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Now comes the tough part -- revivingh the company's sagging sales channel and batterefpublic image. New CEO Henry Herrmann said he will leveragerelationships he's builtg through the course of 34 yeards with Waddell & Reed shareholders, clients and investmenyt advisers to boost the mutual fund company'ws fortunes. "We need to do whatever we can to make sure that our clientss and our advisers are comfortable with our commitment to our business and to the best interest ofour clients," he said. "We will be workingf hard to makesure that's the case and that'xs understood.
" Herrmann, 62, can shoulder that load, formeer Waddell & Reed Chairman Ben Korschot said. Korschot, who retireed from the company in worked closely with Herrmann in the 1970sand '80as and groomed him to become the company's chief investment officer, a titlew Herrmann assumed in 1987. "He's very sound, very good, and he knowes this company backwardsand forwards," Korschot said.
"u think Waddell & Reed is going to be off and Locally, there's a positive vibe about Herrmanmn taking overas CEO, said Robert Smart, president of Fairwayh brokerage Herrmann has been with Waddell & Reed sincr 1971 and is well-known in the "The way I sense the thing is there's a great sigh of relief, and they got a guy in therw who has a great history with Waddell Reed, and he knows what he's doing," Smartr said. Herrmann received a vote of confidencre from Wall Streetas Inc. and Inc. upgraded rating s on Waddell & Reed's stock WDR) after his promotion. The company'sa stock price has increased from a closeof $17.
50 on May 25 -- just beforwe the announcement of Tucker's resignation -- to a closwe of $19.36 on June 1. But in recenty days, analysts warned that turning aroundWaddellp & Reed's sales won't be easy. For the quarter that ended March 31, sales of proprietary investment products by the company's sales channelk decreased $60 million, or 11 percent, from the same perioc a year ago, according to the company's quarterlyu report. Waddell & Reed's overall net income for the quarterf decreased 18 percent from theprevious year.
"It will take some time to get the proprietar y distribution system backon track," wrote Robert Lee, an analysrt for Keefe Bruyette Woods in New York. "Operational challenges coulrd persist for at least the nextseverao quarters." Herrmann said his first priority is improving the performancw of Waddell & Reed's nationa l sales network, which today includes 2,453 advisers. He said he thinksw Waddell & Reed's top producers are energized by the new managemenrt the company introduced earlierthis year. That includesz Chief Marketing OfficerTom Butch, National Salesx Manager Steve Anderson and Associate National Salezs Manager Brad Hofmeister.
He described Anderson and Hofmeisteeras "hands-on guys" who bring to their new jobs yearw of experience in the field as regionak vice presidents. Herrmann said he wants to build on that enthusias with greater emphasis on sales training and recruitingnew advisers. "We've probablyu spent too much time focusing on financial planningb and a little less emphasis helpingg advisers dial in and sharpen thei skills in the areaof sales," he said.
Analysts have argued that Waddell & Reed has spent too much time fighting legal battlews with former parent company and regulatoryg issues raised bythe , whicgh filed a 2004 complaint against the compan y concerning its handling of variable annuities. The compant resolved the bulk of thesew issueswith $32.5 million in settlements announced in late April. But Herrmanj said he knows Waddell & Reed has sufferesd damage to its public In thenext month, he plans to spendr considerable time with shareholders of Waddell & Reed and its mutua funds "so they can get to know me better.
" Lee, the Keefed Bruyette & Woods analyst, said he expects given Herrmann's age, successiomn planning soon will be a focu of Waddell & Reed's board of But the new CEO said he has no plans to slow "There's no mandatory retirement. I'mm physically fit, I love the business, and I love Waddell Reed," Herrmann said. "If I think it's appropriate and I'm still contributing, I may stay on longer than thenormalk 65.
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