in the U.K. Now we're looking at based on the capabilities and the investments we have made in those segments, we can provide those services to small banks here.

We can provide similar services to IFAs and IFA consolidators in U.K. market. Those are just some examples. And what SEI has done over the last couple of years, acquiring Life Eagle or acquiring alts capabilities, investing in data cloud, those are just certain examples that how we can further expand our capabilities through investing in our solutions segments. Now everybody's favorite topic. margin expansion, our journey is not over. I know when I took over the margin was barely single digit. Now I can see based on what we have accomplished last 7 quarters, we are continuously delivering double-digit margin growth, okay?

So I'm very confident that we have the new strategy, which I'm going to walk you through, it will -- we have our path to historical margins. How we will approach there, I'll walk you through that. Okay. So let's talk about my favorite slide, by the way. This is my favorite slide of the entire deck. So let me walk you through why I'm saying this is my favorite slide. If you're existing clients, on the left side of this is how we have a strong foundation. Our existing clients, 100-plus clients globally, 120 or so with average tenure of almost 20 years. Because we have such a good engagement with those and now with the enterprise mindset, we can expand our wallet share. I think about those banks are not just buying the platform. They are outsourcing so many other services.

And so we could establish ourselves as a trusted partner for providing those services as well. I'll talk about professional services in a bit. And then if you look at on the right side, how we were going to market earlier. Our total addressable market, there are 300 or so regional community banks, okay? There are 50 or so large banks. And then there are around 1,000 so small banks. We were not even active in that market earlier. Similarly, around 200 or so in our total addressable market in the U.K. But we were looking at that market only and only if those prospects were looking for a platform change. I mean think about with out of that population, maybe 5%, 7% would be looking for platform change at any point in time.

So which we were narrowing down ourselves that, oh, that's the only total addressable market. But that's not true. Those clients are apart from outsourcing or looking for a platform change, larger banks, that's like once in a lifetime, once in somebody's carrier, they're not going to change the platform just like that. But then they are continuously acquiring other services. And those other services, now look at what is happening in the industry, data and AI, everybody is talking about. We have a strong foundation. We can provide those services. That's why I'm saying this is one of my -- the most favorite slide of this deck. There's so much potential for us to grow, both through existing clients and completely relooking at our go-to-market strategy in our addressable market. not just leading with the platform, but leading with SEI's enterprise capabilities. I talked about professional services a few times. Let me walk you through in detail why I'm so excited about it. If you look at this year, almost 50% of our net new sales is coming through that channel.

What is happening in the industry? Every client, every prospect, every financial services institution right now, they are looking at, okay, how they can improve their operating efficiency, how they can use AI and data so that they can outpace like people -- even at the basic level, how to implement Copilot, Sneha will talk about it. But at that basic level, I feel that we are very well positioned ourselves to help all those clients to adopt SEI's professional services. We started with the backlog delivery as a big challenge, the professional services. We are trying to solve a specific problem. But in that process, we learned a lot.

And the clients are not looking for -- they are asking for just the technology side. They say, hey, can you help on the operations side as well? Okay, sure. We started helping them with the operations workflow redesigns and automation and rethinking their business operating models. We did a really good job there and established credibility and now they are asking us to help on the business side. In many places, now we are helping them to even create business cases for change so that they can take it to the board and look for [indiscernible], and get the necessary capital allocation for the change management program. So we've made significant progress. We are just getting started here. I feel that what we have done in private banking space, the possibility across the company is pretty significant. We can replicate that in IMS business with Phil. We can replicate that in Michael Lane, asset management business.

Sneha and I, we are spending a lot of time that how we incubate new services that okay, these services are fine. How we add more nucleuses here so that we can create additional services. We are putting ourselves in the center of a client segment and looking at all the services which they are procuring from outside. And this is how we are looking at how we can expand our portfolio. When you go to smaller bank segment, they don't even have CTO.

So okay, how about we become their CTO. How about we start providing them the outsourced Chief Technology Officer services. SEI Sphere is a great example. Sneha and I, we have worked together, and I'll walk you through one such examples where we are providing the Sphere services to one large client in U.K. And we are taking care of their network operations and their data transformation -- cloud transformation services as well. So we have made really, really good progress here. Here are just a few examples.

Ryan talked about Vanguard. We never did any business in our 45-plus, 47 years. And then we started engaging with them. First contract was through SWP for providing them trust company services. And in that process, we established ourselves for their professional services as well. We help them in running the overall change management program. We help them with the operations transformation, and now we are working on the business side as well. It's a great progress there. This is my second favorite slide of this deck. Trinity Bids, great example. Ryan and I, we met with the CEO, COO and CTO.

For 1-hour conversation, we didn't even talk about SWP, not even once. We all talked about we wanted to understand what -- okay, what you're trying to accomplish? What's your change management program? What's your North Star? Where do you want to be? They have been going through a lot of change internally. And through that, we learned about their broader business strategy, and we shared what the SEI's enterprise capabilities are. Now Trinity Bridge, they are a client of Sneha, the client of mine. They're working with Michael Lane. And now there's a possibility that Phil will be able to provide them services as well. So this is a really good example of entire SEI capability in Excel. And they're just getting started.

They're payback company, and they're just getting started. We have a really good relationship with them. But they entrusted SEI to help them managing the overall change transformation. And we can replicate this. We can replicate this places as well. Asset management, is the second such pillar when I talk about segment expansion and solution expansion. Michael Lane and I have spent a lot of time together in terms of, okay, what are the possibilities in private banking segment? How we have been leading through technology and operations.

Many of our clients, they consume SEI Wealth platform just Software as a Service. Some of them, they are outsourcing middle office, back office to us. An idea there was that why we are not providing them wealth asset management services. And when you look at our total asset management on our own platform with the private banking segment, $1.3 trillion worth of assets are under direct discretionary authority of those clients, which means that the clients are managing that much money themselves.

Our wallet share of that $1.3 trillion pie, barely 2%, and that's not a reflection of SEI's capabilities. I look at Michael in our entire asset management business, fantastic. He's doing really well there and has a good growth strategy. So my selfish interest was that how I can replicate that in private banking segment as well. And when you look at your wallet share barely 2%, there's so much headroom. And that's what we have been working on, working with Michael closely, the defining go-to-market strategy, investing in our technology, again, looking at the entire assembly line that what needs to be done so that we make it easy for our clients to consume this service.

So I'm very excited about it. Michael will talk about it in detail as well. Your favorite slide. Margin expansion, yes, you talked about it. You -- every time in earnings call, this question comes up, what we are doing. And I'm sure you are seeing positive signs last 7-plus quarters, last quarter was 16%, and we have our path to continue to improve our margin. When you say that this question came up that what's our path to historical margin.

I thought that the work what we have done over the last 2 years or so, it has really set us nicely with a good foundation that what else we should do now to improve our margin. And when you look at margin, margin is not just expense management. Sean and I, we have spent a lot of time on margin expansion. Margin is going to come through the top line growth and very efficiently managing our bottom line. So the 5-pillar strategy I'm talking about here. Number one, outsized growth through the new services I talked about, asset management, professional services, SEI Data Cloud.

By the way, Ryan is the original product manager of SEI Data Cloud. Back in even 2016, Ryan and I, we talked about it. We did the market scan, and we created the Data Cloud solution way ahead of everybody else. And now every single client we are licensing now or signing now, everybody is buying that solution, by the way. And now we are replicating that in other market segments as well. So that's number one. Second, over the last 4-plus years or so, we have been investing significantly in Software as a Service readiness for SWP because we have multiple clients on our Trust 3000 platform. This is how they consume our technology services, and they have no desire to outsource operations.

So in our self interest that, yes, SWP needs to be ready. We have made significant investment in that space. And now we are on the final stages of that investment. And you would see over the next 2 years or so impact of that reduction directly on our bottom line. The third one, the new business contracts, that's just a discipline. Now all the new contracts we are signing, they are with a single-mind focus that, yes, we are helping our clients to grow their business. But at the same time, we don't want to chase revenue just for the sake of changing revenue.

Ryan was very clear. Very first conversation with Ryan was that you need to stay focused One was the focus and second was relentless execution. The focus was that let's define the guardrails. Okay, these are the market segments which are in our lane.

Let's stay focused on that. And then let's see how we expand those guardrails. But staying there, that means we are signing new contracts without major R&D investment. Then GCC, we talked about. And again, I'm just echoing what Sean and Ryan has already said, the GCC is not just a cost reduction strategy, it's a talent strategy. And I'm really excited since I'm taking over the SEI International business, GCC is going to play a major role there, especially when you look at the global clients, they want to see one seamless follow-the-sun model, and GCC would be a big part of that. And then, of course, everybody already talked about and raised the bar so significantly about the SEI International business.

On #1 focus, Jan called it out, managing our growth. Second was managing the expenses. So that's going to also help with the private banking margin expansion. So I think the combination of these 5 will lead us to our historical margins. Very briefly, I will talk about SEI International. I'm just 7 days old. I'm in the process of defining the strategy, but my strategy has 3 core pillars. One, we already have a blueprint, which we have very successfully executed in private banking and a lot of learnings over this period of time. I've been spending a lot of time in U.K. I'm going back there, not 17-hour flight, Phil. It's easy flight. So -- but you would see the number one, executing that blueprint. Second is we are not planting new flags. These are not moon landing projects.

We have presence in South Africa, Luxe, Ireland and U.K. Our first goal is, okay, how we maximize opportunities for SEI Enterprise in those jurisdictions. Second, we have a lot of clients in North America today. They have global presence. So we'll go to those clients and how we help them for their growth in other jurisdictions. So those would be the highest priorities before we look at any moon landing. Singapore, yes, that's a good example. Our clients are asking us to go there. So this is how we are going to grow the international market. So to summarize and to transition to Michael Lane, 3 things I would call out. I want you to have 3 takeaways. Number one, we have a strong foundation and strong foundation in terms of client engagement, our capabilities and enterprise mindset.

We have the required talent to execute on the strategy, number one. Second, I want you to focus on that. We are continuously investing in our platforms, our services so that we can outpace our competition. We are continuously expanding segments and solutions so that we can continue to help our clients grow their business. Number three, I'll be relentless on margin expansion. So trust me, we have shown it over the last 3 years or so, and we'll continue to be on that journey. Asset management would be a major pillar of that strategy. Michael and I have spent a lot of time on that. We are going to execute that strategy. You would see that in action. Michael and I have one thing in common. We are big tennis fans, both of us. The only difference is Michael is a really, really good tennis player. With that, Michael.

All right. Thank you very much. And I will be talking a little bit about banking and the opportunities that exist within the asset management side of combining the banking opportunity with asset management opportunity. I just wanted to say one quick thing.

So Phil shared a story about a firm from 2017 to 2025, the growth of that firm with us. Interestingly, and Phil knows this, after 1 week of being at SEI, I was at a college event with a fraternity brother of mine. who we pledged together, we live next to each other. And he happens to be the President of that firm. And I didn't know the substance of how big of a client they were at the time. But I asked them like, what's your experience been with SEI because I have a lot of friends in leadership positions at private markets companies before I actually say anything about Phil's business to any of them and risk my reputation with them, what's your thoughts? And the quote that he shared with you that SEI has been a joy and it was a tornado of errors before was from that individual.

And so that -- what Phil said is absolutely true. That came from my discussion with the President of that firm that said at that point, the next thing he said is if anybody at SEI ever wants to come talk to me, sign them up. I'll talk to anybody at SEI. So the work that's being done across this firm, whether it's in Phil's business with IMS, whether it's in Sanjay's business, as you've seen the success, the trending in the right direction is phenomenal.

Now for the asset management business, I'd say we're more like Project Apollo. Anybody remember the 1962 speech of Kennedy at Rice University. He talked about that they were going to go to the moon, not because it was easy, but because it was hard, because it would galvanize America. It would pull everybody together because they would have a common vision, a common goal. It wasn't because NASA wasn't doing a good job. It wasn't because NASA had failed. It was because there was more that could be done.

And I shared that speech with the team about 10, 11 months ago, and one of the leaders gave me a card that he had found with that speech on the card and a picture of the moon. So it resonated with them. And that's what we're doing in the investment management, the asset management part of the business.

As an example of that, what would be easy is what somebody came to me when I first started. said, "Hey, I have a great idea, great opportunity in a market that we could be incredibly successful in, state-registered RIAs. Okay. For those who don't know, state-registered RIAs are the smallest of that market segment, $70 million and under. So why do you think that that's a great opportunity? Because no one else is talking to them. Okay. So that's easy. It's not hard. But it's not scalable, it's not repeatable, and it will not be profitable. There's a reason that nobody was calling on them. So what we're going to talk today, we're going to talk a little bit first about a couple of industry trends that would suggest that isn't the path we should take, but it was the path we were taking.

Again, it was a strategy. It's just when you look at what's happening in the industry, there's probably an improved and evolved strategy that would be more successful, more scalable, more repeatable, more profitable. We'll talk about the current business because we can't talk about where we're going until we have a better understanding of where we are. So we'll talk about it a couple of things. I was home a rare weekend one day, about, I'd say, 2 months after I had begun, and I went into a room and I listed all of the different client segments we could potentially talk to on the horizontal and on the vertical, every revenue source that could be had within everything we could bring, every body of the apple that we could bring at SEI and then targeted where we could win, where we could be successful. And that started with clients.

Clients were across the horizontal products and services were the vertical, and then we looked at where the revenue potential was. And that's what we did then as a team. I brought that back to the team, and that's what's created our evolved asset management strategy. So we'll talk about that. That's where we'll spend most of our time. So the quick review of what's happening, particularly in the RIA segment. Now why do we talk about the RIA segment so much? Well, if you think about RIAs, RIAs basically are very similar to regional community bank structure, very, very similar to multifamily offices. And even if you look at the independent broker-dealer business, if you were to talk to people at L-POs, XERRA, any of those, they would prefer you refer to them as an RIA than even an independent broker-dealer now.

So the RIA segment is important. The current RIA segment, by the way, just the RIA segment in America is bigger than the entire wealth business in EMEA. So that also suggests the addressable market is massive for us. And we have not really participated well in that space. We'll talk about how we will. The growth in the RA space is highly fragmented between sort of the haves and have-nots. The top performers are scaled. They're growing.

They're growing through organic and inorganic growth, and they're using that growth. They're using that scale to market more, to bring on more clients. They're getting preferred treatment at custodians. They're getting referrals. That scale is driving a big dispersion between the large and the small. That consolidation is not ending. It's not slowing down. We look at '24, almost 400 acquisitions that took place. And in '25, we participated. We brought long-term capital, not private equity. We brought long-term capital to the RIA business with our Stratos deal. So that consolidation is also causing one other thing, fee compression.

With consolidation, with scale, now we're talking about -- I mean, I started working with RIAs in 1994. There were like 5. The biggest one was -- literally, the biggest one was like $100 million. Now you have $500 billion RIAs. Now it's going to get confusing of what's really in RIA because anybody who read the creative planning announcement of SageView, if you really dig into that, only $13 billion of those $269 billion of assets are actually wealth. The other is institutional consulting. That's happening a lot more. Cerity buys Agility. They're buying SageView.

All of these acquisitions are starting to look almost institutional as much as RIA, which will actually lend itself well to who we are. So that's going to drive fee compression. It's one of the reasons that we wanted to work with Stratos, and we'll talk about that at the end. But the only area of the market, ops, admin, investment management, all of the different segments of this market are all under fee compression, except one, wealth. If you look at the fees, it's actually gone up 1 basis point over the last 10 years. Everything else, and this is a conservative example using Morningstar. You can build a diversified portfolio of passive funds now for 6 basis points. Back when I started in the business, that would have been like 180. I've been doing this for 37 years.

So those are the basic parameters that we now have to work within to create a strategy. So who are the clients? Most of you will know this, independent broker-dealer clients, that's where we got 33 years ago, we were the leading what we call TAM. -- which is basically for a fee, we created model portfolios for advisers who wanted to outsource, a big part of our business. Our institutional, and we still call it institutional OCIO.

We will not in the future. It will be institutional. We just won a mandate for $2 billion that has -- that is not OCIO. That's an institution that's hiring us for investment management only. So our institutional business will continue to grow and diversify. RIAs, we only started working with RIAs about 4 years ago. The growth opportunity in that space is massive for us, but we have to have a strategy that we can win. And we'll talk about why we would have lost in a strategy in the past, but why we won it now.

And that's about the ecosystem. And banks, you heard from Sanjay, huge opportunity, margin expansion, growth, leveraging our relationships. We have not done a great job over the years of bringing asset management, bringing investment management into banks, but Sanjay and I are going to solve that. We're actually going to bring people in that have done it, that know how to do it, that have raised tens of billions of dollars of bringing investments into the bank market. And advice, our fifth point up there, you can see a fraction. We have a small private wealth business, contributes a fraction of the revenues from asset management, but that will change when we include Stratos.

And now, number five, we'll move up the ranks pretty quickly, and that's a good thing because that's very stable revenue. It's very stable growth opportunity. And as you heard from Sean, we will continue to invest in that business. So then we look at the drivers of revenue, the products. What we have been selling, and we will continue to round this out, and this will grow as we have more of these discussions, you'll see this chart grow.

Cash, obviously, from the delta between the first half of this year and the second half of last year, cash revenue is the largest driver of net new revenue, followed by SMA ETFs, which is very good and very surprising, if you -- which you'll see how few ETFs we actually have, which is going to change. And then other is largely life yield. But you see this big drag on the business, which is the mutual fund business. We're not alone in that. Anybody who looks at the data would know that about $742 billion has moved out of equity mutual funds this year alone. That's like $5 trillion, $6 trillion has moved out now in the last few years. That's a drag.

Good news is slowly declining to be less of a drag. And we will look at where we have great track record, great opportunity to convert those assets to something in a different structure, an ETF structure. We will be looking at where we can make additional conversions. We just launched one a couple of weeks ago, QALT. That was one of our first conversions, and you'll see more of those in the future. So we'll take those mutual fund assets, move them into ETF. It will make them a more attractive vehicle for the market. So where are we going? What's the evolved asset management strategy? How are we going to get to the moon?

So first, we've got to grow the core. Now as I mentioned with the Creative SageView announcement, growing the core, you'll hear is largely about bringing our adviser business and our institutional business together, which we've begun. That's not a theory. That's actually something we're already doing and practicing. We talk about moving up market. You heard Ryan say in his earlier remarks that we would talk about that. Why are we moving upmarket? How are we moving up market? Why would we win? Very easy for people to say, "Oh, we can't win there. We don't have a reputation there. Nobody knows who we are. You absolutely can win. There is a phrase that is used by almost everybody I know in the business now that the RIA community, and I'd say more than just the RIA community, banking, multifamily office, they want to do more with fewer.

So if you can do more for them, that decreases their complexity. And that is one of the things we focus on, scalable, repeatable, profitable, simplifying the complexity. If we can bring more capabilities and price holistically and sell the ecosystem, we can win, and we'll explain how we'll do that. And then product development activation. There are certain fees that we have that are flexible. One that is not is 40 Act products. We can't flex on those. But we need more of those so we can flex more in other areas and retain the margins but bring more into the ecosystem.

And then the last thing I'll talk about in our time is the Stratos partnership. So talk a little bit about this. This is where I think there is tremendous opportunity for us. We have already brought the advice units together. When I joined the firm a year ago from BlackRock, I walked around, I asked people what they did. And I heard 5 different times from 5 different people on 5 different floors or 3 different floors that they were leading the advice business. I like, that's great. We have 5 disparate groups leading advice. So we brought them together under one person, and that will now be the advice unit for all, for institutions, for financial advisers, they'll share resources. They were all disparate technologies, as Sean was talking about, easy improvement. It's a very important business, $377 million of earnings.

And everybody knows, Jay is in the back of the room, he was part of institutional for a while. They didn't even talk to each other. They didn't have meetings together. Now they sit on the same floor. They sit next to each other. We actually mix them up. And now what you're seeing in the RIA space where the RIAs, the largest, most successful, are buying up institutional businesses. We have both of those. Every adviser that gets to a certain scale, $500 million, let's call it, which is still relatively small. When they get to $500 million, they don't want to buy a model off the shelf. The models business we -- I'm sure you all hear about it every day. It's a huge discussion point. Everybody wants to me the models business.

We're the third largest model provider behind BlackRock and Capital Group. We're the third largest. We've been doing it for 33 years. And we haven't been using the institutional business to create custom models. Now we're a co-CIO. Anybody that's greater than $500 million, what do they want? They want a custom model. They don't want a shelf model. There's 4,000 models on Morningstar. They don't want that. They want something that is more aligned with their needs, their wants, their philosophies for clients. And so we're bringing that together, and we now have a co-CIO capability, which is a custom model capability, which is using our institutional resources to drive better behavior and better capabilities within the advisory business.

So we will grow the core by bringing these capabilities together. It gets better. You don't have to leave. Just k. And then the -- we talk about engaging larger RIAs. Why do we want to engage larger RIAs? Well, look at where the growth is. The growth is with these hybrid RIAs. That is Stratos. Stratos classifies as a hybrid RIA. The growth is in the independent RIA business. So RIAs, you put the 2 together, everything else pales in comparison in terms of growth.

Although retail bank, broker-dealer isn't a -- it isn't far off unless you combine those 2, it isn't the highest growth, but we have a foothold there in technology that we've never leveraged to do anything in the investment side. That's why that is going to be a critical element. We have been playing for the last 4 years that we've been in the RIA business in the under 250 category. When I asked my first day, could you send me -- I asked somebody to send me the list of all of the adviser firms that we have brought on for the last 12 months. The average was around $30 million, really small. Now if you look at our pipeline, the average is closer to $300 million to $400 million and growing.

So we're not where we want to be yet, but we have closed our first multibillion. And we learned a lot, as Ryan said, from that, that will help us for the next multibillion and the next multibillion. And so we are going to move upstream. The $250 million to $5 billion is a real sweet spot for us, but we can do more. We've had multiple interesting summits with very large. The one that comes to mind, $140 billion RIA. Some of you have heard me say this before, but we sat down. I don't think anybody on either side of the table thought it was a good use of time. They looked like why am I here?

And my team was like, why are we here? And after 2 hours, we had 7 opportunities. that we could work on together. And we've been working on those and meeting routinely ever since. We're doing that with large firms as well, large asset managers. We're getting summits together, and we find all sorts of opportunities. I met with Carlyle last week, and we're working on wealth opportunities. So we're going to move upstream, and we're going to sell the ecosystem. One thing is for certain. If you look at this, there's 5 pieces. Ryan picked up a quote yesterday. You can't connect the dots unless you collect the dots.

Our ecosystem goes one step further. We can connect the dots because we own the dots. We own these 5 dots, and we need to use those 5 dots together. If you think about custody, that multibillion-dollar firm that came to us, that's what they were looking for. They were looking for a custody partner. They were breaking away. If we had tried to sell one piece, which is what the land and expand in the adviser market, which is very different than Phil's, land and expand. His land and expand is very successful because he's a major player, and he is the world-class leader in the private business. So he can do that. In our business, if we had tried to land and expand, I guarantee you would have lost within the first 20 minutes. And we didn't. Before the meeting started, I told the team, we're selling the ecosystem. This is our opportunity to try it. Come along.

It will be -- let's do this together, let's sell the ecosystem, and we sold the ecosystem and they came on board about 3 months ago. And that was a signal to the market, and it was a signal to everybody that works in the asset management business that we can do that. And so that was important. So let's talk about the ecosystem. There's 3 components. First is custody. 2 big behemoths on the custody side. We all know 2/3 or more of the assets at Schwab and Fidelity. But there's not a leader to be the third player in that. By selling the ecosystem, I am very confident we can be that third player. We have the scale. We have the experience.

We have a unique characteristic that we are a trust base instead of a brokerage base that particularly is valuable for the upmarket RIAs who have higher net worth clients. You get to hold the assets in the individual's name instead of the brokerage name. They can't securities lend against your assets. Like those are really important characteristics for a high net worth investor. So I believe we have incredible opportunity to break in as the third player.

We're not going to compete head-to-head one-on-one, hand-to-hand combat against Fidelity and Schwab, but bringing the ecosystem, we've proven we can win. The second part of the technology ecosystem, SWP aside, because we're all familiar with SWP, is the alternatives platform via Access, which is an acquisition that we made of Vaultigo and then turned that into more of a marketplace called Access. Why is that important? Well, as you heard multiple times and Bill shared, alternatives is a big thing and linking this into a system and integrating this into the entire ecosystem, the custody, the wealth tech and the alts and the investment management, we'll talk about in a bit. Linking that all together, again, creates an easier tech stack for a financial adviser. So Access is an important part of that. And then LifeYield.

LifeYield is differentiated. There is nobody in the market. Major players have come to us and said, everybody we ask who can do householding, who can do householding at a multi-account level, who can truly do tax optimization across an entirety of a portfolio regardless whether it's held at Schwab, Fidelity, Merrill, SWP, SEI, who can do that? LifeYield. LifeYield is being integrated into the system right now to be able to do tax management across the entirety of the portfolio and asset location and tax managed withdrawals. So you can extend -- General Counsel in the room, you have the opportunity to extend the length of your distributions in retirement. That doesn't exist anywhere else.

So that's a differentiated dot that we own, that we're incorporating into that ecosystem. Now we think about the asset management, the investment management component of our business. We have an investment management department, manages a couple of hundred billion.

We have an advice business. Now we've consolidated. We have a very sophisticated and very well-run operations and trading. We're going to continue to do value engineering, and we're hiring a company to help us with value engineering in that space. But we had those things, but they were order takers. There wasn't a strategy. And when I say they're order takers, that was the CIO telling me, we're order takers. So I'm not saying anything that would be offensive to our team. That's what they told me.

We don't have a strategy. We don't have a product development team. We don't have governance. like this was told to me when I arrived. And so what have we done? We've created a product development team on the investment side. We hired Bob Humm from BlackRock. He started a month ago. He already has a 46-page road map, which he has shared with the fund Board. He has shared with the Executive Committee, and he is executing it already. We are in discussions to bring that out, to roll that out and to start bringing new product to market, and we'll have a pricing governance, so we price the products across the continuum of exposure, liquidity and opportunity. so that we have logic behind the pricing of these products as well.

And we're looking at every product we have, what could be converted and what should just stay where it is and continue to run off due to attrition. So that is a different investment team. Now why do we think that we can be competitive in the investment world? Where are we going to be competitive in the investment world? We have a very successful $30 billion quant business. We manage in-house. Most everything we do, I think, reputationally is fund to funds, manager managers. That in the public markets, we'll talk about, is a declining value proposition, to be honest. We're bringing more in-house that gives us more control over fees and pricing. It also gives better margin accretion over time because you don't have to pay sort of fixed cost to sub-advisers. But we will create partnerships. I think one-on-one partnerships like we just converted a mutual fund to an ETF with DBI called QALT.

We just did that like 2 weeks ago. I love that strategy, sort of the Vanguard Wellington strategy, where you have expertise in areas we don't have a partnership where they have an incentive to sell that fund as much as we do. And the person who runs QALT is out there probably more than anybody even at SEI out selling that fund right now. And then we have about $14 billion, $15 billion in alternative strategies, which $99.998 billion of that is in institutional. I think we only have like $34 million and it's mostly seed investment in the adviser space. So untapped opportunity for us to bring our history, our focus of being a fund-to-fund manager into the alternative space. Why is that important?

Biggest thing you will hear from advisers who are uncertain whether they want to use alternatives is because they are afraid of not liquidity. They'll say, well, the liquidity thing concerns me. What about liquidity concerns you for 5% to 10% of the portfolio? Do you really think there's going to be a run where somebody is going to need that 5% to 10% Well, no, it's not really about liquidity per se. It's made a bad decision. I bought the wrong alternative strategy or private market strategy, and now I'm illiquid. Now I can't get out. Okay. That makes more sense.

So there's a way for us to participate. We have 30 people in our market research team, our managed research. We can reallocate many of these people who do very good work and have done really good work in the public market space, bring them into the private market space. and use our history and our capabilities of being a manager of managers, bring that more into the -- and not with adding on hundreds of basis points, but bring that into the alternative space so that we can bring a better solution within the ecosystem in the alternative space, where even if we just treated it almost like an index where you get more sort of median returns, that will get more peace of mind.

I think with manager research and with the work that they've done in the past, hopefully, we will do better than that. But that eases that concern that I'm going to be on the bottom of the dispersion table, which is huge, as you can see some of these areas like private equity, 20% variance over this period of time, like that is a concern and then you tied in. So I think we have opportunity to bring our investment capability into the alternative space into wealth and work with those clients to do that. So that's another way that we will bring a horizontal approach. Lastly, on this before I get to Stratos, we had a little problem also.

Anybody who knows the historical TAM business, advisers would work with you until they got to a certain size and then they leave and they go independence and they wouldn't work with you anymore. And that was largely driven because there was not a pricing mechanism to keep them with you. In fact, when I asked for the pricing mechanism, it ended at $125 million.

So once you hit $125 million, you paid the same prices if somebody had $5 billion with us. That's not how the world works anymore. Scale that gets fee reduction. That doesn't necessarily mean margin reduction because you also get reductions in fixed costs. But we have this chart as an indicative of what was missing, but it was even worse than this chart. It was $125 million. Now we have a chart that still needs to continue to go to the right and lower, but at least it goes to $5 billion. And as we continue to grow and move upstream, we will continue to move those pricing benefits further and further to the right. And as the size of the clients continue to increase, one of the firms that we met with, 33% of their clients were 0 to $5 million, $33 million were $5 million to $25 million, 33% were $25 million and up. So it's not just about the size of the firm, it's about the size of the clients.

We will continue to round that out and price holistically. And that is going to be a competitive differentiator when you think about that ecosystem. Okay, Stratos. So Stratos, for those that don't know Jeff Conceion, the CEO of Stratos, he wishes he could be here. He is hosting his national conference for Stratos. It's hundreds of people together in Dallas. I will be flying in 3 hours to join him down there in Dallas to speak to all of his advisers.

Stratos represents what we talked about before, a way to hedge a little bit of the fee compression. There's also some ancillary benefits that are coming from that partnership. But if you look at what's happening in the market, you have this trend of people wanting more advice. And if you read the McKinsey study, there will be 100,000 less financial advisers over the next few years. So supply and demand would suggest that you should have fee stability. Now what is hitting the adviser business is margin compression because of what we talked about earlier. If you look at that ecosystem slide, right now, if they don't come to us, custody, they have to go to Schwab or Fidelity. You go to the next phase, which is the wealth platform to help run the business.

You go to SWP, Investnet or Orion. Then you go to the next part, which is somebody that can create custom models for you. You go to BlackRock Capital Group or us. You go to the next thing, which is you need alts, now you go to Case Capital or us. And then you have -- you want householding. You want tax management across the entirety of the portfolio. can only come to us. That is such a challenge for the operations of an advisory firm. And that is where we think over time, with Stratos, we can improve not just the top line by continuing to invest and grow together, but bring a more, I would say, operational efficiency, which should be a solution to that margin compression over time for the adviser business.

So a lot going on in that world. What are the benefits of Stratos and SEI together? A few of those, I will share that our concepts. We haven't closed yet with Stratos. So what I'm sharing are just concepts of what could be very interesting, and I'd say just thought-provoking. One of the reasons that the OCIO business, the growth of the OCIO business for many is difficult is -- the clients you win are in areas where maybe you have one client. And so it's expensive to serve them. You have to fly, you see one client, then you fly to another city, you see another client. Stratos has 356 advisers.

Let's say, 20% of those are interested in being institutionally minded as well. We could bring of our 400 institutional clients, we could bring to start, let's say, 60 out, 1 each for those 60, 70 advisers and teach them how to serve that business. And we can share in how we are compensated for that. And then we teach them how to go get more. And now in that local community where they have a reputation where they're there every day, they can take that learning of how to be a consultant within the OCIO business and take that to 9 or 10 more. If they only did 1 a year and you did it with 50 advisers, that would be an 8% improvement organic growth in the OCIO business.

We just 1 each for the entirety of the year. So there's interesting opportunities in the OCIO business or in the institutional business. If you think about our private wealth business, which is $5.5 billion to $6 billion of assets, but very skilled at communicating with clients from $10 million to $1 billion. That's the range of the clients that fall within the private wealth business. If you take those capabilities, the technologies we use and the improvements we continue to make in the goals-based approach that we bring into the private wealth business, and that becomes a co-adviser to the people at Stratos, the advisers of Stratos, who don't have experience with the $5 million, the $10 million, the $20 million, the $500 million.

That becomes another interesting synergy. What happens in these deals too often is the word synergy refers only to cutting costs. How can we strip out fees because we've got synergies. What we're looking at when it comes to Stratos is how do we make it an accretive business for both sides, which since we will have mutual interest in that is good for everyone. So how do we make it an accretive business? How do we make it -- how do we take these synergies, whether it's in the private wealth and the mainstream wealth, whether it's in institutional.

And then you look at the fact that Stratos has their own -- they have their own investment management called SIM, Stratos Investment Management. We can help scale that. It's mandatory to use that as advisers come into Stratos. We can help scale that with the capabilities that we're developing under Bob Humm from BlackRock, who has moved over a month ago. So there are synergies that go far beyond overlapping capabilities where you would cut and try to validate a purchase price through reductions of overhead. We have synergies where we can scale, improve, optimize and create a more lucrative environment for Stratos and for SEI.

So is it working? So far, so good, but we're very early. When you think about Phil's business, he's rolling. Think about Sanjay's, we're on the move. We are executing. This is not conceptual other than what I just shared about Stratos. Everything else is not conceptual. It is executing. We are in process. Things are getting better, but I really won't get too excited about this chart until we have another year or 2 under our belt. We are winning, we are improving, but we haven't scaled that yet. So we have to show that we can do it over and over and over again, and that's when I'll have a little bit more comfort as well Sean and Ryan.

So we've got more work to do, but it's a good indicator that we can move upstream and we can serve larger clients. So the last thing I'll leave you with one more time is the ecosystem. We aren't collecting dots. We're owning dots. We're looking at ways to improve the ecosystem. We're looking at ways to improve the capabilities to bring SEI into the wealth business, into the institutional business, merging these businesses together, improving our investment department. And the next speaker has an interesting job at SEI because one of her jobs is to look internally and externally at adding dots, where are there extra dots that we can collect or own or invest in, be strategic about. Some of those will be improvements internally. Some of those will be improvements externally. And so what Sneha focuses on is what's next for SEI.

And so with that, I'll turn it over to SEI's -- the Head of SEI Next, Sneha.

Thank you, Michael. So I have a little story about Michael. When he joined last year, I -- of course, you call up people that you know that might know him to find out what he's like because I'm like I'm going to be working with him. So I wonder what he's about. And the colleague said to me, the thing about Michael is he's got a huge vision and a really good heart. And I have to say like it's been true, you see it when he presents, but you see it every day the way he shows up. And it's actually true about everyone that I work with on the leadership team.

And when Ryan talked about, it's fun to be here, that's why it's fun to be here because when you work with people who have bold ambition, but are just good people who want to like work together, it is fun to show up every day. And so I'm like privileged to be here, and thank you to all of you for like working with me.

So what is SEI Next? Everyone else talked about what's happened in that business over the last 3 years. My role didn't exist 3 years ago. So I've been here 2 years. And SEI Next, I struggle sometimes to explain to people because people are like, are you an incubation lab? Are you a venture studio? Like what do you do? And I don't like those terms necessarily because for me, they feel trendy and cute, and we're not here to be a trendy or cute, right? Like we're here to be the tip of the spear for what SEI is doing in the industry and how we're going to be relevant, scalable, profitable and high growth over the next few decades.

So really, what we are, yes, we do venture. We do innovate. We do all of those things. What we are is a way for SEI to look around the corner and see what's coming next, find out what's relevant and bring it into the whole business. So my team is really small, but we work across the business with everybody to figure out how to scale innovation. And why do we need this? Because you've just heard from everybody. They've all got great strategies. They've had a track record of execution. You can see here, we have a history of innovating in our market. Why do we now need a separate capability that does that? It's because the market has changed and the pace of change in the market is just really accelerating.

And so if you see what's happening with AI, if you see what's happening with blockchain and tokenization and how it's affecting markets, it's really noisy out there. And we talked a lot about relentless focus and execution in our businesses. It's really hard to be a leader of SEI now when you also have to think about every little like start-up out there that's trying to disrupt your space. And so what my team does is we help make sense of that noise, and we help bring that in and we help make it relevant to each of the businesses.

And then we experiment and then we figure out how to scale. And so that's really what we do. We're here because we know that the pace of scale, the pace of change is going to require people who can take that stuff figure out how to make it relevant and how to scale. And we also know that organizations that are going to win in the next 10 to 20 years with the pace of a disruption now are going to be the ones that can learn and adapt the fastest.

And so that's what we're helping SEI to do is to learn and adapt at a faster pace. So how do we do that? We have -- Michael talked about connecting the dots and so did Ryan. We have a lot of dots that we have to connect. We have capabilities that we need to have in order to like win the future. And we also have communities that we need to work with to win the future.

And so the capabilities are our capability to build. So I have a small team that knows how to incubate new business ideas. We work very much like a lean start-up mentality. We go out, we do market validation, we test, we do research, and then we figure out if this is something that SEI should get involved in, and we test with clients. We've got investment capability.

So we've got a CVC arm or corporate venture arm. What we don't do is place lots of small bets on things that we think are cool. What we do is invest strategically in start-ups that we think have the ability to scale with our business and are going to be where the client and where the market is going next. So we are really strategic investors. The average size of our investments are between $1 million and $10 million, so not huge. But what we really give those start-ups beyond the money and what they really need and what our clients need is we give them technology, we give them talent and we give them distribution.

And that's how we actually take something that's a very start-up investment type of focus and make it into much more of a strategic focus. And then the third thing we do, the capability we have is the ability to partner. We know that a lot of the big technology companies are trying to get into financial services. We know that they have a point of view about cloud, about AI, about tokenization, about quantum. And we know that we can learn from them as well as they can learn from us. We know that a lot of our clients can learn from us as well, and we can learn from them. And so we've created an SEI Next Council, which is basically an innovation council that is comprised of some of our start-ups, VCs, partners and clients.

And we talk about some of these big topics that are going to affect the industry. And then beyond that, we also allow them to come in and see under the hood of what we're building. So we don't just share the success stories. We actually share the building process. We allow them to come in and see like how do you adopt AI at scale? What are the challenges of thinking about tokenization in the industry? What are potentially the disruptive parts of that? And they get to come in and build with us but they also get to go in and we do externships with our start-ups.

So one of the unique opportunities we provide to our clients and partners is they can go to some of our start-up portfolio and spend with their talent, spend a week or 2 learning about what's happening in the market. And so it's accelerating everybody by linking these capabilities and the communities together. And that's really how we build. So what are we focused on? When I think about change and what's next, I think in 4 horizons, right? For me, Horizon 1 is kind of what's now, what are we working on in the next 12 months.

For me, then Horizon 2 is about what's coming around the corner, where are the opportunities for us to expand in our current markets. Horizon 3 is about what are the potential transformations we can start thinking about in our industry. And then Horizon 4 is about exploring things that are just potentially nascent, but we're not sure yet how they're going to affect us. And so if you can imagine what my relationship is with the rest of the business on all of these, Copilot, we were one of the first companies to take Microsoft Copilot and deploy it across our whole company. That's not the remarkable thing. The remarkable thing is the adoption rate we've got is one of the highest rates in the industries.

And the reason why is because we worked with every single business unit to get champions from each business unit who wanted to be the adoption champions. We went through workflows and we said, how can we make your day-to-day better? How do we get the humans in our building to understand the value of what this stuff can actually bring. And one of the communities we leverage within our company is we've got a community called SEIsmic, which is every employee in SEI can join SEIsmic. It's an innovation community. And so no matter what your job is, you can put your hand up to be part of it. We will give you access to some of the projects we're working on. We'll give you access to training and design thinking on AI, on all of these things, but also your ideas get to filter up, and we'll evaluate those ideas. And if they're sound, we'll actually build out on those ideas.

And so we leverage SEIsmic for Copilot. And that's where the adoption rate is so high. And we're seeing already value created with things like not just can I prepare better for my client meetings, but actually, can I collaborate better? Because if I'm not in a specific meeting, I can still learn about what's there because I'm able to like collaborate with the team using AI. Can I improve the way that I do market research? We're seeing massive, massive gains in the most dull administrative tasks, spreadsheet processing and things like that. And so these are the ways in which we're bringing it to life. And as you go further out into the horizon, we get into more debate sort of realm. So it will be like Ryan and I will debate is quantum really a thing? What's actually going on? Should we spend time on it? I'll talk to Phil like several times a week about tokenization and how it's going to affect his business. And so it really becomes how do we make it relevant. And then as it comes in, these things become real.

So where are we focused? Where do we think all these things are going to have commercial value? 3 major areas. One is the user experience because we know that AI and automation and tokenization, all these things can drastically change the end user experience. And in financial services, the end users of all of these services have been like frogs in boiling water for a long time. We've just made do with these subpar experiences that are not connected. And the same thing has happened with financial advisers and wealth managers. They're not able to connect all the dots in their organization.

And you know what, with AI, you can now create frictionless experiences that are beautiful and seamless. And the power of those is about retaining your users and making them delighted. But actually, the commercial power of those is the data that you collect from the users and the way that you understand their workflow. And the power of that for us in SEI and for our clients is that in the world of AI, the moat is data. You hear that from so many people. It is all about can you capture proprietary data? Can you capture workflow in a way that nobody else can? Can you capture insights? And so that's why user experience matters, and that's why we are relentlessly focused on that.

The second thing is operational scale. And we all talk about margin, but it's not -- as Sean said, it's not margin for margin's sake. It's really about can we find better ways to scale? Can we find ways to double revenue without doubling headcount? Can we find ways to access markets that we never would have been able to access? And so absolutely, tokenization is in there. AI is in there. Robotic process automation is in there and every other technology on the planet that's going to come and make us better is in that bucket.

And the third area is really growth. And for us, growth is not just about growing our existing businesses. I do a lot of work working with the business units about expanding existing businesses, and Sanjay talked about a couple of examples, and I'll share a few more shortly. But growth for me is also about how can you access markets that people thought were inaccessible. The thing we hear a lot from wealth managers and advisers is everybody wants to go after the mass affluent. But you know what, it's hard. It's hard because you can't service those people in an accessible way at the same margin. But now you can because using some of these leverageable technologies, you actually can service the mass affluent market. You can onboard assets in a way that you've never done before. And so that's really where the growth is going to come from, from thinking differently and reimagining the way that we do our current business.

And so let's make it real now. So let's look at real examples of things that we've invested in and that we're actively working on that are driving those. So on user experience, Michael Lane and I speak on a constant basis about what is the user experience that he's going to need to service the large RIAs. What is the way in which his team can be leveraged in a way that allows them to focus on higher-value things like alternatives.

And so we've got an investment in a company called TIFIN. TIFIN, you'll hear about a lot of AI start-ups in our space. And most of them are features, like they're note-taking apps. They're like they do one little thing. They do calendaring. TIFIN is interesting, and the reason we invested in them is they're a wealth platform. And what that means is they think about the end-to-end workflow of the adviser. They're not just thinking about one little piece of the day. And so what we're thinking about here is can you create like really seamless AI-driven user experiences for advisers because you know what, they're not going to give those things to their clients, unless they understand them themselves. We're also thinking about multimodal ways of delivering AI because people have been talking about text-driven AI. We're already thinking about video-driven AI.

So thinking about what's next and how do we actually help educate and inform and empower advisers so that they don't want to do the same thing with their customers. And so that's one area that we're working with TIFIN. Another, Michael mentioned the manager research team. We're actually automating a lot of their work using AI and TIFIN so that they can then focus on higher-value work. And so we're seeing results both internally and externally around this idea of user experience.

Under operational scale, I mentioned Phil. Phil and I talk a lot about tokenization. I think I get like, I don't know, like 4 or 5 times a week, I get a text from Phil, like either a new start-up that he's seen or like can you think about this or how do we talk to this client about what we think is going to happen to the industry. The potential for tokenization to really impact the operational efficiency of the market is huge. But the reality is that until the regulator gets on board and until all market participants are on board, it's actually not going to get to scale.

And so what are we doing? We invested in a company called Ctrl Alt. It's based in the U.K. So talking about our international strategy, too, we're very aware of the start-up seen overseas. And there, what we're doing, Ctrl Alt is embedded with us with a Digital Security Sandbox at the Bank of England, and we are actually working on tokenizing a fund with them there. And so that is an exploratory thing that we're doing, not just off on the side, but with the regulator, with the market in a market that we think is a high-growth market for us.

And something else interesting about Ctrl Alt that we're learning from, they've just won the contract to tokenize the real estate in Dubai. And so us and our clients are learning from that. We've actually got a client externship that's going to go and work with the team at Ctrl Alt so that they can understand what the future of tokenization is. And that's really the potential.

And then if you think about like growth, Sanjay talked about how he's driving growth in his business. And we've got another example here of both international growth and growth in the banking unit. We've been talking about the fact that banking struggles to serve the sub-billion client because it's not efficient and we want to increase margin. So we found a company called Graphene in the U.K. And Graphene serves that mid-market really, really well. So we invested in them. And this year alone, we're going to get billions of dollars of new assets onto our wealth platform because of Graphene.

And so these aren't like just ideas. They aren't just like cool things or cool technologies. We don't get sort of sucked into the glamor of the new tech. We really think about how to make it tangible and real and scalable. And so I'm really excited about what's next at SEI, and I hope that you are, too.

I believe that we are now going to move to Q&A. So I will turn it over to you, Brad.

Yes. Thank you very much, Sneha. So as we get everyone set up in the front, just for the Q&A protocol, I'm going to be walking around with a handheld microphone if you have a question. We want to take as much time as is needed to answer questions from this group, either flag down myself or I think many of you know Leslie Wojcik, who runs Global Communications for SEI. We're happy to take your questions.

Brad, before we start, I'd like to take a brief moment and give you a shout out. You got us really prepared for today. It's your idea to do it in Manhattan. I think another great example of us being willing to bring in really, really talented leaders from outside the organization and listen to their ideas. So on behalf of all of us boss man, thank you.

I appreciate it. Thank you.

Crispin Love, Piper Sandler. International was a key theme throughout the day. And with Sanjay now running international, has done a fantastic job with banks, can you just Talk a little bit about the biggest opportunities there, 15% of revenue now, lower on an operating income basis. How could that ramp low-hanging fruit? And just where you're excited about most internationally and then also how M&A could fit in the equation there?

So I'll go first, Crispin. If you think about, again, kind of this constant concept of creating an integrated enterprise strategy. So Phil sent Bryan Astheimer over there a few years ago because we wanted to send a seasoned leader who understood growth to get IMS sales moving. Bryan has done a spectacular job. Sanjay and I spent years over in London. SWP had a lot of momentum. We have started to get more aggressive in terms of taking asset management out to intermediaries in the U.K. But there's no integrated plan around how are we going to market in all of these areas? What's the branding? How are we leveraging our workforce footprint? Everybody still feels that they are part of their kind of team and not part of the office or offices.

So I think -- and I'll turn to Sanjay. I think when you look at our opportunity, it's to get really, really disciplined around where do we want to go to market with what capabilities, but then leverage the footprint that we have in Dublin, Luxembourg, the U.K. and other areas to really deliver a superior client experience. Do I think we have $1 billion of latent revenue sitting under a rock over there? No, I don't. Do I believe we have a lot of upside potential because the other thing, Crispin, you got to remember, the difference between there and if you take London, we can go over to London and see everybody we want to see in 72 hours because it's geographically, the U.K. is the size of Florida, that's true fact. So I think it makes 0 sense to go to market in those markets as 5 disparate entities.

Sanjay?

Two things I would call out. In the international markets, as I was saying earlier, our existing clients in North America, they have presence in other jurisdictions. So we are going to look at how we maximize our wallet share in other jurisdictions with existing client. I think because we have trusted partnerships, that's why we are starting Singapore office, for example. And we have those relationships already established.

Second part is that if you look at our Dublin office or you look at our Lux office, those are like IMS offices today. South Africa, that's asset management office. U.K., that's asset management and private banking office. We want to change that. These are all SEI offices. And we want to change that mindset and replicate what we have done here in North America over those jurisdictions.

And there's a cost structure component, obviously, to it. I think what we've done really, really well over the last couple of years from a cost optimization, again, not expense reduction, but cost optimization in the U.S., I think we can -- I don't think we've done as good of a job over there, and I think we have an opportunity to do that.

Patrick O'Shaughnessy, with Raymond James. Sean, you talked about capital allocation and willingness to take out debt. Would you contemplate taking out debt to accelerate share repurchases? Or is it only for strategic growth?

No. We're -- Brad prepped this well. He thought that might have been a question, and it was. Well done, Bradley. No. So we're not going to draw down on our revolver for stock repurchases.

Pavel Gulberg, Bloomberg Intelligence. A question on digital assets and integration across different businesses. Obviously, we just heard about tokenization, some of the opportunities you see in there. But broader, we're hearing from institutional investors, from retail investors, they're looking for ways to integrate it in their portfolios. We hear from a lot of CIOs for the businesses that you actually see in a percentage allocation into this. We haven't heard as much during the last 3 hours. What's the broader digital asset strategy?

Yes. I think we're just getting going in terms of like our overall digital asset strategy. I think we're really focused on the efficiency gains around tokenization because that's where the regulator is moving faster. And so that's where our experiments have been, but we're absolutely involved with conversations with start-ups in this space and also with a couple of interesting experiments with regulators in the U.K. and the U.S. as well. So we're in the early stages, but yes, you'll expect to see more of it. And we definitely are seeing demand and interest from our clients.

Jeffrey Schmitt, with William Blair. Could you maybe talk about some of the revenue synergies that you see with Stratos? I know you talked about greater opportunities there than cost synergies. So what are you thinking there and maybe the timing of that?

Yes. I'll go first and Michael, you go. I mean I think Michael highlighted 3 major ones, Jeff. If you think about the $37 billion under management, they have a really, really disciplined value proposition when they're bringing on new advisers who need to adopt their centralized investment management. So our ability to supplement and augment their centralized investment management group is certainly something we've been talking to the team about. If you look at their platform, the non-brokerage assets find themselves in 2 or 3 different wealth platforms. So we absolutely have SWP opportunities there, especially as new advisers come on board.

And then I think the third, and Michael highlighted, is our ability to kind of cross-sell our OCIO capabilities and help them go upmarket and actually go after either foundations, endowments or also ultra-high net worth clients. And then I would flip that around, Jeff, and say, we have so many opportunities that we can learn from 356 advisers, what's winning and what's resonating with end clients that we can be quickly turning around and putting that in the hands of our banking clients and our adviser clients to grow our revenue as well.

Mike, do you want to...

Yes. There's a couple of things. One I didn't mention during my discussion, which I think is important is we will now have the opportunity to go in sit in Stratos' office in Cleveland and learn about every technology that they use, which are every one of the ones I used as competitors in all 5 of those dots -- or 4 of those 5, they use competitors. We will learn about them. We will see how they use them. We'll see where they're better or worse than us. We'll know where to more strategically align investment dollars with capabilities and needs instead of improving something we're already a leader in, improve where we're not so that we have a better platform. For advisers, we don't have an ownership interest in.

And so our independent adviser business is critical, and they're going to help us grow that faster by learning from them sitting in their office, learning how they actually do business. That's one. And then I think the investment opportunity is -- the investment management opportunity is absolutely untapped in that area because they have a very disparate way of how they have historically worked on an investment from an investment perspective. SIEM is relatively new. It's getting traction. I think there's lots of work we can do to have a more disciplined investment approach within the Stratos family.

And SIEM has little to no exposure to alts. And I think to your timing question, Jeff, it's going to be ready, aim, fire. We're going to be really thoughtful, like -- and these guys have been amazing. Like Jeff and the team want the same things we want. So it will definitely happen. But we're not going to go in and force something down the throats of a firm that we need to go really understand why they continue to win and go accelerate that.

But to Ryan's point, when we talk about alts and wealth, that's going to be obviously a great place to build product together that can be expanded in other words.

Jeff, on aside, we wanted Jeff here, Concepcion here today. He couldn't be here. He had a previous engagement. Actually, Michael is going out to, I think, spend time with at a conference that he is at. Just an FYI.

My name is Jeff Nathan, at Rockefeller Asset Management. Building on this last discussion, your strategy around alternative assets, you're clearly doing well in investment management with alts and exciting growth prospects in fund admin. But the rest of SEI, it seems like a bit of a missed opportunity. Competitors at the intersection of wealth and alts such as, say, iCapital are taking share. And I think they recently raised at a valuation nearly equal to your market cap. Two questions. It seems like you have the infrastructure for this market. Alts are all upside. Why aren't you going after this market far more aggressively? And then secondly, what KPIs should we track for your opportunity here outside of investment management?

And so when you speak about -- when you asked the question about going after the marketplace in alts, so are you speaking about the platform or the product?

Platform.

Platform. So the platform, when we acquired Altigo less than 2 years ago, it was more of -- think of almost like subscribe, where it was more of a technology for subaccount -- for subdoc processing more than a platform that would be in the realm of, say, an iCapital or case. And that's why earlier this year, when we rolled out Access and rebranded and created a marketplace, it will be something that we will be definitely putting more resources behind to use that. We are right now -- we have signed on several broker-dealers who are going to use Access as their alts platform. That's one of the strategies will be to become the Intel Inside a lot of the broker-dealer community as well as within the adviser community to have a discussion around where they are today and where we can go. iCapital and [ Case ] are great companies. They're clients of ours as well as they're going to be companies that we think we will complement well in the marketplace from a platform perspective.

And the other thing I'll keep harping on this enterprise concept. So Jeff, you're suggesting you're surprised that when we power 11 of the top 12 publicly traded alternative investment managers, we haven't done more to harness that on the retail side? Yes, I agree. But with the collaboration, like Michael was just saying, Carlyle is a great client of SEI. Michael was just up at Carlyle with some of Phil's team members also talking about what we could do. I think this idea of co-creating things with our clients and not overcomplicating it, it doesn't all have to be invented here at the front of this room. We power some of the world-class players in this area, and we understand the fund structure. So that's a super fair question, Jeff, but also one that I think the approach we take and what Sean went through earlier around the pain of running the company differently, the benefits of that have barely, barely manifested themselves yet in sales results.

And what we have not talked about at all today, which aligns with your question, both from a platform and a product perspective, is what everybody wants to talk about is alts and models and alts and custom models. That is a massive opportunity to be more systematic about the use of alternatives within portfolios. And that is something that is 100% in the top of our priority list for development to not just do it in an Excel spreadsheet, which is what a lot of the people are doing right now if they have alts and models. We can hold an alt and model right now. That is 100% capable on our platform.

If you want to have an alternative product in the model, in the portfolio, you can do that. The problem is that we -- nobody really has automated how to trade around the subscription windows for liquidity. So how do you rebalance the alt? Is a subscription liquidity window issue or it's a proxy window? And so we and everyone else that is in this business in terms of being a wealth tech provider, we are all racing to make that capability reality while not taking on tremendous amount of manual spreadsheeting to make that work. We don't want to go there yet, ever.

Patrick, you've another one?

Patrick O'Shaughnessy again. How durable of a revenue stream is professional services revenue?

Sanjay?

Yes. So think about every new client we are signing, every new client we are signing right now, they -- we are also providing the professional services. And with that process, we are establishing good relationship with them. They are trusting us. So the clients we signed last year, now we are providing them more professional services after they went live. So it is turning into a repeatable business after they are live. I think about -- I think Michael, he called this out. Most of these large institutions, they are looking at fewer trusting partners, fewer partners to outsource. And that's how we're establishing ourselves. We are already providing them technology and operations. And now we are positioning ourselves as professional services as well.

And if you look at what is happening in the industry right now, as I was calling out, data and AI those are the current challenges. Think about in future, quantum, yes, that means that, yes, people would be looking for cybersecurity as #1 concern. We are already working on that. What would that mean? So we are keeping ourselves ahead of that. And one thing which I called out outsourced CTU. Once you establish yourself as a trusted partner, that's a durable relationship.

The only point I would add to that is that Sean talked about our 2,000 consultants that we have, and those consultants have been with us for 30 years. So it's been pretty durable for them, and I'm sure it could be pretty durable for us. So...

Great point.

And I think a tactical example of this, Patrick, is we're starting to win some professional services SOWs from non-platform clients. So historically, at SEI, if Bank ABC decided to run their platform on FIS, somebody would say, okay, well, they're off the prospect list. No, they're not. They may be off the prospect list for SWP. They're not off SEI's prospect list. So we should be in there talking about asset management, talking about professional services. We have an example that I'm sure we're going to talk about next year around a firm that was struggling to install a competitor. We went in to help, and that's going to result in a really, really good outcome for SEI in that firm. But we went in with some class, too, to say, "Hey, we'll help you out of this." So I think it also has just broadened the aperture of what we're able to go talk to these organizations about.

I'll take it a click further. So we bring in kind of behind the curtain here a little bit. I mean we are talking in earnest about how we professionalize professional services and actually stand it up. A lot of the things that I spoke about today, we're making massive progress on, whether it's procurement, whether RPA, I think we've got to be a lot further along. I spent a lot of my time there. AI, again, early days. Professional services is one of those. I believe it can be significant. What that time frame looks like, how much that is. Sanjay has done an amazing job, a little serendipitous of how he started creating this and looking around. We're starting to look in Phil's business. We're looking at Michael Lane's business to say, what are the other offerings that are being purchased by those clients of ours and nonclients of ours that we can do. That's very complementary. I don't think we want to go become a McKinsey and a strategy consulting firm. That's not what we do. So we're actually -- I mean, we had a meeting as early or as late as Monday or Tuesday on this very topic.

So again, a lot of what we're talking is early days, but hopefully, you're getting the sense that we're trying to build something in professional service, I'm really, really bullish on. It's just now how do we stand it up, how do we get the services, who's the leader, how do we get the right workforce. Margins are dynamite in that space, as you're aware. Our clients are buying tremendous amount of services, tremendous. Our wallet share is almost 0.00001 in some of these clients. I think there's an opportunity there.

And we've taken it through our EBA process. We've taken it through comparing that to other uses of capital, and it's got real legs.

I'd love for it to be, not tomorrow, a segment someday. I'd love it to be a stand-alone segment. Not there yet.

Connell Schmitz, with Morgan Stanley. So thinking more high level here, just thinking back to the 2022 Investor Day, you put out the target of doubling revenues. Do you have an updated time line as to when you think you can get there versus 2022?

No, I learned my last one on that. I think we've got a really clear path around growth. Embedded in that -- like we've done a lot of work on that. Embedded in that, I think I'll be on, like I underestimated where we were on asset management and just the pure kind of flight out of mutual funds into ETFs. We -- as Sean mentioned, we're not an extremely acquisitive company, but we are going to use the balance sheet in other ways. But I think my opening slide, to be honest, when you look at -- if we continue to do what we're doing on that opening slide around the right sort of sales events, like if you think our old baseline for sales events for a quarter was $20 million, $22 million. We did $47 million in Q1. We did $30 million in Q2. We like the way our pipelines look right now, but it's the right sort of sales event. So I'm not sidestepping your question. If I could go back and maybe give a different metric. I follow the sales, I follow the EPS, and we will continue to expand margins and drive the shareholder return that Sean laid out.

Got it. Sticking high level on...

I was 90 days into the job, too. Right, Todd? Come on, man.

So we see the chart on de-siloing the firm. Can you just give an update on where you are on this de-siloing journey and how we can see that...

That's an awesome question. Mike Peterson and I were having this conversation as a sidebar. I think, Sean, and I'll turn it to you, but what you were going through there, some of those are kind of done and some of those aren't. So it isn't as though we're in any one of all of those areas. And what you didn't see on the chart is -- and I'm sure you saw today is there are very little silos that exist at the leadership level right now, but if you want to...

I think -- so, again, we just stood up procurement. We are real time, this entire executive team, Mike Peterson, we are working through a shift in where technology lives in the organization. It's going to be a major shift for us. It probably won't be as visible to the Street and outside, but it is a shift, all of these things. I would say GCC, I mean, early -- again, GCC, we stood up in May. AI and automation. I mentioned second or third inning. Automation, RPA is a massive opportunity. We still are a very manual organization, really almost across the organization. There's an opportunity there. So I'd say maybe second or third inning across all of this. Change management is hard, really hard. When I retire someday and look back, this journey from a shift from vertical to horizontal will go down as one of the hardest things I've ever done in my career.

But we're making incredible progress. When we met with one of the largest RIAs, and I said earlier, 7 opportunities were uncovered that we could work together on, 2 of those are in Phil's business. And nobody from Phil's business was even in the room. We know what Phil's business does now. they didn't before. We had people in one building on 3 different floors that had never even met in a building and didn't communicate. That doesn't happen anymore. I walk into the New York office here, and I know everybody in that office, and they work across every business. And so it is going to take time to go fully horizontal and to break down barriers across technology, operations, things like that. It's going to take time. But the people are thinking broadly now and not just narrow in what they do every day, they're thinking broadly of how we can bring the enterprise to a client.

And coming back to your doubling revenue question, not justify, I owned it. Don't underestimate the power that had internally. It basically -- when you're trying to drive large-scale change across 5,200 people, you need to change their mindset around what is acceptable and what we can be. And we got so much positive momentum and mobilization around when we explained internally why that opportunity existed and the math behind it. That's super different in terms of how we operate. Just like one of the first meetings we had a few years ago where I said I think we need to do $100 million in sales, and we told we can't do $100 million in sales. Well, now we're talking about $300 million in sales, $400 million in sales.

And I say this a lot to the team. They're very -- the group up here loves SEI. And one of the major changes we made was we were finishing too many sentences a few years ago with a period, and I tell people to bring the comma back. So well, we had $1 billion in outflows from our mutual funds. That's not a period. That's a comma. So what are we doing about it? And what are the options? We have $700 million. We have talent. So part of the doubling revenue was to kind of scare some people and actually let the company know we were running this company differently and our expectations around winning were very different.

Another way of saying it is we have a lot of people that will tell you why still within the firm, why we can't do things. It will happen. So my response is we could, if fill in the blank. What would we have to do to do it? I brought up a $10 billion opportunity the other day for people in the room. Whether it will ever come to fruition or not, we'll see. But the first reaction was, no, we can't do that. Okay. We could if what's missing that we couldn't do it. And it turned out nothing. There was nothing missing. But it was just a reaction. Oh, we've never done it, so we can't. Now you can't. You don't experience in that business, we can do it. So I think it's just changing that mentality around the if, the comma, whatever it may be. It's a cultural change.

And bringing back the entrepreneurial spirit of SEI. Sanjay's first presentation about what he -- first meeting he and I had about Patrick around he wanted to launch professional services to increase net sales SEI, I was like, cool, go ahead. And instead of litigating that for days upon, go get out there, try it, what's the cost of failure and then let's figure out how to methodically scale this.

Yes. And I think we shouldn't underestimate like the little changes that have happened in the culture, too. Like so I was talking about SEIsmic earlier, right? The fact that all of our employees can join projects that aren't just even in their space. that somebody has an idea that can help another part of the business, they can actually go work on that part of the business now, and that wasn't possible 3 years ago. And so the talent mobility that's happening and the learning that's happening across the organization is driving a massive culture shift as well.

The greatest strength we have at SEI is the longevity of our employees. One of the biggest curses is the longevity of our employees. And so I mean, when I got there, I'm like, oh, how long have you been here? I haven't been here that long. I've been here 11 years. I mean that's literally a common state. I've only been here 11 years.

I've been here 27.

That's a long time, buddy. But anyway, I mean, that's the thinking. So kind of changing that thinking to Michael's point -- I think Michael's example is perfect one.

I do, too.

One more?

Jeff Nathan, at Rockefeller. my question is on your operating margins, 25 to 50 basis point operating margin expansion per year, pretty moderate relative to the last 2 years relative to improving mix, efficiency, new wins. I think it's really wise to be prudent on your guidance. But what do you see as the swing factors?

So Brad had that question as well, Jeff. Well done, Brad. So yes, I think if you look at the numbers and even some of the examples I gave around procurement, some of the things that we did not necessarily talk about tech synergies and redundant technologies, it could be, could be higher than that. And I think everyone out here is like, these numbers seem kind of low. We also have a lot of investments to make. So when Michael is building, Michael, I don't want to say Michael has a blank check because he does not. But Michael has a lot of things he needs to build to go get asset management to where we need to be. Phil has a laundry list of things, Phil. We need to continue to scale IMS as he grows that costs money. Sanjay has a lot of things that he wants to do. We need to keep up with our competitors around tech. Sneha has a lot of things.

So I get a lot of requests for capital allocation. We're doing a much better job. We've put that discipline in place. Could it be higher? Yes, it could be higher. But we didn't want to come out here and say we're going to give 200 basis points in margin appreciation for the next 5 years. So there is a give and take. Some we want to give to EPS and to the bottom line, and we also want to make sure we're investing for the future.

And coming from where I came from, one of the art forms even more than a science is the reallocation of resources. I think what -- I don't think I would speak out of turn, and Ryan, I think you would agree, historically, SEI has just hired more. The key is to look at areas that you shouldn't be investing in anymore, areas that 100% aren't going to be the future, and you have to reallocate those resources. That could be reallocate the bodies, it could be reallocate the positions.

But you've got to look at reallocating every day. And I don't think that was the strength of SEI in the past that we are bringing that discipline, reallocation of resources, not just more. And when somebody comes to us and now I'd say our natural discussion is different than it used to be. Somebody comes and says, I need 5 more people. Great. What 5 are you going to eliminate? Because obviously, there's got to be 5 on the bottom if you think you need to bring 5 at the top. So keep top grading, don't just hire 5 more. And so we have to have that discipline where we reallocate and be more disciplined about constantly improving the workforce, not just adding to the workforce.

Last call. Last call for questions?

I mean on behalf of all of us up here, thank you. I mean it's 4 hours. It's a lot of time. People are busy. So we appreciate you taking the time. We appreciate your support of SEI. We hope you walked away with that kind of conviction and enthusiasm that we hope we really have planned and intended. Come down to Oaks, come spend some more time with us. We can go into greater detail. We're in a really good spot. We're going to execute.

If there's any specific follow-ups on question, Brad, you can reach out to Brad. We'll be happy to answer those questions.

Thanks, everybody.

Thank you.

Thank you.