Q3 2019 Earnings Call
Good morning, and welcome to the Waddell <unk> Reed financial Inc. third quarter 2019 earnings Conference call.
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I would now like to turn the conference over to Mike Daly, Vice President Investor Relations. Please go ahead.
Thank you on behalf of our management team I would like to welcome you to our quarterly earnings Conference call. Joining me on our call today or Phil Sanders, our CEO Ben class, our CFO , Brent Bloss, our COO, Dan Hansen, our CIO, Sean me, all president of our retail wealth management business what.
<unk> Inc. and Amy Scott I'm President of Ivy Distributors, Inc.
We begin I'd like to remind you that some of our comments and responses may include forward looking statements well. We believe these statements to be raising more based on information that is currently available to us actual results could materially differ from those expressed or implied due to a number of factors that we referenced in our public filings with the FCC.
We assume no duty to update any forward looking statements.
Materials relevant to today's call, including a copy of the press release and supplemental schedules have been posted on Investor Relations section of our website at <unk> IR Dot Waddell Dot com.
I'd now like turn the call over to Phil.
Thanks, Mike.
Good morning, and thanks for joining.
During the third quarter, we continued to push forward on the transformational progress we are pursuing as part of our long term growth strategy working toward consistent improvement in our performance productivity and profitability.
Our focus remains on strengthening our investment management capabilities, enhancing our distribution operations and positioning our wealth manager to capitalize on its long term growth potential all while maintaining operational efficiency and returning significant capital to shareholders.
Ben will discuss the financial details, but at a high level.
We reported net income of $33 million or 46 cents per share for the third quarter compared to $34 million or 45 cents per share during the prior quarter.
Despite the usual ebbs and flows the investment backdrop did not substantially change over the past three months for the financial markets. Thus far in 2019, U.S. large cap equities have continued to lead the way.
S&P 500 returns of over 20% year to date represent the best nine months start in over two decades.
For the third quarter returns were muted with large cap stocks slightly positive small cap stocks slightly negative and mixed returns globally.
In contrast to the muted index level returns for the quarter.
Volatility has continued to be the story for a year so far.
With geopolitical issues, including global trade restrictions.
Recession fears and continued global and domestic political tensions dominating headlines.
Continuing can concerns around long term economic growth, where manifested in the bond market as yields on the 10 year bond nearly reached a record lows of 2016.
Corporate earnings generally remain healthy and provide a positive backdrop for investors, however, CEO confidence and forecast remain cautious, particularly in light of the continuing trade issues.
Regardless of the environment as a fundamental research driven active investment manager our focus remains on researching businesses identifying distinct business models in evaluating their prospects for growth.
We believe that our long term fundamental approach is well suited to add value for clients in today's investment environment.
That will cover the details on asset flows.
It's remain challenged during the quarter.
Well redemptions have continued a multiyear positive trend and improved compared to 2018.
Sales have remained slow across our complex.
Given the geopolitical uncertainties and a weakening global growth outlook.
Flows across the industry continued to be weighted toward fixed income and money market products at the expense of active equity products.
This has been the case throughout 2019.
As you know sales can be impacted by a number of factors such as investment performance product relevance distributions ability to capture market share and the overall market environment.
We are focused on those things that we can control to that end. We have worked hard over the past couple of years to fortify our investment management resources and realign our sales infrastructure to more closely align our distribution efforts with the unique needs of our client base.
We have made significant investments across our asset management business to reinforce Ivy investments as an institutional caliber platform.
Recent industry flow patterns also highlight the need to broaden our asset mix in terms of product relevance and we are actively looking at a number of ways to address that need.
Well the pace of visible progress can be hard do appreciate in a short term. We are confident in our approach and are committed to those actions that position us for long term success.
Turning to investment performance, we are encouraged by improvements in the trailing one three and five year performance as measured by the percentage of assets ranked in the top half of their respective Morningstar universes.
On an equal weighted basis, three and five year performance improved modestly however, one year performance slightly declined.
As we noted last quarter, we believe the investments we've made in recent years to enhance our research staff portfolio management teams technology and risk management capabilities will ultimately lead to sustained improvements <unk> intermediate and long term performance.
Next I want to highlight the progress we have made in our wealth management business, which we believe remains an underappreciated part of our company yet as a key component of our transformation into a more diversified financial services company in the future.
We continue to build on our value proposition to financial advisors through enhancements to products technology, and a leading service model.
A core tenant of the transformation of the wealth management business is broadening our product offering.
Specifically fee based advisory products.
Today, we offer nine different advisory products, three of which launched within the last two years.
Across those products, what I wouldn't read financial advisors now have access to more than 5000 mutual funds from over 100 different families. In addition to a wide universe of each <unk> and other general Securities.
These products include both what's known as adviser managed programs and those that use third party strategist.
Strategist program called guided investment strategies offers over 45 different portfolio models from various institutional money managers, including etiology and mutual fund models.
Within the advisor managed programs advisers have choices between a variety of investment options ranging from fold open architecture offering individual securities such as stock some dts as well as programs composed of Bts and mutual funds that have been screened by an independent third party consult.
Jim.
Last quarter, we mentioned the launch of Waddell, one centralized adviser desktop platform available to all financial advisors and associates, providing direct to kind of activity just several of the firm's existing technology partners.
The option across the advisor force has been strong increasing efficiencies and facilitating access to key information.
During the third quarter, we also launched Waddell one anywhere the web based version of the Waddell one desktop platform.
Progress continues on the other key components of our business administration program, including enhanced reporting improved data analytics and a simplified business processing model.
You'll recall it has now been over two years since we began the process of opening the architecture within our wealth management business transforming technology products and our service delivery model to where we are today well positioned to compete as a leading wealth management firm.
We are keenly focused on recruiting and other growth enablers within this business.
Well the transformation process is not without its challenges most notably its impact on asset flows Friday.
We have that we have seen a stabilization of redemptions in the overall flow trends have remained inside of our initial expectations, while advisory assets in revenues continue to grow.
We have successfully positioned our wealth management business for future expansion with a real value proposition to advisors and clients and I'm excited for the future.
As we move closer to an inflection point in our wealth management business and reestablish more favorable growth metrics in terms of advisor count and assets under administration. We expect this to exert a stabilizing influence in our overall operating model in further position our company has a diversified financial services franchise.
Finally, we have made considerable progress and identifying a future location for our new corporate headquarters and are now focused on the possibility of bringing innovative distinctive and sustainably design new facility to downtown Kansas City, Missouri.
Our foremost goal isn't workplace environment that meets the needs of the workforce up tomorrow and enables us to attract and retain top talent to accelerate our growth strategy. We look forward to sharing more as we continued to progress in this process.
Ill now turn it over to ban to discuss the court quarterly results.
Thank you Phil and good morning, everyone.
That's still noted we reported net income of $33.1 million or 46 cents per share compared to $33.9 million or 45 cents per share during the prior quarter.
Earnings per share for the quarter benefited from unrealized gains on our seed and corporate investment portfolios of about two cents per share as well as from a lower share count.
I will start by covering asset flows in more detail and then review our operating results for the quarter.
Assets under management ended the quarter at $68.8 billion down 4% from the prior quarter, while average assets under management of $70.5 billion were down 1%.
In total net outflows of $2.7 billion were elevated in the quarter, most notably in our unaffiliated channel where redemption activity in two of our larger products had an outsized impact on the quarterly results.
At the same time sales continued to be slow given the market environment and investors preference for lower risk fixed income and money market funds.
I'd be investments a U.M. within our affiliated wealth management business experienced net outflows of $1.1 billion, which was consistent with both the first and second quarters of 2019 and as Phil mentioned, it's encouraging to see the pace of outflows within the wealth management business stabilizing.
In fact, those results have been relatively consistent across the past six quarters and we're continuing momentum in advisory asset growth as clients continue to move from brokerage to advisory which is our long term focus in the wealth management business.
Within the institutional channel net outflows were $181 million for the quarter.
While the net outflows in this channel have continued to improve modestly the balance of the $200 million of known redemptions. We disclosed earlier this year have now redeemed in October .
While our current institutional business represents a small portion of our overall assets, we remain focused on future opportunities and believe our long history of delivering institutional caliber investment management capabilities will serve us well as we continue to rebuild the pipeline.
Wealth management assets under administration ended the quarter at $57.1 billion and decreased slightly compared to the second quarter.
We ended the quarter with 1344 advisors and advisor associates, a reduction of only three compared to last quarter as the pace of advisor attrition continues to slow.
The reduction in advisor count has been inline with our expectations and we have been pleased with our ability to retain assets under administration.
As you know we've completely redesigned our recruiting approach towards experienced higher producing advisors and we are out in the market now actively engaging with advisors, who will benefit from our approach to advisor support our competitive grid, our technology enhancements and our full product suite.
Okay.
While our recruiting teams are still getting up to full speed. The pipeline is building and we're encouraged with the activity. Thus far as we look to drive advisor growth.
Turning now to the quarterly financial results.
Total revenue was $271 million and increased slightly compared to the prior quarter as stronger you in D. revenues were partially offset by lower investment management fees and shareholder service fees.
You in D. revenues increased primarily due to higher advisory assets under administration in our wealth manager.
Investment management fees were lower due to slightly lower average assets under management and a lower effective investment management fee rate.
The effective fee rate was 62.9 basis points and was half a basis point lower than the prior quarter entirely due to a true up in fund fee waiver expenses.
Adjusting for that true up amount the effective fee rate was consistent with the second quarter rate.
Shareholder service fees were lower by $700000 as well primarily due to a nonrecurring decrease related to the outsourcing of transfer agency transactional processing operations, which reduced shareholder service fee revenues by $500000 in the quarter.
Operating expenses increased $1.8 million due to an increase in distribution costs of $1 million related to the higher revenues and an increase in the controllable expense categories from a low second quarter amount.
Controllable expenses, which are comprised of compensation DNA technology occupancy and marketing totaled $104.5 million compared to $103.5 million last quarter.
The compensation line included approximately $3 million of severance expense related to the transfer agency outsourcing.
While the technology line actually benefited from a nonrecurring decrease from the transfer agency outsourcing of $1 million. Additionally, occupancy costs decreased $1 million due to field office real estate closures inline with our plans.
For the fourth quarter, we expect controllable expenses will be in a range of $106 million to $108 million inclusive of the remaining restructuring charges related to the transfer agency outsourcing.
The effective income tax rate was 23.3% for the quarter inline with expectations and we continue to expect the tax run rate to be in the range of 23% to 25%, excluding the impact of any additional nonrecurring or discrete items.
Cash and investment balances were again relatively consistent with the prior quarter.
As we highlighted on the last call we completed our prior buyback target and continued our active repurchase program into the third quarter.
Given the volatility during the quarter, we repurchased over 3% of our outstanding shares. So what we continue to believe to be attractive prices.
We remain focused on executing an active capital return program, while investing in targeted organic growth enablers and keeping our options available for inorganic growth opportunities.
Operator, we would now like to open the call for questions.
We will now begin the question and answer session.
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Please limit your questions to one with a single follow up.
This time, we will pause momentarily to assemble our roster.
The first question comes from Dan Fannon with Jefferies. Please go ahead.
Thanks. My first question is on the advisor you kind of outlook you talked about a backlog of recruitment. That's building. So I guess as you think about the next 12 24 months like what is the what does a reasonable expectation for advisors coming on what does that make up of those advisors in terms of average size.
I'm, just trying to get a sense of the momentum in that business and how to think about that on the onboarding process.
Yeah, Hi, Dan. Good morning. This is Sean Mcguckin take that question, we're continuing to see the study progress as we've been building out our full recut recruiting capabilities, we've been staffing up our recruiting department over the last few months in the pipeline has been building.
With regard to the advisors that we're focusing on as we've been talking about focusing on the higher performing or higher producing type advisors that are more in line and more consistent with our current average productivity of advisors. So as we look at those attending to have a five year or more average inside the industry as well as having productivity that's in line with our key.
Her and advisors. So we're continuing to see that expand as we move into 2020 in or intent on hitting an inflection point from a growth perspective, as we continue to progress forward as the pipeline continues to grow.
And when you say inflection point you mean.
We should see that in the number of advisors in terms of starting to grow I guess when used when you say it was used in the prepared remarks as well that term I guess, what does that mean from your definition and what we should we expect.
Yeah. So that's that's for us looking to get to positive growth rates on head count of advisors.
Got it.
My follow up is on just expenses and you do I think you gave some initial guidance for 2020 last quarter around kind of the controllable component this quarter came in a little bit.
Below I think what you had said and then we get the fourth quarter guidance, I guess any updates or how you're thinking about 2020.
And the kind of maybe the moving parts if markets or less.
Instructive, what do you are there other areas to potentially cut back on if the revenue environment becomes more difficult.
Sure. Dan. This is this is Ben good morning.
As you mentioned our costs were up a bit lower for third quarter. A couple of primary drivers there some savings and compensation due to open positions in particular as you know we're in the midst of our T.A. outsourcing.
We've seen some.
Voluntary turnover there are as we made that announcement. We've also we're a little bit aggressive I think on our forecast for hiring and that I mentioned in my remarks. The couple of the other things related to the D.S.T. transition that drove the quarter a little bit lower.
Sure.
In regard to 2020 as you can imagine we're in the midst of our budgeting process and we'll have a much better sense for you on the next call as I've indicated before as some guide posts, we expect to have some headwind going into next year for.
Our inflation as well as some of the ongoing technology project work that we have talked through that's underway right. Now however, we expect to be able to offset at least a part of that with continued broad cost control and finding ways to operate as efficiently as.
They can.
Okay. Thank you.
The next question is from Bill Katz with Citi. Please go ahead.
Okay. Thank you very much taking the questions such as you think about the wealth management platform, where your focus is actually talk a little bit about how you sort of see the migration of maybe to the fee rate, where the overall expense ratio to the client as you migrate more to feed based and to third party financial.
Visors.
Hi, Good morning, Bill. This is Sean Yeah, we're continuing to see the fee rate remaining at about 118 basis points on keeping in mind. That's on those retail client accounts, which is the primary market in which we serve we expect that to remain relatively consistently advisory based programs there could be some some.
Movement in that and time as we continue to see more adoption into some of the newer programs such as the got investment strategies and map direct which are new programs that we introduced that can have some alternatives with some lower a fee levels, but in general we've been seeing the migration from brokerage to advisory for sometime now and we expect that fee level to remain relatively.
Consistent.
Okay, and then so perhaps resellers you should think about I appreciate the migration to wealth management from sort of the manufacturing side of equation, but when you look at your grid of flows either by segment by asset class.
No. It was a pretty stout negatively as you look over the next 12 24 months, where do you see it the product level, the best opportunity to maybe enhanced gross sales.
Yeah, Hey, Bill it. This year. This is Amy <unk>, So I would say over the course of the next 12 to 24 months and we're starting to see it in some pipeline opportunities. Today is we continue to have those strong performance and strong interest in our small and mid cap franchise.
It is so we would anticipate seeing continued growth. There I would also state that are large cap growth product has really started to pick up a lot of interest in the pipeline and so that's an area where while at the asset classes and outflow, we have the opportunity to go and capture some market share.
In addition to that you know our emerging market equity that the environment is working against it today, but certainly you know we believed that there are they a nice strong secular growth behind that asset class in general and it and we have a couple of on fixed income products that we could start to season.
Scott I will say that and of course as a third quarter, we were able to get asset strategy. We've replaced on a large distributor platforms. So that's a nice step into right direction for that product and continued conversation spoke on around that strategy as well.
Okay I'll hop back into queue. Thank you.
The next question is from Glenn Schorr with Evercore ISI. Please go ahead.
Good morning is actually John Dunn for Glenn kind of piggybacking on that last question on the fee reduction side.
You know now there was a little further away from this fee cuts you know just maybe a little more on a you know the effect maybe you've seen on gross sales there and maybe if it you know.
It could be extended to other funds.
Yeah.
Take takes that's I'll take the part about the had an effect on gross sales. So you know we did the reductions in late July of last year on a on a series of some of our products that we're focused on you know sales comes from a number of different places and so I do think said it was Joe.
Generally a very positive response in the reduction and you know we've seen a couple of the products that where we where we lowered the fees are in and net positive flow.
Both year to date and when you look out to the three year timeframe. So you know positive flow and then in an environment where on the asset classes are negative I think we're seeing some some good traction there really as we've looked at the fees and continue to evaluate fees going forward Yeah, we're really.
Looking at making sure that we stay in it.
Ah in a competitive stance within the category knowing that as the active managers, we have to earn it we have to earn our right to compete.
Just maybe a one follow up additional point is is the reductions that Amy was referencing that took place a little over a year ago were.
For a fairly meaningful and broad based I think as we go forward there will be a little bit more targeted and kind of.
Maybe across the a selective across the product line, but also and random points throughout the year to it wouldn't be you'd be more incremental in nature and kind of a rolling a ongoing review process. Yeah. When you look out our fees across our fund complex we have approach.
Definitely 70% of our assets that sits at an average fee level or below average sale and for we're making good progress in that area.
Got you and then just you know.
We're in a rig or be a world. Maybe just comment then how you think about that and maybe any adjustments you might be making to you know for that new environment.
Yeah. So I'll take that this this is Sean we're continuing our efforts and establishing our projects and moving forward with the implementation of the material aspects of rugby I, we made significant progress through the prior initiatives with our deal well fiduciary rule efforts.
Although that rule was vacated a number of the things that we did in progress with that rule remained in effect, even in light of the vacate and aspect of the rule I'm, So mitigation and elimination of conflicts of interest in our wealth management business Levelization of compensation arrangements. All those types of things that came out of that rule or the we implemented we kept.
In effect I'm also doing things from client disclosure enhancements with respect to conflicts of interest or other types of aspects of account relationships account assessments. So we felt like we were in a really good position as the Red Bee I was introduced by the FCC. However, we're continuing to look at a completion of our form Crs and disclose.
<unk> requirements associated with that since we are a door registrant broker dealer in investment advisor, we have a four page document that we haven't draft format that will be incorporating into our operational workflow processes. We're also operating through a number of the other initiatives that are inside of rugby I just from an overall aspect of disclosure requirements and aspect.
So related to fees and other transactional right rather processes that will be working with our clearing firms. So good progress is being made in that regard as we work towards the June implementation date.
Got it thank you.
The next question is from cannot time with RBC capital markets. Please go ahead.
Hi, Thanks for taking my question just one within be unaffiliated distribution channel wondering if you could just comment on what you're seeing in terms of client demand and fund flow trends, specifically within the national accounts, the <unk> and the be already markets.
Sure sure. So I'll start I'm kinda us with the are a market.
You know that that is eight channels, where our new model delivery portfolios are really interesting to the client base inside of that channel. So first thing conversation a across the large small and mid growth franchises.
As it relates to the new model livery portfolios, we have out we're actually in contract right now are in contract negotiations right now with a potential partner on that side of the business for a large cap growth model. So there's been a lot of great traction in conversation there as well as with our emerging market equity franchise.
And that DC space, you know the DC space tends to be more style box oriented. So we have our large mid small grow franchises, there as well I'm not really picking up traction and then the D.C. space outside of the scientists and you know we have a series that's collective investment trust. So as you know we continue.
To try to make sure that we address product development not only from.
Where we have a strong capabilities and to be able to management from an investment standpoint, but also what does the appropriate vehicle that a client base might need and so we're seeing a nice pick up in interest and their collective investment trust space from the are you.
From our partners and the de CIO space and that would be across you know again, the domestic equity franchises and emerging market equity and then and science and tech as well.
And then.
From a national accounts standpoint, like I said, we did just have Oh excuse me [laughter] asset strategy replaced on one of our partner platforms. So we felt like that was was really good progress you know we continue to you have conversations around some mid cap opera.
Attunitys, both with our mid cap growth portfolios and our mid cap income opportunities and as it relates to potential models. So you know, it's it's all kind of in the same area across channels.
Gotcha very helpful. And then just one follow up in terms of any updated thoughts on potential for M&A I know I know in the past you've talked about either looking for opportunities to further expand the wealth management business or expanded product mix just wanted to get your latest thoughts right now thanks.
Sure sure kind of this is Ben I'm no I'll start.
I think as we've said before given the progress we've made and strengthening both our investment management and wealth management platforms of our business. We feel that we're now positioned to execute on a transaction, if something attractive work to surface and and would fit well with either of those big.
Mrs. We're looking for and acquisition with strategic rationale and of course that makes financial sense, a transaction certainly our hard hard to predict a it as you can imagine and there are a lot of factors that that we will consider a I can tell you from our first.
Back to the market is active there's a lot of activity going on and and we are studying opportunities.
Great. Thank you very much.
The next question comes from Robert Lee with KBW. Please go ahead.
Hi, This is Jeff try there on for Rob.
So one quick question on these share repurchases or another you kind of answered the program. How do you think about next year and how much would you be willing to dip into the cash and investments for that.
Jeff I'm <unk> as I think you know we completed the commitment that we made of course and we've really continued with a.
Very similar pattern here through the rest of the third quarter in particular, because trite prices were quite.
Attractive our balance sheet strength and liquidity, we think is a key differentiator for us and we'll continue to to work toward not necessarily growing our cash balance from the significant free cash flow, we have but continuing to balance returning that to shareholders through our.
Dividend of course, and buybacks and have some dry powder. There. If you will went in the F and acquisition opportunity arises.
Great. There's a fair to is it fair to assume that at these prices perhaps is the repurchase would continue in this that and as manner.
Well I don't.
Necessarily comment on current activity or pricing I think you can see from past experience in and that type of thing we've been pretty active in the marketplace as Ben said Weve really not that interested in letting our cash balance grow we generate significant cash flow.
We don't feel like it's mutually exclusive in terms of.
You know being active in share repurchase and also doing incremental acquisitions, we've done a lot of a balance sheet strength liquidity and that type of thing so.
I think that.
The record really speaks for itself and we're committed to a strong capital return program.
Hi, Thank you and then I just quick follow up in the wealth management, what percentage of sales <unk> fee based accounts or otherwise you're going to your products first third party product.
Yeah. So this is Sean.
Yeah, we're continuing to see with regard to the overall new sales coming in with the opening of the architectural platforms and expansion of sales going towards I'm on the other unaffiliated products in general the overall concentration ratios that are occurring within the wealth management side of the business in our own affiliated products is running at about that 60.
Per center, so we're going to continue to likely see that continue to shift over the course of the the coming months in years as the product platform has been opened with newer sales going to be availability of new product lines and as Phil mentioned on the opening remarks with respect to opening the product platforms, we've launched nine different advisory programs.
Money those have unaffiliated products associated with them, obviously has indicated with more than 5000 funds from 100 different fund families. We are still seeing some sales go into our affiliated products through some of the other legacy more advisory programs that we've had another brokerage type programs, but with regard to new sales our expectation is that.
We'll continue to see a the migration over of sales going towards additional unaffiliated products.
Got it okay. So I'm sorry, he said, 68% was in your product all right.
That's correct, yeah, right around 68.7% currently today as the concentration ratio affiliated products.
Okay. Thanks very much.
Your next question comes from Michael Carrier with Bank of America Merrill Lynch. Please go ahead.
Hey, Good morning, guys is actually Samir Merck has gone from Michael.
Quick one I just want to clarify on the just the Threeq you fee right now that was impacted by some of the waiver is there any of that that's going to spill over into Fourq, you or should we just a assumes that we can't assume a bump off or something that makes a similar.
I think you can assume a bump up to be consistent with Q or the prior quarter.
Okay. Thank you.
Yeah.
Next question as a follow up from Bill Katz with Citi. Please go ahead.
Okay. Thanks for taking the had a question just a few things it's sort of came up from some of the commentary back and forth. Phil just a there's been a bunch of articles just about the potential for the headquarter move anyway to sort of frame out. So any type of particular savings opportunity that may arise as you migrate from the current to the tune a new location.
Well I might let Ben address that bill sure I'd I'd be happy too and so feel free to add.
Yeah Bill you know, we're currently working through the process to assess all of our options very carefully we don't have any specific financial impacts to share a today at the moment and I hope to be in a position to share those in a coming quarter. Once we from up every.
Thing I would tell you that we don't anticipate any near term run rate impacts a in regard to the headquarters change.
Okay. That's helpful. And then you'd mentioned that you had a the outflows or somebody amplified by a couple of your larger products.
Could you highlight just maybe when that happened, which products quantify them and then to the extent you have any kind of view of what's been happening October sort of curious to see what what the trends look like.
Yeah Bill this is Amy so international equity in our international core product is certainly then one where we've seen a large amount of outflow as you know our larger increased amount about flow over the course of the last year really as you went into Fourq Healive 2018, you saw.
Really substantially big change in that category from a flow characteristic period. So you know as you look through the first three quarters of 2018 on as an asset class. It was not positive and as you roll through the first three quarters of 2019, that's a net negative asset class that we have a little bit of a.
Going on as well as on the product that just suffered up performance interruption and so we've had some struggles there working hard to retain to retain the dollars that we have and then.
Science and Tech has been a product that's been out flowing over the course of the last few years again, there was a performance in her option there a though a this here and now for really like the last 18 months of performance is really picked up so we would hope and expect to see that slow.
Hey, we want to comment on how October has been given that we're so it till the end involved at this point.
Yeah, Yeah, sorry about that and you know October looks a lot like September August and in July So a lot more of the same on our redemptions do continue to slow so our net numbers there are getting better though that gross numbers are are certainly muted.
So I would say more of the fan.
Okay. All right. Thank you very much taking the questions.
<unk>.
Again, if you have a question. Please press Star then one.
The next question comes from Mac Sykes Gabelli. Please go ahead.
Hi, good morning, everyone.
Can you talk a little about the fourth quarter first quarter in terms of seasonality for recruitment of advisors. How important is that period for for bringing on new.
Assets versus the rest of the year.
Yeah, Hi, magnets to Sean I'm, certainly a as weve had been ramping up our recruiting efforts and engaging more with the other advisors experienced advisors, we are focusing quite a bit as we roll off of this year into 2020, a with expectations at that pipeline as it's been building.
I really starts to generate additional recruits as we roll into 2020, what we typically been experiencing as a it's it's the preparatory work that goes into making a migration of moving from one from to another and a lot of times its rounding out the conclusion of the year and then rolling into the following year since we've been working with a number of recur.
Roots indications are our strong for a increased activity as we move into Q1 I would that being said typically we will experience a a little bit of reduction rolling off fourth quarter I'm, just having to do with a minimum production requirements and things of that nature. So that may have some impacts on that numbers, but.
That's why typically bend, the lower performing type advisors that are exiting the from due to not hitting minimum production requirements.
Great. Thank you.
The next question is from Stephanie Mom with Morgan Stanley . Please go ahead.
MS. My your line is open on already has a possibly muted on yours.
Showing no further questions. This concludes our question and answer session I would like to turn the conference back over to Phil Sanders for any closing remarks.
Okay. Thank you thanks, everybody for.
Joining us this this morning.
I appreciate your Ah focus time and attention and we look forward to catch up and even a few months. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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