Waddell & Reed Financial Inc (WDR) Q3 2020 Earnings Call Transcript

Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Waddell & Reed Financial Inc (NYSE: WDR)
Q3 2020 Earnings Call
Oct 27, 2020, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning, everyone. And welcome to the Waddell & Reed Financial Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please also note, today's event is being recorded.

At this time, I'd like to turn the conference call over to Mike Daley, Vice President of Investor Relations. Sir, please go ahead.

Michael Daley -- Vice President, Investor Relations

Thank you. On behalf of our management team, I would like to welcome you to our quarterlyearnings conference call Joining me on our call today are Phil Sanders, our CEO; Brent Bloss, our President; Ben Clouse, our CFO; Dan Hanson, our CIO; Shawn Mihal, President of our Wealth Management Business, Waddell & Reed, Inc.; and Amy Scupham, President of Ivy Distributors, Inc.

Before we begin, I would like to remind you that some of our comments and responses may include forward-looking statements and non-GAAP financial measures. While we believe these forward-looking statements to be reasonable based on information that is currently available to us, actual results could materially differ from those expressed or implied due to a number of factors that we reference in our public filings with the SEC. We assume no duty to update any forward-looking statement.

Materials relevant to today's call, including a copy of the press release that contains a description of these non-GAAP financial measures and a reconciliation to GAAP and supplemental schedules, have been posted on the Investor Relations section of our website at ir.waddell.com.

I would now like to turn the call over to Phil.

Philip J. Sanders -- Chief Executive Officer

All right. Thanks, Mike. Good morning and thank you for joining us. As it has throughout 2020, uncertainty surrounded the financial markets during the third quarter. Given the political landscape in the US, the ongoing pandemic, social unrest and economic challenges, investors had plenty of reasons to remain cautious.

However, the financial market seemed to be looking beyond short-term concerns, providing strong returns over the quarter, with the S&P 500 Index hitting an all-time high in early September before pulling back somewhat since then.

Volatility in the markets has been a constant throughout the year, driven by concerns about a second wave of COVID-19 infections and ongoing questions about the viability and timing of a vaccine.

As we approach the final days of the US presidential election campaign, uncertainty is only rising. Regardless of the election results, the eventual resolution of the political leadership questions should provide some clarity as we enter 2021. The likelihood of a new stimulus package at some point in the next few months also appears to be supporting the markets as we look ahead.

While challenging, this environment does provide an opportunity for active investors. Our investment teams continue to execute on proven investment processes that are designed to deliver more consistent results over the long term.

As investors seek advice on long-term plan and guidance amid the uncertainty, our Wealth Management business and its affiliated advisors continued to focus on delivering disciplined advice and long-term personalized financial planning to help clients achieve their financial goals.

Across our enterprise, the majority of our employees continue to work remotely. I want to publicly acknowledge and thank our teams for the commitment they have demonstrated to our clients, affiliated advisors and shareholders throughout this challenging environment.

We see wealth and asset management services as relevant and impactful today as they have ever been, and we remain committed to steadily executing on our long-term vision and growth strategy.

Next, I'd like to highlight some of the progress we made this quarter on several key focus areas. We continue to evaluate our product lineup and ensure we are competitively priced to succeed in the marketplace.

In September, we introduced a series of enhancements to the Ivy InvestEd 529 Plan, increasing the number of InvestEd portfolios, including age based and static options and adding two ETFs and 3 Ivy Funds as underlying investments in those options, all designed to provide flexibility and best meet investor needs as they save for education.

In addition, effective October 1, we reduced load fees on all Class A shares for Ivy equity and Ivy fixed income funds. These reductions, which include various breakpoints on all funds at certain purchase levels, are a further illustration of our desire to maintain competitive pricing across our lineup. We have made significant investments since 2018 to drive down fees to clients. Today, 75% of our AUM is at or better than competitor median fees.

Technology and analytics is also an ongoing focus area, where we made additional investments this quarter, appointing Eric Meltzer as our new Chief Technology Officer. Eric is a member of our executive leadership team and is leading efforts to leverage technology as a strategic asset across the organization, overseeing areas including enterprise technology, architecture and infrastructure, cybersecurity, application development, data integration and service delivery management.

Within our asset management business, we continue to progress on our data strategy, with the rollout of RIA target and segmentation tool. The use of data and analytics continues to be an area of focus for our teams as we constantly strive to be more efficient in coverage of our sales territories.

We continue to support our wealth management and asset management technology platform initiatives with the goal of improving our affiliated advisor and client experiences, enhancing sales enablement and improving internal operations.

Specifically, within our Wealth Management business, we are expanding the capabilities of our WaddellONE digital platform, with the introduction of OnePath, a digital account opening and maintenance tool, that will reduce the time required to open an account through a data-driven dynamic workflow process. We'll launch a pilot program for OnePath during the fourth quarter with full implementation by early 2021.

OnePath simplifies and enhances workflow for affiliated advisors, serving their clients by accelerating straight-through processing, reducing clicks, improving e-signature capabilities and providing transparency for advisors into the status of work in progress.

In our asset manager, our institutional distribution model has benefited from new technology that brings a more seamless client experience to further support sales and retention efforts.

In our Wealth Management business, we appointed industry veteran Cory McCruden to lead our advisor and client experience initiatives. He will collaborate with key stakeholders across the business to improve advisor and client journeys, while creating new innovative experiences, increasing loyalty and driving advocacy.

He is also working to develop and lead strategies in support of best-in-class client and advisor experience processes and procedures, while acting on opportunities for innovative investment growth and expansion.

Our capacity to make these investments in our products, technology and personnel is supported by our strong balance sheet. Our robust capital base and the high cash flow generation of our business fortified us as COVID-19 impacted the markets and enabled us to continue investing in growth throughout the spring and summer. This remained a key strength for us this quarter. And going forward, positions us well to continue to pursue both organic and inorganic growth opportunities, while supporting meaningful capital return to shareholders via our dividend and share repurchases.

Lastly, we took additional steps to enhance our culture, including diversity and inclusion initiatives. We have made great strides to ensure we have a true culture of belonging within our organization. In recognition of some of the steps we have taken this year, Waddell & Reed Financial was recently named a finalist for the Diversity Champions Award by Investment News. We were proud to be recognized, along with other firms, for our ability to inspire others from diverse backgrounds to join, flourish and bring their authentic selves to work in the financial services industry.

Before I turn it over to Ben, I will touch on a few details within both our Asset Management and Wealth Management businesses. Within our Asset Management business, Ivy Investments, third quarter net flows improved meaningfully compared to the same quarter of 2019, as both sales and redemptions improved.

Sales continued to be strong in our mid-cap suite with both strategies in net positive flow for the quarter. Our mid-cap income opportunities strategy launched through a seed capital six years ago recently achieved a milestone of $1 billion in fund assets. This milestone was the result of a strong investment process and 100% organic growth.

While short-term performance has improved, we continue to see outflows in our international core equity product. Overall, our investment and distribution teams are effectively working remotely and distribution has continued to make traction across channels since we realigned the structure of our sales teams.

Turning to investment performance, the quarter was generally positive for the equity markets, with many market segments delivering strong year-to-date returns, as I noted earlier. Active managers were challenged during the period, with the majority of active managers lagging benchmarks. Although our distinct investment process kept us competitive.

Broadly, our relative performance across the complex held steady on a one-year basis and improved on longer term metrics. But we continue to see opportunities to improve performance in the future.

As a fundamental active manager and long-term investor on behalf of our clients, we believe that acting as an engaged, knowledgeable steward is an integral component of our value-add to our clients. And so, we wanted to highlight some of our initiatives in this area.

In the quarter, we shared our views in a comment letter to the Department of Labor regarding the value of ESG in investment decision-making. In addition, we support disclosure of material ESG matters as an active member of the SASB Investor Advisory Group as a CDP investor signatory and as a signatory to the Investor Stewardship Group.

We believe that the market is increasingly recognizing the important role that specialist fundamental active managers play in driving authentic shareholder engagement and ESG integration, and we will continue to invest in these capabilities.

In our Wealth Management business, we have been pleased to see continued improvement in net AUA flows and continued growth in advisory net new assets, with positive net advisory flows for the seventh consecutive quarter.

We also have seen strong advisor recruiting results this year and we think our differentiated service and support model, combined with our technology package and full product suite, offer value to advisors looking for a differentiated independent business model with meaningful support in the areas that matter to them most.

In summary, we continue to see evidence of progress across the enterprise and believe that our strategic positioning, our robust capital position and, most importantly, the resilience and adaptability of our people positions us well for growth in the future.

I'll now turn it over to Ben to go over the financials.

Benjamin R. Clouse -- Senior Vice President and Chief Financial Officer

Thank you, Phil. And good morning, everyone. We reported net income of $30.5 million or $0.48 per share compared to $24.8 million or $0.38 per share in the prior quarter. Steady recovery in the markets during the quarter led to an increase in both AUM and AUA and resulted in total revenues growing by 11.5% compared to the second quarter. At the same time, operating expenses were higher by $13.6 million due to an increase in distribution costs of $14.3 million. We were pleased to be able to hold controllable expenses below the second quarter levels at $101.4 million, benefiting from continued low travel and business meetings expense as well as lower compensation costs from slower hiring than planned.

Investment income was lower by $9.7 million compared to the very strong second quarter levels due to lower unrealized investment gains on our corporate and seed investment portfolios, net of our hedging strategy.

We continued the momentum from earlier in the year within our Wealth Management business. Wealth management AUA ended the quarter at $62.7 billion and increased 6.3% compared to the prior quarter, primarily due to the market rebound.

Net new assets improved compared to the second quarter from stronger net new advisory assets. As Phil mentioned, we achieved the seventh consecutive quarter of positive net new advisory assets with 6.4% annualized growth and an all-time high balance of $29.3 billion in advisory assets at quarter-end.

Our recruiting success has also continued with another 11 advisors affiliating during the quarter, bringing our total for 2000 to 32 new advisors with prior firm assets in excess of $1.9 billion. Our transition teams are engaged and working well together with advisors to ensure a seamless transition for advisors and clients.

We did experience some turnover this quarter, which led to the slight decrease in total advisor and associate count. However, our outlook for the fourth quarter remains positive and our recruiting teams continue to have productive dialog with potential recruits.

Furthermore, we continue to attract and retain incredibly high caliber advisors and have seen advisor productivity continue its steady improvement, reaching an all-time high of 474,000 trailing 12-month revenue per advisor.

Ivy Investments ended the quarter at $67.9 billion in AUM, an increase of 4.5% from the prior quarter, while average AUM of $68 billion was up 10%. Phil covered the details on flows and I would just add that, while we did experience a seasonal decrease in sales this quarter, the year-over-year improvement in net flows and redemption rates are both encouraging.

Turning now to the income statement. Total revenue increased 11.5% compared to the prior quarter, led by the 12.8% increase in U&D fees, primarily resulting from higher advisory fee revenues and higher commissionable sales from the low second quarter levels.

Investment Management revenues were also higher from the higher asset levels and one additional day compared to the prior quarter. The management fee rate held fairly consistent with the second quarter as improvements in the overall mix were offset by increased fee waivers on our money market funds.

Operating expenses totaled $230 million and increased $13.6 million compared to the prior quarter. Distribution costs were higher, $14.3 million, due to the higher revenue, while controllable costs decreased $700,000, primarily due to lower G&A costs as business meetings and travel expenses continue to be minimal.

We did make progress on several key projects, as Phil mentioned, and I would attribute the lower expense results to broad cost controls, coupled with the lingering impacts of the current operating environment on meetings and travel as opposed to a step back in growth-oriented investments.

I expect fourth quarter controllable costs to be higher in a range of $103 million to $105 million due to strategic project activity and the absence of the meeting expense reductions we experienced in Q3. That said, our continued discipline on controllable expenses, particularly with increases in revenue, provides operating leverage that enables us to continue to invest in growth.

The effective income tax rate was 24.8% for the quarter and it was a fairly normal quarter from a tax perspective. Based on current asset levels and the resulting forecast, we expect the tax rate to remain within our prior guided range of 24% to 26% for the fourth quarter.

Finally, cash and investment balances decreased modestly compared to the prior quarter due primarily to the deconsolidation of one of our seeded investments that lowered the balance by $26 million.

We also returned another $56 million of capital to shareholders this quarter through dividends and share repurchases. For 2020 year-to-date, we've returned $162 million to shareholders, while maintaining ample liquidity on the balance sheet to support our growth plans.

Operator, we would now like to open the call for questions.

Questions and Answers:


[Operator Instructions]. Our first question today comes from Dan Fannon from Jefferies & Company. Please go ahead with your question.

James Steele -- Jefferies -- Analyst

Hey, this is actually James Steele filling in for Dan. Thank you for taking our question. So, you touched on it in the prepared remarks, the targeted fee reductions. I'm just curious on the lessons learned here so far. I know you've been using these for a few years, and you're trying to strike a balance between increasing the salability of the products versus the immediate loss of revenue. So, just interested in how you're benchmarking progress and any feedback that you may have heard from your distribution teams.

Philip J. Sanders -- Chief Executive Officer

Okay, great. Amy, do you want to address that question with respect to fees and our strategy there and how we are seeing that implemented across the product line.

Amy J. Scupham -- Senior Vice President, Distribution

Absolutely. Hi, James. It's Amy. Thank you for the question. What we've done as we've looked at our overall pricing and product strategy over the last few years is certainly take a look at the competitiveness of our strategies in multiple formats, and fees and pricing is one of them. And so, as we're competing against passive and the pricing dynamics that passive causes, so what we've done is we've really focused on trying to get those strategies that we feel like are well resourced with a strong institutional quality process and performance to a space where we're in that kind of median range of the below average quintile in their peer group.

And so, as we measure success, it's very different depending on the asset class that we're talking about. So, if you look at -- Phil mentioned in his prepared comments, our mid-cap suite of products are a net positive, while mid-cap income for a long period of time, mid-cap growth has moved to a net positive over the course of the last quarter. When you look at those two categories, mid-cap growth and mid cap value in the Morningstar Mutual Fund peer group, they're in pretty substantial net outflow as a category. So, we view that as being positive from a success metric.

So, what we try to do internally is look at where are we from competitiveness on multiple formats. If we feel like we're well priced, what's happening in the asset class and how do we compare to that?

Philip J. Sanders -- Chief Executive Officer

Thanks, Amy. And the only thing I would add there is, as Amy said initially in her comments, obviously, pricing is just one component of this. Obviously, you have to have a product suite that's desired and very competitive performance to be successful as well. Next question?


Our next question comes from Mike Carrier from Bank of America. Please go ahead with your question.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Good morning. Thanks for taking the questions. So, just given more M&A activity in the sector, I just wanted to get your updated thoughts on how you think about M&A as part of the growth strategy and if you feel like you need more scale in the business.

Philip J. Sanders -- Chief Executive Officer

Yeah. We've been looking at this obviously and talked about it the last -- for quite some time here with respect to a lot of the activity in the sector. There's fee pressures, consolidation of platform access, that type of thing. So, as you know, we've highlighted M&A as one component of our growth strategy. The way I guess we think about it, there is a lot going on. Some of them are the big scale plays. That's not likely to be us. We're going to be more focused on the approach where we're looking at, I think, specialized strategies that can supplement our product profile as it is. We're not the type of company that's going to be everything to everybody. So, we're going to be more focused in our approach, but certainly with disruption in activity in the environment, we certainly have the ability to be relevant in that, but it would likely be more focused and complementary to what we do.

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Okay, that's helpful. And then, just as a follow-up, Ben, just on expenses, so controllable side came in better and even the guide seems a little bit better. Just when you think about -- when we do get post-COVID and things start to normalize back, like anything changed in -- like, what you learned in operating in this environment that would make that controllable level, say, lower than where it was a few quarters ago?

Benjamin R. Clouse -- Senior Vice President and Chief Financial Officer

Mike, as you can imagine, we are right in the midst of our planning process for 2021. So, I'll certainly have some better guidance for you next time. In regard to the environment, obviously, low or near zero travel costs have a big impact on that. We also have some significant impact related to the absence of meetings or having meetings in a virtual format that have both contributed significantly to savings this year. As we think about '21, I expect those will come back at some point and we will have to factor that in. We also have a number of initiatives under way for investments in technology, in particular in the wealth business that we expect to realize some efficiencies from and be able to provide better service to our advisors and our clients. And I think we've learned that we're able to continue the momentum of that in this operating environment without any significant impact, which I think has been a positive. But like I said, I'll have better guidance on the next call.


And our next question comes from Glenn Schorr from Evercore ISI. Please go ahead with your question.

Glenn Schorr -- Evercore ISI -- Analyst

Hi. Thanks very much. Quick question on Wealth Management. I think in the text, you noticed the advisory products continue to drive the majority of new sales. A, I'm curious what products it would be. I'm curious of the new money coming into Wealth Management, how much of that is attributable to the new advisor adds versus the current client base. Thanks a lot.

Philip J. Sanders -- Chief Executive Officer

Okay, great. Shawn, you want to take that one?

Shawn M. Mihal -- Senior Vice President, Wealth Management

Yeah. Thanks, Phil. And thanks, Glenn. Yes, absolutely. We are seeing the positive flows come through the advisory business channels and we have expanded out those product line-ups to add additional advisory programs over the last few years. Namely, where we're seeing some strong results and positive flows have been in our MAP Direct program, which is a mutual fund ETF program that we have available on our clearing platform as well as our guide and investment strategies platform, which is more of a turnkey asset management type program offering a variety of different model portfolios.

We're seeing a substantial amount of growth in those two areas, as well as some of our advisory programs where we really see opportunities is inside our MAP Navigator program as well. Following behind that is a couple of other advisory programs. So, overall, the growth really is attributed to our MAP Direct and guide and investment strategies program.

With regard to the overall ratios, we are seeing significant increases just due to the recruiting aspect and seeing the transition of that business come into our platforms. In addition, we're also seeing a considerable amount of just organic growth with the existing customer base. So, the exact breakdowns on those, we probably have to get back to you on that. But the combination of those two are resulting in the overall net improvements with regard to advisory inflows.

Glenn Schorr -- Evercore ISI -- Analyst

Okay, great. I appreciate that.

Philip J. Sanders -- Chief Executive Officer

All right. Next question.


Our next question comes from Bill Katz from Citigroup. Please go ahead with your question.

William Katz -- Citigroup -- Analyst

Okay, thank you very much for taking the questions this morning. You had mentioned that you had done a few more price adjustments of fee and loads. Is the third quarter the right run rate to model off of or is there a further change to anticipate into the fourth quarter?

And then, relatedly, in the other 25% of assets that are sort of not below median, should we be expecting some further strategic review on pricing and maybe you think about what kind of impact that might have?

Philip J. Sanders -- Chief Executive Officer

Okay. So, maybe Ben, you can maybe address the run rate issue. And then, Amy, you can follow up with any thoughts with respect to pricing strategy on the other 25%. Ben?

William Katz -- Citigroup -- Analyst

Sure. Bill, you are correct. Third quarter would generally be a good run rate. The only recent impact was the load waivers that Phil mentioned in his comments. Our prior management fee waiver adjustments were baked in. So, third quarter I think would be a relatively good proxy for that. And I'll defer to Amy on the balance of your question.

Amy J. Scupham -- Senior Vice President, Distribution

Good morning, Bill. Thanks for the question. I think the way we think about the other 25% is, certainly, if you look at what we've done up to this point over the course of the last two-and-a-half years, we've really addressed the strategic component of this or the more tactical component, I guess. Strategically, what we want to do as active managers is provide strong consistent long-term returns at a reasonable price. And so, I would say it is something that we will continue to address as we look at the remaining 25% of assets. Some of that will be addressed through continued pricing updates which we evaluate a couple of times a year. It doesn't mean we make the moves a couple of times a year, but we certainly evaluate them as an executive team a couple of times a year. And then, in addition to that, we are also undergoing a share class project where we take a look at the alphabet soup of share classes that are available to our clients today, which ones are the most relevant, what do we think our share classes should look like in the future and some of it can be addressed through some of that as well.

William Katz -- Citigroup -- Analyst

Great, thanks.

Philip J. Sanders -- Chief Executive Officer

Bill, I wanted to add one more. Sorry, I wanted to add one more thing, which is we'll continue to watch our money market waivers which may be further challenged in fourth quarter. As you can appreciate, the interest rate environment has been difficult there.

William Katz -- Citigroup -- Analyst

Okay. And just a point of clarification -- and thank you for all that. When you mentioned that ex-load waivers, is that something that might show up on the distribution yield, so to speak, as a partial offset to some of the productivity gains?

Philip J. Sanders -- Chief Executive Officer

That is correct. That's where that would show up. and we believe it is a relatively minimal impact, less than a penny.


[Operator Instructions]. Our next question comes from Michael Cyprys from Morgan Stanley. Please go with your question.

Michael Cyprys -- Morgan Stanley -- Analyst

Hey, good morning. Thanks for taking the question. Maybe just coming back on the expenses, if I heard you guys correctly, for the fourth quarter, expecting controllable expenses at $103 million to $105 million, I guess, how much would you quantify are the environmental savings embedded in there from the lack of meetings and travel? And then, understand you guys are in your budgeting process for '21, but I guess maybe just how are you thinking about quantifying and thinking about prioritizing investments in the business? What would you say are the top three areas you're making investments in?

Philip J. Sanders -- Chief Executive Officer

Hey, Ben, you want to take a crack at that?

Benjamin R. Clouse -- Senior Vice President and Chief Financial Officer

Sure. I would be happy to. Good morning, Michael. In regard to fourth quarter -- sorry, in regard to fourth quarter, we do expect that to be up a bit primarily due to ongoing strategic project work as the main driver, which really centers around our wealth management technology platform and the continued roll out of OnePath to drive toward a better work flow and more efficient processing for our advisors and for their clients. We're also making a number of other infrastructure investments continually, as you can imagine, to keep our technology at the forefront. We're also beginning some efforts related to our Asset Management business to continue modernization there in regard to our trading and other portfolio management systems and platforms and also continuing to invest significantly in our data to ensure that we're well positioned to leverage our data in the most significant way that we can, again, with an eye toward best supporting and serving our advisors and their clients and, of course, our asset management clients as well.

Michael Cyprys -- Morgan Stanley -- Analyst

Okay. Maybe just a follow-up maybe on the M&A side, if I could, Phil. I guess just how are you thinking about the opportunity with the broker dealer in terms of opportunities for inorganic growth and opportunities there to further accelerate the broker-dealer, the wealth management side of the business? What could be additive in your view, what could make sense there?

And then, as you think about more bigger picture, broker dealer versus the asset management side, I guess, which part could M&A, you think, make more sense or where could it be more additive?

Philip J. Sanders -- Chief Executive Officer

I think consistent with what we said in the past, we're open to both sides of the business. I do think in the Wealth Management side, there was a question earlier about scale, that's a little bit easier in terms of potentially growing inorganically. But also, you get the benefit of just doing some one-off acquisitions with respect to groups of advisors or smaller operations, that type of thing. So, I think that's probably an easier thing to execute on. And the Asset Management side, obviously, I think it's going to be a little bit more specific and targeted, lot of cultural issues that you've got to watch and that type of thing. While we're open for both, I think certainly we see longer-term benefits by growing our wealth manager. That's been an area of focus for us. We've talked about that in the future.

The last few years have been really about kind of putting us in this position, and we've made a lot of improvements internally with respect to -- especially on the Wealth Management side. So, a few years ago, if we had opportunities presented to us, I think it would have been difficult for us to execute, but we're now positioned to execute on those types of opportunities.

I might stop there and let Shawn -- Shawn, if you want to add and maybe elaborate what areas of -- or maybe the characteristics of opportunities, whether it's organic or inorganic and how you might be focused within our Wealth Management side, that probably would be helpful here.

Shawn M. Mihal -- Senior Vice President, Wealth Management

Yeah. Thanks, Phil. I think as we mentioned, if we look back a few years ago, our scalability just wasn't necessarily where it needed to be on our Wealth Management line of business. And over the last couple of years, we've really been working to refine that line of business to improve its overall ability to scale. So, when we look at the technology platforms, and which we're still making investments into, our overarching support model that we've developed over the last couple of years, as well as enhancing our product set has made it more strategically aligned for that ability to organically grow and inorganically grow through scale with the ability to acquire additional advisors into the wealth management business. So, when we really look at that channel, we're looking at that ability to bring additional advisors in and accelerate that growth. Over the last few years, it's been that process in place in order to get to this position, and we think we've got ourselves relatively well positioned as we look forward here for that ability to scale this line of business.


And our next question is a follow-up from Bill Katz from Citigroup. Please go ahead with your follow-up.

William Katz -- Citigroup -- Analyst

Okay, thank you very much. I'm sorry if I overspoke someone before. So, just going back to the FAs for a moment, few moving parts there. Could you sort of maybe peel back in terms of the recruited assets that you've announced already? A, are all those assets in? And is there a way to sort of think about the recruitment pipeline here in terms of recruitable assets that might be pending as an opportunity set just to sort of gauge that?

And the broader question is, these FAs, can you tell me from what channels they are coming from? Are these other independent established financial advisors? Are they part of wirehouses? Just trying to get a sense of the competitive backdrop there. Thank you.

Philip J. Sanders -- Chief Executive Officer

Okay. Shawn, you want to take that one?

Shawn M. Mihal -- Senior Vice President, Wealth Management

Yeah, yeah. Absolutely. Thanks, Phil. We are tracking the overall movement of assets and, obviously, there is -- relatively to those recruited advisors, there is incentives that are based around the ability to move those assets over to our platforms. So, we are seeing significant progress in that nearly $1.9 billion that has been recruited in making that transition on to our platforms. In addition, as we look forward into the rest of the year, we have about 17 signed or pending offers to advisors, which we have strong probabilities for being able to close those advisors as we go through the fourth quarter and into the first quarter, which represented about another $8.2 million in trailing 12 production. We've got another $1 billion in assets under administration. So, we are seeing as the ability to bring advisors over from a variety of different types of firms. So, still in the independent space, we're seeing opportunity there and the advisors that have joined this year, a considerable number come from independent, a few from wirehouse and a few from bank channels. So, the larger majority really coming through the other independent channels making a transition over to Waddell & Reed.

William Katz -- Citigroup -- Analyst

Terrific. Thank you so much.


And ladies and gentlemen, at this time, I'm showing no additional questions. I'd like to turn the call over to management for any closing remarks.

Philip J. Sanders -- Chief Executive Officer

Okay. This is Phil. Just want to thank everybody for your interest. And have a great day. And we'll see you next quarter. All right. Thanks, everybody.


[Operator Closing Remarks].

Duration: 40 minutes

Call participants:

Michael Daley -- Vice President, Investor Relations

Philip J. Sanders -- Chief Executive Officer

Benjamin R. Clouse -- Senior Vice President and Chief Financial Officer

Amy J. Scupham -- Senior Vice President, Distribution

Shawn M. Mihal -- Senior Vice President, Wealth Management

James Steele -- Jefferies -- Analyst

Michael Carrier -- Bank of America Merrill Lynch -- Analyst

Glenn Schorr -- Evercore ISI -- Analyst

William Katz -- Citigroup -- Analyst

Michael Cyprys -- Morgan Stanley -- Analyst

More WDR analysis

All earnings call transcripts

AlphaStreet Logo

10 stocks we like better than Waddell & Reed Financial
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Waddell & Reed Financial wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 20, 2020

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.