All right. Welcome back. Hello, everyone. I'm Alex Kramm, Senior Research Analyst at UBS, covering the exchanges and business services companies. Excited to have a new addition here this year on stage, Sean Denham, EVP and CFO of SEI. Thanks for joining us this year.
Thanks for having me.
Look, why don't we just jump in? Since I just mentioned it's the first time for you guys to present at this conference, for everybody's benefit, why don't you actually just start by giving us a quick overview about the company?
Yeah. At the highest level, we like to refer to ourselves as the connective tissue (you like that?) of the financial services industry. So, really what we do, we provide world-class administration platforms, world-class asset management platforms. And with the acquisition of Stratos, a large RIA, greatly expanded our footprint in advice. We think about, the three drivers of revenue in financial services, administration, asset management, and advice. So, the acquisition of Stratos really rounds out all three of those A's for us.
Okay. Well, I'm sure we're gonna jump in all of those items. So look, why don't we start with the IMS business? I think a lot of people, and I've only covered the company for less than a week now, but a lot of people view the IMS business as the crown jewel within the company. Very steady double-digit growth over the last few years. So can you talk a little bit about the medium-term outlook here and really what's driving the underlying strength in that business?
Yeah. I will say, Alex, your first report on us was spot on. The executive team, the board, thought, "Really, you really hit us really well." So, really appreciate that. So IMS, I'm glad Phil McCabe, who leads our IMS business, isn't here. His head gets swollen when we call it the crown jewel of SEI, but it really has been over the last number of years. So we are really well positioned as a global fund administrator for the largest managers really in the world. Our client base really are the crown jewels, whether it's traditional or alternatives. You know, we are top five global fund admin. We're really well positioned. We have the best competitive position, in our opinion, in the best part of the market, and that's really around alts.
If you go back five or six years ago, I won't have the numbers exactly right, about 70% of our business was more on the traditional side, 30% on alts. That's really done in inverse, in the last year or so, where about 70%'s in the alt space, 30% traditional. But we are seeing the convergence of private and public markets. So classic alternative managers have really started to move into traditional space and vice versa. Traditionals are looking into the alt space. You know, we think we've got a really good position with those managers. I think classically, we've been thought about operations for the fund, and we've really, I think, positioned ourselves differently as a platform for the firm. We're seeing managers trying to do more with less. No one's really looking to add vendors. They're looking to consolidate vendors.
You know, when there's a new fund launch, especially with the largest of the large, we are that first phone call. So again, really well positioned. Really excited where we are. We have an incredibly strong pipeline, as strong a pipeline as we've ever had in our 58-year history. Over the last couple quarters, we've more than indicated some different moves in the market. You've seen a lot of now classic insourcers of fund administration or doing their own fund administration moving to an outsourced model. We were really excited. We haven't announced anything, no press releases, but we're excited in Q1 to really unpack some of those new potential wins that we have on the horizon. Being well positioned has really not just positioned IMS but the company for really the success we've driven over the last couple years.
I just wanna come back to the last point, 'cause yes, on the last earnings call, you did talk about some of these outsourcing deals really in the near term. And I know you haven't announced anything, although this is a Reg. FD event, so you can say whatever you want. But, can you can you go a little bit deeper? Like, why the confidence all of a sudden? Are these deals that you actually already have signed, and you're just trying to define the exact scope with those, with those funds? Or what gives you that, that confidence that you're really gonna have something to say here soon?
Well, we've been talking to these managers. You know, these deals don't happen overnight. A decision to move from an insourcer to an outsourcer, these managers don't take lightly. You know, there's a heavy lift in doing those transitions. So we're, I'm not here to announce anything today. Would love to, but probably not. I know we're under FD, but not the right form. I think, at the next earnings release, we'll be in a better position. Phil will be on the call to really talk about, you know, what the impact to our financials would look like. You know, this is not necessarily completely revolutionizing our business, but they're meaningful. These are gonna be impactful for the business, impactful wins. We're really excited to be partnering with these new managers.
Yeah. In line with that, you also talked about maybe some margin pressure in that business coming as you, I guess, get ready for those implementations. So can you can you size up that impact a little bit more? And then also, you know, if these are basically investments ahead of implementation, how quickly do you kinda recoup that?
Yeah.
Make sure that you have a good return on those investments? Like, how do you think about it?
Yeah. Over the last few quarters, I have talked about near-term margin pressure. No, it has not always come to fruition. You know, in my role, I never wanna get ahead of us. So I'd rather be conservative in nature than trying to get too far out over my skis or over our skis. So, Q1, typically for us, there typically is some margin compression in Q1. Usually, we have raises. You know, we had some; we did have a RIF in Q4. We had some severance. So, some of that severance cost or reduction in headcount should offset some of the raises that we typically give on January 1. So, we will continue to hire when we and not just in IMS, but really across the businesses, including private banking. As we see new work coming online, we are a relatively large, labor-intensive business.
These new large mandates do require more manpower, although there are some interesting things that we're doing around automation. Maybe we can touch on that a little later. But, you know, some of the potential margin pressure, we do have certain investments that we're continuing to make. We've made investments over the last couple years specifically in IMS in order to continue to, you know, as we scale our revenue, we needed to scale some of our platforms to support that work. We do need to, and we have; we've been hiring up to get in front of some of the work that, you know, I just alluded to with some of these new fund managers coming on board and some new fund launches. So there is some upfront capital. In addition, we do have some technology investments, other investments we are making.
When I mentioned the technology platform, the upgrade that we had in the IMS business, some amortization will come online in Q1. So non-cash, but still some, you know, P&L expense for Q1. So, we expect to see a little bit of margin pressure. But we're not talking about going from, I don't know, where we ended Q4 in IMS around, you know, 39, 40 or so—somewhere around 40%. We're not talking about dropping 200 basis points. But I do like to, you know, when the street sees progressive quarter-over-quarter margin growth, just like to sometimes pump the brakes a little bit so not to expect that continual march forward. So, like I said, you know, we are doing things in our IMS business, making investments around things like, for instance, NAV visualization, really important for our business.
You know, fund administrators, if you're not, if you're not aware, they will do shadow accounting. And so we'll, we'll strike any of these. We'll do a lot of the administration works. Even though you're an outsourcer, there is a certain amount of work that's still done internally to compare NAVs, etc. Some of the technology that we're investing in may allow these managers to no longer have to do some of that shadowing. So, you know, really all good stuff really to set us up for future success.
Well, sounds good. Thanks for unpacking that. Switching gears a little bit to the to the private banking business, it's been a decent performer over the last couple of years, actually improved a decent amount, right? So good to see that. But recently, one thing that's stood out a little bit is that, that pickup in the non-recurring professional sales events, I guess you could call it. So can you talk a little bit more what's going on here? And are these, I guess, professional fees actually becoming a little bit more of a recurring thing? 'Cause it seems they seem to be getting bigger and more, more, more recurring to,
Yeah.
For lack of a better word. So in where do you really see this business being in the next couple of years? Like, what kind of evolution are we going through here?
Yeah. So, so that's something we're incredibly excited about. So, just to back up a couple of years, so when Sanjay Sharma, who was our Chief Technology Officer when Ryan Hicke became our CEO, literally the first thing Ryan did was move Sanjay from being our CTO to taking over private banking. And he's really done a truly amazing job. Looking back, you know, our margins, depending on the quarter, were flat or not flat, but zero. So, even certain quarters, I think we had some negative margins. You know, at that time, we gave a little bit of a runway to how to get margins back to historical margins. Part of that was looking at our total addressable market, understanding our client base, understanding what, you know, if we were to implement our asset management platform, SWP, that's what was being acquired.
Typically, we were just selling the SWP platform with some operation services that would support that. What we did was is take a look at all the other services that our clients were buying that supported that. That may be, looking at their total tech stack. You know, what is the right course to sunset certain technologies as SWP comes on board? You know, even, even ahead of the RFP process, doing an assessment of their tech stack, which obviously puts us in a really good position if we're bidding on some of that work. Tremendous amount of change management when these implementations happen and there's a, you know, a, a change from one platform to another platform. There's tremendous change management professional services that they were buying from other third parties.
So we took a look at that and said, "Well, you know, we should be creating these services that surround our platform in some of those implementations." It's been really successful. And by the way, those margins are, you know, much higher than our classic wealth. I think our margins right now in PB sit around 18%-ish. Historical margins were probably around 25%. Some of these professional services margins are more in that 40% range. So definitely accretive . You know, I've now used the word professional services probably 25 times. We've been using but what we've been using the moniker, and we've been thoughtful about it over the last couple of years, is we use this term non-recurring services. That's not exactly true.
We've historically used that, but we've received some feedback even as recently as the last quarter from some of the analysts and our investors to start unpacking what are some of those non-recurring? Are they truly non-recurring? When you think about a company like Accenture or even where I came from, hi I used to work at Grant Thornton. I was a partner there. About a third of Grant Thornton's business was advisory services. Every year, Grant Thornton had to sit and resell 60% of that. By the way, revenue grew every year. So then Grant Thornton was re or Accenture was re does replace that work with other work. It might not be the same exact SOW, but clients still buy from their vendors, and SEI does as well.
So I think going forward, you'll see us doing, having a better terminology than non-recurring, but those truly are professional services. Some of the questions that we get are, in those non-recurring sales events, what's in there? So as I mentioned, there's other advisory services. Yes, there are some implementation fees. But in this past quarter, we had about $23 million in sales events related strictly to professional services. Less than half, probably about maybe 25%-30% of that was implementation fees. And the rest was truly, truly these other advisory services that we really weren't selling two years ago. And I think the opportunity there is that we haven't done a lot of that work in IMS. We see an opportunity in our IMS business to take a page out of Sanjay's book, what are some of those things that managers are buying?
It might be services around data. We spend some money around technology to make sure we're supporting those needs. There's, you know, various other services we've identified. If you look at our total sales events for the past 12 months or for calendar year 2025, fiscal 2025, we had $150 million in sales events in 2025. $50 million were these non-recurring or professional services. Going back two or three years, that number was zero. So while the revenue portion compared to $2.3-$2.4 billion in revenue is relatively small, the ramp-up of what portion we're selling compared to our total sales events is actually increasing. And those are really nice margins.
Okay. That's, I guess we'll keep on watching that develop even further. I wanna stay on the private banking business. I do wanna come back to the truly recurring business 'cause the sales in that business have been a little bit weaker or were a little bit weaker last year. So can you talk about the pipeline here? How confident are you in that sales picking up again in 2026? And anything we should be aware of on the retention side 'cause quite frankly, there's also been some cancellations.
Yeah. Well, so sales events in PB were actually incredibly strong last year, but when we net them out, we had one loss. We did. So, and there were facts and circumstances related to that one loss. So in Q3, part of our policy, we were informed that one of our clients that was on the platform had given us notification that they were potentially not renewing. There were a couple of caveats in there, you know, and that was about, I think, $15 million or so, which net net would pull it down. That was really the only loss we've had in private banking over the last couple of years, at least of any significance. Really, it broke Sanjay's heart. He was really disappointed about that, as we all were.
But you know, just to unpack that a little bit, these conversions take years. These aren't. We're giving we're putting you on notice. Part of our contract, we have to give you notice by a certain date. The notice was given. These could take. Some of these conversions can take three years, four years, five years. And when you look at the margins, you know, you look at a $15 million negative sales events as we net, you know, the P&L impact could be $1 million, $2 million in totality five years from now. So, you know, we want to we tried to put that into perspective. From a pipeline standpoint, our pipeline in PB, IMS has literally in our history, has never been more robust and stronger. You know, again, we had a great win in Q4.
That was not just that was not just professional services. That was, you know, another large mandate that we had won, and we'll implement that over the next, you know, couple of years. But the pipeline in PB is as strong as it's ever been. As a reminder, about three years ago when Sanjay four years ago when Sanjay took over, we were primarily focused on the largest institutions. And we about, I think the number's around 12 now or so. 12 of the largest 20 U.S. institutionals are on our on our platform. That was a big focus where, where we've seen margin improvement, increase in sales events, increase in revenue and profitability has really come from the regional and the community bank space. And, we weren't really focused on the community bank space. And why we're so excited about this, there's obviously many more banks.
Those decisions could be made more fluidly and quicker by the smaller banks compared to the behemoths. Those sometimes can take three or four years to make a decision if a conversion is gonna take place. And it's served us incredibly well, including with professional services. So while yes, we did have one announced loss, you have to put it in perspective of the magnitude of how successful that business has been.
No, fair, fair, fair enough. And you explained it well. Just, you know, we look at the numbers, and the numbers don't sometimes tell the full story, right? So moving on then though to a business which I think you will agree with me, you still have some more work to do.
We do.
That's asset management, which has been soft-ish, in particular when you take out the really favorable markets that we've had over the last few years. So new management in that business. So maybe just give us an update what they're doing there. And then maybe more importantly, any proof points you're seeing that some of the new initiatives are actually working.
Yeah. So that is a business that Ryan and I and the rest of the executive team, I would argue, is really the most exciting and the hugest opportunity for us. So IMS is a machine. You use the word crown jewel. We hear that a lot. We, we agree with that statement. We believe IMS is gonna continue to run and have a great trajectory. Sanjay took over PB a couple of years, four years ago. Negative margins, as I mentioned. You know, the third of our verticals and when we say asset management, we use that as a catch-all for our investment advisors business and our institutional business. You know, not unlike some of our legacy businesses that needed some turnaround, that business definitely needed a turnaround.
We brought in new leadership led by Michael Lane. Michael is former BlackRock. One of our key tenets on Investor Day back in September, one of the, I think, five was the reimagination of asset management. Can be a really catchy term to use, but it truly is we've reimagined asset management. There's been early successes. I think in Q1 or Q2, we announced, like a $200 million positive inflows, which seems like nothing, but when you had $5 billion of negative flows the year before, it actually is somewhat significant. So we have seen momentum. There are a number of things that, Michael has instituted. He's brought in new talent. He brought in Rob Humm , who, essentially leads our is our chief product officer, if you will, for asset management. We've launched and are launching a number of new ETFs.
I think the number is around 7 or 8 for 2026. There's a lot of opportunity there. If you know our business, we do a lot around model portfolios. The majority of those, the product inside those model portfolios are not SEI products. There's a little bit, but not much. I think there's an opportunity for especially for some of our ETF products to be infused into those model portfolios. In 2025, we won under Michael's leadership in a kind of new direction. In for a, give that little nugget. You know, there was a tremendous amount of work that needed to be done. There had to be kind of re-confidence blown into the sales team, the leadership team of the catch-all that we refer to as asset management.
You know, what Michael has done and one of the main thing he did is said, "Hey, we're the majority of some or some of our strategy was really retention in the smallest parts of the market, retaining some of our smaller advisors. We still serve them very well, but we also knew that we needed to move up market." Michael's done that very well. You know, a proof point of that is, you know, just in 2025, we won two of our biggest ever asset management engagements in the history of SEI. And to be honest, we never even would have pursued that in prior years. It wouldn't have even been on our radar. So that's really exciting. We had $1.4 billion in total ETF flows in 2025, far outweighing any other historical point for our ETF flows.
So there are nuggets that we are seeing and little buds here and there, especially with some of the leadership changes that he's made there. We're going to continue to expand our ETF lineup. So yeah. So that's kind of why we're pumped. And that's where we see some of the runway coming from.
Excellent. And since we were just talking about the asset management business, maybe a good time to also go back to the Stratos acquisition, which you mentioned at the beginning at the first question. So look, you just closed it a couple of months ago. So the question really is any early learnings, anything you're more excited about? And then, of course, maybe just lay out or remind us about the strategy here 'cause it's a little bit of a departure from what the company was doing before.
It is. And yeah. And I'll repeat, right? There's three in our opinion, three drivers. There's three A's in financial services: administration, asset management, and advice. You know, if you look at administration and asset management, there are pricing pressures. Somehow the advisors have done an amazing job of maintaining the advice lack of pricing pressure. So, 10 years ago, advice was 80-100 basis points, advice today is 80-100 basis points where you'll see, you know, mutual funds have had pressure. You know, the cost of those have resulted in moving from active to passive. Even ETFs have gone down. Even fees around custody have been pressured down. In some cases, have gone away. So we felt we needed to be closer to the advice space.
And so, we looked at a lot of different opportunities. Stratos was and is an incredible RIA platform, incredible leadership. Jeff Concepcion is the president and CEO of Stratos. First time we met, fit really well into our culture. His vision, his acquisition strategy, the way he looks at deal, looks at deals, his reputation in the market. A lot of inbounds come into Stratos. And so it just really was a natural fit for us. You know, one of the questions on the day we announced, we got on the phone with some analysts and investors, and people wanted to understand, you know, the rationale. To your point, it's not something we necessarily dove deep into. Although, when Ryan took over 4 years ago, probably 2 to 3 years ago, you know, in his M&A conversation, there were two areas, two areas that he had discussed.
One was doing something with the U.S. RIA, now known as Stratos. So we delivered on that. And then two was, do we need to do something around European Fund Administration? Do we need to, you know, buy something there in order to kind of scale quicker, the EMEA admin area? So getting back to Stratos, so it, it should never have been a surprise. We had been, you know, giving indications every single quarter that we think we needed to be closer to the advice base. You know, the question we received the day of the deal was, "Hey, help me understand what those synergies, you know, classic question, where the synergy's coming from." We paused there a little bit. We, we didn't really wanna dive too deeply into where we thought the synergies could come from.
You know, as we sit here 60 days later, we're seeing early indications from advisors that, you know, they wanna know more about SEI and the opportunities that we can provide, whether that's investment products, whether it's our custody platform, whatever it may be. We also talked about, when the acquisition happened, we got a question whether we would, you know, force any of their advisors onto our platform. The answer to that is no. It's still no. We wanna be able to earn that business and not force any advisors into doing anything that they choose not to. It's their, you know, it's their businesses. So, you know, early days have been really successful. We've had an advisor conference down here actually in Marco Island, I think in maybe December, somewhere around there. Really successful. The feedback was incredible.
People, the advisors there were really excited about the, the Stratos transaction, learning more about us. And it's not just custody platform. It's really all of our products. So we're moving from a sales, you know, a relatively mild sales force, for instance, in our institutional business around OCIO or Co-CIO opportunities. Now we have a sales force of RIAs or advisors across the country that have said, "Hey, I have certain connections and certain, you know, companies that look like your client base. Can we help with an introduction? And by the way, what does that look like for me?" And so we've already had early conversations for even our institutional business that we would not have had otherwise. So I don't think the synergies are necessarily from a cost takeout, actually. I know they're not.
It's more about, right, just classic, what is 1 + 1 = 3 and how do we make that happen? So, early days, Q4's numbers had 1 month, 1 month of revenue, as part of the deal. In early January, with there was some put/calls part of the deal. And so we did consummate the rest of the anticipated transaction outside of NSC, which is the Mexico entity that has not been completed yet. So anyway, early days been really, really positive. We'll have more to share after Q1.
Okay. That sounds great. Thank you. And then let me maybe move on to some more company-wide questions. The first topic here, AI. There's a day two of.
I haven't had that question yet.
Yeah. There's a day two of the conference. And I can tell you, AI has been a frequent topic. So look, your business in some areas seems fairly labor-intensive. So naturally, I would think AI can probably help there. So any, anything you're already doing, what's on the roadmap? And then, you know, on the same topic, what about the other side of the coin? I mean, some of the companies in my coverage over the last month, over the last week, and again today, are getting caught up in this AI narrative, in terms of disruption. So again, maybe, maybe you can talk about this. Maybe you've even been caught up in that as well. So what, where are you seeing risks? Are there risks? And, why do you not, what, what how can you fight back, I guess, is the question.
Yeah. So the value of software is not declining. The barrier to creating the software is, you know, that barrier is becoming less and less of a barrier. So yes, we do have obviously technology, part of our platforms. But just to put it in context, so, let's take SWP, for instance. We believe we've built a relatively large moat. From an overall revenue standpoint, we have two. We wish we had more, but we have two SaaS clients that are really only using the platform where we sell our service. And the majority of our revenue, specifically in private banking, for instance, is really a full suite of services. So it's not just software sales for software sales. We're providing front, middle, and back office services to our client base.
That is a labor. There is a labor component to that. There is a tremendous amount of regulatory issues around that, obviously, as you know, from the banking space, and we are as well. So I don't think the barrier to entry, from software and technology, specifically in some of the things that we do, are going to be really in the front of the line versus maybe the back of the line of where people may think about it. From an overall revenue standpoint, it's we actually spend more on technology than we actually receive from a revenue standpoint just from a SaaS standpoint. So we actually see this as an opportunity for us. We spend a tremendous amount with third-party vendors from a technology standpoint.
So we're actually hoping to use AI with some of our, you know, current vendors and are there new entrants coming in? Our technology spend is expensive. And every year, year over year, it's actually a very expensive proposition with increasing pricing. We see this as a really interesting opportunity in order from an expense and cost standpoint to actually help the business. You asked the question, so what are we specifically doing? So, over the last few years, you know, we have a ventures group. Sneha Shah leads that. She's outstanding. The group is outstanding. You know, we have been making investments in AI. You know, classic SEI, we always historically try to build everything ourselves. This is not an area where you can build yourself, so you need to be partnering.
We made an investment in TIFIN a number of years ago. That is not our solution. But getting closer in a front row seats to some of these AI platforms like TIFIN has really helped us tremendously. You know, we've made investments around Data Cloud. That is part of our professional services. There are AI components inside our Data Cloud offering in professional services to PB. We announced an investment in Axyon AI, so part of our ventures group, which is an AI-native organization, which is helping inform, and we're embedding that into some of our platforms. So there is a lot of things that we're doing. You know, our legacy platform before SWP was actually built on COBOL in the '70s. So no one has come by and tried to disrupt COBOL for the last 50 years.
And so we believe the moat is there, but we're not also ignorant to the point that it can't happen. There are a lot of barriers, a lot of barriers to entry specifically around regulatory environments. So, we're keeping a close eye on it. But there's, there's a number of other things from an AI standpoint that we are doing. We haven't announced it publicly yet. I'm not gonna necessarily do it today. But, you know, we even yesterday at 9:00 A.M. in our offices, we, we signed an SOW a couple of weeks ago around automation for the organization. We are, as I mentioned, very labor-intensive. We have a tremendous amount of manual processes.
So bringing in a well-known global third party to partner with us, thinking about how we can use automation and specifically AI on top of that automation, I think, is gonna continue to help with margin improvement, and really just kinda get our workforce leaner so we can continue to make those other investments in things, not just AI, but all things investments, which would include AI.
Okay. Oof.
I know.
That's a lot.
It is a lot. It's a big question.
No, it's there's a lot going on, and it changes every day. Look, shifting gears again, one of the things I should have probably asked or talked about earlier is that SEI over the last few years has been this company in transition, a lot of management coming in, including yourself. I wanna talk about margins in a minute, but maybe before that, just can you just talk about how the company has changed? What has this meant from a go-to-market strategy perspective, what it means financially, obviously? And to what degree do you think it's changed your perception of your company from clients?
Yeah. When I joined two years ago, my anniversary's coming up here next month. You know, in, I guess when Ryan took over almost four years ago now, I think SEI had lost its mojo a bit. We were viewed more as, as a sleepy company. People weren't seeing us show up in the market, like we are today, definitely like we were 10 years prior to a number of years ago. So I think under Ryan's leadership, bringing in kind of new ideas, new strategies, identifying all the broken windows and we had a bunch of them. We had a lot of broken windows that we had to fix, including some of the ones we already spoke about.
But I think, and, you know, very trendy to say, but moving from a product organization to an enterprise solution, which we have demonstrated and we talked about in private banking, companies, clients, firm wanna do more with less. They're not looking to add vendors. They're looking to consolidate vendors. And I think we've done a really, really good job of being that thought leader along with whether it's a large national bank, whether it is some of the largest fund managers in the world of moving from, you know, simply providing one administrative service to being a platform for the organization. We've been really successful. It's honestly just the way we show up and think about the business differently.
The old SEI of making excuses of why we're losing as opposed to where the opportunities lie, that has really been under Ryan's leadership, and he's changed that mindset. So I do think infusing outside-in talent, that's not to pat myself on the back. We have a lot of great outside, new leaders, including Michael Lane, has just helped us rethink. If you've ever been to our campus in Oaks, we have a beautiful campus in Oaks, Pennsylvania. It's huge. It's like a college campus. There is a pep in everyone's step now. People are excited to be showing up where I think we maybe we've lost that for a number of years. So it's really nothing more than how we're showing up, and I think the results are showing that.
Okay. Two more things to go through. Let's see if we can make it happen. I'm looking at the time, but I promise I will get to the margins. Nice level of improvement there, but it does seem like if I look at the number and where you were in the past, there's more to go. So maybe just quickly, what are you focused on in particular? How quickly do you think you can drive change? And then, of course, how do you balance that with investing, as we talked about earlier?
Yeah. So, all right, so let's unpack this a little bit, and I know we have 3 minutes here. I mean, I think last year in 2025, I think margins improved about 140 basis points, somewhere around there. So we're really proud of that. As you mentioned, we do have more room to go. And I made the comment at Investor Day that we're looking to improve year-over-year basis points by 25-50 basis points per year, which, you know, one of our analysts said that seems low. I'm not saying it's low or not, but I would say, you know, I try to be a little more conservative in some of the financials we give out. But we are doing a lot. And, you know, I mentioned the automation project.
You know, we talk a lot at the executive committee and at the board level. As we scale revenue, if we have to scale heads, we failed. And so the automation project, how we're leveraging and, and laying in AI over top, of, of it all is, is a big portion of where we're going to drive, margin appreciation. So and, you know, as I walk around SEI, I just feel there's $1 million here. There's $1 million there under you turn over every chair. There's just tons of opportunities where we are very manual-intensive. And the opportunity to get automated more, and be able to scale is something we really haven't spent a lot of time, focused on. So I think that's where it's gonna that's gonna be a portion where it comes from. And then just on and then anything from an asset management.
If we can get investment product asset management moving some of those margins compared to our expenses, right, they can scale very, very quickly. We are excited where the margins can move to.
Okay. Excellent. All right. With a minute and a half left, I obviously need to go into capital allocation. We did already talk about a few things there as well, but more recently, you've been an active buyer of your stock, $600 million last year. You did the Stratos acquisition. So A, how do we think about buybacks going forward? And then, of course, where do you think the business could be complemented through M&A? And very quickly, how does leverage fit in? Because quite frankly.
Yep.
You used a lot of cash for Stratos, but you had previously said you would also maybe tap the debt market. You didn't. I don't know why you didn't. So maybe talk, talk, talk about that for a second.
So we historically have been very conservative with our leverage. We historically have used that as a prior to me joining SEI. I think we used that as a badge of honor, and I think that the investor community would say maybe that's not the smartest strategy. So at Investor Day, we did talk about moving from a negative 1x to maybe getting to zero to maybe 1x in the future. We're not going to be doing acquisitions for acquisition's sake. We did claim a state, and we stand by this. We're looking to return 90%-100% of free cash flow back to our shareholders. We are not afraid of debt. We, I think you can expect when we're making future investments, I don't think that's necessarily in the terms of M&A.
There may be some tuck-ins with the Stratos to continue to support that, as Jeff and others, and we wanna continue to bring on new advisors. So, I think there's an opportunity that's where we're gonna leverage some of the debt. But I wouldn't expect us to go from negative one-time to one-time overnight.
In any particular areas in terms of M&A that you're spending time on?
Yeah. Yeah. When we, I think it's gonna be in the short term, it's gonna be more to support the Stratos acquisition as opposed to anything else.
Okay. Very good.
Yeah.
All right. Why don't we stop here? Thank you very much.
Thank you.
For all the insights.
Thank you.
Hope to have you back here in a year.
Yeah. Appreciate it. Thank you.
Thanks.