Executive Summary / Key Takeaways

• Strategic Transformation Driving Growth: SEI is executing a deliberate "enterprise-first mindset" shift, moving from a vertical to a horizontal solutions provider, which is translating into record sales events and broad-based revenue growth across its diverse segments. This strategy, coupled with disciplined investments in talent and technology, is positioning SEI for sustained market share gains.
• Differentiated Technology as a Core Moat: The SEI Wealth Platform (SWP) and new offerings like SEI Access and SEI Sphere provide a significant competitive advantage, enabling efficient, scalable, and integrated solutions for complex client needs, from back-office processing to front-office client experience and specialized alternative investments.
• Robust Financial Performance and Capital Allocation: SEI delivered strong Q2 2025 EPS of $1.78 (or $1.20 excluding one-time gains), reflecting healthy revenue and operating income growth. The company maintains a fortress balance sheet with no long-term debt, supporting significant capital returns to shareholders through buybacks and dividends, while also funding strategic investments like the recent Stratos partnership.
• Strategic Investments Fueling Future Expansion: The transformative investment in Stratos Wealth Holdings and the commitment of seed capital to LSV Global Equity Market Neutral Fund underscore SEI's intent to expand its footprint in high-growth areas like independent advisory and alternative investments, leveraging its technology and operational expertise.
• Outlook Focused on Execution and Market Opportunity: Management anticipates continued sales momentum, particularly in Investment Managers and Private Banks, with margins expected to remain in the current range as investments in talent and technology precede revenue realization. The company is well-positioned to capitalize on industry trends like outsourcing, wealth management growth, and the convergence of public and private markets.

The Enterprise Evolution: SEI's Strategic Blueprint for Financial Services

SEI Investments Company, founded in 1968, has long been a global provider of financial technology, operations, and asset management services. From its roots in investment processing for wealth managers to its comprehensive solutions for institutional and personal wealth, SEI has consistently adapted to the evolving financial landscape. The company's current strategic narrative centers on a profound shift towards an "enterprise-first mindset," aiming to serve as a comprehensive strategic partner rather than merely a single-platform vendor. This transformation is designed to leverage SEI's full breadth of capabilities, from its foundational technology to its deep operational expertise, across its diverse client segments.

This strategic pivot is particularly timely given prevailing industry trends. Firms across the financial services spectrum are actively rethinking their operating models, leading to increased interest in outsourcing technology and operations. This appetite is evident among banks, large Registered Investment Advisors (RIAs), and alternative asset managers, many of whom historically managed these functions in-house. The wealth management landscape is also rapidly evolving, characterized by a growing demand for advice-driven solutions and a notable shift towards wealth within the banking sector. Furthermore, the market is embracing new product types and asset classes, including passive investments and the increasing presence of alternatives in retail portfolios. Consolidation among custody and investment processing platform providers, coupled with an influx of private equity capital into the intermediary space, creates both disruption and significant opportunity for integrated solution providers like SEI.

Technological Foundation: The SEI Wealth Platform and Beyond

At the heart of SEI's competitive differentiation lies its proprietary technology, most notably the SEI Wealth Platform (SWP). This integrated platform is foundational to its investment processing services, offering comprehensive capabilities for wealth managers, including investment processing, custody, safekeeping of assets, income collections, and securities settlement. The SWP's net book value stood at $199.2 million as of June 30, 2025, with a weighted average remaining life of 7.8 years, underscoring its long-term strategic importance. Amortization expense related to SWP was $14.3 million in the first half of 2025, reflecting ongoing significant enhancements.

The tangible benefits of SWP are clear: it streamlines back-office operations, enhances the client experience, and provides advanced portfolio management tools. This technological superiority allows SEI to offer greater efficiency and scalability to its clients, translating into potentially lower operational costs for them and stronger margins for SEI. The company is also developing a new platform for its Investment Managers segment, expected to be in service during the second half of 2025, further expanding its technological capabilities.

Beyond SWP, SEI is actively investing in new technologies to meet evolving market demands. SEI Access, launched in March 2025, is an alternative investment product marketplace designed to provide wealth managers and advisors with a digital, public market-like experience for private markets. This initiative aims to expand access to alternative investments and optimize tax and income strategies through offerings like direct indexing Separately Managed Accounts (SMAs). Additionally, SEI Sphere provides unified managed services across cloud, cybersecurity, and network operations, securing a significant win in May 2025 by expanding a partnership with an existing private banking client. These innovations collectively strengthen SEI's competitive moat, enabling it to capture new market opportunities and reinforce its position as a technology-driven leader.

Competitive Landscape and Strategic Positioning

SEI operates within a competitive landscape populated by large, diversified financial services firms and specialized technology providers. Key direct competitors include BlackRock (BLK), State Street (STT), Invesco (IVZ), and Franklin Resources (BEN).

SEI's competitive strengths lie in its operational efficiency and client-focused innovation. Its integrated technology solutions, particularly the SWP, offer more streamlined administration and potentially lower operating costs for clients compared to some rivals. SEI's strategy emphasizes customized outsourcing solutions, providing a unique value proposition that fosters stronger customer loyalty, as evidenced by its high client retention rates in Private Banking (around 1% attrition). The company maintains a premium price point and service level, indicating confidence in its value proposition.

Compared to BlackRock, SEI's offerings emphasize customized outsourcing and technology-enabled platforms, providing greater efficiency in handling complex client portfolios. While BlackRock leads in overall scale and innovation speed, SEI's niche focus and specialized advisory services allow it to compete effectively. Against State Street, a major custodian, SEI's platforms offer more integrated technology solutions for wealth managers, enhancing user experience and potentially faster processing. State Street's global reach is broader, but SEI's agility and client-centric innovation provide a unique value proposition. In competition with Invesco and Franklin Resources, both active asset managers, SEI's technology platforms offer more streamlined administration and potentially lower operating costs for clients. SEI's focus on institutional outsourcing provides a key differentiator through customized, scalable solutions that enhance client efficiency, while these competitors often have stronger retail brand recognition.

SEI acknowledges vulnerabilities, including its smaller overall scale compared to industry giants and potential technological gaps in retail innovation. However, its "enterprise-first" approach is a direct strategic response to these challenges. By offering a comprehensive suite of solutions, SEI aims to be a partner that firms turn to for multiple needs, rather than a single-focus vendor. This approach is gaining traction, with existing clients leveraging the breadth of SEI's capabilities and new clients seeking fewer strategic partners.

Financial Performance and Operational Momentum

SEI has demonstrated robust financial performance, reflecting the early successes of its strategic transformation. For the second quarter of 2025, SEI reported diluted earnings per share (EPS) of $1.78. This figure included significant one-time items, notably a $94.4 million gain from the sale of its Family Office Services business and a $4.5 million gain from a vendor settlement, which together contributed $0.60 to EPS. Excluding these items, adjusted EPS would have been $1.20, still reflecting an increase from both the prior year and prior quarter. Total revenues for Q2 2025 reached $559.6 million, an 8% increase year-over-year, while operating income grew by 9% to $148.6 million.

Across its segments, performance was strong:

• Investment Managers: Revenue increased 8% in Q2 2025 to $195.1 million, driven by increased administration fees from alternative fund clients and positive cash flows. Operating margin remained strong at 38%.
• Private Banks: Revenue grew 7% in Q2 2025 to $141.4 million, benefiting from new SWP client conversions, growth from existing clients, and increased transaction volumes. Operating margin expanded to 16% from 15%.
• Investment Advisors: This segment saw a 14% revenue increase in Q2 2025 to $137.2 million, largely due to a $21.8 million increase in fees from the SEI Integrated Cash Program, which expanded in late 2024. Operating margin improved to 45% from 43%.
• Institutional Investors: Revenue decreased 3% in Q2 2025 to $69.3 million due to fee reductions and client losses, though new Outsourced Chief Investment Officer (OCIO) clients provided some offset. Operating margin remained high at 48%.
• Investments in New Businesses: Revenue increased 13% in Q2 2025 to $16.5 million, driven by growth in network and data protection services (SEI Sphere) and SEI Private Wealth Management.

Overall, consolidated operating margins improved slightly year-over-year but declined sequentially in Q2 2025, reflecting targeted investments in talent and technology to support future growth. Management emphasizes these investments are "targeted and intentional" to ensure flawless execution for new business.

Operational momentum is evident in SEI's sales events. The company achieved nearly $30 million in net sales events in Q2 2025, marking a new trailing 12-month record. This follows a record-breaking $47 million in net sales events in Q1 2025 ($37 million recurring). Full-year 2024 net sales events reached nearly $130 million ($100 million recurring), a 60% increase over 2023 and double 2022. These sales are broad-based, spanning new and existing clients, domestically and globally, without any changes to pricing or value propositions.

Assets under management (AUM) and assets under administration (AUA) also saw healthy growth. AUM net flows in the first half of 2025 were roughly flat, a significant improvement from several billion in net outflows in the same period last year. Average AUA increased by $119.7 billion, or 12%, to $1.10 trillion in the first six months of 2025.

Capital Allocation and Strategic Outlook

SEI maintains a robust financial position, characterized by a "fortress balance sheet" with no long-term debt and substantial liquidity. As of July 10, 2025, the company had $353.2 million in cash and cash equivalents immediately accessible for general corporate purposes, in addition to a $325 million credit facility (with $320.1 million available). This strong liquidity supports SEI's balanced capital allocation strategy, which includes significant returns to shareholders and strategic investments.

In the first six months of 2025, SEI repurchased $383.3 million of common stock and paid $123.3 million in cash dividends. The company's Board of Directors recently increased its share repurchase authorization by $500 million, signaling continued commitment to shareholder returns. Management aims to bring cash levels lower, targeting a run rate of around $300 million, while continuing to return free cash flow (projected at $500 million to $600 million annually) through buybacks and dividends.

A key strategic move is the recently announced investment in Stratos Wealth Holdings. On July 17, 2025, SEI agreed to acquire 57.5% of a newly formed entity comprising Stratos for approximately $527 million. This partnership is expected to integrate Stratos's client-centric model with SEI's technology, custody, and investment management capabilities, creating a powerful platform for advisors in the evolving wealth management landscape. The transaction is expected to close in two stages, with the U.S.-based business in the second half of 2025 and the Mexico-based NSC business in the first half of 2026. This investment is seen as a strategic and cultural fit, positioning SEI to capture long-term shareholder value and strengthen innovation. SEI also committed $50 million in seed capital to the LSV Global Equity Market Neutral Fund, LP, expected in Q3 2025, further expanding its investment offerings.

Looking ahead, management anticipates the pace of Investment Managers pipeline wins to accelerate in the back half of 2025. Margins are expected to remain in the current range as costs associated with hiring ahead of new business layer on. While the institutional business faces structural headwinds from corporate defined benefit plan terminations due to elevated interest rates, SEI sees robust opportunities in the broader OCIO market (endowments, municipalities, healthcare foundations). The SEI Integrated Cash Program is expected to see its benefit moderate in 2025 due to potential interest rate decreases and client exploration of alternative cash options.

Risks and Challenges

Despite the positive momentum, SEI faces several risks. The company operates in a complex and changing regulatory environment, leading to increased oversight and compliance costs. Its UK subsidiary, SIEL, is currently undergoing a supervisory review by the FCA, which has led to voluntary regulatory restrictions on new client agreements and product launches without prior consent. While SIEL is committed to remediation, the process is ongoing. Litigation related to the Rubicon Wealth Management accounts, involving approximately $15 million in client assets, also presents a contingent liability, though SEI believes potential losses would not exceed this amount.

Market volatility, as seen in April 2025, can cause temporary delays in sales events, particularly in segments like Private Banking. Structural headwinds in the institutional business from defined benefit plan terminations are expected to persist through 2025. LSV Asset Management continues to experience net outflows due to broader industry trends of changing asset allocations and active-to-passive shifts, though LSV has not lost business to other active value managers. Finally, the company's strategic investments in talent and technology, while crucial for long-term growth, may temporarily pressure margins as expenses are incurred ahead of revenue realization.

Conclusion

SEI Investments Company is undergoing a profound and deliberate transformation, shifting its identity from a collection of vertical solutions to a unified enterprise partner. This strategic evolution, underpinned by its robust proprietary technology like the SEI Wealth Platform and complemented by new innovations such as SEI Access and SEI Sphere, is proving to be a powerful catalyst for growth. The company's recent record-breaking sales events, broad-based revenue expansion across its segments, and improving asset flows are tangible evidence that its "enterprise-first mindset" is resonating with clients seeking comprehensive, integrated solutions.

With a fortress balance sheet and a disciplined approach to capital allocation, SEI is strategically deploying resources to fuel future expansion, as exemplified by its transformative investment in Stratos Wealth Holdings and continued investments in talent and technology. While challenges such as regulatory scrutiny and structural headwinds in certain segments persist, SEI's diversified business model and commitment to operational excellence position it to capitalize on significant industry trends like outsourcing and the evolving wealth management landscape. The company's ability to leverage its technological leadership and strategic partnerships to capture market share in high-growth areas like alternative investments and independent advisory services will be key to realizing its stated ambition of enduring and thriving for the long term.