SEI Investments Co: Form 10-K for the period ended Dec 31, 2024

Corporate overview

SEI Investments Company (together, with its subsidiaries unless otherwise noted, “SEI” or the “Company”) is a leading global provider of financial technology, operations, and asset management services within the financial services industry.

We tailor our solutions and services to help our clients more effectively deploy their capital—whether that’s money, time, or talent—so they can better serve their clients and achieve their growth objectives.

We are headquartered in Oaks, Pennsylvania, and approximately 5,000 employees support clients from service centers located in the United States, United Kingdom, Ireland, Canada, continental Europe, India, and South Africa.

In 2024, we earned approximately 55% of our revenue from technology and operations outsourcing and 40% from asset management fees, with the remainder attributable to professional services and other ancillary services. SEI provides these services across four core client-oriented business segments; Investment Managers, Private Banks, Investment Advisors, and Institutional Investors. SEI’s clients include 8 of the top 20 U.S. banks and 43 of the top 100 investment managers worldwide, and we manage, advise or administer approximately $1.6 trillion in assets.

Core capabilities

With our core competency pillars of technology, operations, and asset management, the breadth of the markets we serve and capabilities across investment processing, investment operations, and investment management uniquely position us in the financial services industry. We deliver our services standalone or combine multiple capabilities into comprehensive solutions designed to meet the needs of each market we serve globally. Our clients include wealth managers, banks, investment advisors, asset managers, family offices, institutional investors, and ultra-high-net-worth investors.

(all dollar amounts in thousands)

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Technology and operations

We provide the technology and operational infrastructure across the front, middle, and back office to help our clients scale, increase efficiency, and improve performance. Capabilities include:

• Business process outsourcing and custody
• Fund administration, depositary services, investment accounting, and investor servicing
• Curated suite of internally managed and third-party investment products, including ETFs, SMAs, and UMAs
• Investment expertise in direct indexing, factor-based, alternatives, and tax management
• Discretionary investment management for institutions in need of expertise, infrastructure and enhanced governance
• Data and information management, analytics, and reporting
• Regulatory and compliance service
• Network operations, cloud, and cybersecurity services

Our proprietary technology platforms include the SEI Wealth PlatformSM (SWP) and its predecessor, TRUST 3000®. We use these technologies to deliver operations and administrative outsourcing services, including custodial and back-office accounting services.

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. SWP’s open architecture also allows for technology integrations with other SEI capabilities and client systems to enable a seamless wealth management experience.

Investment processing platforms are offered in Software-as-a-Service (SaaS) or Platform-as-a-Service (PaaS) delivery. 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.

Our technology and operations platform also includes technology and operationally-enabled investment service capabilities for a broad range of traditional and alternative investment managers, delivered as unbundled product components for front, middle, and back offices through our Investment Managers segment.

Asset management

We provide comprehensive solutions for managing personal and institutional wealth. These solutions include investment strategies, customized investment management programs, and SEI-sponsored and third-party investment products to support an investor’s organizational or personal goals.

Investment strategies are typically implemented with investment products that include ETFs, alternative investments, collective investment products, separately managed accounts, and mutual funds. We serve as sponsor, administrator, transfer agent, investment advisor, distributor, and shareholder servicer for many of these products.

Our active, factor-based, and passively managed solutions enable our clients to focus on their clients while implementing processes that help them gain efficiencies, manage risk, and grow their businesses. Solutions are offered both individually and as part of model portfolios, with the majority of our asset management business historically focused on model portfolios. SEI has earned a well-regarded reputation in the market for clients seeking whole portfolio and model portfolio solutions due to our size and long track record in offering these products.

These solutions and programs leverage more than four decades of experience with manager research, advice, asset allocation, and portfolio construction. Additionally, our robust technology offering creates a differentiated competitive advantage. We are able to monetize our technology either directly or as part of a comprehensive asset management offering in which technology is included within our asset management fees.

As of December 31, 2024, we managed $390.2 billion in assets including:

• $180.0 billion invested in fixed-income and equity funds and separately managed account programs;
• $202.4 billion invested in collective trust fund programs; and
• $7.8 billion invested in liquidity or money market funds.

An additional $86.5 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.

Business segments overview

Our business segments are generally organized around our target markets. Financial information about each business segment is contained in "Note 12. Business Segment Information" included in our Notes to Consolidated Financial Statements.

The percentage of consolidated revenues generated by our business segments for the last three years was:

Investment Managers

We provide a comprehensive, outsourced investment management operating platform to alternative and traditional asset managers, fund companies, and sovereign wealth funds. Our clients include asset owners and a diverse, sophisticated group of alternative, traditional, and hybrid investment managers globally.

Our capabilities span the front, middle, and back office to manage assets, including supporting complex fund structures through best-in-class 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 also offer trustee, investment management, and administration services for collective investment trusts, serving the U.S. retirement market.

SEI’s global operational footprint services funds in all major jurisdictions amid a constantly evolving regulatory environment. Our outsourcing solutions across the front-to-back office with best-in-breed technology accommodate investment managers of all sizes and complexities and enables them to focus on core business activities—from the unique needs of emerging and start-up managers to the complex needs of global, multi-asset hybrid managers.

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, 16% of the revenues for this segment is earned as account servicing fees.

Our competitors vary according to the asset class or solutions provided and the domiciles in which they operate. They include SS&C Technologies, State Street, BNY Mellon, Northern Trust, and Citco.

Private Banks

We provide technology, operations, and asset management solutions primarily to the wealth management businesses embedded within banks and trust companies, in addition to independent wealth advisors. Clients include several financial institutions whose relationships span decades with SEI.

Our solutions provide the investment processing, operations, and administrative capabilities that are vital to helping wealth management businesses achieve their business objectives, manage change and complex operations, replace legacy platforms, comply with regulations, and deploy capital more effectively.

Contracts generally range from five to seven years. As of December 31, 2024, we had significant relationships with 117 clients, including TRUST 3000® relationships with 37 bank and trust institutions in the United States, and SWP relationships with 80 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 asset management programs to banks, wealth managers and other financial services firms, including 29 clients who had at least $100.0 million each in customer assets invested in our programs as of December 31, 2024. Competitors for our asset management services may include in-house investment teams and global asset management firms, such as LPL Financial and BlackRock.

Investment Advisors

We provide wealth management technology, operations, and asset management solutions for independent financial advisors across the RIA and independent broker/dealer market segments.

This segment offers both fully integrated and unbundled solutions that enable advisors to devote more of their resources to growing their businesses and achieving better financial outcomes for their clients.

Our clients 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. These programs include goals-based strategies, SEI-curated models that utilized multiple structures such as direct indexing, separately managed accounts, ETFs, and mutual funds, to help advisors align diversified portfolios with client needs.
• Advisor services: We help advisors manage and grow their businesses by offering consultative practice management services, including access to our business transition services, case management expertise, third-party applications, thought leadership, and marketing and growth programs.

Fees are typically bundled and embedded in asset management or custody fees.

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 investment advisory platform providers, such as Envestnet and Orion, as well as diversified firms that focus on custody operations, such as Charles Schwab & Co., Inc., Fidelity Investments, and LPL Financial.

Institutional Investors

Our Institutional Investors business is one of the first and largest providers of outsourced investment management services. Providing fully outsourced CIO (OCIO) and unbundled OCIO services, we primarily serve retirement plan sponsors, healthcare systems, higher education, not-for-profit organizations, and other institutional asset owners.

• OCIO: 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.
• Unbundled OCIO: 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, as well as access to alternative investment products.

Both fully outsourced and unbundled solutions leverage the breadth of our investment management, advisory, administration, technology, and operational capabilities to help institutional investors make more confident decisions, achieve greater control, reduce risk, and improve efficiencies.

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 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 in our Institutional Investors business 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.

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 providing managed security services through SEI Sphere®, the modularization of larger technology platforms, and a private client wealth management solution offering flexible family office-type services through a highly personalized solution that utilizes a goals-based approach.

Human capital

Our talented workforce is the key to our ability to serve our clients globally. At December 31, 2024, we had 5,066 full-time and 32 part-time employees.

Employee unions do not represent any of our employees.

Corporate sustainability

Our values are the foundation from which we drive our company’s and our clients’ long-term success and make an impact on our communities. We work with each other and welcome diverse perspectives to foster an inclusive environment and solve problems that matter. We think and act like owners, having the courage to push boundaries and do the right thing in the best interest of our company, clients, and community. More information about our commitment to corporate sustainability can be found in our Corporate Sustainability Report.

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, or FCA;
• 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;
• 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, or to meet regulator expectations, 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 or a direction that we comply with certain restrictions, the revocation of applicable registration as a broker-dealer, investment advisor or other regulated entity, and, as the case may be, censures and fines. Currently, our subsidiary in the United Kingdom, SIEL, is working with the FCA to determine the nature and scope of remedial actions in which SIEL will engage in order to meet the FCA's expectations and to enable SIEL to continue to grow and execute on its development and offering of new products and solutions. 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.

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. See also “Note 10. Commitments and Contingencies” included in our Notes to Consolidated Financial Statements for a more fulsome summary of our current regulatory matters with the FCA.

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 or a significant number of clients opting out of these programs 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. The implementation of many product innovation and development opportunities, particularly cloud-based solutions, requires us to obtain client consent and/or vendor consent, which may be withheld or be obtainable only if we incur a cost that is disproportionate to the revenue opportunity. 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. Expansion of Business-to-Consumer products and services presents unique risks as it increases direct interaction with individual consumers, exposing us to heightened cybersecurity threats and data privacy concerns. Growth in Business-to-Consumer models may increase operational risk due to higher transaction volumes, potentially increasing operational costs and fraud risks.

Product development in the asset management arena has experienced significant growth in alternative investments, including private equity, hedge funds, real estate, and infrastructure. The growing focus on alternatives reflects increasing demand for diversification beyond traditional asset classes; however, new alternative products often require three or more years in the market to generate the track records necessary to attract significant asset inflows. In addition, alternatives present significant operational challenges for asset managers, primarily due to the lack of widely adopted and trusted technological solutions in this space. Unlike traditional investments, which benefit from well-established operational infrastructures and automated processes, alternative investments often require more manual intervention and bespoke operational support. Failure to effectively manage the risks associated with these new products could lead to reputational damage, regulatory scrutiny, and potential financial losses.

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 Tax Harvesting programs. New products often must be in the marketplace 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.

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, business process outsourcing services, 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. Companies that successfully implement artificial intelligence (AI)-driven pricing could gain a significant advantage in optimizing revenues and responding to market dynamics. 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.

The competitive landscape is rapidly evolving with the entry of fintech firms and big tech companies into asset management. Our ability to compete effectively against these new entrants, who may have superior technological capabilities, is crucial for maintaining market share. Furthermore, these 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 capabilities and regulatory status 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 outsourcing strategy may affect our business operations and financial performance. We have recently implemented a new outsourcing strategy that leverages a Global Capability Center (GCC) in India. While this strategy aims to enhance operational efficiency and access a skilled talent pool, it also introduces new risks that could materially affect our business operations and financial performance. The establishment and management of a GCC in India involves complex operational, regulatory, and compliance challenges. We may face difficulties in navigating local laws, cultural differences, and communication barriers, which could impede effective collaboration and oversight. Additionally, the GCC's operations may be subject to geopolitical risks, changes in local regulations, or economic instability in India, potentially disrupting our business processes or increasing operational costs. Our GCC relies heavily on local infrastructure and technology systems, which may be vulnerable to cybersecurity threats, natural disasters, or other disruptions. Any significant interruption in the GCC's operations could adversely affect our ability to deliver services to clients, potentially resulting in reputational damage and financial losses. Furthermore, the transfer of certain business functions to the GCC may involve the handling of sensitive data, raising concerns about data privacy and security. Despite our efforts to implement robust security measures, we cannot guarantee that our GCC will be immune to data breaches or cyber-attacks, which could expose us to legal liabilities and regulatory scrutiny.

The success of our GCC strategy depends on our ability to attract and retain skilled talent in India. However, the competitive labor market for technology professionals in India may lead to increased attrition rates or higher compensation costs, potentially eroding the cost benefits of our outsourcing strategy. Moreover, any failure to effectively integrate the GCC's operations with our global processes or to manage the quality of services provided by the GCC could negatively impact our operational efficiency and client satisfaction. If we are unable to realize the anticipated benefits of our GCC strategy or if we face significant challenges in its implementation and management, it could have a material adverse effect on our business operations, financial condition, and results of operations.

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 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, vulnerabilities or defects when first introduced or when new versions are released. We may also experience difficulties in installing, integrating or supporting 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 AI and 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:

• 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 technology infrastructure including our, computer systems, software and networks could also make us susceptible to breaches, 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 extensive global operations, expansion through acquisitions, and the substantial volume of transactions we process daily, coupled with our vast network of clients, partners, vendors, and counterparties, we face an elevated risk of sophisticated and persistent cyber-attacks. The complexity of our systems and the evolving nature of cyber threats mean that a breach could potentially remain undetected for an extended period, potentially compromising sensitive data and disrupting critical operations. 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.

Certain regulatory requirements, while aimed at enhancing cybersecurity, significantly restrict our ability to allocate resources based solely on our own risk assessments. The mandatory nature of these requirements, coupled with the potential for severe penalties for non-compliance, forces us to divert resources that might otherwise be allocated to areas we deem higher risk or more critical to our specific business needs.

We are exposed to risk of the disclosure and misuse of personal data. We store, transfer and process large amounts of personally identifiable information of our customers to deliver our products and services. 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 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 (IP) 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.

The success of our merger and acquisition (M&A) activity and strategy also depends on our ability to protect our proprietary technology and solutions, defend against infringement claims, and effectively manage intellectual property assets acquired through M&A activities. Failure to maintain the confidentiality and exclusivity of our intellectual property, or inadequate due diligence in M&A transactions may have a material adverse effect on our business and financial results. Additionally, the complexity of IP issues in M&A deals may impact our ability to close transactions or realize their full value.

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.

We are at risk of failing to keep pace with significant new technologies. The financial services industry is undergoing rapid technological change, and financial institutions and fintech companies are investing significantly in new and disruptive technologies, such as artificial intelligence, machine learning, blockchain and other distributed ledger technologies. The failure to develop new solutions or enhancements to our existing solutions that incorporate or interact with new technologies, or doing so at a slower pace than our competition, could cause our solutions to be less competitive and adversely impact our business. Further, such technologies are complex and changing rapidly, and there are technical challenges associated with achieving desired levels of accuracy, efficiency, and reliability. The algorithms and models used may have limitations, including biases, errors, or inability to handle certain data types or scenarios. Furthermore, the use of new technologies introduces additional risks of system failures, disruptions, or vulnerabilities that could compromise the integrity, security, or privacy of data. These limitations or failures could result in reputational damage, legal liabilities, or loss of user confidence.

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 management business may be affected by the performance of our AI-driven investment strategies, changing client preferences for sustainable and digital assets, and the increasing demand for hyper-personalized solutions. Poor investment returns, whether due to market conditions or underperformance relative to AI-powered competitors or ESG benchmarks, could impact our ability to retain assets and attract new clients.

The rise of alternative investments, including private credit and infrastructure, presents both opportunities and risks. Failure to effectively integrate these assets into our offerings could lead to outflows as clients seek diversification beyond traditional asset classes.

Poor investment performance could lead to the loss of clients and may cause AUM, revenue and earnings to decline. Investment performance is one of the most important factors for the growth and retention of AUM. Poor investment performance relative to applicable portfolio benchmarks or competitors may cause AUM, revenue and earnings to decline as a result of client withdrawals in favor of better performing products offered by competitors or diminished ability to attract additional funds from existing and new clients.

Failure to identify errors in quantitative investment models could adversely affect product performance and client relationships. We employ quantitative models to support certain of our investment processes, including with respect to risk assessment and portfolio management. Any errors or limitations in these models, including model inputs or assumptions, as well as any failure of our governance and validation in respect of such models, the failure to timely update such models, or errors in how such models are used, could have adverse effects on our business and reputation.

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 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 (AML), 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, swap dealer, 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 or could adversely impact a portfolio’s ability to achieve its investment strategies or make certain investments.

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, regulations like the EU's Digital Operational Resilience Act (DORA) are intended to implement a global regulatory standard, may introduce additional or more restrictive requirements for non-EU affiliates, which can create competitive disadvantages for multi-jurisdictional operations. In addition, the regulatory environment is increasingly influenced by geopolitical factors and technological advancements. For instance, the implementation of Basel 3.1 in the United Kingdom has been delayed, partly due to uncertainties in the US regulatory landscape. The interconnectedness of global financial markets means that regulatory initiatives often have cross-border implications. Firms must navigate potential regulatory divergences and the related tensions and irreconcilable policies between jurisdictions, which can create regulatory risk, operational challenges and competitive dynamics.

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. Recent regulatory developments have also introduced new obligations for registered investment advisers (RIAs), aligning them with other financial institutions under AML frameworks. RIAs must now establish formal AML programs with written policies, a designated compliance officer, ongoing training, and independent testing which extends our AML obligations to subsidiaries that were previously not require to maintain a standalone AML Program.

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 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 sanction regulations, 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 United States, 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.

Compliance with existing and emerging regulations, as well as responding to regulatory examinations and supervisory activities, continues to have a significant impact on our operations globally. This includes, without limitation, adapting to new requirements for consumer protection, operational resilience, and sustainable finance. The fees, assessments and operational restrictions that may be imposed on our regulated subsidiaries by federal, national, state, and foreign regulatory authorities could have a significant impact on us, including, without limitation, materially affecting our ability to do business and generated revenue in a particular jurisdiction. The frequency and scope of regulatory reform in the current regulatory environment may lead to an increase in fees, assessments and operational restrictions resulting in increased expense, or an increase or change in regulatory requirements which could affect our operations and business. Moreover, maintaining adequate staffing levels to address these evolving regulatory demands presents an ongoing challenge. The complexity and volume of new regulations require specialized expertise, and there is a risk that we may face difficulties in attracting, retaining, and training qualified personnel to manage compliance effectively. Insufficient staffing in compliance and risk management roles could expose us to regulatory breaches, financial penalties, and reputational damage. As regulatory requirements continue to evolve rapidly, particularly in areas such as operational resilience, second line functions, ESG reporting, cybersecurity, and digital asset management, the pressure on our human resources to keep pace with these changes remains a significant operational risk.

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. The regulatory landscape has evolved, with bodies like the SEC placing greater emphasis on conflicts disclosure, particularly for dual registrants and advisers with affiliated broker-dealers. 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. The global nature of our operations also means we must navigate potentially conflicting regulatory requirements across different jurisdictions, adding another layer of complexity to our conflict management efforts.

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 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 and jurisdictions in which we operate. 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. Regulators in the jurisdictions in which we operate are increasingly focused on the experience and staffing levels of control functions, technology infrastructure and operational resilience, areas which can be more costly and specialized to remediate and deviate from the types of regulatory remediations we are accustomed to. This shift in regulatory focus may require substantial investments in advanced technologies and specialized expertise to ensure compliance. The direct and indirect costs of responding to these examinations, undertaking remediation activities 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, penalties and operational changes. 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. Moreover, the increasing complexity of regulatory requirements, especially in areas like AI governance and cybersecurity, may lead to higher compliance costs and operational challenges. Failure to adequately address these emerging regulatory priorities could result in significant financial and reputational damage

Risks Related to Our Business Generally

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 platforms for existing and new businesses, expanding our operational services, integrating acquired businesses, and partnering with other firms involves 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. As we expand our business-to-consumer offerings, we face heightened cybersecurity and fraud risks. The rapid growth in digital payments introduces increased threats of data breaches, identity theft, and sophisticated hacking attempts. These risks could lead to significant financial losses and reputational damage if not adequately addressed. 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.

The expansion of services in subsidiaries that do not have a primary regulator but are still supervised as part of the SEC-regulated public company and the FFIEC from a technology governance perspective presents unique challenges. These entities may face increased scrutiny and potential regulatory gaps, as they fall under the umbrella of consolidated supervision. Our technology infrastructure and operations must align with these regulatory expectations, which may require significant investments and operational changes as regulation in this space continues to evolve. Our corporate governance structure and enterprise risk functions are replied upon to mitigate and control these risks.

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.

These risks could result in decreased earnings and harm to our competitive position in the investment management industry. Additionally, failure to effectively manage these risks could lead to regulatory sanctions, financial losses, and damage to our reputation in an increasingly competitive and rapidly evolving financial services landscape.

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 defined and strict timelines which present inherent risk. Our operations rely on the competence and trustworthiness of our employees and consultants, as well as of our contractors and third parties, including vendors, custodians and financial intermediaries. Should we experience any significant operational breakdown or failure, theft, fraud or other unlawful conduct, or other negative outcomes caused by poor judgment, 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 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.

The expansion of our GCC and the outsourcing of technology and global operations functions currently performed onshore introduce additional risks. Outsourcing to the GCC may lead to a loss of direct control over critical business functions and create dependencies on third-party providers. This could result in unexpected service disruptions, particularly if the GCC faces technical failures or operational challenges. The distance and potential cultural differences may also complicate communication and oversight, potentially leading to missed deadlines or mistakes that could subject us to claims or regulatory scrutiny.

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.

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. Industry trends indicate activists are targeting operational enhancements and strategic demands, with a notable increase in CEO scrutiny. The global expansion of activism increases risks for multinational companies. Large institutional investors are more actively engaging in governance issues, often supporting or initiating activist campaigns. This evolving landscape, coupled with ongoing regulatory changes, has led companies to a higher likelihood of becoming subject to stockholder activism, potentially leading to more significant disruptions to business operations and strategy. The costs and diversion of management attention could be more substantial, and the impact on stock prices more pronounced.

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.

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. Global conflicts and tensions continue to pose significant risks to the financial services industry and our operations. State-based armed conflicts have emerged as the top immediate global risk, with geopolitical instability driven by ongoing conflicts such as the Russia-Ukraine war and the Israel-Hamas confrontation in Gaza creating substantial economic uncertainty. The prolonged nature of these conflicts has contributed to increased volatility in commodity and energy prices, disrupted global supply chains, and created significant instability in financial markets. Sanctions and trade tensions have escalated geoeconomic confrontation, potentially exacerbating market instability. While our direct exposure to these conflicts remains limited, the broader economic consequences present complex challenges for our business. The potential for increased cyberattacks, particularly from state-affiliated actors, poses a significant threat to our operational infrastructure. The export of disruption by major global powers like the United States and China is accelerating geoeconomic fragmentation, creating an increasingly unpredictable business environment. Our exposure to these geopolitical risks is particularly pronounced in regions where we currently operate or seek to expand, potentially impacting our revenue, earnings, and strategic growth initiatives. The global economic recovery remains fragile, with the risk of biological, chemical, or nuclear weapons escalating in the geopolitical risk rankings. These multifaceted challenges require continuous monitoring and adaptive strategies to mitigate potential adverse effects on our operations, financial performance, and long-term strategic objectives. As the geopolitical landscape continues to evolve, we must remain vigilant in assessing and responding to emerging risks that could materially impact our business and the broader financial services industry.

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. 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. For example, the European Securities and Markets Authority (ESMA) introduced stringent guidelines on ESG-related fund names, aiming to eliminate ambiguity in the use of sustainability-related terminology in financial products. As we navigate this complex and global ESG landscape, we recognize that our various stakeholders hold diverse and often conflicting views on ESG topics. Additionally, in the United States, there are numerous state and federal investigation and enforcement actions that are directed at investment managers related to the actual or apparent use of ESG-related investment screens.

The growing interest in ESG factors has increased the risk of accusations of "greenwashing" and potential litigation or regulatory enforcement actions. The lack of global harmonization in ESG laws and regulations has led to fragmentation across jurisdictions, creating conflicts across global businesses and potentially impacting competitiveness and reputation. 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 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. The politicization of ESG practices, particularly those related to climate issues, has amplified these risks. We acknowledge that any action or lack thereof with respect to ESG matters may be perceived negatively by at least some stakeholders, potentially damaging our reputation, ability to attract and retain clients and employees, compete effectively, and grow our business.

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 addition, we leverage our Third Party Risk Management, Insider Threats, Business Continuity and Disaster Recovery 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.

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 182,000 square feet.

We and certain of our subsidiaries are a party to or have property subject to litigation and other proceedings, examinations and investigations that arise in the ordinary course of our business that we do not believe are material. These types of matters could result in fines, penalties, cost reimbursements or contributions, compensatory or treble damages or non-monetary sanctions or relief. We believe the probability is remote that the outcome of any of these matters will have a material adverse effect on SEI as a whole, notwithstanding that the unfavorable resolution of any matter may have a material effect on our net earnings in any particular interim reporting period. We cannot predict the outcome of legal or other proceedings with certainty. These matters include the proceedings summarized in “Note 10. Commitments and Contingencies” included in our Notes to Consolidated Financial Statements.

(In thousands, except share and per-share data)

This discussion reviews and analyzes the consolidated financial condition at December 31, 2024 and 2023, the consolidated results of operations for the years ended December 31, 2024, 2023 and 2022, 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 Investments Company is a leading global provider of financial technology, operations, and asset management services within the financial services industry. 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, 2024, through our subsidiaries and partnerships in which we have a significant interest, we manage, advise or administer approximately $1.6 trillion in hedge, private equity, mutual fund and pooled or separately managed assets.

Condensed Consolidated Statements of Operations for the years ended 2024, 2023 and 2022 were:

* Variances noted "NM" indicate the percent change is not meaningful.

Significant Items Impacting Our Financial Results in 2024

Revenues increased $205.4 million, or 11%, to $2.1 billion in 2024 compared to 2023. Net income increased $118.9 million, or 26%, to $581.2 million and diluted earnings per share increased to $4.41 per share in 2024 compared to $3.46 per share in 2023. We believe the following items were significant to our business results during 2024:

• Revenue from Assets under management, administration, and distribution fees increased in 2024 primarily from higher assets under administration due to cross sales to existing alternative investment clients of the Investment Managers segment as well as new sales within the segment. Average assets under administration increased $132.9 billion, or 15%, to $1.0 trillion during 2024, as compared to $880.3 billion during 2023.
• Revenue from the SEI Integrated Cash Program launched in December 2023 in the Investment Advisors segment was $51.5 million during 2024 as compared to $1.5 million in 2023, an increase of $50.0 million. Revenue from this program is included in Asset management, administration and distribution fees on the accompanying Consolidated Statement of Operations.
• Revenue from Asset management, administration and distribution fees also increased from market appreciation and positive cash flows into separately managed account programs and Strategist programs of the Investment Advisors segment. This was partially offset by negative cash flows from SEI fund programs and fee reductions in separately managed account programs. Revenue growth was also partially offset by client losses in the Institutional Investors segment. Average assets under management in equity and fixed income programs, excluding LSV, increased $10.9 billion, or 6%, to $179.5 billion in 2024 as compared to $168.6 billion during 2023.
• Revenue from Information processing and software servicing fees increased in 2024 primarily from new client conversions and growth from existing SEI Wealth PlatformSM (SWP) clients. A one-time early contractual buyout fee of $10.5 million recorded during the second quarter of 2023 from an investment processing client of the Private Banks segment acquired by an existing client partially offset the increase in revenues.
• Earnings from LSV increased to $135.7 million in 2024 as compared to $126.9 million 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.
• Operating expenses increased from higher personnel costs due to business growth, primarily in the Investment Managers segment, and the impact of inflation on wages and services. Cost containment measures related to consulting and other vendor costs partially offset the increase in operating expenses in 2024.
• During the fourth quarter of 2024, we recognized additional personnel costs from a one-time increase in our incentive compensation awards to employees as a result of better than expected financial results.
• Stock-based compensation costs related to stock options increased during 2024 primarily from the acceleration of $11.2 million in expense from a change in estimate of the attainment of vesting targets for these awards due to strong earnings growth (See the caption "Stock-Based Compensation" later in this discussion for more information).
• Capitalized software development costs were $24.3 million in 2024, of which $13.7 million was for continued enhancements to SWP. Capitalized software development costs also include $10.6 million of software development costs in 2024 for a new platform for the Investment Managers segment.
• Amortization expense related to SWP was $27.5 million in 2024 as compared to $25.6 million in 2023.
• Interest and dividend income was $48.9 million in 2024 as compared to $41.0 million in 2023. The increase in interest and dividend income was due to an overall increase in interest rates and higher invested cash balances.
• In July 2024, SEI sold a condominium located in New York, New York and recognized a net pre-tax gain of $8.2 million after associated costs and expenses. The gain from the sale is included in Other income on the accompanying Consolidated Statement of Operations (See Note 19 to the Notes to Consolidated Financial Statements).
• In December 2024, SEI acquired LifeYield, LLC (LifeYield), a Boston-based, tax-smart technology firm for a cash consideration of $29.0 million (See Note 15 to the Notes to Consolidated Financial Statements).
• Effective tax rates were 22.2% during 2024 and 22.3% during 2023 (See the caption "Income Taxes" later in this discussion for more information).
• SEI repurchased 6.8 million shares of its common stock at an average price of $74.92 per share for a total cost of $512.5 million and paid $120.3 million in cash dividends to shareholders during 2024.

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 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. 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 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.
• 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 16 to the Notes to Consolidated Financial Statements).
• 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 16 to the Notes to Consolidated Financial Statements).
• 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.

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:

• 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 and operational 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. During the fourth quarter of 2024, approximately 47% 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 continuation of favorable capital market returns during 2024 had a positive impact on our asset-based fees thereby contributing to growth in our base revenues. Macroeconomic factors such as the reacceleration of inflationary pressures, higher long term interest rates, continued monetary stimulus measures from central banks, and geopolitical tensions, among others, could have significant influence on capital markets in 2025 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. This program generated revenue of $51.5 million for the Investment Advisors segment in 2024. A decline in market interest rates or an increase in alternative cash management options selected by clients could 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.

External factors affecting the fiduciary management market

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 of the Institutional Investors segment have frozen or curtailed their defined benefit plans resulting in decreased revenues and earnings. 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 resulting from defined benefit client losses.

Business Growth

Implementing new clients and making strategic investments that drive future revenue growth involves financial, managerial, and operational challenges. We may incur significant expenses to position our technology and operational infrastructure in connection with onboarding new clients and developing new products and services to enter new or adjacent markets. Our overall profitability would be negatively affected if strategic investments and expenses associated with such growth are not matched or exceeded on a timely basis by the revenues that are derived from such investment or growth.

Business Acquisitions

To enhance our capabilities, scale our competitive presence, or enable strategic growth, we pursue selective acquisitions. During 2024, we acquired LifeYield. During 2023, we acquired the National Pensions Trust and Altigo. 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.

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.

(In millions)

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(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 $1.4 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, 2024).

(C) Equity and fixed-income programs include $6.4 billion of assets invested in various asset allocation funds at December 31, 2024.

(D) In addition to the assets presented, SEI also administers an additional $10.3 billion in Funds of Funds assets on which SEI does not earn an administration fee (as of December 31, 2024).

(E) Due to the reorganization of business segments, client assets under administration were reclassified from Investment Managers to Investments in New Businesses (See Note 12 to the Consolidated Financial Statements).

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.

(In millions)

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(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, 2024 was $1.7 billion.

(C) Equity and fixed-income programs include $6.3 billion of average assets invested in various asset allocation funds for the year ended December 31, 2024.

(D) In addition to the assets presented, SEI also administers an additional $8.8 billion of average assets in Funds of Funds assets for the year ended December 31, 2024 on which SEI does not earn an administration fee.

(E) Due to the reorganization of business segments, client assets under administration were reclassified from Investment Managers to Investments in New Businesses (See Note 12 to the Consolidated Financial Statements).

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.

Business Segments

Revenues, Expenses and Operating profit (loss) for our business segments for the year ended 2024 compared to the year ended 2023, and for the year ended 2023 compared to the year ended 2022 were:

For additional information pertaining to our business segments, see Note 12 to the Consolidated Financial Statements.

Investment Managers

Revenues increased $83.1 million, or 13%, in 2024 compared to the prior year. Revenues during 2024 were primarily affected by:

• Increased revenues from additional services provided to our largest alternative fund clients; and
• Positive cash flows into alternative and traditional funds from new and existing clients; partially offset by
• Client losses and fund closures.

Revenues increased $45.6 million, or 8%, in 2023 compared to the prior year. Revenues during 2023 were primarily affected by:

• Increased revenues from new products launched and additional services provided to our largest alternative fund clients; and
• Positive cash flows into alternative and traditional funds from new and existing clients; partially offset by
• Client losses and fund closures.

Operating margins were 38% in 2024 and 35% in 2023. Operating income increased $49.2 million, or 22%, in 2024 compared to the prior year. Operating income during 2024 was primarily affected by:

• An increase in revenues as mentioned above; and
• Decreased non-capitalized investment spending, mainly consulting costs; partially offset by
• Increased costs associated with new business, primarily personnel expenses and third-party vendor costs;
• Costs to enhance, support and maintain technologies and investment service capabilities; and
• Increased incentive compensation and stock-based compensation costs related to the attainment of strong financial results during 2024.

Operating margins were 35% in 2023 and 36% in 2022. Operating income increased $8.4 million, or 4%, in 2023 compared to the prior year. Operating income during 2023 was primarily affected by:

• An increase in revenues; and
• Decreased non-capitalized investment spending, mainly consulting costs; partially offset by
• Increased costs associated with new business, primarily personnel expenses and third-party vendor costs;
• Increased personnel costs due to competitive labor markets; and
• The write off of $5.3 million in previously capitalized software development costs.

Private Banks

Revenues increased $45.1 million, or 9%, in 2024 compared to the prior year. Revenues during 2024 were primarily affected by:

• Increased investment processing fees from new SWP client conversions and growth from existing SWP clients due to market appreciation and increased transaction volumes;
• Increased investment management fees from existing international clients due to market appreciation; and
• Increased investment processing fees earned on our mutual fund trading solution; partially offset by
• One-time early termination fees of $10.5 million from an investment processing client during the second quarter 2023; and
• Lower investment processing fees from the recontracting of existing clients and a client loss.

Revenues decreased $73.7 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.

Operating margins were 15% in 2024 and 10% in 2023. Operating income increased $33.2 million, or 69%, in 2024 compared to the prior year. Operating income in 2024 was primarily affected by:

• An increase in revenues as mentioned above; and
• Decreased costs, mainly non-capitalized consulting and other vendor costs from cost containment measures; partially offset by
• Increased amortization expense related to SWP;
• Increased personnel costs from business growth; and
• Increased incentive compensation and stock-based compensation costs related to the attainment of strong financial results during 2024.

Operating margins were 10% in 2023 and 18% in 2022. Operating income decreased $54.4 million, or 53%, 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.

Investment Advisors

Revenues increased $73.1 million, or 17%, in 2024 compared to the prior year. Revenues during 2024 were primarily affected by:

• Increased fee revenue of $50.0 million from the SEI Integrated Cash Program; and
• Increased fees from separately managed account programs and Strategist programs due to growth from new and existing clients and market appreciation; partially offset by
• Decreased investment management fees from SEI fund programs resulting from the continued shift out of SEI fund programs into separately managed accounts and other investment products; and
• Fee reductions in our separately managed account programs.

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.

Operating margins were 44% in 2024 and 41% in 2023. Operating income increased $49.4 million, or 28%, in 2024 compared to the prior year. Operating income in 2024 was primarily affected by:

• An increase in revenues as mentioned above; and
• Decreased non-capitalized consulting costs; partially offset by
• Increased direct expenses associated with the increase in separately managed account fees;
• Increased personnel costs from business growth; and
• Increased incentive compensation and stock-based compensation costs related to the attainment of strong financial results during 2024.

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.

Institutional Investors

Revenues decreased $4.0 million, or 1%, in 2024 compared to the prior year. Revenues during 2024 were primarily affected by:

• Decreased investment management fees from client losses; partially offset by
• Increased investment management fees from existing clients due to higher assets under management due to market appreciation;
• Revenues from new Outsourced Chief Investment Officer (OCIO) platform clients; and
• Added revenues from the acquisition of XPS Pensions (Nexus) Limited.

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.

Operating margins were 46% in 2024 and 43% in 2023. Operating income increased $6.8 million, or 5%, in 2024 compared to the prior year. Operating income during 2024 was primarily affected by:

• Decreased direct expenses associated with investment management fees;
• Decreased costs, primarily personnel, related to cost containment measures; and
• A one-time operational charge of $4.5 million related to a client reimbursement during the second quarter 2023; partially offset by
• A decrease in revenues as mentioned above;
• Increased costs and amortization related to the acquisition of XPS Pensions (Nexus) Limited; and
• Increased stock-based compensation costs related to the attainment of strong financial results during 2024.

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
• Decreased direct expenses associated with investment management fees; and
• Decreased professional fees.

Investments in New Businesses

Revenues increased $8.0 million, or 15%, in 2024 compared to the prior year. Revenues during 2024 were primarily affected by:

• Increased revenues from hosted technology offerings through SEI Family Office Services due to increased non-recurring implementation fees and new business; and
• Increased revenues from SEI Private Wealth Management through higher assets under advisement due to market appreciation and new business.

Revenues increased $2.0 million, or 4%, in 2023 compared to the prior year. Revenues during 2023 were primarily affected by:

• Increased revenues from hosted technology offerings through SEI Family Office Services due new business; partially offset by
• Decreased non-recurring implementation fees for hosted technology offerings through SEI Family Office Services.

Other

Corporate overhead expenses

Corporate overhead expenses primarily consist of general and administrative expenses and other costs not directly attributable to a reportable business segment. Corporate overhead expenses were $147.6 million, $132.2 million and $168.2 million in 2024, 2023 and 2022, respectively. The increase in corporate overhead expenses during 2024 was primarily due to incentive compensation, severance costs, stock-based compensation costs and investments in upgrading and enhancing various technologies utilized by corporate overhead units. Additionally, personnel costs increased from enhancements to further build our compliance infrastructure. The decrease in corporate overhead expenses during 2023 was primarily due to personnel costs associated with the VSP recorded in the third quarter of 2022 (See Note 14 to the Consolidated Financial Statements). Non-recurring consulting costs related to corporate strategic planning, target market review and other corporate analysis projects partially offset the decrease in corporate overhead expenses in 2023.

Other income and expense items

Other income and expense items on the accompanying Consolidated Statements of Operations consist of:

Equity in earnings of unconsolidated affiliates

Equity in earnings of unconsolidated affiliate reflects our 38.6% ownership interest in LSV. The table below presents the revenues and net income of LSV and our proportionate share in LSV's earnings.

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The increase in earnings from LSV in 2024 and 2023 was primarily due to higher assets under management from market appreciation and higher performance fees. Negative cash flows from existing clients and client losses partially offset the increase in earnings from LSV. Average assets under management by LSV increased $5.2 billion to $90.9 billion during 2024 as compared to $85.7 billion during 2023, an increase of 6%.

Interest and dividend income

Interest and dividend income is earned based upon the amount of cash that is invested daily. The increase in interest and dividend income in 2024 was due to rising market interest rates during 2023 and higher invested cash balances. The increase in 2023 was due to increased market interest rates.

Net gain (loss) from investments

Net gains and losses from investments during 2024 and 2023 were primarily due to realized and unrealized gains and losses recorded in current earnings related to the investment funds sponsored by LSV, equity holdings and SEI-sponsored investment products (See Note 5 to the Consolidated Financial Statements).

Other income

Other income during 2024 is related to a net gain of $8.2 million recognized from the sale of property located in New York, New York (See Note 19 to the Consolidated Financial Statements).

Amortization

Amortization expense on the accompanying Consolidated Statements of Operations consists of:

Capitalized software development costs

The increase in amortization expense related to capitalized software development costs during 2024 was primarily due to significant enhancements to SWP placed into service during 2024. The decline in amortization expense in 2023 was due to the amortization period associated with the initial development work related to SWP which began in mid-2007 when the platform was determined to be ready for its intended use. The amortization expense related to these initial software development costs ended in the second quarter of 2022 (See Note 1 to the Consolidated Financial Statements). We expect to recognize amortization expense of $28.6 million related to all capitalized software development costs in 2025.

Intangible assets

The increase in amortization expense related to intangible assets and asset purchases in 2024 was due to the acquisitions of XPS Pensions (Nexus) Limited and Altigo during the fourth quarter 2023 (See Note 15 to the Consolidated Financial Statements). Through these transactions, we acquired intangible assets related to technology, trade names and client relationships which are amortized over the estimated useful life of the assets. We expect to recognize amortization expense of $13.5 million related to all intangible assets in 2025.

Income Taxes

Our effective tax rate was 22.2% for 2024, 22.3% for 2023 and 22.0% for 2022. The effective tax rate is affected by recurring items, such as the U.S. federal tax rates and tax rates in various states and foreign jurisdictions and the relative amount of income earned in those jurisdictions. The income earned by jurisdiction has been fairly consistent. The effective tax rate is also affected by discrete items that may occur in any given year, but are not consistent from year to year.

Below are the most significant recurring and discrete items (See Note 11 to the Consolidated Financial Statements for more information):

The decrease in the effective rate in 2024 was primarily due to the recognition of tax credits and a reduction of the valuation reserve for net operating losses impacting our state tax rate. Increased tax benefits related to stock option exercises as compared to the prior year also reduced our effective rate. The increased corporate tax rate in the United Kingdom partially offset the decline in the effective tax rate in 2024.

The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two). Certain aspects of Pillar Two became effective January 1, 2024 and other aspects are effective January 1, 2025. While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. We have determined Pillar Two has not had a material impact on our effective tax rate, consolidated results of operation, financial position, or cash flows.

Stock-Based Compensation

During 2024, 2023 and 2022, we recognized approximately $58.6 million, $31.3 million and $39.4 million, respectively, in stock-based compensation expense. Our stock-based compensation expense in 2024 primarily consisted of $41.2 million related to stock options and $16.7 million related to restricted stock units (RSUs). The amount of stock-based compensation expense related to stock options is recognized based upon an estimate of when the financial vesting targets may be achieved. Any change in estimate could result in the remaining amount of stock-based compensation expense to be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense and materially affect earnings (See Note 7 to the Consolidated Financial Statements for more information).

During 2024, 2023 and 2022, we revised the estimates of when certain vesting targets for stock options were expected to be achieved. These changes in estimates resulted in an increase in stock-based compensation expense of $11.2 million in 2024, and a decrease of $6.9 million and $4.9 million in 2023 and 2022, respectively.

There was approximately $67.9 million of unrecognized compensation cost related to unvested employee stock options at December 31, 2024 and we expect to recognize approximately $31.1 million in stock-based compensation costs for stock options in 2025.

There was approximately $52.7 million of unrecognized compensation cost related to RSUs at December 31, 2024 and we expect to recognize approximately $25.6 million in stock-based compensation costs for RSUs in 2025.

Fair Value Measurements

The fair value of financial assets and liabilities, except for the investment funds sponsored by LSV, is determined in accordance with the fair value hierarchy. The fair value of the investment funds sponsored by LSV is measured using the net asset value per share (NAV) as a practical expedient. The fair value of all other financial assets are determined using Level 1 or Level 2 inputs and consist mainly of investments in equity or fixed-income investment products that are quoted daily and Government National Mortgage Association (GNMA) and other U.S. government agency securities that are single issuer pools that are valued based on current market data of similar assets. Level 3 financial liabilities at December 31, 2024 and December 31, 2023 consist of contingent considerations resulting from business acquisitions (See Note 15 to the Consolidated Financial Statements).

Regulatory Matters

Like many firms operating within the financial services industry, we are experiencing a complex and changing regulatory environment across our markets. Our current scale and reach as a provider to the financial services industry, the introduction and implementation of new solutions for our financial services industry clients, 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, and a greater propensity of regulators to pursue enforcement actions and other sanctions against regulated entities, have made this an increasingly challenging and costly regulatory environment in which to operate.

SEI and some of our regulated subsidiaries have undergone or been scheduled to undergo a range of periodic or thematic reviews, examinations or investigations by numerous regulatory authorities around the world, including the Office of the Comptroller of the Currency, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Financial Conduct Authority of the United Kingdom (FCA), the Central Bank of Ireland (CBI), the Commission de Surveillance du Secteur Financier (CSSF) of the Grand Duchy of Luxembourg, and others. These regulatory activities typically result in the identification of matters or practices to be addressed by us or our subsidiaries and, in certain circumstances, the regulatory authorities require remediation activities or pursue enforcement proceedings against us or our subsidiaries. As described under the caption “Regulatory Considerations” in Item 1 of this report, the range of possible sanctions that are available to regulatory authorities include limitations on our ability to engage in business for specified periods of time or with certain restrictions, the revocation of registration, censures and fines. The direct and indirect costs of responding to these regulatory activities and of complying with new or modified regulations, as well as the potential financial costs and potential reputational impact against us of any enforcement proceedings that might result, is uncertain but could have a material adverse impact on our operating results or financial position.

Liquidity and Capital Resources

Our credit facility provides for borrowings up to $325.0 million and is scheduled to expire in April 2026. As of January 31, 2025, we had outstanding letters of credit of $4.9 million which reduced the amount available under the credit facility. These letters of credit were primarily issued for the expansion of the corporate headquarters and are due to expire in 2025. As of January 31, 2025, the amount of the credit facility available for corporate purposes was $320.1 million.

The availability of the credit facility is subject to compliance with certain covenants set forth in the agreement. The credit facility contains covenants which restrict our ability to engage in 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 a default under the credit facility, we would also be restricted from paying dividends on, or repurchasing, our common stock. Currently, our ability to borrow from the credit facility is not limited by any covenant of the agreement (See Note 6 to the Consolidated Financial Statements).

The majority of excess cash reserves are primarily placed in accounts located in the United States that invest in SEI-sponsored money market mutual funds denominated in the U.S. dollar. We also utilize demand deposit accounts or money market accounts at several well-established financial institutions located in the United States. Accounts used to manage these excess cash reserves do not impose any restrictions or limitations that would prevent us from being able to access such cash amounts immediately. As of January 31, 2025, the amount of cash and cash equivalents considered free and immediately accessible for other general corporate purposes was $276.3 million.

Cash and cash equivalents include accounts managed by our subsidiaries that are used in their operations or to cover specific business and regulatory requirements. The availability of this cash for other purposes beyond the operations of these subsidiaries may be limited. We therefore do not include accounts of our foreign subsidiaries in the calculation of free and immediately accessible cash for other general corporate purposes. A portion of the undistributed earnings of foreign subsidiaries are deemed repatriated. Any subsequent transfer of available cash related to the repatriated earnings of foreign subsidiaries could significantly increase free and immediately accessible cash.

Cash flows from operations increased $175.3 million in 2024 compared to 2023 primarily from the increase in net income, the increase in accrued liabilities primarily due to higher personnel compensation costs, increased partnership distributions from our unconsolidated affiliate, LSV, and non-cash items. The increase in cash flows from operations was partially offset by higher receivables from clients of the Investment Managers segment. Cash flows from operations decreased $119.1 million in 2023 compared to 2022 primarily from the decrease in net income, an increase in receivables from clients of the Investment Managers segment, and a decrease in accrued liabilities primarily from payments related to the VSP.

Net cash used in investing activities includes:

• Purchases, sales and maturities of marketable securities. Our purchases, sales and maturities of marketable securities during 2024, 2023 and 2022 were as follows:

See Note 5 to the Consolidated Financial Statements for more information related to marketable securities.

• The capitalization of costs incurred in developing computer software. We capitalized $24.3 million, $34.0 million and $35.3 million of software development costs in 2024, 2023 and 2022, respectively. Our software development costs are related to significant enhancements for the expanded functionality of the SEI Wealth Platform and the development of a new platform for the Investment Managers segment (See Note 1 to the Consolidated Financial Statements).
• Capital expenditures. Capital expenditures in 2024, 2023 and 2022 primarily include capital outlays for purchased software and equipment for data center operations. We continue to evaluate improvements to our information technology infrastructure which, if implemented, will result in additional expenditures for purchased software and equipment for data center operations.
• Cash paid for acquisitions, net of cash acquired. In 2024, we made a net cash payment of $29.0 million for the acquisition of LifeYield. In 2023, we made net cash payments of $43.9 million and $12.5 million for the acquisitions of XPS Pensions (Nexus) Limited and Altigo, respectively (See Note 15 to the Consolidated Financial Statements).
• Proceeds from fixed asset dispositions. In 2024, we received proceeds of $8.8 million after associated costs and expenses from the sale of property located in New York, New York.

Net cash used in financing activities includes:

• The repurchase of our common stock. The Board of Directors has authorized the repurchase of common stock through multiple authorizations. Currently, there is no expiration date for the common stock repurchase program. The following table lists information regarding repurchases of common stock during 2024, 2023 and 2022:

• Proceeds from the issuance of our common stock. We received $126.0 million, $101.2 million and $58.2 million in proceeds from the issuance of common stock during 2024, 2023 and 2022, respectively. The proceeds we receive from the issuance of common stock is directly attributable to the levels of stock option exercise activity.
• Dividend payments. Cash dividends paid during 2024, 2023 and 2022 were as follows:

The Board of Directors declared a semi-annual cash dividend of $0.49 per share on December 12, 2024. The dividend was paid on January 8, 2025 for a total of $63.9 million.

Cash Requirements

Cash requirements and liquidity needs are primarily funded through cash flow from operations and our capacity for additional borrowing. At December 31, 2024, unused sources of liquidity consisted of cash and cash equivalents and the amount available under our credit facility.

We are obligated to make payments in connection with the credit facility, operating leases, maintenance contracts and other commitments (See Notes 6, 10 and 18 to the Consolidated Financial Statements). We believe our operating cash flow, available borrowing capacity, and existing cash and cash equivalents will provide adequate funds for these obligations and ongoing operations. We currently anticipate that our available funds and cash flow from operations will be sufficient to meet our operational cash needs and fund our stock repurchase program for at least the next 12 months and for the foreseeable future.

Critical Accounting Policies and Estimates

The accompanying consolidated financial statements and supplementary information were prepared in accordance with accounting principles generally accepted in the United States. Inherent in the application of many of these accounting policies is the need for management to make estimates which require extensive judgments in the determination of certain revenues, expenses, assets and liabilities. Materially different financial results can occur as circumstances change and additional information becomes known. We believe that the assumptions and estimates associated with computer software development costs, income taxes, stock-based compensation and the valuation of long-lived assets including goodwill and intangible assets acquired in an acquisition, when applicable, have the greatest potential to have a material impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. All of our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements.

Computer Software Development Costs:

We utilize internally developed computer software as part of our product offerings. In the development of a new software product, substantial consideration must be given by management to determine whether costs incurred are research and development costs, or internal software development costs eligible for capitalization. Management must consider a number of different factors during their evaluation of each computer software development project that includes estimates and assumptions. Costs considered to be research and development are expensed as incurred. After meeting specific requirements, internal software development costs are capitalized as incurred. The capitalization and ongoing assessment of recoverability of software development costs requires considerable judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life. Amortization of capitalized software development costs begins when the product is ready for its intended use. Capitalized software development costs are amortized on a project basis using the straight-line method over the estimated economic life of the product or enhancement.

We evaluate the carrying value of capitalized software when circumstances indicate the carrying value may not be recoverable. The review of capitalized software for impairment requires significant assumptions and estimates about operating strategies, underlying technologies utilized, and external market factors. External market factors include, but are not limited to, expected levels of competition, barriers to entry by potential competitors, stability in the target market and governmental regulations.

Income Taxes:

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. Management must make assumptions, judgments and estimates to determine our current provision for income taxes and also deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset.

Assumptions, judgments and estimates relative to the current provision for income taxes take into account current tax laws, interpretations of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We have established reserves for income taxes to address potential exposures involving tax positions that could be challenged by tax authorities. Although we believe the assumptions, judgments and estimates are reasonable, changes in tax laws or interpretations of tax laws and the resolution of any future tax audits could significantly impact the amounts provided for income taxes in the consolidated financial statements.

Assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income, such as income from operations or capital gains income and from which subsidiary or jurisdiction such income is expected to be realized. Actual operating results and the underlying amount and category of income in future years could render the current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause actual income tax obligations to differ from the estimates, thus materially impacting our financial position and results of operations.

Stock-Based Compensation:

Stock-based compensation cost for awards under share-based compensation plans is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. We currently use the Black-Scholes option pricing model to determine the fair value of stock option awards. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as various other assumptions. These assumptions include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. We account for forfeitures as they occur. The amount of stock-based compensation expense for stock options that is recognized in a given period is dependent upon management’s estimate of when the financial vesting targets are expected to be achieved. If this estimate proves to be inaccurate, the remaining amount of stock-based compensation expense for stock options could be accelerated, spread out over a longer period, or reversed. We currently base expectations for these assumptions from historical data and other applicable factors. These expectations are subject to change in future periods.

Valuation of Assets Acquired in an Acquisition Including Goodwill and Intangible Assets:

We allocate the fair value of the total purchase price paid for acquisitions to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of the purchase price consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of the purchase price consideration to identifiable assets and liabilities affects our amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill is tested for impairment at the reporting unit level annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of a reporting unit below its carrying value. We have four reporting units subject to goodwill impairment testing. As of December 31, 2024, no impairment of goodwill has been identified.

Intangible assets acquired in an acquisition are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount is reduced to fair value. We have not recorded any material impairment charges during the years presented.

The useful lives of our finite-lived intangible assets are determined by management when those assets are initially recognized and are routinely reviewed for the remaining estimated useful lives. The current estimate of useful lives represents management’s best estimate based on current facts and circumstances, but may differ from the actual useful lives due to changes in future circumstances such as changes to our business operations, changes in the planned use of assets, and technological advancements. When we change the estimated useful life assumption for any asset, the remaining carrying amount of the asset is accounted for prospectively and depreciated or amortized over the revised estimated useful life.

The assessment of critical accounting policies and estimates is not meant to be an all-inclusive discussion of the uncertainties to financial results that can occur from the application of the full range of our accounting policies. Materially different financial results could occur in the application of other accounting policies as well. Also, materially different results can occur upon the adoption of new accounting standards.

Information required by this item is set forth under the captions "Our revenues and earnings are affected by changes in capital markets and significant changes in the value of financial instruments" and "Changes in interest rates may affect the value of our fixed-income investment securities" in Item 1A, Risk Factors and under the captions "Sensitivity of our revenues and earnings to capital market fluctuations" and "SEI Integrated Cash Program" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of the end of the period covered by this annual report to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer’s management including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2024.

The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the quarter ended December 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.