10-K 1 seic-20231231.htm FORM 10-K seic-20231231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________to ________

Commission File Number: 0-10200
________________________________________
SEILogo.jpg
________________________________________
SEI INVESTMENTS COMPANY
(Exact name of Registrant as Specified in Its Charter)
Pennsylvania 23-1707341
State or Other Jurisdiction of Incorporation or Organization I.R.S. Employer Identification No.
1 Freedom Valley Drive
Oaks, PA 19456
(Address of Principal Executive Offices and Zip Code)
610-676-1000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading SymbolName of each exchange on which registered
Common Stock, par value $.01 per share SEICThe NASDAQ Stock Market LLC
(The NASDAQ Global Select Market®)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes      No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No  
The aggregate market value of the voting common stock held by non-affiliates of the registrant was approximately $6.6 billion based on the closing price reported by NASDAQ on June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter). For purposes of making this calculation only, the registrant has defined affiliates as including all executive officers, directors and beneficial owners of more than 10% of the common stock of the registrant.
The number of shares outstanding of the registrant's common stock, as of the close of business on January 31, 2024:
Common Stock, $.01 par value 131,352,305

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference herein:

1.    The definitive proxy statement relating to the registrant’s 2024 Annual Meeting of Shareholders, to be filed within 120 days after the end of the fiscal year covered by this annual report, is incorporated by reference in Part III hereof.




SEI INVESTMENTS COMPANY
Fiscal Year Ended December 31, 2023
TABLE OF CONTENTS
  Page
PART I
Item 1.Business.
Item 1A.Risk Factors.
Item 1B.Unresolved Staff Comments.
Item 1C.Cybersecurity.
Item 2.Properties.
Item 3.Legal Proceedings.
Item 4.Mine Safety Disclosures.
PART II
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6.[Reserved]
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.
Item 8.Financial Statements and Supplementary Data.
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Item 9A.Controls and Procedures.
Item 9B.Other Information.
Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
PART III
Item 10.Directors, Executive Officers and Corporate Governance.
Item 11.Executive Compensation.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13.Certain Relationships and Related Transactions, and Director Independence.
Item 14.Principal Accounting Fees and Services.
PART IV
Item 15.Exhibit and Financial Statement Schedules.
Item 16.Form 10-K Summary.

1



PART I
Forward-looking Statements
This Annual Report on Form 10-K contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve certain known and unknown risks, uncertainties and other factors, many of which are beyond our control, and are not limited to those discussed in Item 1A, Risk Factors. All statements that do not relate to historical or current facts are forward-looking statements. These statements may include words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to present or anticipated strategies, products and markets, future revenues, capital expenditures and uses, expansion plans, future financing and liquidity, personnel, and other statements regarding matters that are not historical facts or statements of current condition.
Any or all forward-looking statements contained within this Annual Report on Form 10-K may turn out to be wrong. They can be affected by inaccurate assumptions we might make, or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, we cannot guarantee any forward-looking statements. Actual future results may vary materially. Further information about factors that could materially affect its results of operations and financial condition include, but are not limited to, the discussion contained in Item 1A, Risk Factors, in this Annual Report on Form 10-K.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in our filings with the U.S. Securities and Exchange Commission (SEC).
Item 1. Business.
Corporate Overview
SEI delivers technology and investment solutions that connect the financial services industry. With capabilities across investment processing, operations, and asset management, SEI works with corporations, financial institutions and professionals, and ultra-high-net-worth families to help drive growth, make confident decisions, and protect futures.
SEI’s four core business segments provide outsourcing services to banks, investment advisors, investment managers and institutional investors. We serve a broad range of client types of all sizes and complexity, including 10 of the top 20 U.S. banks and 48 of the top 100 investment managers worldwide. Investments in New Businesses is a fifth segment, focused on other businesses, ventures or research and development activities intended to expand our solutions to new or existing markets.
SEI manages, advises, or administers approximately $1.4 trillion in assets. We are headquartered in Oaks, Pennsylvania and support clients globally from service centers primarily located in the United States, United Kingdom, Ireland, Canada, continental Europe, and South Africa. We were founded in 1968 and became a public company in 1981.
Mission and Strategy
SEI’s mission is to build brave futuresSM through the power of connection. The needs of wealth managers, investment managers, financial advisors, family offices, and investors continue to converge, particularly among larger firms and investors. They face increasing competitive and market pressures, ever-growing regulations, and the need to replace aging legacy technologies. They also seek to expand services, offer differentiated solutions, improve efficiencies, reduce risk, and better manage their businesses. With relationships across the financial services industry, we're uniquely positioned to meet our clients’ emerging and converging needs, help them make confident decisions and transform their businesses, and capture growth opportunities that increase shareholder value. Key strategies include:
Transforming how we drive growth. We are focused on capitalizing on market trends and connecting addressable market opportunities to deliver the outsourced solutions our markets value. We continuously seek to enhance existing capabilities, create broader solutions, and invest in new ideas for new solutions. We enable an unbundled approach to delivery through aggregated data sourced from multiple systems and modularizing specific applications into standalone components. We believe this approach, as well as assessing opportunities for mergers and acquisitions, allow us to create flexible, client-responsive solutions, address the complex needs of larger firms, and expand the size of our addressable markets.
Investing in talent. The attraction, retention, and development of diverse talent is paramount to continuing to deliver tech-forward solutions to our markets globally. We continue to evaluate opportunities to competitively position SEI as an employer of choice, including compensation, training, and development programs. We look to
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leverage the talent, technology, and capabilities across the company for the benefit of our clients and to expand opportunities for our employees.
Igniting our culture. We strive to cultivate an environment where our behavior aligns with our corporate values of courage, integrity, collaboration, inclusion, connection, and fun. Our focus on promoting flexibility and work/life integration for our employees, acting with a sense of urgency, and encouraging and rewarding positive risk-taking and productive debate enable us to deliver world-class service and solutions for our clients.
Business Model
Our growth strategies are anchored in our proven business model. We pursue growth by focusing on four critical elements: turning challenges into opportunities, driving mutual growth, meaningfully engaging clients and employees, and leveraging our financial strength.
Turn challenges into opportunities. For more than 55 years, we have delivered solutions that anticipate and address complex business challenges. We balance our investments over the short, medium and long term to serve existing clients, enhance existing solutions, develop new capabilities, expand markets, and keep an eye toward the future to deliver new sources of growth.
Drive mutual growth. We focus on the long term, helping our clients more intelligently deploy their capital and achieving sustainable growth by delivering enterprise-wide platforms to the markets we serve. We are growing the business through new-name sales, cross-sales, and solution delivery, as well as entering adjacent markets by delivering existing and new solutions. To enhance our capabilities, scale our competitive presence, or enable strategic growth, we pursue selective acquisitions.
Engage clients and employees. We foster an open, collaborative, client-first culture to nurture a talented and engaged workforce, forge intimate, enduring client relationships, be a thought leader in the markets we serve, and craft “win-win” pricing models. We believe SEI’s long-lasting client relationships—some of which span decades—are fundamental to enhancing SEI’s financial strength.
Leverage financial strength. We focus on achieving long-term, sustainable revenue and earnings growth. We maintain a strong balance sheet and are committed to research and development. We favor scalable businesses that generate recurring revenues and predictable cash flows. SEI’s revenue is highly recurring; we generate strong cash flow, and we have a long history of profitability. We return capital to shareholders through stock repurchases and paid dividends.
Other Competitive Advantages
Our experience in delivering technology and investment solutions, market leadership position, industry expertise, operational footprint, and proven business model serve as competitive advantages. Other key advantages include:
We are uniquely positioned in the wealth and investment management industry. We provide critical capabilities across technology, operations, and asset management, delivered standalone or combined into comprehensive solutions. These capabilities and our multi-industry expertise uniquely position us to address the emerging and increasingly converging needs of wealth managers, asset owners, and investors.
We leverage our assets across the company. We invest in business opportunities derived from our core competencies. We seek to make our assets, particularly technology, available as components for all of our markets. We are both a provider and a user of many of our services. This dual role helps to drive service quality and product innovation. As an example, we provide fund accounting capabilities for the investment products we manage, as well as for those we administer for clients. We also leverage our principal business platforms and assets across multiple market segments, further enhancing the potential for operating leverage.
Our dynamic workforce is key to our success and is the foundation of our culture. Each of our employees brings a distinct set of skills, strengths, experiences, and backgrounds, which contribute to our individual and collective growth. We also believe our business should be conducted in a manner that achieves sustainable growth and demonstrates a commitment to corporate social responsibility (CSR). We expect all employees to exemplify our values and act responsibly, ethically, and with integrity in our dealings with each other, our clients, and the community.
Business continuity planning and disaster recovery exercises continue to reinforce our preparedness. Our products and services are enabled by SEI’s information technology infrastructure and supported by onsite employees. We also maintain and regularly exercise enterprise-wide business continuity tests. During the pandemic-driven shutdown of onsite operations, we were able to maintain operational integrity for clients and seamlessly transition to a remote work environment for our global workforce. More recently, we were able to welcome back our workforce to our offices without disruption to our clients. This flexibility enables us to adapt sales and client-onboarding processes for virtual engagement, delivery, and operations.
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We are committed to bringing new solutions to our markets. We develop and nurture new business initiatives that we believe present opportunities for longer-term growth. An important component to achieving our growth goals is solidifying the foundation from which we launch new businesses that can contribute to our success. In order to consistently generate new business ideas, test, and launch them, our Investments in New Businesses segment explores opportunities to incubate and accelerate those new ideas and cultivate innovation that drives top-line growth. Our Corporate Development team focuses on the development, execution, and integration of potential strategic transactions to accelerate growth.
Core Capabilities
Sitting at the intersection of technology and investments, we combine one or more of three core capabilities, including technology services, investment operations, and asset management, into outsourced solutions tailored to the needs of each market we serve.
Technology and operations
We provide technology and operations services to banks, wealth managers, trust companies, investment managers, asset owners, independent wealth advisers, investment advisors, financial planners, family offices, and other financial services firms. Our platforms include advanced technologies for asset management and wealth advisory and administration, as well as processing, infrastructure, and cybersecurity services.
Our platforms also include technology and operationally-enabled investment service capabilities for a broad range of traditional and alternative investments, delivered as unbundled product components for front, middle, and back offices. Capabilities include advanced technologies for data management and analytics, fund and investment accounting, administration, global regulatory and compliance services, investor servicing, and client reporting.
We also offer investment operations capabilities for family offices in the United States, including technology and outsourced services that support the accounting, investment management, and reporting functions for family offices, private banks, private wealth advisors, and alternative asset managers.
Asset management
We provide comprehensive solutions for managing personal and institutional wealth. These solutions include investment strategies, customized asset management programs, and SEI-sponsored and third-party investment management products, as well as other consultative, operational, and technology components. We offer these solutions to wealth managers, investment advisors, and other financial intermediaries as part of a comprehensive asset management program for their investors, as well as directly to institutional investors and ultra-high-net worth investors.
Investment management programs include strategies customized to support an investor’s organizational or personal objectives, risk tolerances and other considerations. A typical long-term personal investor may have a series of goals, each with a specific investment strategy, appropriately diversified both globally and by asset class. Investment strategies are typically implemented with investment products that include mutual funds, collective investment products, ETFs, alternative investments and separately-managed accounts. Through our wholly-owned subsidiaries, we serve as sponsor, administrator, transfer agent, investment advisor, distributor, and shareholder servicer for many of these products.
Principal Business Platforms and Revenue Recognition
Our principal business platforms are the foundational components for modularization and unbundling:
Investment processing platforms provide technologies, business process outsourcing, and infrastructure services for wealth managers. We primarily deliver these services through our proprietary technology platforms, including the SEI Wealth PlatformSM and TRUST 3000®. Through our wholly-owned subsidiaries, we use these technologies to deliver operations and administrative outsourcing services, including custodial and back-office accounting services.
Revenues for investment processing services include application software services, business process outsourcing services, professional services, and transaction-based services. These revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations. Application and business process outsourcing revenues are earned from monthly fees for contracted Software as a Service (SaaS) and Platform as a Service (PaaS) services. Revenues are based upon the type and number of investor accounts serviced or as a percentage of the market value of the clients’ assets processed. Professional services revenues are earned from contracted, project-oriented services, including client implementations. Transaction-based revenues are earned primarily from commissions earned on securities trades executed on behalf of clients through one of our investment processing platforms.
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Investment operations platforms provide technologies, business process outsourcing, and infrastructure services for investment managers and asset owners.
Revenues for these investment operations services are earned primarily as a percentage of net assets under administration and are recognized in Asset management, administration, and distribution fees on the accompanying Consolidated Statements of Operations. Revenues for the processing of institutional separate accounts and separately managed accounts are generally based on the number of investor accounts serviced. Assets associated with this separate account processing are not included in reported assets under administration.
Investment management platforms provide comprehensive solutions for managing personal and institutional wealth. These platforms include goals-based investment strategies; SEI-sponsored and third-party investment products, including ETFs, mutual funds, collective investment products, alternative investment portfolios, and separately managed accounts; and other market-specific advice, technology, and operational components.
As of December 31, 2023, we managed $342.7 billion in assets including:
$175.5 billion invested in fixed-income and equity funds and separately managed account programs;
$156.4 billion invested in collective trust fund programs; and
$10.8 billion invested in liquidity or money market funds.
An additional $89.3 billion in assets is managed by our unconsolidated affiliate LSV Asset Management (LSV), a registered investment advisor (RIA) that specializes in value equity management for its clients.
Investment management revenues are earned primarily as a percentage of net assets under management. These revenues are recognized in Asset management, administration, and distribution fees on the accompanying Consolidated Statements of Operations. Our interest in the earnings of LSV is recognized in Equity in earnings of unconsolidated affiliates on the accompanying Consolidated Statements of Operations.
Human Capital
Our talented workforce is the key to our ability to serve our clients globally. At January 31, 2024, we had 5,061 full-time and 28 part-time employees.
Employee unions do not represent any of our employees.
Diversity, Equity, and Inclusion
SEI strives to create an environment where employees, clients, and strategic partners feel welcomed, heard, valued, and respected. We are committed to ensuring that no element of anyone’s diverse identity impedes them from accessing the opportunities and resources they need to achieve their fullest potential. Our community connects people, regardless of their race, sex, gender, religion, ethnicity, national origin, sexual orientation, dis/Ability, life experience, and viewpoints. We ask our employees to bring their whole selves to work because their talent, knowledge, experiences, and perspectives are core to what makes SEI so special and drives our company’s success. We ask them to have the courage to challenge convention and take risks, so we can unlock new opportunities to build brave futures—for our clients, our communities, and ourselves.
Our core principles of diversity, equity, and inclusion (DEI) work stem from the company’s inherent desire to welcome, respect, value and care for all individuals in our SEI community on a human level, in their collective and unique identities.
In 2022, we formed our Diversity & Inclusion Council, made up of colleagues and leaders from across the company who are passionate about DEI and share the goal of working as a group to help shape initiatives and hold SEI accountable to action. Since its formation, the Diversity & Inclusion Council has undertaken numerous initiatives:
We launched a multiyear initiative to continue our efforts for DEI. CEO Ryan Hicke joined more than 2,200 CEOs and presidents in signing the CEO Action for Diversity & InclusionTM, pledging to “ACT ON” and supporting a more inclusive workplace for employees, communities, and society at large.
We joined the DEI committee of the Investment Company Institute, the leading association representing regulated investment funds, and we align our DEI work with their DEI framework.
We contributed to and partnered with nonprofit organizations focused on global diversity and creating opportunities for youth of color.
Training and Development
We provide multiple tools to our employees to support their growth and professional development. Our continued commitment to employee education includes the introduction of new programs and learning content that suit their needs and development, along with the knowledge to fulfill their roles at SEI. We have also invested in a comprehensive learning
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platform to remove the physical barriers of in-person training and provide employees with access to thousands of topical courses, enhancing how employees receive and interact with educational content.
We are committed to making as much of an investment in recruiting from our current staff as we do recruiting outside our walls. By moving around our company through a formalized internal mobility program, employees gain experience, skills, perspective, and knowledge about SEI to help drive their professional growth.
Our Design Thinking program, which aims to foster employee creativity and innovation, provides an in-depth immersion into the core methodology of design thinking, as well as the opportunity to immediately apply the mindset and tools and take this learning to everyday practices. The Gallup© CliftonStrengths assessment program also continues to help employees understand and build upon their unique strengths and develop as leaders.
Leadership Development
Women’s Development Series: With the continued focus and need to ensure gender diversity within all levels at SEI, our 11-week cohort provided a balance of learning sessions, networking, and discussion circles with a focus on the growth and development of women at SEI.
Manager Offsite: In partnership with St. Joseph’s University, we launched a two-day immersive leadership development experience facilitated by their faculty on their campus. This program is comprised of 30 managers throughout the organization that have been in their role for at least five years and have taken part in our Manager Series class offerings. Through panel discussions, lecturettes, networking, and teambuilding, the topics covered during the offsite include leading through change, conflict management, and inclusive leadership.
Emerge Program: Formerly the “5-15 Leadership Program,” Emerge brings together emerging and experienced leaders from across SEI, to learn, grow, and be challenged to think differently about the future of our business. Throughout each three-month program, they are given the opportunity to learn from each other, grow together, connect across organizational functions, gain exposure to executive management, and develop a leadership mindset–all while working on key SEI business topics.
Connected Leaders Academy: As part of SEI’s commitment to fostering an inclusive culture, we partnered with McKinsey’s Connected Leaders Academy to offer accelerated development opportunities to diverse talent. The goal of the Connected Leaders Academy is to accelerate the progression of leaders in our organization.
For our emerging leaders coming from universities across the globe, our Associates and Internship programs equip recent and soon-to-be graduates with the tools, exposure, and development opportunities necessary to launch their SEI careers and provide ongoing support for long-term success at SEI.
Employee Affinity Groups
We believe it is important to make a meaningful, positive impact on the communities we work in and serve. We strive to be stewards of advocacy, which may be best represented in our diversity initiatives and the grassroots efforts that define our employee-led volunteer groups. Each group follows a specified mission to accomplish their objectives. Our affinity groups are self-created, self-run, and self-sustained with a global reach.
SEI Black Professionals Network: Fosters positive change and supports the advancement of Black professionals
SEI Cares: Sponsors and identifies volunteer opportunities and awareness events and oversees an employee-led 501(c)(3) organization
SEI enABLE: Provides resources and support for individuals who identify as and/or who support individuals who identify as Neurodivergent and/or as a person with dis/Abilities (PWD)
SEI Green Team: Provides environmental education focused on creating a sustainable future
SEI Pride: Supports SEI's LGBTQ+ community
SEI Salutes: Supports veterans and their families in the transition from military service to civilian life
SEI Women’s Network: Seeks to inspire and support the professional growth of women both at SEI and beyond
Somos SEI: Honors Hispanic and Latin Americans
Wellness Team: Promotes employees’ physical, financial, and social well-being
Workplace Health and Safety
The health and safety of our global workforce remains a top priority. Our Security and Life Safety committee coordinates activities to train staff in mental health first aid, management of aggressive behavior, the administration of naloxone, CPR, first aid, and AED use. We have a minimum of one AED per building at our corporate headquarters, and our kitchens include first aid cabinets. SEI also offers its employees access to a range of health and wellness benefits through our
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employee total rewards and assistance programs. The “Safe Secure SEI” program helps facilitate a consistent health and safety approach and communication strategy globally. Our global offices participate in corporate programs where applicable.
Sustainability
We know that our clients’ goals may often consider how ESG considerations could impact their business risk and results, and position them for future growth. We continue to formalize and build upon our efforts.
Sustainable Investing
We understand that ESG factors could have material impacts on the financial performance of an investment, thereby affecting investors’ ability to take advantage of opportunities, manage risk, and achieve their desired investment goals. We approach sustainable investing with the same curiosity and conviction that have enabled our success for more than 55 years.
We have incorporated an in-depth analysis of each of our manager’s sustainable investing capabilities into our manager research process. Every firm and investment strategy considered for our platform undergoes an ESG due diligence review and receives an ESG score of strong, moderate, limited, or weak, determined by SEI. These ESG ratings are one of many factors available to SEI’s Portfolio Management team when selecting managers; however, there is no minimum ESG score a firm or strategy must meet to be selected for a portfolio that does not have an express sustainable investing mandate. The degree to which ESG considerations affect our decisions varies and is considered on a case-by-case basis.
In addition to integrating sustainability into our investment research and processes, we aim to bring dedicated sustainable investment solutions to our clients through investment products and customized solutions. We also continue to introduce tools for our clients to use in building portfolios for their clients that meet their desired sustainability goals.
As active owners of our investments, we seek to utilize our voice to influence investment managers and investee companies to act in the best interests of our clients through manager engagement, shareholder engagement, and proxy voting. We also act at the direction of our clients to fulfill their individual sustainability goals for their investments.
Corporate Social Sustainability
We believe that our business should be conducted in a manner that achieves sustainable growth and demonstrates a commitment to corporate responsibility. Each of our company’s employee-led resource groups also contributes to SEI’s CSR efforts by engaging, educating, and supporting employees through grassroots programs focused on philanthropy and volunteerism, diversity, environmental sustainability, military and veterans support, women’s empowerment, and wellness.
Our commitment to CSR includes managing our operations efficiently and working to reduce our environmental footprint. We aim to manage our greenhouse gas emissions, effectively manage our waste, and work to benefit the local watershed near our corporate headquarters.
Business Segments Overview
Business segments are generally organized around our target markets. Financial information about each business segment is contained in Note 12 to the Consolidated Financial Statements. Our business segments are:
Private Banks – Provides outsourced investment processing and investment management platforms to banks and trust institutions, independent wealth advisers, and financial advisors worldwide;
Investment Advisors – Provides investment management and investment processing platforms to affluent investors through a network of independent registered investment advisors, financial planners, and other investment professionals in the United States;
Institutional Investors – Provides Outsourced Chief Investment Officer solutions, including investment management and administrative outsourcing platforms to retirement plan sponsors, healthcare systems, higher education and other not-for-profit organizations worldwide;
Investment Managers – Provides investment operations outsourcing platforms to fund companies, banking institutions, traditional and non-traditional investment managers worldwide, and family offices in the United States; and
Investments in New Businesses – Focuses on providing investment management solutions to ultra-high-net-worth families residing in the United States; developing network and data protection services; modularizing larger technology platforms into stand-alone components; entering new markets; and conducting other research and development activities.
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The percentage of consolidated revenues generated by our business segments for the last three years was:
202320222021
Private Banks26 %29 %26 %
Investment Advisors23 %23 %25 %
Institutional Investors15 %16 %18 %
Investment Managers35 %31 %30 %
Investments in New Businesses%%%
100 %100 %100 %
Private Banks
We provide investment processing outsourcing solutions to institutional and private-client wealth managers across a global wealth management marketplace, including banks, trust companies, independent wealth advisers, investment advisors, financial planners, and other financial services firms. Clients include 10 of the top 20 U.S. banks, as well as several financial institutions whose relationships span decades with SEI.
Our solutions are designed to provide the advanced operating infrastructure, technologies, and operational and administrative capabilities that are vital to the success of wealth management organizations, helping them achieve their business objectives, manage change and complex operations, replace legacy platforms, comply with regulations, and deploy capital more effectively.
Our investment processing services are enabled by the SEI Wealth PlatformSM (SWP) and its predecessor, TRUST 3000®. SWP offers a modern, fully-integrated, single infrastructure solution that integrates technology, operational outsourcing, and asset management. Capabilities span the front, middle, and back office and are designed to support a diverse mix of investors, accounts, and asset types, including portfolio management, client administration, accounting, and investment processing. SWP’s open architecture also allows for technology integrations with other SEI capabilities and client systems to enable an integrated and seamless private banking and wealth management experience.
Investment processing platforms are offered in Software-as-a-Service (SaaS) or Platform-as-a-Service (PaaS) delivery modes. SaaS includes investment processing software and information processing services. PaaS includes software and information processing services, as well as business processing outsourcing services, including back and middle-office operations, accounting, and custodial services.
Contracts for TRUST 3000® and SWP services generally range from five to seven years. As of December 31, 2023, we had significant relationships with 109 clients, including TRUST 3000® relationships with 40 bank and trust institutions in the United States, and SWP relationships with 69 signed banks, independent wealth advisers and other wealth managers located in the United Kingdom and the United States.
Our competitors include in-house information technology organizations, as well as wealth management technology service providers such as Fidelity National Information Services, Inc. (FIS), Fi-Tek, SS&C Innovest, FNZ UK Ltd. and Avaloq.
This segment also provides investment management programs to wealth managers and financial services intermediaries in North America, Europe, and Asia. These programs leverage more than four decades of experience with manager research and advice, asset allocation, and portfolio construction. We believe that we can provide flexible and better solutions and quicker speed to market through outsourcing. We deliver active, factor-based, and passively managed solutions to give firms the ability to focus on their clients while implementing and maintaining consistent, efficient processes that help them grow their businesses and manage risk.
As of December 31, 2023, we have asset management distribution relationships in this segment with banks, wealth managers, and other financial services firms, including 92 clients who had at least $5.0 million each in customer assets invested in our programs. We primarily serve clients and their investors in the United States, Canada, the United Kingdom, continental Europe, Hong Kong, and Singapore. We compete with various other providers depending on the prospective client’s domicile and business requirements. Competitors may include in-house investment teams and global asset management firms, such as Russell Investment Group and BlackRock.
Investment Advisors
We provide wealth management technology and investment solutions for independent financial advisors throughout the United States across the RIA and independent broker/dealer market segments, including independent investment advisors, financial planners, life insurance agents and other wealth managers. Through our integrated or unbundled solutions, we help advisors reduce risk, improve quality and gain operational efficiencies that enable them to devote more of their resources to growing their businesses and achieving better financial outcomes for their clients.
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Advisors are responsible for the investor relationship, including financial plan creation, investment strategy implementation, and customer education and servicing. We provide advisors with a flexible operating platform offering a complete end-to-end business, technology and operational solution with capabilities across the front, middle, and back office, including:
Technology and Administrative Services. Enabled by the SEI Wealth Platform, these services include front-office investment management and end-investor collaboration capabilities, middle-office administrative outsourcing, and back-office processing and custody services.
Customized Investment Management Programs. We provide advisors with an array of investment programs to customize portfolios for their personal or institutional investors. Our wealth and investment programs are designed to be attractive to affluent or high-net-worth individual investors and small to medium-sized institutional retirement plans.
These programs include goals-based strategies, SEI-sponsored mutual fund models, separately-managed account programs, and curated third-party investment products, including ETFs. Additionally, we offer specialized investment strategies focused on an investor’s needs across their life and wealth cycle, such as strategies designed to optimize tax-efficiency or income distribution. Advisors may also use models and funds of their own selection.
Practice Management Expertise. We help advisors manage and grow their businesses by offering consultative practice management services, including access to our business transition services, case management expertise, thought leadership, and marketing and growth programs.
This business is primarily based on approximately 2,300 investment advisors who each have a minimum of $5.0 million in customer assets invested in our programs.
Revenues are primarily earned as a percentage of average daily assets under management. Revenues for non-managed assets are earned as a percentage of average daily assets processed.
We compete with other custodians and providers of advisor technology products, money managers (both active and passive), turnkey asset management platform providers, and broker-dealers with affiliated advisor networks. Principal competitors include diversified firms that focus on custody operations such as Charles Schwab & Co., Inc., Pershing LLC and Fidelity Investments, as well investment advisory platform providers, such as AssetMark Financial Holdings and Envestnet.
Institutional Investors
We provide institutional investors with a variety of solutions aligned with their investment implementation preferences. As one of the first and largest providers of outsourced investment management services, we deliver solutions that leverage the breadth of our investment management, advisory, administration, technology, and operational capabilities to help institutional investors make more confident decisions and achieve greater control, reduced risk, and improved efficiencies.
We primarily serve retirement plan sponsors, healthcare systems, higher education, not-for-profit organizations, and other institutional asset owners in the United States, Canada, the United Kingdom, continental Europe, South Africa, and East Asia.
SEI’s Outsourced Chief Investment Officer (OCIO) platform supports institutional investors who delegate investment management decisions through a flexible implementation model. Investors outsource some or all investment management functions based on their preferred governance structure, business needs, and financial objectives. Our Unbundled OCIO platform supports internal investment teams through SEI NovusSM, a global portfolio intelligence tool, and SEI’s comprehensive investment processing, shadow accounting, and data and workflow management.
We acquired Atlas Master Trust from Capita in 2021 and National Pensions Trust from its parent company XPS Pensions Group in 2023 to expand our competitive presence in the United Kingdom’s growing market for institutional investor services.
We compete with various other providers depending on the prospective client’s national jurisdiction, business type, size, complexity and unique requirements. Competitors for OCIO services at larger institutional investors may include global advisory firms offering fiduciary management services such as Aon Hewitt and Willis Towers Watson, as well as with asset management firms like Mercer and Russell Investments. We also compete with numerous investment-management firms, including regional or boutique firms with an industry specialization. Competitors for Unbundled OCIO services include data analytics software firms and investment data management providers.
Fees are primarily earned as a percentage of average assets under management calculated using the average of the four-month ending balances preceding the billing date. At December 31, 2023, we had relationships with 558 institutional clients, which includes clients of SEI Novus.
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Investment Managers
We provide investment operations outsourcing solutions to alternative and traditional investment managers, fund companies, sovereign wealth funds and family offices across a global investment management marketplace. Our solutions provide the advanced operational infrastructure, technologies, and skills critical to our clients’ success, enabling their ability to navigate constantly evolving markets and increasingly complex business challenges. Our clients include asset owners and a diverse, sophisticated group of alternative, traditional, and hybrid investment managers including 48 of the top 100 managers worldwide.
We believe clients select our integrated operational infrastructure and solutions because they are scalable, flexible and can effectively support their diverse and often bespoke business needs across multiple product types and structures, investment strategies, and asset classes. SEI has a global operating footprint which enables us to service funds in all major jurisdictions. Our outsourcing solutions accommodate investment managers of all sizes and complexities, from the unique needs of emerging and start-up managers to the complex needs of global, multi-asset hybrid managers.
Our capabilities include data and information management and analytics; investment operations; regulatory and compliance support; fund administration, fund accounting and depository services; investor reporting; distribution support; and middle office services. We offer trustee, investment management, and administration services for collective investment trusts (CITs), serving the U.S. retirement market.
We help our clients view their business in a comprehensive and integrated way, providing insight into potential risks and giving them increased control over their business results. Addressing the continuously evolving and complex global regulatory environment, we offer our clients regulatory support services, allowing them to aggregate data and meet increasingly stringent reporting deadlines.
Our clients are able to manage assets in almost any manner they are required, including hedge funds, private equity funds, private debt funds, business development companies (BDCs), real estate funds, open-ended and closed-ended mutual funds, interval and tender offer funds, separate accounts, ETFs, CITs, auction funds, UCITS, and other offshore vehicles. We support fund structures using standalone private or public fund vehicles or leveraging our SEC-registered U.S. ’40 Act series trust platform, The Advisors’ Inner Circle Fund®.
We offer a comprehensive suite of technology- and operationally-enabled services for ultra-high-net-worth families, their trusted advisors, and the institutions who serve the family office market. Enabled by SEI's Archway PlatformSM, we handle complex partnership, portfolio, and corporate accounting alongside bill payment, investment management, and multi-asset class data aggregation for alternative and traditional investment portfolios. Our family office services are designed to help family offices and their advisors serve the ultra-high-net-worth community in a more efficient manner.
We believe the competitive environment in which we operate will continue to focus on capabilities other than just portfolio investment expertise. With that in mind, we offer managers solutions to help them gain scale and efficiency, run their businesses more intelligently through data analytics and intuitive online dashboards, and allow them to be more responsive to regulatory, investor, and intermediary needs. We will continue to add new asset managers, asset owners, family offices, and private wealth advisors as clientele, and grow our existing client relationships while expanding into new markets.
Contracts for the outsourcing services we provide generally have terms ranging from three to five years, and fees are earned primarily as a percentage of assets under management and administration. In addition, a portion of the revenues for this segment is earned as account servicing fees. As of December 31, 2023, we had relationships with 545 investment management companies, alternative investment managers, family offices and private wealth advisors.
Our competitors vary according to the asset class or solutions provided and the domiciles in which they operate. They include State Street, BNY Mellon, Northern Trust, SS&C Technologies, and Citco.
Investments in New Businesses
The Investments in New Businesses segment represents other business ventures or research and development activities intended to expand our solutions to new or existing markets, including ultra-high-net-worth families who reside in the United States.
This segment also includes costs associated with managed security services through SEI Sphere, the modularization of larger technology platforms, and a family wealth management solution offering flexible family-office type services through a highly personalized solution utilizing a goals-based planning process. Reported in this segment is also our recent acquisition of Altigo, a cloud-based technology platform that provides inventory, e-subscription, and reporting capabilities for alternative investments.
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Research and Development
We continue to devote significant resources to research and development, including expenditures for new technology platforms, enhancements to existing technology platforms and new investment products and services. Our research and development expenditures for the last three years were:
(all dollar amounts in thousands)202320222021
Research and development expenditures$137,492 $144,459 $168,519 
Capitalization of costs incurred in developing computer software$33,958 $35,293 $26,037 
Research and development expenditures as a percentage of revenues7.2 %7.3 %8.8 %
The majority of our research and development spending is related to adding capabilities to the SEI Wealth Platform (SWP) and the development of a new platform for the Investment Managers segment. SWP is the technology infrastructure for the business solutions now being marketed and delivered to clients in the United States and the United Kingdom served by the Private Banks segment. SWP also is the technology infrastructure for the business solutions now being marketed and delivered to clients in the United States served by the Investment Advisors segment. We believe the advanced capabilities of SWP will enable us to significantly extend and enhance the services we offer to clients and expand SEI’s addressable markets.
The decline in research and development expenditures in 2023 and 2022 was primarily due to decreased spending related to the One SEI strategy to modularize and leverage technologies across the company. Research and development expenditures as a percentage of revenues in 2022 was impacted by one-time early termination fees of $88.0 million recorded during the first quarter 2022 from a significant investment processing client of the Private Banks segment. Excluding this one-time fee, research and development expenditures as a percentage of revenues in 2022 would have been 7.6%.
Research and development expenditures are included in Compensation, benefits and other personnel and Consulting, outsourcing and professional fees on the accompanying Consolidated Statements of Operations.
Marketing and Sales
Our business platforms are directly marketed to potential clients in our target markets. At January 31, 2024, we employed approximately 100 sales representatives who operate from offices located throughout the United States, Canada, the United Kingdom, continental Europe, South Africa, Asia, and other locations.
Customers
In 2023, no single customer accounted for more than 10% of revenues in any business segment.
Regulatory Considerations
We conduct our operations through several regulated wholly-owned subsidiaries. These subsidiaries include:
SEI Investments Distribution Co., or SIDCO, a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority, Inc., or FINRA;
SEI Investments Management Corporation, or SIMC, an investment advisor registered with the SEC under the Investment Advisers Act of 1940 and with the Commodity Futures Trading Commission, or CFTC, under the Commodity Exchange Act;
SEI Private Trust Company, or SPTC, a limited purpose federal thrift chartered and regulated by the Office of the Comptroller of the Currency;
SEI Trust Company, or STC, a Pennsylvania trust company, regulated by the Pennsylvania Department of Banking and Securities;
SEI Institutional Transfer Agent, Inc., or SITA, a transfer agent registered with the SEC under the Securities Exchange Act of 1934.
SEI Investments (Europe) Limited, or SIEL, an investment manager and financial institution subject to regulation by the Financial Conduct Authority of the United Kingdom;
SEI Investments Canada Company, or SEI Canada, an investment fund manager that has various other capacities that is regulated by the Ontario Securities Commission and various provincial authorities;
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SEI Investments Global, Limited, or SIGL, a management company for Undertakings for Collective Investment in Transferable Securities, or UCITS, and for Alternative Investment Funds, or AIFs, that is regulated primarily by the Central Bank of Ireland, or CBI;
SEI Investments - Global Fund Services, Ltd., or GFSL, an authorized provider of administration services for Irish and non-Irish collective investment schemes that is regulated by the CBI;
SEI Investments - Depositary and Custodial Services (Ireland) Limited, or D&C, an authorized provider of depositary and custodial services that is regulated by the CBI;
SEI Investments - Luxembourg S.A., or SEI Lux, a professional of the specialized financial sector subject to regulation by the Commission de Surveillance du Secteur Financier of the Grand Duchy of Luxembourg;
SEI Investments Global (Cayman), Ltd., a full mutual fund administrator that is regulated by the Cayman Island Monetary Authority; and
SEI Investments (South Africa) (PTY) Limited, a Private Company that is a licensed Financial Service Provider regulated by the Financial Sector Conduct Authority.
In addition to the regulatory authorities listed above, our subsidiaries are subject to the jurisdiction of regulatory authorities in other foreign countries. In addition to our wholly-owned subsidiaries, we also own a minority interest of approximately 38.6% in LSV, which is also an investment advisor registered with the SEC.
The Company, its regulated subsidiaries, their regulated services and solutions and their customers are all subject to extensive legislation, regulation, and supervision that recently has been subject to, and continues to experience, significant change and increased regulatory activity. These changes and regulatory activities could have a material adverse effect on us and our clients.
The various governmental agencies and self-regulatory authorities that regulate or supervise the Company and its subsidiaries have broad administrative powers. In the event of a failure to comply with laws, regulations, and requirements of these agencies and authorities, the possible business process changes required or sanctions that may be imposed include the suspension of individual employees, limitations on our ability to engage in business for specified periods of time, the revocation of applicable registration as a broker-dealer, investment advisor or other regulated entity, and, as the case may be, censures and fines. Additionally, certain securities and banking laws applicable to us and our subsidiaries provide for certain private rights of action that could give rise to civil litigation. Any litigation could have significant financial and non-financial consequences including monetary judgments and the requirement to take action or limit activities that could ultimately affect our business.
Governmental scrutiny from regulators, legislative bodies, and law enforcement agencies with respect to matters relating to our regulated subsidiaries and their activities, services and solutions, our business practices, our past actions and other matters has increased dramatically in the past several years. Responding to these examinations, investigations, actions, and lawsuits, regardless of the ultimate outcome of the proceeding, is time consuming and expensive and can divert the time and effort of our senior management from our business. Penalties, fines and changes to business processes sought by regulatory authorities have increased substantially over the last several years, and certain regulators have been more likely in recent years to commence enforcement actions or to advance or support legislation targeted at the financial services industry. We continue to be subject to inquiries from examinations and investigations by supervisory and enforcement divisions of regulatory authorities and expect this to continue in the future. We believe this is also the case with many of our regulated clients. Governmental scrutiny and legal and enforcement proceedings can also have a negative impact on our reputation, our relationship with clients and prospective clients, and on the morale and performance of our employees, which could adversely affect our businesses and results of operations.
We are subject to U.S. and foreign anti-money laundering and financial transparency laws that require implementation of regulations applicable to financial services companies, including standards for verifying client identification and monitoring client transactions and detecting and reporting suspicious activities. We offer investment and banking solutions that also are subject to regulation by the federal and state securities and banking authorities, as well as foreign regulatory authorities, where applicable. Existing or future regulations that affect these solutions could lead to a reduction in sales of these solutions or require modifications of these solutions.
We must comply with economic sanctions and embargo programs administered by the Office of Foreign Assets Control (OFAC) and similar national and multinational bodies and governmental agencies outside the United States, as well as anti-corruption and anti-money laundering laws and regulations throughout the world. We can incur higher costs and face greater compliance risks in structuring and operating our businesses to comply with these requirements. Furthermore, a violation of a sanction or embargo program or anti-corruption or anti-money laundering laws and regulations could subject us and our subsidiaries, and individual employees, to regulatory enforcement actions as well as significant civil and criminal penalties.
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Our businesses are also subject to privacy and data protection information security legal requirements concerning the use and protection of certain personal information. These include those adopted pursuant to the Gramm-Leach-Bliley Act and the Fair and Accurate Credit Transactions Act of 2003 in the United States, the General Data Protection Regulation (GDPR) in the EU, Canada’s Personal Information Protection and Electronic Documents Act, the Cayman Islands' Data Protection Law, and various other laws. Privacy and data security legislation is a priority issue in many states and localities in the United States, as well as foreign jurisdictions outside of the EU. For example, California enacted the California Consumer Privacy Act (CCPA) which broadly regulates the sale of the consumer information of California residents and grants California residents certain rights to, among other things, access and delete data about them in certain circumstances. Other states are considering similar proposals. Such attempts by the states to regulate have the potential to create a patchwork of differing and/or conflicting state regulations. Ensuring compliance under ever-evolving privacy legislation, such as GDPR and CCPA, is an ongoing commitment, which involves substantial costs.
Compliance with existing and future regulations and responding to and complying with recent increased regulatory activity affecting broker-dealers, investment advisors, investment companies, financial institutions, and their service providers could have a significant impact on us. We periodically undergo regulatory examinations and respond to regulatory inquiries and document requests. In addition, recent and continuing legislative activity in the United States and in other jurisdictions (including the European Union and the United Kingdom) have made and continue to make extensive changes to the laws regulating financial services firms. As a result of these examinations, inquiries, and requests, as a result of increased civil litigation activity, and as a result of these new laws and regulations, we engage legal counsel and other subject matter experts, review our compliance procedures, solution and service offerings, and business operations, and make changes as we deem necessary or as may be required by the applicable authority. These additional activities and required changes may result in increased expense or may reduce revenues.
Our bank clients are subject to supervision by federal, state, and foreign banking and financial services authorities concerning the manner in which such clients purchase and receive our products and services. Our plan sponsor clients and our subsidiaries providing services to those clients are subject to supervision by the Department of Labor and compliance with employee benefit regulations. Investment advisor and broker-dealer clients are regulated by the SEC, state securities authorities, or FINRA. Existing or future regulations applicable to our clients may affect our clients’ purchase of our products and services.
In addition, see the discussion of governmental regulations in Item 1A, Risk Factors for a description of the risks that the current regulatory regimes and proposed regulatory changes may present for our business.
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Item 1A. Risk Factors.
We believe that the risks and uncertainties described below are those that impose the greatest threat to the sustainability of our business. However, there are other risks and uncertainties that exist that may be unknown to us or, in the present opinion of our management, do not currently pose a material risk of harm to us. The risk and uncertainties facing our business, including those described below, could materially adversely affect our business, results of operations, financial condition, capital position, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material losses or a decrease in earnings.
Risks Related to Our Business Model
Our revenues and earnings are affected by changes in capital markets and significant changes in the value of financial instruments. A majority of our revenues are earned based on the value of assets invested in investment products that we manage or administer. A decrease in the value of these assets, whether due to general market movements or as a consequence of various products’ unique investment performance, would cause a decline in our assets under administration or management, and a corresponding decline in our revenue and earnings. And, in certain investment programs, a portion of our clients’ cash is swept into insured deposit accounts at third party banks on which we earn fees, which fees may be significant. A material change in interest rates could affect our profitability. Significant fluctuations in securities prices may also influence an investor’s decision to invest in and maintain an investment in a mutual fund or other investment products. Declining or adverse economic conditions and adverse changes in investor, consumer and business sentiment generally result in reduced business activity, which may decrease the demand for our products and services. Geopolitical events, market volatility, illiquid market conditions and other disruptions in the financial markets may make it extremely difficult to value or monetize certain financial instruments, particularly during periods of market displacement. Subsequent valuations of financial instruments in future periods, in light of factors then prevailing, may result in significant changes in the value of these instruments. Additionally, periods of extreme market dislocation may require us to monetize our assets or those of our clients at a significant loss. As a result, our revenues and earnings derived from assets under management or administration, or our profitability or value as a firm, could be adversely affected.
We are exposed to product development risk. We continually strive to increase revenues and meet our customers' needs by introducing new products and services as well as maintaining and improving our existing products and services. As a result, we are subject to product development risk, which may result in loss if we are unable to develop and deliver products to our target markets that address our clients' needs, that are developed on a timely basis, or that reflect an attractive value proposition. We are also subject to the risk that new products and solutions we develop may not function as expected or may be prone to error or disruption, which may result in material losses or harm to our reputation and ability to market such solutions. The majority of our technology product development risk pertains to the evolution of the SEI Wealth PlatformSM, TRUST 3000®, our platform for the Investment Managers segment, and our other proprietary technology platforms.
The development and introduction of new products and services in the markets in which we operate requires continued innovative efforts on our part and may require significant time and resources as well as ongoing support and investment. Substantial risk and uncertainties are associated with the introduction of new products and services, including the implementation of new and appropriate operational controls and procedures, shifting client and market preferences, the introduction of competing products or services and compliance with regulatory requirements.
Product development in the asset management arena has had significant growth in newer areas where investment criteria and performance metrics have not yet been fully defined or developed, such as Environmental, Social and Governance, or “ESG” products, Sustainable Investing products, and Tax Harvesting programs. New products often must be in the market place for three or more years in order to generate track records required to attract significant asset inflows. A failure to continue to innovate, to introduce successful new products and services, or to manage effectively the risks associated with such products and services, may impact our market share and may cause our revenues and earnings derived from assets under management and administration to decline.
We may not achieve significant revenue from new products or services for years, if at all. New products and services may not be profitable, and even if they are profitable, operating margins for some new products and services may not be as high as the margins we have experienced historically.
If we fail to develop new or enhanced products or services at an acceptable cost or on a timely basis, or if our development strategies are not accepted by our clients, we may recognize significant financial losses. Further, if we fail to deliver products and services which are of sound economic value to our clients and our target markets, or are unable to support the product in a cost-effective and compliant manner, we may face reputational damage and incur significant financial losses.
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We rely on third parties to provide products and services that may be difficult to replace or which could cause errors or failures in the services we provide. We rely on third parties we do not control to provide us with products and services, including software development, licensed software, software as a service, cloud services, hosting, web hosting, and the Automated Clearing House (ACH) network which transmit transaction data, process chargebacks and refunds, and perform clearing services in connection with our settlement activities. In the event these third parties fail to provide these services adequately or in a timely manner, including as a result of errors in their systems or events beyond their control, or refuse to provide these services on terms acceptable to us or at all, and we are not able to find and implement timely suitable alternatives, we may no longer be able to provide certain services to customers, which could expose us and our clients to information security, financial, compliance and reputational risks, among others, and have a material adverse effect on our results of operations and financial condition. In addition, if we are unable to renew our existing contracts or licenses with key vendors, technology providers or service providers, we might not be able to replace the related product, application or service at all or at the same cost, which would negatively impact our offerings and our results of operations.
Pricing pressure from increased competition and disruptive technology may affect our revenues and earnings. The investment management industry is highly competitive and has relatively low barriers to entry. In recent years, we have experienced, and continue to experience, pricing pressures from the introduction of new, lower-priced investment products and services and the growth of passive investing, as well as from competitor firms offering automated portfolio management and other services based on technological innovations. These new investment products and technological innovations available to both institutional and retail investors have led to a general trend towards lower fees in some segments of the investment management industry. We believe price competition and pricing pressures in these and other areas will continue as investors continue to reduce the amounts they are willing to pay and financial services firms seek to obtain market share by reducing fees or margins.
Financial technology companies and other non-traditional competitors may not be subject to banking regulation, or may be supervised by a national or state regulatory agency that does not have the same resources or regulatory priorities as those regulatory agencies that supervise more diversified financial services firms such as us, or the financial services regulatory framework in a particular jurisdiction may favor financial institutions that are based in that jurisdiction. These types of differences in regulatory status and framework may result in losing market share to competitors that have a lower cost of compliance due to being less regulated than we are or not subject to regulation, especially with respect to unregulated financial products.
Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have left businesses, been acquired by or merged into other firms, or have declared bankruptcy. Such changes could result in our remaining competitors gaining greater capital and other resources, such as the ability to offer a broader range of products and services and geographic diversity, or new competitors may emerge.
Our investment management platforms include investment management programs and back-office investment processing outsourcing services and are generally offered on a bundled basis. The breadth of our business solutions allows us to compete on a number of factors including:
the performance of our investment products;
the level of fees charged;
the quality of our investment processing services;
our reputation and position in the industry;
our ability to adapt to disruptive technology developments or unforeseen market entrants; and
our ability to address the complex and changing needs of our clients.
Increased competition on the basis of any of these factors could have an adverse impact on our competitive position resulting in a decrease in our revenues and earnings. Additionally, the trend toward direct access to automated, electronic markets will likely continue as additional markets move to more automated trading platforms. We have experienced and will likely continue to experience competitive pressures in these and other areas in the future.
Our earnings and cash flows are affected by the performance of LSV. We maintain a minority ownership interest in LSV which is a significant contributor to our earnings. We also receive partnership distribution payments from LSV on a quarterly basis which contribute to our operating cash flows. LSV is a registered investment advisor that provides investment advisory services to institutions, including pension plans and investment companies. LSV is a value-oriented, contrarian money manager offering a deep-value investment alternative utilizing a proprietary equity investment model to identify securities generally considered to be out of favor by the market. Volatility in the capital markets or poor investment performance on the part of LSV, on a relative basis or an absolute basis, could result in a significant reduction in their assets under management and revenues and a reduction in performance fees. Consequently, LSV's contribution to our
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earnings through our minority ownership, as well as to our operating cash flows through LSV's partnership distribution payments, could be adversely affected.
Consolidation within our target markets may affect our business. Merger and acquisition activity within the markets we serve could reduce the number of existing and prospective clients or reduce the amount of revenue and earnings we receive from retained clients. Consolidation activities may also cause larger institutions to internalize some or all of our services. These factors may negatively impact our ability to generate future growth in revenues and earnings.
External factors affecting the fiduciary management market could adversely affect us. The utilization of defined benefit plans by employers in the United States, Canada and the United Kingdom has been steadily declining. A number of our clients have frozen or curtailed their defined benefit plans resulting in decreased revenues and earnings related to this market segment. We have also experienced increasing fee sensitivity and competition for certain fiduciary management services due to investor preferences toward lower-priced investment products including passive management approaches. The current growth strategies of our Institutional Investors segment include entering new global markets and placing greater emphasis on defined contribution and not-for-profit organizations fiduciary management sales opportunities. These strategies may not be successful in mitigating the impact of lower revenues and earnings caused by these external factors which could adversely affect our revenues and earnings.
We may experience software defects, development delays or installation difficulties, which would harm our business and reputation and expose us to potential liability. A significant portion of our revenue is dependent upon our ability to develop, implement, maintain and enhance sophisticated software and computer systems. We may encounter delays when developing new applications and services. Further, the software underlying our services may contain undetected errors or defects when first introduced or when new versions are released. We may also experience difficulties in installing or integrating our technology on systems or with other programs used by our clients. Likewise, our clients may make a determination to delay or cancel the integration of our new applications and services. Defects in our software, failure to adequately maintain and enhance our software products, errors or delays in the processing of electronic transactions or other difficulties could result in interruption of business operations, delay in market acceptance, additional development and remediation costs, diversion of technical and other resources, loss of clients or client data, negative publicity or exposure to liability claims. Although we attempt to limit our potential liability through disclaimers and limitation of liability provisions in our license and client agreements, we cannot be certain that these measures will successfully limit our liability.
Risks Related to Our Technology
We are exposed to data and cyber security risks. Like other global financial service providers, we experience millions of cyber-attacks on our computer systems, software, networks and other technology assets on a daily basis. Cyber security and information risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies, the use of the internet and mobile telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state actors, in some circumstances as a means to promote political ends. In addition to the growing sophistication of certain parties, the commoditization of cyber tools which are able to be weaponized by less sophisticated actors has led to an increase in the exploitation of technological vulnerabilities. Any of these parties may also attempt to fraudulently induce employees, customers, clients, vendors or other third parties or users of our systems to disclose sensitive information in order to gain access to our data or that of our employees or clients. Cyber security and information security risks may also derive from:
human error,
fraud, or malfeasance on the part of our employees or third parties,
accidental technological failure, or
our failure to introduce security patches provided by vendors in a timely manner.
In addition, third parties with whom we do business, their service providers, as well as other third parties with whom our customers do business, are sources of cyber security risk to us, particularly when their activities and systems are beyond our own security and control systems. A cyber-attack, information breach or loss, or technology failure of a third party could adversely affect our ability to effect transactions, service our clients, manage our exposure to risk, expand our businesses, or significantly harm our reputation. There is no guarantee that the strategies we have deployed that are designed to protect against threats and vulnerabilities will be effective or provide recoverability of our systems or our data or that of our clients given the techniques used in cyber-attacks are complex and frequently change.
A successful penetration or circumvention of the security of our systems or the systems of a vendor, governmental body or another market participant could cause serious negative consequences, including:
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significant disruption of our operations and those of our clients, customers and counterparties, including losing access to operational systems;
misappropriation of our confidential information or that of our clients, counterparties, vendors, employees or regulators;
damage to our technology infrastructure or systems and those of our clients, vendors and counterparties;
inability to fully recover and restore data that has been stolen, manipulated or destroyed, or to prevent systems from processing fraudulent transactions;
violations by us of applicable privacy and other laws;
financial loss to us or to our clients, vendors, counterparties or employees;
loss of confidence in our cyber security measures;
dissatisfaction among our clients or counterparties;
significant exposure to litigation and regulatory fines, penalties or other sanctions; and
harm to our reputation.
Any of the foregoing factors could expose us to liability for damages which may not be covered by insurance; but may result in the loss of customer business, damage to our reputation, regulatory scrutiny or civil litigation.
The failure to upgrade or maintain our computer systems, software and networks could also make us susceptible to breaches and unauthorized access and misuse. We may be required to expend significant additional resources to modify, investigate or remediate vulnerabilities or other exposures arising from data and cyber security risks. Furthermore, even if not directed at us specifically, attacks on other financial institutions could disrupt the overall functioning of the financial system. As a result of the importance of communications and information systems to our business and our reliance on the services provided to us by third parties, we could also be adversely affected if attacks affecting our third-party service providers impair our ability to process transactions and communicate with clients and counterparties.
Given our global footprint and the high volume of transactions we process, the large number of clients, partners, vendors and counterparties with which we do business, and the increasing sophistication of cyber-attacks, a cyber-attack or information security breach could occur and persist for an extended period of time without detection. We expect that any investigation of a cyber-attack would be inherently unpredictable and that it would take time before the completion of any investigation and before there is availability of full and reliable information. During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all or any of which would further increase the costs and consequences of a cyber-attack.
While many of our agreements with partners and third-party vendors include indemnification provisions, we may not be able to recover sufficiently, or at all, under such provisions to adequately offset any losses. In addition, although we maintain insurance coverage that may, subject to policy terms and conditions, cover certain aspects of cyber and information security risks, such insurance coverage may be insufficient to cover all losses.
The cost of managing cyber and information security risks and attacks along with complying with new and increasingly expansive regulatory requirements could adversely affect our business.
We are exposed to risk of the disclosure and misuse of personal data. We store and process large amounts of personally identifiable information of our customers. It is possible our security controls over personal data, our training of employees on data security, our vendor due diligence and oversight processes, and other practices we follow may not prevent the improper disclosure or misuse of personal data that we or our vendors store and/or manage. Improper disclosure or misuse of personal data could harm our reputation, lead to legal exposure, or subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue. Perceptions that the collection, use, and retention of personal information is not satisfactorily protected could inhibit sales of our products or services. Additional security measures we may take to address customer concerns may cause higher operating expenses or hinder growth of our products and services.
We are exposed to risk of outages, data losses, and disruptions of services. We maintain and process data for our clients that is critical to their business operations. The products and services used to process that data is increasingly complex, and maintaining, securing, and expanding this infrastructure is expensive. It requires that we maintain an Internet connectivity infrastructure and storage and compute capacity that is robust and reliable within competitive and regulatory constraints that continue to evolve. Inefficiencies or operational failures, including temporary or permanent loss of customer data, damaged software codes, delayed or inaccurate processing of transactions, insufficient Internet connectivity, or inadequate storage and compute capacity, could diminish the quality of our products, services, and user experience resulting in contractual liability, claims by customers and other third parties, regulatory actions, damage to our
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reputation, and loss of current and potential users, each of which may adversely impact our consolidated financial statements. The costs necessary to rectify these problems may be substantial and may adversely impact our business.
The trend toward direct access to automated, electronic markets and the move to more automated trading platforms has resulted in the use of increasingly complex technology that relies on the continued effectiveness of the programming code and integrity of the data to process the trades. We rely on the ability of our employees, our consultants, our internal systems and third-party systems to operate our different businesses and process a high volume of transactions. Unusually high trading volumes or site usage could cause our systems to operate at an unacceptably slow speed or even fail. Disruptions to, destruction of, instability of or other failure to effectively maintain our information technology systems or external technology that allows our clients and customers to use our products and services could harm our business and our reputation. There can be no assurance that our business contingency and security response plans fully mitigate all potential risks to us.
We are exposed to intellectual property risks. Our continued success also depends in part on our ability to protect our proprietary technology and solutions and to defend against infringement claims of others. We primarily rely upon trade secret law, software security measures, copyrights and confidentiality restrictions in contracts with employees, vendors and customers. Our industry is characterized by the existence of a large number of trade secrets, copyrights and the rapid issuance of patents, as well as frequent litigation based on allegations of infringement or other violations of intellectual property rights of others. A successful assertion by others of infringement claims or a failure to maintain the confidentiality and exclusivity of our intellectual property may have a material adverse effect on our business and financial results.
We are dependent upon third-party service providers in our operations. In connection with our ongoing operations, we utilize the services of third-party suppliers, which we anticipate will continue and may increase in the future. These services include, for example, outsourced development, processing and support functions, and other professional services.
Third-party financial entities and technology systems upon which we rely are becoming more interdependent and complex. For example, in recent years, there has been significant consolidation among clearing agents, exchanges and clearing houses and increased interconnectivity of multiple financial institutions with central agents, exchanges and clearing houses. This consolidation and interconnectivity increases the risk of operational failure, on both an individual and industry-wide basis, as disparate complex systems need to be integrated, often on an accelerated basis.
A failure by a third-party product or service provider may impair our ability to provide contractual services to our clients on a timely basis, to process transactions for our clients accurately, or to meet our regulatory obligations. If a third-party service provider is unable to provide services, we may incur significant costs to either internalize some of these services, find a suitable alternative, or to compensate our clients for any losses that may be sustained as a consequence of the actions or inactions of our third-party services providers. In the event of a breakdown or improper operation of a direct or indirect third-party’s systems or processes, or improper or unauthorized action by third parties, including consultants and subcontractors, we could suffer financial loss, a disruption of our businesses, regulatory sanctions or damage to our reputation.
Risks Related to Our Investment Products and Solutions
Our investment management business may be affected by the poor investment performance of our investment products or a client preference for products other than those which we offer or for products that generate lower fees. Poor investment returns in our investment management business, due to either general market conditions or underperformance (relative to our competitors or to benchmarks) by funds or accounts that we manage or investment products that we design or sell, affects our ability to retain existing assets and to attract new clients or additional assets from existing clients and could affect the management and incentive fees that we earn on assets under management. To the extent that our clients choose to invest in products that we do not currently offer, we will suffer outflows and a loss of management fees. Further, if, due to changes in investor sentiment or the relative performance of certain asset classes or otherwise, clients invest in products that generate lower fees, our investment management business could be adversely affected.
Our investment advisory contracts may be terminated or may not be renewed on favorable terms. We derive a substantial portion of our revenue from providing investment advisory services. The advisory or management contracts we have entered into with clients, including the agreements that govern many of SEI’s investment funds, provide investors or, in some cases, the independent directors of applicable investment funds, with significant latitude to terminate such contracts, withdraw funds or liquidate funds with limited notice or penalty. We also manage U.S. mutual funds under management contracts that must be renewed and approved annually by the funds’ respective boards of trustees, a majority of whom are independent from SEI. Our fee arrangements under any advisory or management contracts may be reduced (including at the behest of a fund’s board of trustees). In addition, if a number of our clients terminate their
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contracts, liquidate funds or fail to renew management contracts on favorable terms, the fees we earn could be reduced, which may cause our assets under management, revenue and earnings to decline.
We rely on the services of third-party sub-advisers. We serve as the investment advisor for many of the products offered through our investment management programs and utilize the services of investment sub-advisers to manage the majority of these assets. A failure in the performance of our due diligence processes and controls related to the supervision and oversight of these firms, as well as errors, fraudulent activity, or noncompliance with relevant securities and other laws and regulations by those firms, could cause us to suffer financial loss, regulatory sanctions or damage to our reputation.
We are dependent upon third-party approvals. Many of the investment advisors through which we distribute our investment offerings are affiliated with independent broker-dealers or other networks, which have regulatory responsibility for the advisor’s practice. As part of the regulatory oversight, these broker-dealers or networks must approve the use of our investment products by affiliated advisors within their networks. Failure to receive such approval, or the withdrawal of such approval, could adversely affect the marketing of our investment products.
We are dependent on third-party pricing services for the valuation of securities invested in our investment products. The majority of the securities held by our investment products are valued using quoted prices from active markets gathered by external third-party pricing services. Securities for which market prices are not readily available are valued in accordance with procedures applicable to that investment product. These procedures may utilize unobservable inputs that are not gathered from any active markets and involve considerable judgment. If these valuations prove to be inaccurate, our revenues and earnings from assets under management could be adversely affected.
Risks Related to Our Legal, Regulatory and Compliance Environment
The financial services industry is subject to extensive regulations that impact our business. Legal, regulatory and compliance risk includes the risk of legal or regulatory sanctions, material financial loss including fines, penalties, judgments, damages and/or settlements, or loss to reputation we may suffer as a result of our failure to comply with laws, regulations, rules, related self-regulatory organization standards and codes of conduct applicable to our business activities. This risk also includes contractual and commercial risk, such as the risk that a counterparty’s performance obligations will be unenforceable. It also includes compliance with privacy, anti-money laundering, anti-corruption and terrorist financing rules and regulations.
As a major financial services firm, we are subject to extensive regulation by U.S. federal and state regulatory agencies and securities exchanges and by regulators and exchanges in each of the major markets where we conduct our business. Our parent company, SEI Investments Company, is regulated by the FFIEC as a significant service provider to the financial industry and subject to SEC oversight as a publicly traded company. Our various business activities in the United States are conducted through entities such as an investment advisor, broker-dealer, commodity pool operator, transfer agent, investment company, national bank and trust company which may be registered with or regulated by the SEC, FINRA, CFTC, NFA, DOL, OCC, and the PA Department of Banking. In addition, some of our foreign subsidiaries are registered with, and subject to the oversight of, regulatory authorities primarily in the United Kingdom, Ireland, Canada, Luxembourg, South Africa, and the Cayman Islands. Many of our clients are subject to substantial regulation by federal and state banking, securities, insurance or employee benefit authorities. Compliance with existing and future regulations, responding to and complying with regulatory activity (new requirements, examinations and supervisory activity) affecting our financial intermediary clients and their service providers could have a significant impact on our operations or business or our ability to provide certain products or services.
We offer financial services technology products and services that also are subject to regulation by the federal and state securities and banking authorities, as well as foreign regulatory authorities, where applicable. Existing or future regulations that affect these products could lead to a reduction in sales of these products or an increase in the cost of providing these products. There can also be significant differences in the ways that similar regulatory initiatives affecting the financial services industry are implemented in the United States and in other countries. For example, when adopting rules that are intended to implement a global regulatory standard, a national regulator may introduce additional or more restrictive requirements, which can create competitive disadvantages for financial services firms such as ours that are subject to those enhanced regulations as a consequence of multi-jurisdictional operations.
In the United States, the Bank Secrecy Act, as amended by the USA PATRIOT Act of 2001 and the Anti-Money Laundering Act of 2020, imposes significant obligations on financial institutions to detect and deter money laundering and terrorist financing activity, including requiring banks, bank holding companies and their subsidiaries, broker-dealers, futures commission merchants, introducing brokers and mutual funds to implement anti-money laundering programs, verify the identity of customers that maintain accounts, and monitor and report suspicious activity to appropriate law enforcement or regulatory authorities. Outside the United States, applicable laws, rules and regulations similarly require designated types of financial institutions to implement compliance programs to address regulatory requirements related to
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money laundering, financial crime and the financing of terrorist activities. Failure to implement comprehensive anti-money laundering programs across our globally-regulated businesses poses regulatory risk including fines for noncompliance.
We are also subject to sanctions, such as regulations and economic sanctions programs administered by the U.S. government, including the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the U.S. Department of State, and similar sanctions programs imposed by foreign governments or global or regional multilateral organizations. In addition, we are subject to anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, in the jurisdictions in which we operate. Anti-corruption laws generally prohibit offering, promising, giving or authorizing others to give anything of value, either directly or indirectly, to a government official or private party in order to influence official action or otherwise gain an unfair business advantage, such as to obtain or retain business. We can incur higher costs and face greater compliance risks in structuring and operating our businesses to comply with these requirements. Furthermore, a violation of a sanction or embargo program or anti-corruption or anti-money laundering laws and regulations could subject us and our subsidiaries, and individual employees, to regulatory enforcement actions as well as significant civil and criminal penalties.
Our businesses are also subject to privacy and data protection information security legal requirements concerning the use and protection of certain personal information. These include those adopted pursuant to the Gramm-Leach-Bliley Act and the Fair and Accurate Credit Transactions Act of 2003 in the United States, the General Data Protection Regulation (GDPR) in the EU, Canada’s Personal Information Protection and Electronic Documents Act, the Cayman Islands' Data Protection Law, and various other laws. Privacy and data security legislation is a priority issue in many states and localities in the United States, as well as foreign jurisdictions outside of the EU. These laws impose mandatory privacy and data protection obligations, including providing for individual rights, enhanced governance and accountability requirements and significant fines and litigation risk for noncompliance. Many other jurisdictions have adopted or are proposing to adopt standards similar to the GDPR. In addition, several jurisdictions have enacted or proposed personal data localization requirements and restrictions on cross-border transfer of personal data that may restrict our ability to conduct business in those jurisdictions or create additional financial and regulatory burdens to do so.
Many aspects of our businesses are subject to legal requirements concerning the use and protection of certain customer information. These include those adopted pursuant to the Gramm-Leach-Bliley Act and the Fair and Accurate Credit Transactions Act of 2003 in the U.S., as well as the privacy and cybersecurity laws referenced above. We have adopted measures designed to comply with these and related applicable requirements in all relevant jurisdictions. Well-publicized allegations involving the misuse or inappropriate sharing of personal information have led to expanded governmental scrutiny of practices relating to the use or sharing of personal data by companies in the United States and other countries. That scrutiny has in some cases resulted in, and could in the future lead to, the adoption of stricter laws and regulations relating to the use and sharing of personal information. These types of laws and regulations could prohibit or significantly restrict financial services firms from sharing information among affiliates or with third parties such as vendors, and thereby increase compliance costs, or restricting the use of personal data when developing or offering products or services to customers. These restrictions could inhibit our development or marketing of certain products or services, or increase the costs of offering them to customers.
The fees and assessments imposed on our regulated subsidiaries by federal, national, state and foreign regulatory authorities could have a significant impact on us. The frequency and scope of regulatory reform in the current regulatory environment may lead to an increase in fees and assessments resulting in increased expense, or an increase or change in regulatory requirements which could affect our operations and business.
A failure to address conflicts of interest appropriately could adversely affect our business and reputation. As a global financial services firm that provides products and services to a diversified group of clients, including public and private entities, financial institutions and individuals, we face potential conflicts of interest in the normal course of business. For example, potential conflicts can occur when there is a divergence of interests between us and a client, among clients, between an employee on the one hand and us or a client on the other, or situations in which we may be a creditor of a client. Moreover, we utilize multiple business channels, including those resulting from our acquisitions, and continue to enhance the collaboration across business segments, which may heighten the potential conflicts of interest or the risk of improper sharing of information. We have policies, procedures and controls that are designed to identify and address potential conflicts of interest, and we utilize various measures, such as the use of disclosure, to manage these potential conflicts. However, identifying and mitigating potential conflicts of interest can be complex and challenging and can become the focus of media and regulatory scrutiny. It is possible that potential conflicts could give rise to litigation or enforcement actions, which may lead to our clients being less willing to enter into transactions in which a conflict may occur and could adversely affect our businesses and reputation.
Our investment management operations may subject us to legal liability for client losses. Our fund and trust management and administration operations are complex activities and include functions such as recordkeeping and accounting, security pricing, corporate actions processing, compliance with investment restrictions, daily net asset value
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computations, account reconciliations, and required distributions to fund shareholders. Failure to properly perform operational tasks or the misrepresentation of our services and products could subject us to regulatory sanctions, penalties or litigation and result in reputational damage, liability to clients, and the termination of investment management or administration agreements and the withdrawal of assets under our management.
In the management and administration of funds and client accounts, we use models and other tools and resources to support investment decisions and processes, including those related to risk assessment, portfolio management, trading and hedging activities and product valuations. Errors in the design, function, or underlying assumptions used in these models and tools, particularly if we fail to detect the errors over an extended period, could subject us to claims of a breach of fiduciary duty and potentially large liabilities for make-whole payments, litigation, and/or regulatory fines.
We are subject to litigation and regulatory examinations and investigations. The financial services industry faces substantial regulatory risks and litigation. Like many firms operating within the financial services industry, we are experiencing a difficult and continuously evolving regulatory environment across our markets. Our current scale and reach as a provider to the financial services industry, the increased regulatory oversight of the financial services industry generally, new laws and regulations affecting the financial services industry and ever-changing regulatory interpretations of existing laws and regulations, have made this an increasingly challenging and costly regulatory environment in which to operate. Examinations or investigations could result in the identification of matters that may require remediation activities or enforcement proceedings by the regulator. The direct and indirect costs of responding to these examinations, or of defending ourselves in any enforcement investigation or litigation could be significant. Additionally, actions brought against us may result in settlements, awards, injunctions, fines and penalties. Litigation or regulatory action could also harm our reputation with clients and prospects, have an adverse effect on our ability to offer some of our products and services, or impede our ability to maintain operations in certain jurisdictions.
Risks Related to Our Business Generally
If our management fails to develop and execute effective business strategies, and to anticipate changes affecting those strategies, our results could suffer. Our business strategies significantly affect our results of operations. These strategies relate to:
the products and services we offer;
the geographies in which we operate;
the types of clients we serve;
the counterparties with which we do business; and
the manner in which we deploy our capital resources to take advantage of perceived opportunity in the short and long-term.
If management makes choices about these strategies and goals that prove to be incorrect, do not accurately assess the competitive landscape, the head winds and tailwinds affecting our business, or fail to address changing regulatory and market environments, then our growth prospects may suffer and our earnings could decline.
Our growth and prospects also depend on management’s ability to develop and execute effective business plans to address these strategic priorities, both in the near term and over longer time horizons. Management’s effectiveness in this regard will affect our ability to develop and enhance our resources, control expenses and return capital to shareholders. Each of these objectives could be adversely affected by any failure on the part of management to:
devise effective business plans and strategies;
effectively implement business decisions;
institute controls that appropriately address the risks associated with business activities and any changes in those activities;
offer products and services that are appropriately priced, meet the changing expectations of clients and customers and are delivered in ways that enhance client satisfaction;
allocate capital in a manner that promotes long-term stability to enable us to build and invest in market-leading technologies and products, even in a highly-stressed environment;
adequately respond to regulatory requirements;
appropriately address shareholder concerns;
react quickly to changes in market conditions or market structures, or
develop and enhance the operational, technology, risk, financial and managerial resources necessary to grow and manage our business.
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Additionally, our Board of Directors plays an important role in exercising appropriate oversight of management’s strategic decisions, and a failure by our Board of Directors to perform this function could also impair our results of operations.
We may be unable to fully capture the expected value from acquisitions, divestitures, joint ventures, minority stakes or strategic alliances. In connection with past or future acquisitions, divestitures, joint ventures, minority stakes or strategic alliances, we face numerous risks and uncertainties combining, transferring, separating or integrating the relevant businesses, systems and personnel, including the need to combine or separate accounting and data processing systems and management controls and to integrate relationships with clients, trading counterparties and business partners. In the case of joint ventures and minority stakes, we are subject to additional risks and uncertainties because we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control.
In addition, conflicts or disagreements between us and any of our joint venture, strategic or minority partners may negatively impact the benefits to be achieved by the relevant venture.
There is no assurance that any of our acquisitions or divestitures will be successfully integrated or disaggregated or that any of these transactions or our joint ventures, minority stakes or strategic alliances will yield the anticipated benefits, synergies or objectives. If we are not able to integrate or disaggregate successfully our past and future acquisitions or dispositions, or we do not fully realize the anticipated benefits, synergies or objectives of the transactions that we undertake, there is a risk that our results of operations, financial condition and cash flows may be materially and adversely affected.
In addition, acquisitions that expand our geographic footprint often involve additional or increased risks that we may not mitigate, which, in turn could adversely affect our operations and profitability. These risks include, for example:
managing geographically separated organizations, systems and facilities;
integrating personnel with diverse business backgrounds and organizational cultures;
complying with non-U.S. regulatory requirements;
fluctuations in currency exchange rates;
enforcement of intellectual property rights in some non-U.S. countries;
difficulty entering new non-U.S. markets due to, among other things, consumer acceptance and business knowledge of these new markets; and
general economic and political conditions.
Growth of our business could increase costs and regulatory risks. Providing a platform for new businesses, integrating acquired businesses, and partnering with other firms involve a number of risks and present financial, managerial, and operational challenges. We may incur significant expenses in connection with further expansion of our existing businesses or in connection with strategic acquisitions or investments, if and to the extent they arise from time to time. Our overall profitability would be negatively affected if investments and expenses associated with such growth are not matched or exceeded by the revenues that are derived from such investment or growth. Expansion may also create a need for additional compliance, risk management and internal control procedures, and often involves the hiring of additional personnel to monitor such procedures. To the extent such procedures are not adequate to appropriately monitor any new or expanded business, we could be exposed to a material loss or regulatory sanction.
Moreover, to the extent we pursue strategic acquisitions, we may be exposed to a number of risks, including additional demands on our existing employees; additional or new regulatory requirements, operating facilities and technologies; adverse effects in the event acquired goodwill or intangible assets become impaired; and the existence of liabilities or contingencies not disclosed to or otherwise known by us prior to closing a transaction. These risks could result in decreased earnings and harm to our competitive position in the investment management industry.
Certain of our business initiatives, including expansions of existing businesses, may bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes and new markets. These business activities could expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, political and operational risks, and reputational concerns regarding the manner in which these assets are being administered or held.
We are exposed to operational risks. We are subject to the risk of loss, or of harm to our reputation, resulting from manual, inadequate or failed processes or systems. We are exposed to operational risk across the full scope of our business activities, including revenue-generating activities (e.g., sales and trading) and support and control groups (e.g., information technology, accounting systems and trade processing).
Our businesses are highly dependent on our ability to process and report, on a daily basis, a large number of transactions across numerous and diverse markets and asset classes in many currencies. Operational efficiency is modeled on
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defined and strict timelines which present inherent risk. In the event of a breakdown or improper operation of systems, human error or improper action by employees or consultants, we could suffer significant financial loss, regulatory sanctions or damage to our reputation. Additionally, we may introduce new products or services or change processes or reporting, including in connection with new regulatory requirements, resulting in new operational risk that we may not fully appreciate or identify.
Notwithstanding evolving technology and technology-based risk and control systems, our products and services ultimately rely on people, including our employees and those of third-parties with which we conduct business. As a result of human error or engagement in violations of applicable policies, laws, or procedures, certain errors or violations are not always discovered immediately by our controls, which are intended to prevent and detect such errors or violations. These can include calculation or input errors, inadvertent or duplicate payments, errors in software or model development or implementation, or errors in judgment, as well as intentional efforts to disregard or circumvent applicable policies, laws, rules or procedures. Human errors and malfeasance, even if promptly discovered and remediated, can result in material losses and liabilities for us.
We have devoted significant resources to develop our risk management capabilities and expect to continue to do so in the future. Nonetheless, our risk management strategies, models and processes, including our use of various risk models for assessing market, credit, liquidity and operational exposures and other analysis, may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated.
The primary responsibility for the management of operational risk is with the business segments; the business managers maintain processes and controls designed to identify, assess, manage, mitigate and report operational risk. Oversight of operational risk is provided by the Enterprise Risk Management function, the Enterprise Risk Committee, legal entity boards, jurisdictional risk officers, committees and senior management. This governance structure may not adequately assess or address operational risk, which could lead to significant financial loss and reputational harm.
Disruptions of operations of other participants in the global financial system could prevent us from delivering our products and services. The operations and systems of many participants in the global financial system are interconnected. Many of the transactions involving our products and services rely on multiple participants in the global financial system to move funds and communicate information to the next participant in the transaction chain. A disruption for any reason of the operations of a participant in the global financial system could impact our ability to obtain or provide information or cause funds to be moved in a manner to successfully deliver our products and services. Although we work with other participants to avoid any disruptions, there is no assurance that such efforts will be effective. Such a disruption could lead to our inability to deliver products and services, reputational damage, lost clients and revenue, loss of clients’ and their customers’ confidence, as well as additional costs, all of which could have a material adverse effect on our business, results of operations and financial condition.
Our businesses may be adversely affected if we are unable to hire and retain qualified employees. Our performance is largely dependent on the talents and efforts of highly-skilled people; therefore, our continued ability to compete effectively in our businesses, to manage our businesses effectively and to expand into new businesses and geographic areas depends on our ability to attract new talented and diverse employees and to retain and motivate our existing employees. Factors that affect our ability to attract and retain such employees include our compensation and benefits, and our reputation as a successful business with a culture of fairly hiring, training and promoting qualified employees. Declines in our profitability, or in the outlook for our future profitability, as well as regulatory limitations on compensation levels and terms, can negatively impact our ability to hire and retain highly-qualified employees.
Competition from within the financial services and technology industries and from businesses outside the financial services and technology industries for qualified employees has often been intense. Employment markets continue to grow in competitive intensity leading to higher costs.
Changes in law or regulation in jurisdictions in which our operations are located that affect taxes on employees’ income, or the amount/composition of compensation, may also adversely impact our ability to hire and retain qualified employees in those jurisdictions. As a global financial services and technology company, we are subject to limitations on compensation practices (which may or may not affect our competitors) by regulators worldwide. These limitations, including any imposed by or as a result of future legislation or regulation, may require us to alter our compensation practices in ways that could adversely affect our ability to attract and retain talented employees.
Our operations depend on the competence and integrity of our employees and third parties. Our ability to operate our businesses efficiently and profitably, and to offer products and services that meet the expectations of our clients, is highly dependent on the competence and trustworthiness of our employees and contractors, as well as those of third parties on which our operations rely, including vendors, custodians and financial intermediaries. Our businesses could be materially and adversely affected by a significant operational breakdown or failure, theft, fraud or other unlawful conduct,
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or other negative outcomes caused by poor judgement, human error or misconduct on the part of one of our employees or contractors or those of a third party on which our operations rely.
We are a holding company and, therefore, may not be able to receive dividends or other payments in needed amounts from our subsidiaries. We are organized as a holding company, a legal entity separate and distinct from our operating entities. As a holding company without significant operations of its own, our principal assets are the shares of capital stock of our subsidiaries. We rely on dividends and other payments from these subsidiaries to meet our obligations for paying dividends to shareholders, repurchasing our common stock and paying corporate expenses. Certain of our subsidiaries are subject to regulatory requirements of the jurisdictions in which they operate or other restrictions that may limit the amounts those subsidiaries can pay in dividends or other payments to us. No assurance can be given that there will not be further changes in law, regulatory actions, or other circumstances that could restrict the ability of our subsidiaries to pay dividends or otherwise make payment to us. Furthermore, no assurance can be given that our subsidiaries may be able to make timely payments to us in order for us to meet our obligations.
Changes in, or interpretation of, accounting principles could affect our revenues and earnings. We prepare our consolidated financial statements in accordance with generally accepted accounting principles. A change in these principles can have a significant effect on our reported results and may even retrospectively affect previously reported results (See Note 1 to the Consolidated Financial Statements for more information).
Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be adversely affected by changes in tax laws or the interpretation of tax laws. We are subject to possible examinations of our income tax returns by the Internal Revenue Service and state and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes; however, there can be no assurance that the final determination of any examination will not have an adverse effect on our operating results or financial position.
Currency fluctuations could negatively affect our future revenues and earnings as our business grows globally. We operate and invest globally to expand our business into foreign markets. Our foreign subsidiaries use the local currency as the functional currency. As these businesses evolve, our exposure to changes in currency exchange rates may increase. Adverse movements in currency exchange rates may negatively affect our operating results, liquidity, contract values and financial condition.
Changes in interest rates may affect the value of our fixed-income investment securities. We own Government National Mortgage Association (GNMA) mortgage-backed securities for the sole purpose of satisfying applicable regulatory requirements imposed on our wholly-owned limited purpose federal thrift subsidiary, SPTC. The valuations of these securities are impacted by fluctuations in interest rates. The effect of a rising interest rate environment may negatively impact the value of these securities and thereby negatively affect our financial position and earnings.
We are subject to financial and non-financial covenants which may restrict our ability to manage liquidity needs. Our $325.0 million five-year senior unsecured revolving credit facility (Credit Facility) contains financial and non-financial covenants. The non-financial covenants include restrictions on our ability to execute transactions with affiliates other than wholly-owned subsidiaries or to incur liens or certain types of indebtedness as defined in the agreement. In the event of default, we have restrictions on paying dividends and repurchasing our common stock. We have one financial covenant, the Leverage Ratio, which restricts the level of indebtedness we can incur to a maximum of 2.25 times earnings before interest, taxes, depreciation and amortization (EBITDA). We believe our primary risk is with the financial covenant if we were to incur significant unexpected losses that would impact the EBITDA calculation. This would increase the Leverage Ratio and restrict the amount we could borrow under the Credit Facility. A restriction on our ability to fully utilize our Credit Facility may negatively affect our operating results, liquidity and financial condition.
We may become subject to stockholder activism efforts that each could cause material disruption to our business. Certain influential institutional investors and hedge funds have taken steps to involve themselves in the governance and strategic direction of certain companies due to governance or strategic related disagreements between such companies and such stockholders. If we become subject to such stockholder activism efforts, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business and adversely affect the market price of our common stock. In addition, third party organizations that place ESG ratings on companies may create brand impact as a result of a rating that we do not control.
We rely on our executive officers and senior management. Most of our executive officers and senior management personnel do not have employment agreements with us. The loss of these individuals may have a material adverse effect on our future operations.
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We may incur losses if our risk management and business continuity strategies, models and processes are not fully effective in mitigating our risk exposures in all market environments or against all types of risk. We seek to monitor and control our risk exposure through a risk and control framework encompassing a variety of separate but complementary financial, credit, operational, compliance and legal reporting systems, internal controls, management review processes and other mechanisms. Our risk management process seeks to balance our ability to profit from our business activities, with our exposure to potential losses and liabilities. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the specifics and timing of such outcomes. As our businesses change and grow, and the markets in which we operate evolve, our risk management strategies, models and processes may not always adapt with those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate. In addition, the use of models in connection with risk management and numerous other critical activities presents risks that such models may be ineffective, either because of poor design or ineffective testing, improper or flawed inputs, as well as unpermitted access to such models resulting in unapproved or malicious changes to the model or its inputs. Market conditions in recent years have involved unprecedented dislocations and highlight the limitations inherent in using historical data to manage risk. Thus, we may, in the course of our activities, incur losses.
Despite the business contingency, disaster recovery and security response plans we have in place, there can be no assurance that such plans will fully mitigate all potential risks to us. Our ability to conduct business may be adversely affected by a disruption in the infrastructure that supports our business and the communities where we are located, which are concentrated in the Philadelphia metropolitan area, London and Dublin. This may include a disruption involving physical site access, cyber or information security incidents, terrorist activities, disease pandemics, catastrophic events, natural disasters, severe weather events, electrical outage, environmental hazard, computer servers, communications or other services used by us or third parties with whom we conduct business.
Although we employ backup systems for our data, those backup systems may be unavailable following a disruption, the affected data may not have been backed up or may not be recoverable from the backup, or the backup data may be costly to recover, which could adversely affect our business.
We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, extreme weather events or other natural disasters. The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic, extreme terrestrial or solar weather events or other natural disasters, could create economic and financial disruptions, and could lead to operational difficulties (including travel limitations) that could impair our ability to manage our businesses and may adversely affect our operations, financial condition, and results of operations.
The extent to which an event negatively affects our businesses, results of operations and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments that are uncertain and cannot be fully predicted, including:
the ultimate scope and duration of the event;
the effectiveness and acceptance of vaccines, other treatments, and their availability in certain regions;
actions taken by governmental authorities and other third parties in response to the event; and
the effect that the event may have on the pace of economic growth, inflation and the cost of the labor market.
Increased geopolitical unrest and other events could adversely affect the global economy or specific international, regional and domestic markets, which may cause our revenue and earnings to decline. Geopolitical risks, including those arising from trade tension and/or the imposition of trade tariffs, European fragmentation, military conflicts and terrorist activity, political conflict and economic sanctions involving Russia, China and other countries, as well as acts of civil or international hostility, are increasing. In particular, the military conflict between Russia and Ukraine, the war between Israel and Hamas in the Gaza region, and the attacks on Western military and commercial targets in the Middle East and related reprisals, have resulted in and may continue to increase geopolitical instability and adversely affect the global economy or specific markets, which could continue to have an adverse impact or cause volatility in the financial services industry generally or on our results of operations and financial conditions. In addition, these geopolitical tensions can cause an increase in volatility in commodity and energy prices, creating supply chain issues, and causing instability in financial markets. Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others, could exacerbate market and economic instability. While we do not have any operations in Russia or any clients with significant Russian operations and we have minimal market risk related to securities of companies either domiciled or operating in Russia, the specific consequences of the conflict in Ukraine and its potential spread on our business is difficult to predict at this time. In addition to inflationary pressures affecting our operations, we,
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and the infrastructure we rely upon, may also experience an increase in cyberattacks against us and our third-party service providers from Russia or its allies. Any such events, and responses thereto, may cause significant volatility and declines in the global markets, disruptions to commerce (including to economic activity, travel and supply chains), loss of life and property damage, and may adversely affect the global economy or capital markets, as well as our products, clients, vendors and employees, which may cause our revenue and earnings to decline. Our exposure to geopolitical risks may be heightened to the extent such risks arise in countries in which we currently operate or are seeking to expand our presence.
Climate change concerns and incidents could disrupt our businesses, adversely affect the profitability of certain of our investments, adversely affect client activity levels, adversely affect the creditworthiness of our counterparties, or damage our reputation. There continues to be increasing concern over the risks of climate change and related environmental sustainability matters. Climate change may cause extreme weather events that disrupt operations at one or more of our or our customer’s or client’s locations, which may negatively affect our ability to service and interact with our clients, and also may adversely affect the value of certain of our investments, including our real estate investments. Climate change, as well as uncertainties related to the transition to a lower carbon dependent economy, may also have a negative impact on the financial condition of our clients, which may decrease revenues from those clients and increase the credit risk associated with loans and other credit exposures to those clients. Additionally, our reputation and client relationships may be damaged as a result of our involvement, or our clients’ involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
New regulations or guidance relating to climate change and the transition to a lower carbon dependent economy, as well as the perspectives of legislative bodies, shareholders, employees and other stakeholders regarding climate change, may affect whether and on what terms and conditions we engage in certain activities or offer certain products, as well as impact our business reputation and efforts to recruit and retain employees and customers. The risks associated with, and the perspective of regulators, governments, shareholders, employees and other stakeholders regarding, climate change are continuing to evolve rapidly, which can make it difficult to assess the ultimate impact on us of climate change-related risks and uncertainties.
We are subject to risks relating to environmental, social, and governance (ESG) matters that could adversely affect our reputation, business, financial condition, and results of operations, as well as the price of our stock. We are subject to increasing scrutiny from clients, investors, regulators, elected officials, shareholders and other stakeholders with respect to ESG matters. Our various stakeholders hold diverse and often conflicting views on ESG topics, including the role of ESG in the investment process. This increases the risk that any action or lack thereof with respect to ESG matters will be perceived negatively by at least some stakeholders. Views on ESG practices, particularly those related to climate issues, have also become political issues, which can amplify these risks. Any adverse publicity or reaction in connection with ESG issues could damage our reputation, ability to attract and retain clients and employees, compete effectively, and grow our business.
A growing interest on the part of investors and regulators in ESG factors, and increased demand for, and scrutiny of, ESG-related disclosures by companies and asset managers, has increased the risk that we could be accused of making inaccurate or misleading statements regarding our ESG efforts or initiatives, commonly referred to as “greenwashing.” Further, certain government officials have suggested that ESG-related investing practices may result in breaches of fiduciary duty or violations of law, including antitrust laws. Such perceptions or accusations could damage our reputation, result in litigation or regulatory enforcement actions, and adversely affect our business. Regardless of the outcome of any governmental enforcement or litigation matter, responding to such matters is time-consuming and expensive and can divert the attention of senior management.
Certain U.S. states have adopted laws or regulations that provide that asset managers that have adopted policies that restrict investing in certain industries or sectors, such as traditional energy, may not be permitted to manage money belonging to these states and their pension funds. If such a state deems our policies to contain such restrictions, whether accurate or not, it could impair our ability to access capital from certain clients and investors.
A lack of harmonization globally in relation to ESG laws and regulations leads to a risk of fragmentation across global jurisdictions. This may create conflicts across our global business, which could impact our competitiveness in the market and damage our reputation resulting in a material adverse effect on our business.
We may, from time to time, communicate certain initiatives, targets, or goals regarding environmental matters, diversity, responsible sourcing, or other ESG matters. These initiatives, targets, or goals could be difficult and expensive to implement, and we may not be able to accomplish them within the timelines we announce or at all. Our reputation, business, financial performance, and growth could be adversely affected if stakeholders react negatively to the targets or
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goals that we set, or if our ESG-related data, processes, and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to ESG targets or goals.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity risk management is an important part of our overall risk management efforts. Our industry is prone to cybersecurity threats and attacks, and we regularly experience cybersecurity incidents of varying degrees. At any given time, we face known and unknown cybersecurity risks and threats that are not fully-mitigated, and we discover vulnerabilities in our Cybersecurity Program. We continuously work to enhance our Cybersecurity Program and risk management efforts. As of the date of this report, we are not aware of any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations and financial condition.
We use a risk management framework based on applicable laws and regulations, and informed by industry standards and industry-recognized practices, for managing cybersecurity risks within our products and services, infrastructure, and corporate resources. This risk management framework is implemented through our Cybersecurity Program. Our Cybersecurity Program is designed to provide a framework for assessing the potential threats to the security and integrity of our systems, networks, databases, applications, electronic information and intellectual property and developing appropriate defenses based on these assessments. We routinely invest to develop and implement numerous cybersecurity programs and processes, including risk management and assessment programs, security and event monitoring capabilities, detailed incident response plans, and other advanced detection, prevention and protection capabilities, including practices and tools to monitor and mitigate insider threats. We regularly assess cybersecurity risks to identify and enumerate threats to us and vulnerabilities these threats can exploit to adversely impact our business operations. In some instances, we engage third parties to conduct or assist us with conducting cybersecurity risk assessments. We have developed and implemented a security infrastructure designed to ensure infrastructure and data confidentiality, integrity, and availability.
Key components of our Cybersecurity Program include, but are not limited to, the following:
Information Security Governance: We designed what we believe are appropriate measures, policies and procedures to ensure that information and information systems are properly protected given the nature of our businesses and the size and complexity of our organization, including our reliance on third parties;
Organization: The Information Security team, led by the Chief Information Security Officer (CISO), is responsible for implementing and managing the Cybersecurity Program with executive oversight from the Chief Executive Officer and Chief Financial Officer, as well as oversight from our Board of Directors. Our CISO has extensive cybersecurity knowledge and skills gained from over 26 years of work experience on the information security team at SEI. In addition to the CISO’s cybersecurity experience, he has certifications in risk and information systems control along with information systems auditing;
Cybersecurity Controls: We have implemented what we believe are appropriate preventative measures to protect SEI’s infrastructure, systems, and data. These measures include network architecture segmentation, system and platform hardening, in-transit and at-rest encryption, dynamic security awareness training, regular vulnerability scanning and penetration testing, firewalls, web proxy filtering, and multifactor authentication, all of which we constantly evaluate and upgrade as we believe is needed based on our risk assessments;
Managed Detection and Response: Our security operations center’s uninterrupted monitoring processes utilize tools such as network and host-based intrusion detection systems, endpoint detection and response technology, distributed denial of service detection and mitigation service, and centralized security and information event management (SIEM). These efforts are further supplemented by signals operations and threat hunting that provide the incident responders the ability to write custom detections to complement commercial technology controls and execute triage/analysis, threat intelligence, and response;
Independent Audits: We are subject to industry regulatory examinations. Our internal audit function provides independent assessment and assurance on the overall operations of our Cybersecurity and Privacy Programs and the supporting control frameworks. We also engage various reputable third parties to perform independent auditing and testing as well as network and web application penetration testing;
Risk Management Oversight: Enterprise Risk Management, through the Enterprise Risk Committee, provides independent monitoring and reporting of cybersecurity risks commensurate with our Technology Risk Program. In
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addition, we leverage our Third Party Risk Management, Insider Threats, Business Continuity & Disaster Recovery and Information Governance programs to supplement our Cybersecurity Program; and
Privacy Oversight: In addition to our Enterprise Risk Management functions, our Legal and Compliance team maintains a privacy risk management program to assess, manage and report privacy risks related to how we are collecting, using, sharing, and storing user data. Our Privacy team works with our Third Party Risk and Information Security teams to manage privacy-related issues.
As part of the governance and oversight of the Cybersecurity Program, regular reporting is performed for the Legal and Regulatory Oversight Committee of our Board of Directors along with SEI’s various subsidiaries’ boards of directors. The reports include cybersecurity metrics/statistics, details of relevant events, results of testing, and overview of current threats. Should any material incidents arise, those will be timely and appropriately communicated to the relevant subsidiary's board of directors.
Additional information about cybersecurity risks we face is discussed in Item 1A of Part I, “Risk Factors,” under the heading “We are exposed to data and cyber security risks,” which should be read in conjunction with the information above.
Item 2. Properties.
Our corporate headquarters is located in Oaks, Pennsylvania and consists of ten buildings situated on approximately 134 acres. We own and operate the land and buildings, which encompass approximately 628,000 square feet of office space and 34,000 square feet of data center space. We lease other offices which aggregate 155,000 square feet. We also own a 3,400 square foot condominium that is used for business purposes in New York, New York.
Item 3. Legal Proceedings.
The Company is party to various disputes, actions and claims arising in the normal course of business that the Company does not believe are material. The Company believes that the ultimate resolution of any of these matters will not have a material adverse effect on the Company's financial position or the manner in which the Company conducts its business. Currently, the Company does not believe the amount of losses associated with these matters can be estimated. While the Company does not believe that the amount of such losses will, when liquidated or estimable, be material to its financial position, the assumptions may be incorrect and any such loss could have a material adverse effect on the Company's results of operations or the manner in which the Company conducts its business in the period(s) during which the underlying matters are resolved.
Item 4. Mine Safety Disclosures.
None.
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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Price Range of Common Stock and Dividends:
Our common stock is traded on The Nasdaq Global Select Market® (NASDAQ) under the symbol “SEIC.” The following table shows the high and low sales prices for our common stock as reported by NASDAQ and the dividends declared on our common stock for the last two years. Our Board of Directors intends to declare future dividends on a semiannual basis.
2023HighLowDividends
First Quarter$64.69 $53.93 $— 
Second Quarter59.87 56.10 0.43 
Third Quarter64.43 58.25 — 
Fourth Quarter64.94 52.20 0.46 
2022HighLowDividends
First Quarter$64.29 $54.03 $— 
Second Quarter61.43 51.34 0.40 
Third Quarter58.96 48.90 — 
Fourth Quarter63.49 46.30 0.43 
According to the records of our transfer agent, there were 202 holders of record of our common stock on January 31, 2024. Because many of such shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
For information on our equity compensation plans, refer to Note 7 to the Consolidated Financial Statements and Item 12 of this Annual Report on Form 10-K.
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Stock Performance Graph:
The following graph shows a comparison from December 31, 2018 through December 31, 2023 of the cumulative total return for our common stock, the NASDAQ Market Index and an Industry Index, a blend of indices including 79% NASDAQ US Asset Managers and Custodians and 21% NASDAQ US Software. This information is obtained from sources believed to be reliable; however, we cannot guarantee their accuracy. Returns are based on historical performance and are not indicative of future results.
1466
ASSUMES $100 INVESTED ON DECEMBER 31, 2018
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDED DECEMBER 31,
Issuer Purchases of Equity Securities:
Our Board of Directors has authorized the repurchase of up to $5.578 billion worth of our common stock. Currently, there is no expiration date for our common stock repurchase program (See Note 7 to the Consolidated Financial Statements). On December 15, 2023, our Board of Directors approved an increase in the stock repurchase program by an additional $250.0 million.
Information regarding the repurchase of common stock during the three months ended December 31, 2023 is:
PeriodTotal Number of Shares PurchasedAverage Price Paid per Share (1)Total Number of
Shares Purchased as
Part of Publicly
Announced Program
Approximate Dollar
Value of Shares that
May Yet Be
Purchased
Under the Program
October 2023175,000 $53.58 175,000 $91,628,000 
November 2023625,000 56.89 625,000 56,069,000 
December 2023387,000 61.41 387,000 282,079,000 
Total1,187,000 57.88 1,187,000 
(1) Average price paid per share does not include excise tax on stock repurchases.
Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(In thousands, except share and per-share data)
This discussion reviews and analyzes the consolidated financial condition at December 31, 2023 and 2022, the consolidated results of operations for the years ended December 31, 2023, 2022 and 2021, and other factors that may affect future financial performance. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report.
Certain information contained in this discussion is or may be considered forward-looking. Forward-looking statements relate to future operations, strategies, financial results, expenditures and other uses of capital or other developments. Forward-looking statements are based upon estimates and assumptions that involve certain judgments, risks and uncertainties, many of which are beyond our control or are subject to change. Although we believe our assumptions are reasonable, they could be inaccurate. Our actual future revenues and income could differ materially from our expected results. Further information about factors that could materially affect our results of operations and financial condition include, but are not limited to, the discussion contained in Item 1A, Risk Factors, in this Annual Report on Form 10-K. We have no obligation to publicly update or revise any forward-looking statements.
Overview
Consolidated Summary
SEI delivers technology and investment solutions that connect the financial services industry. With capabilities across investment processing, operations, and asset management, SEI works with corporations, financial institutions and professionals, and ultra-high-net-worth families to help drive growth, make confident decisions, and protect futures. Investment processing fees are earned as either monthly fees for contracted services or as a percentage of the market value of our clients' assets processed on our platforms. Investment operations and investment management fees are earned as a percentage of assets under management, administration or advised assets. As of December 31, 2023, through our subsidiaries and partnerships in which we have a significant interest, we manage, advise or administer approximately $1.4 trillion in hedge, private equity, mutual fund and pooled or separately managed assets.
Condensed Consolidated Statements of Operations for the years ended 2023, 2022 and 2021 were:
Year Ended December 31,20232022Percent
Change*
2021Percent
Change
Revenues$1,919,793 $1,991,037 (4)%$1,918,309 %
Expenses1,495,269 1,515,284 (1)%1,364,928 11 %
Income from operations424,524 475,753 (11)%553,381 (14)%
Net gain (loss) from investments2,757 (3,078)NM(366)NM
Interest income, net of interest expense40,444 12,559 222 %3,086 307 %
Other income 3,379 NM— NM
Equity in earnings of unconsolidated affiliates126,930 120,667 %137,572 (12)%
Income before income taxes594,655 609,280 (2)%693,673 (12)%
Income taxes132,397 133,813 (1)%147,080 (9)%
Net income462,258 475,467 (3)%546,593 (13)%
Diluted earnings per common share$3.46 $3.46 — %$3.81 (9)%
* Variances noted "NM" indicate the percent change is not meaningful.

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Significant Items Impacting Our Financial Results in 2023
Revenues decreased $71.2 million, or 4%, to $1.9 billion in 2023 compared to 2022. Net income decreased $13.2 million, or 3%, to $462.3 million and diluted earnings per share remained unchanged at $3.46 per share in 2023 compared to 2022. We believe the following items were significant to our business results during 2023:
Revenue from Information processing and software servicing fees decreased primarily from one-time early termination fees of $88.0 million from a significant client of the Private Banks segment recorded during the first quarter 2022. A one-time early contractual buyout fee of $10.5 million recorded during the second quarter 2023 from an investment processing client of the Private Banks segment acquired by an existing client partially offset the decline in revenues. Revenue from Information processing and software servicing fees was positively impacted by new client conversions and growth from existing SEI Wealth PlatformSM (SWP) clients during 2023.
Revenue from Assets under management, administration, and distribution fees was favorably impacted by higher assets under administration due to new products and additional services provided to existing alternative investment clients of the Investment Managers segment. Average assets under administration increased $38.4 billion, or 5%, to $880.3 billion during 2023 as compared to $841.9 billion during 2022.
Revenue from Asset management, administration and distribution fees was unfavorably impacted by lower assets under management in equity and fixed income programs from negative cash flows from SEI fund programs and declining average basis points earned on assets in the Investment Advisors segment and client losses in the Institutional Investors segment. The unfavorable impact was partially offset by market appreciation and positive cash flows into separately managed account programs of the Investment Advisors segment. Average assets under management in equity and fixed income programs, excluding LSV, decreased $6.5 billion, or 4%, to $168.6 billion during 2023 as compared to $175.1 billion during 2022.
Earnings from LSV increased by $6.3 million, or 5%, in 2023 due to market appreciation and higher performance fees. Negative cash flows from existing clients and client losses partially offset the increase in earnings from LSV.
The decline in operating expenses was primarily due to total costs of $54.8 million related to the Voluntary Separation Program (VSP) recognized during the third quarter 2022. These one-time costs are primarily included in Compensation, benefits and other personnel costs on the accompanying Consolidated Statement of Operations and are reported in corporate overhead expenses (See Note 14 to the Consolidated Financial Statements). Decreased non-capitalized consulting costs also contributed to the decline in operating expenses during 2023.
Operational expenses unrelated to the VSP increased in 2023 due to higher personnel costs from business growth, primarily in the Investment Managers segment, competitive labor markets, and investments in compliance infrastructure to meet new regulatory requirements. The increased personnel costs were primarily related to salary and incentive compensation costs.
Capitalized software development costs were $34.0 million in 2023, of which $18.2 million was for continued enhancements to the SEI Wealth PlatformSM (SWP). Capitalized software development costs also include $15.8 million of software development costs for a new platform for the Investment Managers segment.
Management decided to abandon certain functionality within the platform for the Investment Managers segment due to a change in development strategy and wrote off $5.3 million of previously capitalized software development costs during the fourth quarter 2023. The expense associated with the write off is included in Facilities, supplies and other costs on the accompanying Consolidated Statement of Operations.
Amortization expense related to SWP was $25.6 million in 2023 as compared to $35.6 million in 2022. The decline in amortization expense was due to the amortization period of the initial development costs related to SWP which ended in second-quarter 2022 (See the caption "Capitalized software development costs" later in this discussion for more information).
Interest and dividend income was $41.0 million in 2023 as compared to $13.3 million in 2022. The increase in interest and dividend income was primarily due to an increase in market interest rates.
The effective tax rate during 2023 was 22.3% as compared to 22.0% during 2022. The increase in the effective rate was primarily due to reduced tax benefits related to stock option exercises.
On November 20, 2023, our wholly-owned operating subsidiary in the United Kingdom closed the acquisition of XPS Pensions (Nexus) Limited, principal employer and scheme funder of the National Pensions Trust. We paid a cash consideration of $43.9 million, net for the acquisition and recorded a contingent consideration of $3.9 million that may be earned by the seller over the two years after the closing, subject to the achievement of certain post-closing performance measurements (See Note 15 to the Notes to Consolidated Financial Statements).
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On December 20, 2023, we acquired Altigo, a cloud-based technology platform that provides inventory, e-subscription, and reporting capabilities for alternative investments, for a cash consideration of $12.5 million (See Note 15 to the Notes to Consolidated Financial Statements).
Cash flow from operations was $447.0 million during 2023.
SEI repurchased 5.2 million shares of its common stock at an average price of $59.34 per share for a total cost of $310.8 million and paid $114.8 million in cash dividends to shareholders during 2023.
Significant Items Impacting Our Financial Results in 2022
Revenues increased $72.7 million, or 4%, to $2.0 billion in 2022 compared to 2021. Net income decreased $71.1 million, or 13%, to $475.5 million and diluted earnings per share decreased to $3.46 per share in 2022 compared to $3.81 per share in 2021. We believe the following items were significant to our business results during 2022:
Revenue from Information processing and software servicing fees increased primarily from early termination fees of $88.0 million recorded during the first quarter 2022 and new client conversions.
Revenue from Asset management, administration and distribution fees declined from lower assets under management from market depreciation during 2022 and negative cash flows from SEI fund programs due to client losses in the Investment Advisors and Institutional Investors segments. The decline was partially offset by positive cash flows into separately managed account programs of the Investment Advisors segment. Average assets under management in equity and fixed income programs, excluding LSV, decreased $22.1 billion, or 11%, to $175.1 billion during 2022 as compared to $197.2 billion during 2021.
Revenue from Asset management, administration and distribution fees increased from existing alternative investments clients of the Investment Managers segment due to new products and additional services. Average assets under administration reflect a loss of a significant client which was not charged asset-based fees.
Revenues from our acquisitions of SEI Novus and Atlas Master Trust were $11.3 million and $4.8 million, respectively, during 2022. SEI Novus and Atlas Master Trust were acquired during the fourth quarter of 2021 and are reported in the Institutional Investors segment.
Earnings from LSV decreased by $16.9 million, or 12%, in 2022 due to negative cash flows from existing clients, market depreciation and client losses. Increased performance fees during 2022 partially offset the decrease in earnings from LSV.
Operating expenses increased from higher personnel and consulting costs due to business growth and competitive labor markets. Operational expenses also increased due to personnel costs and investments in compliance infrastructure to meet new regulatory requirements. The increase was partially offset by lower direct costs related to asset management revenues and lower amortization expense.
We initiated the VSP to long-tenured employees as part of our commitment to professional development and expanded responsibilities for current and new employees by increasing advancement opportunities. We recognized one-time costs of $54.8 million during 2022 from the program.
The Institutional Investors segment includes personnel, professional fees, amortization and other costs related to SEI Novus and Atlas Master Trust. These expenses are primarily included in Compensation, benefits and other personnel costs, Consulting, outsourcing and professional fees, and Amortization on the accompanying Consolidated Statements of Operations.
Capitalized software development costs were $25.7 million in 2022 for SWP as compared to $25.9 million in 2021. Amortization expense related to SWP decreased to $35.6 million during 2022 as compared to $47.8 million during 2021 due to the fully amortized initial SWP development costs.
The effective tax rate during 2022 was 22.0% as compared to 21.2% during 2021. The increase in the effective rate was primarily due to reduced tax benefits related to a lower volume of stock option exercises and an increase in the state effective tax rate.
Cash flow from operations was $566.1 million during 2022.
SEI repurchased 5.9 million shares of its common stock at an average price of $57.22 per share for a total cost of $338.4 million and paid $109.8 million in cash dividends to shareholders during 2022.
Other Significant Items Impacting Our Business
Infrastructure Investments
We believe that a critical component of our long-term success is our ability to continually improve our technology infrastructure. Accordingly, we endeavor to:
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automate selected manual processes in our operational, compliance, risk, control and other functions in order to create internal efficiencies;
evolve our cyber-security and data privacy systems to combat known and emerging threats and meet and exceed industry and regulatory standards around the world;
increase the resiliency and reliability of our systems; and
create more efficient technology solutions to scale our various businesses.
We will continue to invest in improving our technology infrastructure in order to maintain the foundation that we believe enables us to best serve our clients’ needs.
Investment Processing and Software Servicing Fees
Investment processing and software servicing fees in our Private Banks segment primarily include application and business-process-outsourcing services, professional fees and transaction-based services. Application and business-process-outsourcing services revenues are based upon the type and number of investor accounts serviced or as a percentage of the market value of the clients’ asset processed on our platforms. Professional services revenues are earned from contracted, project-oriented services. Transaction-based revenues are primarily earned from fees earned on securities trades executed on behalf of our clients. Approximately 43% of our investment processing and software servicing fees are earned as a percentage of the market value of clients’ asset processed, primarily from SWP and our solution clients.
Investment Management Platforms
Our investment management platforms include investment management programs and back-office investment processing outsourcing services and are generally offered on a bundled basis. Although we believe the breadth of our business solutions offer a competitive advantage, factors such as the underperformance of investment products that we manage relative to our competitors or to benchmarks and client preferences for lower cost investment products offered through an unbundled model have resulted in cash outflows and a loss of management fees primarily impacting the Investment Advisors segment.
Sensitivity of our revenues and earnings to capital market fluctuations
The majority of our revenues are based on the value of assets invested in investment products that we manage or administer which are affected by changes in the capital markets and the portfolio strategy of our clients or their customers. The generally favorable capital market conditions during 2023 had a positive impact on our asset-based fees thereby contributing to growth in our base revenues. Macroeconomic factors such as stagnant or recessionary economies, persistent inflationary pressures, continuation of interest rate increases, declining property markets and consumer confidence, tight labor markets and geopolitical tensions, among others, could have significant influence on capital markets in 2024 and beyond. Any prolonged future downturns in general capital market conditions could have adverse effects on our revenues and earnings derived from assets under management and administration.
SEI Integrated Cash program
In December 2023, we launched the SEI Integrated Cash program, an enhanced cash sweep program offered through SPTC's custody services utilizing an SEI-sponsored money market mutual fund for investment-related cash allocations and FDIC-insured deposit accounts through a network of independent banks. Under the terms of the program, SPTC will earn interest income based on the portion of its client’s cash balances held in the FDIC-insured accounts. We expect this program could generate significant revenue for the Investment Advisors segment in 2024 assuming interest rates remain at current levels. A decline in interest rates will significantly reduce the earnings derived from this program. The assets related to the SEI Integrated Cash program are included in Platform-only assets-deposit program of the Investment Advisors segment on the accompanying Ending Assets Balances and Average Assets Balances schedules.
Business Acquisitions
To enhance our capabilities, scale our competitive presence, or enable strategic growth, we pursue selective acquisitions. During 2023, we acquired the National Pensions Trust and Altigo. In 2021, we acquired Finomial Corporation and Novus Partners. If we are not able to successfully integrate our past and future acquisitions, or we do not fully realize the anticipated benefits, synergies or objectives of these transactions, we may incur additional costs such as impairment charges to goodwill or intangible assets recognized from acquisitions that could adversely affect our results of operations or financial condition.

34



Ending Asset Balances
This table presents ending asset balances of our clients, or of our clients’ customers, for which we provide management or administrative services through our subsidiaries and partnerships in which we have a significant interest.
Ending Asset Balances 
(In millions)As of December 31,
   Percent Change Percent Change
 202320222021
Private Banks:
Equity and fixed-income programs $24,496 $22,377 %$26,281 (15)%
Collective trust fund programs4 (43)%17 %
Liquidity funds3,916 3,201 22 %4,724 (32)%
Total assets under management$28,416 $25,585 11 %$31,011 (17)%
Client assets under administration7,267 4,151 75 %4,481 (7)%
Total assets$35,683 $29,736 20 %$35,492 (16)%
Investment Advisors:
Equity and fixed-income programs$71,634 $66,240 %$81,686 (19)%
Liquidity funds4,812 5,436 (11)%4,317 26 %
Total Platform assets under management$76,446 $71,676 %$86,003 (17)%
Platform-only assets18,324 13,931 32 %14,564 (4)%
Platform-only assets-deposit program843 — NM— NM
Total Platform assets$95,613 $85,607 12 %$100,567 (15)%
Institutional Investors:
Equity and fixed-income programs$77,208 $73,178 %$91,719 (20)%
Collective trust fund programs1 (80)%— %
Liquidity funds1,734 1,557 11 %2,118 (26)%
Total assets under management$78,943 $74,740 %$93,842 (20)%
Advised assets6,120 4,314 42 %4,857 (11)%
Total assets$85,063 $79,054 %$98,699 (20)%
Investment Managers:
Collective trust fund programs (A)$156,376 $141,285 11 %$92,549 53 %
Liquidity funds114 199 (43)%423 (53)%
Total assets under management$156,490 $141,484 11 %$92,972 52 %
Client assets under administration935,564 810,491 15 %907,377 (11)%
Total assets$1,092,054 $951,975 15 %$1,000,349 (5)%
Investments in New Businesses:
Equity and fixed-income programs$2,174 $1,912 14 %$2,096 (9)%
Liquidity funds209 215 (3)%240 (10)%
Total assets under management$2,383 $2,127 12 %$2,336 (9)%
Advised assets1,150 1,077 %1,410 (24)%
Total assets$3,533 $3,204 10 %$3,746 (14)%
LSV:
Equity and fixed-income programs (B)$89,312 $83,753 %$98,984 (15)%



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Total:
Equity and fixed-income programs (C)$264,824 $247,460 %$300,766 (18)%
Collective trust fund programs156,381 141,297 11 %92,560 53 %
Liquidity funds10,785 10,608 %11,822 (10)%
Total assets under management$431,990 $399,365 %$405,148 (1)%
Advised assets7,270 5,391 35 %6,267 (14)%
Client assets under administration (D)942,831 814,642 16 %911,858 (11)%
Platform-only assets19,167 $13,931 38 %14,564 (4)%
Total assets$1,401,258 $1,233,329 14 %$1,337,837 (8)%
(A)Collective trust fund program assets are included in assets under management since SEI is the trustee. Fees earned on this product are less than fees earned on customized asset management programs.
(B)Equity and fixed-income programs include $1.9 billion of assets managed by LSV in which fees are based solely on performance and are not calculated as an asset-based fee (as of December 31, 2023).
(C)Equity and fixed-income programs include $6.3 billion of assets invested in various asset allocation funds at December 31, 2023.
(D)    In addition to the assets presented, SEI also administers an additional $11.2 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of December 31, 2023).

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Average Asset Balances
This table presents average asset balances of our clients, or of our clients’ customers, for which we provide management or administrative services through our subsidiaries and partnerships in which we have a significant interest.
Average Asset Balances 
(In millions)For the Year Ended December 31,
   Percent Change Percent Change
 202320222021
Private Banks:
Equity and fixed-income programs$23,638 $23,326 %$25,857 (10)%
Collective trust fund programs6 (14)%17 %
Liquidity funds3,537 3,834 (8)%4,019 (5)%
Total assets under management$27,181 $27,167 — %$29,882 (9)%
Client assets under administration4,976 4,204 18 %4,451 (6)%
Total assets$32,157 $31,371 %$34,333 (9)%
Investment Advisors:
Equity and fixed-income programs$68,407 $70,394 (3)%$77,596 (9)%
Liquidity funds4,960 5,682 (13)%3,509 62 %
Total Platform assets under management$73,367 $76,076 (4)%$81,105 (6)%
Platform-only assets16,026 13,574 18 %13,426 %
Platform-only assets-deposit program70 — NM— NM
Total Platform assets$89,463 89,650 — %94,531 (5)%
Institutional Investors:
Equity and fixed-income programs$74,546 $79,415 (6)%$91,832 (14)%
Collective trust fund programs4 (20)%44 (89)%
Liquidity funds1,636 1,939 (16)%2,609 (26)%
Total assets under management$76,186 $81,359 (6)%$94,485 (14)%
Advised assets4,479 4,330 %4,533 (4)%
Total assets$80,665 $85,689 (6)%$99,018 (13)%
Investment Managers:
Collective trust fund programs (A)148,097 125,595 18 %85,622 47 %
Liquidity funds261 311 (16)%496 (37)%
Total assets under management$148,358 $125,906 18 %$86,118 46 %
Client assets under administration875,369 837,647 %850,510 (2)%
Total assets$1,023,727 $963,553 %$936,628 %
Investments in New Businesses:
Equity and fixed-income programs$2,053 $1,968 %$1,906 %
Liquidity funds205 247 (17)%202 22 %
Total assets under management$2,258 $2,215 %$2,108 %
Advised assets1,089 1,191 (9)%1,395 (15)%
Total assets$3,347 $3,406 (2)%$3,503 (3)%
LSV:
Equity and fixed-income programs (B)$85,661 $87,220 (2)%$99,591 (12)%
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Total:
Equity and fixed-income programs (C)$254,305 $262,323 (3)%296,782 (12)%
Collective trust fund programs148,107 125,607 18 %85,672 47 %
Liquidity funds10,599 12,013 (12)%10,835 11 %
Total assets under management$413,011 $399,943 %$393,289 %
Advised assets5,568 5,521 %5,928 (7)%
Client assets under administration (D)880,345 841,851 %854,961 (2)%
Platform-only assets16,096 13,574 19 %13,426 %
Total assets $1,315,020 $1,260,889 %$1,267,604 (1)%

(A)    Collective trust fund program average assets are included in assets under management since SEI is the trustee. Fees earned on this product are less than fees earned on customized asset management programs.
(B)    Equity and fixed-income programs include assets managed by LSV in which fees are based solely on performance and are not calculated as an asset-based fee. The average value of these assets for the year ended December 31, 2023 was $2.0 billion.
(C)    Equity and fixed-income programs include $6.2 billion of average assets invested in various asset allocation funds for the year ended December 31, 2023.
(D)    In addition to the assets presented, SEI also administers an additional $11.8 billion of average assets in Funds of Funds assets for the year ended December 31, 2023 on which SEI does not earn an administration fee.

In the preceding tables, assets under management are total assets of our clients or their customers invested in our equity and fixed-income investment programs, collective trust fund programs, and liquidity funds for which we provide asset management services through our subsidiaries and partnerships in which we have a significant interest. Advised assets include assets for which we provide advisory services through a subsidiary to the accounts but do not manage the underlying assets. Assets under administration include total assets of our clients or their customers for which we provide administrative services, including client fund balances for which we provide administration and/or distribution services through our subsidiaries and partnerships in which we have a significant interest. Platform-only assets-deposit program include assets of our clients in the SEI Integrated Cash program for which we provide custody services through our federal thrift subsidiary. The assets presented in the preceding tables do not include assets processed on SWP and are not included in the accompanying Consolidated Balance Sheets because we do not own them.
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Business Segments
Revenues, Expenses and Operating profit (loss) for our business segments for the year ended 2023 compared to the year ended 2022, and for the year ended 2022 compared to the year ended 2021 were:
Year Ended December 31,20232022Percent
Change
2021Percent
Change
Private Banks:
Revenues$503,317 $575,625 (13)%$493,570 17 %
Expenses455,820 473,209 (4)%462,796 %
Operating profit$47,497 $102,416 (54)%$30,774 233 %
Operating margin9 %18 %%
Investment Advisors:
Revenues436,298 447,766 (3)%482,949 (7)%
Expenses259,142 251,650 %240,334 %
Operating profit$177,156 $196,116 (10)%$242,615 (19)%
Operating margin41 %44 %50 %
Institutional Investors:
Revenues289,708 323,353 (10)%343,805 (6)%
Expenses165,455 172,252 (4)%168,070 %
Operating profit$124,253 $151,101 (18)%$175,735 (14)%
Operating margin43 %47 %51 %
Investment Managers:
Revenues670,486 624,918 %581,157 %
Expenses437,174 404,850 %348,655 16 %
Operating profit$233,312 $220,068 %$232,502 (5)%
Operating margin35 %35 %40 %
Investments in New Businesses:
Revenues19,984 19,375 %16,828 15 %
Expenses45,437 45,159 %53,219 (15)%
Operating loss$(25,453)$(25,784)NM$(36,391)NM
For additional information pertaining to our business segments, see Note 12 to the Consolidated Financial Statements.

39



Private Banks
Year Ended December 31,20232022Percent
Change
2021Percent
Change
Revenues:
Investment processing and software servicing fees
$370,730 $453,531 (18)%$356,655 27 %
Asset management, administration & distribution fees
132,587 122,094 %136,915 (11)%
Total revenues$503,317 $575,625 (13)%$493,570 17 %
Revenues decreased $72.3 million, or 13%, in 2023 compared to the prior year. Revenues during 2023 were primarily affected by:
One-time early termination fees of $88.0 million from a significant investment processing client recorded during the first quarter 2022;
A negative adjustment to fees from an investment processing client which reduced their business processed with us through divestment;
Reduced investment processing fees earned on our mutual fund trading solution; and
Lower investment processing fees from the recontacting of existing clients; partially offset by
Increased investment processing fees from new client conversions;
One-time early termination fees of $10.5 million from an investment processing client acquired by an existing client recorded in second quarter 2023;
Increased revenues from U.K. clients on cash balances due to increased interest rates, and
Increased investment management fees from market appreciation.
Revenues increased $82.1 million, or 17%, in 2022 compared to the prior year. Revenues during 2022 were primarily affected by:
An increase in one-time termination fees, including an $88.0 million fee recorded during the first quarter 2022 from a significant investment processing client;
Increased investment processing fees from new client conversions; and
Increased revenues from U.K. clients impacted by increased interest rates; partially offset by
Decreased investment processing fees from lost clients and market depreciation during 2022;
Decreased investment management fees from existing international clients due to market depreciation during 2022;
The negative impact from foreign currency exchange rate fluctuations between the U.S. dollar and the British pound on our foreign operations; and
A negative adjustment to fees from an investment processing client which reduced their business processed through divestment.
Operating margins were 9% in 2023 and 18% in 2022. Operating income decreased $54.9 million, or 54%, in 2023 compared to the prior year. Operating income in 2023 was primarily affected by:
A decrease in revenues;
Increased personnel costs due to competitive labor markets; and
Increased costs, mainly personnel costs, primarily related to maintenance, support and client migrations to SWP; partially offset by
Decreased non-capitalized consulting costs;
Decreased amortization expense related to SWP; and
Decreased amortization expense related to deferred sales commissions.
Operating margins were 18% in 2022 and 6% in 2021. Operating income increased $71.6 million, or 233%, in 2022 compared to the prior year. Operating income in 2022, excluding the previously mentioned early termination fees of $88.0 million, net of direct costs of $1.9 million, would have been $16.3 million. Operating income in 2022 was primarily affected by:
An increase in revenues; and
Decreased direct expenses associated with lower investment management fees from existing international clients; partially offset by
Increased personnel costs due to competitive labor markets;
40



Increased costs, mainly personnel and consulting costs, primarily related to maintenance, support and client migrations to SWP; and
The negative impact from foreign currency exchange rate fluctuations between the U.S. dollar and the British pound on our foreign operations.
Investment Advisors
Year Ended December 31,20232022Percent
Change
2021Percent
Change
Revenues:
Investment management fees-SEI fund programs$239,244 $263,266 (9)%$301,581 (13)%
Separately managed account fees174,418 162,762 %158,181 %
Other fees22,636 21,738 %23,187 (6)%
Total revenues$436,298 $447,766 (3)%$482,949 (7)%
Revenues decreased $11.5 million, or 3%, in 2023 compared to the prior year. Revenues during 2023 were primarily affected by:
Decreased investment management fees from SEI fund programs resulting from negative cash flows and a decrease in average basis points earned on assets; partially offset by
Increased fees from separately managed account programs from positive cash flows; and
The positive impact from market appreciation on our asset-based fees.
Revenues decreased $35.2 million, or 7%, in 2022 compared to the prior year. Revenues during 2022 were primarily affected by:
Decreased investment management fees from SEI fund programs resulting from market depreciation and negative cash flows primarily from a significant client loss during the third-quarter 2022; partially offset by
Increased fees from separately managed account programs from positive cash flows and market appreciation occurring during 2021.
Operating margins were 41% in 2023 and 44% in 2022. Operating income decreased $19.0 million, or 10%, in 2023 compared to the prior year. Operating income in 2023 was primarily affected by:
A decrease in revenues;
Increased personnel costs;
Increased net direct expenses primarily associated with the increase in separately managed account fees; and
Increased non-capitalized consulting costs; partially offset by;
Decreased amortization expense related to SWP.
Operating margins were 44% in 2022 and 50% in 2021. Operating income decreased $46.5 million, or 19%, in 2022 compared to the prior year. Operating income in 2022 was primarily affected by:
A decrease in revenues;
Increased direct expenses associated with increased assets into our separately managed account program; and
Increased personnel and technology costs as well as increased promotion costs; partially offset by
Decreased direct expenses related to a significant client loss during third-quarter 2022.
41



Institutional Investors
Revenues decreased $33.6 million, or 10%, in 2023 compared to the prior year. Revenues during 2023 were primarily affected by:
Decreased investment management fees from defined benefit client losses; partially offset by
Revenues from new Outsourced Chief Investment Officer (OCIO) platform clients; and
The positive impact from market appreciation on our asset-based fees.
Revenues decreased $20.5 million, or 6%, in 2022 compared to the prior year. Revenues during 2022 were primarily affected by:
Decreased investment management fees from defined benefit client losses and market depreciation; and
The negative impact from foreign currency exchange rate fluctuations between the U.S. dollar and the British pound on our foreign operations; partially offset by
Added revenues from the acquisitions of SEI Novus and Atlas Master Trust.
Operating margins were 43% in 2023 and 47% in 2022. Operating income decreased $26.8 million, or 18%, in 2023 compared to the prior year. Operating income during 2023 was primarily affected by:
A decrease in revenues;
A one-time operational charge of $4.5 million related to a client reimbursement; partially offset by