SEI revenue falls with markets and loss of Retirement Planners of America

The revenue generated by SEI Investment Co.’s investment adviser business fell in the third quarter on the back of lower capital markets and the loss of Retirement Planners of America, which had announced plans to terminate its relationship with SEI in November.

For the three months that ended Sept. 30, SEI’s investment adviser business brought in $109.56 million, down 12% from same period in 2021, according to the company’s quarterly earnings report. In addition to inflation, volatility and other economic factors placing pressure on markets, the loss of Retirement Planners of America will cost SEI about $1.4 million per quarter, chief financial officer Dennis McGonigle said on a conference call with shareholders.

Those losses were tempered by net new cash flow of $800 million, which McGonigle attributed to initiatives such as direct indexing strategies, tax-managed ETFs and a team within SEI dedicated to the registered investment adviser market. The turnkey asset management provider also recruited 57 new financial advisers, McGonigle said.

“Advisor activity remains strong, but we continue to see a slowdown in market activity on the part of both advisors and their clients,” he said.

SEI’s overall revenue declined 3% from a year ago. Part of the hit comes from a voluntary separation program, which CEO Ryan Hicke said was designed to create an opportunity for employees “to explore their life ambition and concurrently create space for internal mobility, fresh perspectives, diversity, and external experience," and which cost $57 million in Q3.

Since Hicke stepped into the CEO role in June, the company has been reevaluating its business and plans to “act with conviction about how we deploy capital.” SEI announced a business realignment plan in June and plans to consolidate teams across the company and assess expenses to improve operations.

When asked whether this includes layoffs, SEI did not immediately respond to a request for comment.

On the conference call, Hicke focused on positive news for the company, such as partnering with technology company Snowflake to launch SEI Data Cloud in August. The product already has two clients from the SEI Wealth Platform using the product, Hicke said.

SEI launched SEI Connect, a new digital client and prospect engagement portal, and is on track to have it in production for all clients by the end of the year, he added. The firm also onboarded a significant book of business from U.S. Bank onto the SEI Wealth Platform.

Hicke also sees opportunity in SEI Sphere, a cybersecurity product, which brought on four new clients in Q3.

“We have sold this solution to clients that are new to SEI, as well as successfully sold the service to existing clients,” Hicke said. “We've also had early success cross-selling additional services within SEI Sphere, especially in the cloud migration space.”

[More: Fidelity ramps up efforts to offer direct indexing through financial advisers]