Advisors channel

Sales efforts of our financial advisors totaled $1.1 billion during the current quarter, an 18% improvement compared to the third quarter and a 24% improvement compared to the same period last year. Sales marked the second highest quarterly level in this channel’s history, slightly below the high water mark set during the second quarter of 2008.

Flows were negative at $75 million during the quarter as investors apparently sought to realize capital gains in anticipation of higher tax rates in 2013. Still, our Advisors channel finished 2012 with inflows of $191 million for the year, comparing favorably to 2011’s outflows of $156 million. Sales for the year were a record $4.1 billion.

Our advisors’ productivity continued to rise, reaching an average of $44.3 thousand per advisor during the fourth quarter for an annual total of $168 thousand per advisor, an improvement of 8% compared to the year ended December 31, 2011. This productivity improvement is the combined result of our focus on more selective recruiting as well as our clients’ increased use of fee-based advisory products. During 2012, approximately 37% of underwriting and distribution revenues generated by the Advisors channel came from asset-based fees on advisory products, compared to 29% during 2011.

Wholesale channel

Sales from our Wholesale channel were $3.5 billion during the quarter, a decline of 3% compared to the previous quarter and 7% compared to the fourth quarter of 2011. Net flows were negative at $77 million, only the second quarter of outflows in the channel’s 10-year history. The current quarter’s outflows may have been influenced by investors’ desire to lock in capital gains before the highly anticipated increase in the capital gains tax rate.

The breadth of our sales remains good with 42% of sales in fixed income products – including 33% in our High Income product, and 58% in equities – including 33% in the Asset Strategy fund. Concentration of assets under management continues to diminish as seven funds are now in excess of $1 billion of assets under management. Asset Strategy, our largest fund, now accounts for 54% of total assets under management and 32% of 2012’s sales compared to 59% of assets under management and 47% of sales during 2011.

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