(In thousands, except asset balances and per share data)
This discussion reviews and analyzes the consolidated financial condition at September 30, 2012 and 2011, the consolidated results of operations for the three and nine months ended September 30, 2012 and 2011 and other key factors that may affect future performance. This discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements.

Overview
Consolidated Summary
We are a leading global provider of investment processing, investment management, and investment operations solutions. We help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth by providing comprehensive, innovative, investment and investment-business solutions. Investment processing fees are earned as monthly fees for contracted services, including computer processing services and investment operations services, as well as transaction-based fees for providing securities valuation and trade-execution. Investment operations and investment management fees are earned as a percentage of average assets under management or administration. As of September 30, 2012, through our subsidiaries and partnerships in which we have a significant interest, we manage or administer $447.8 billion in mutual fund and pooled or separately managed assets, including $195.2 billion in assets under management and $252.6 billion in client assets under administration. Our affiliate, LSV Asset Management (LSV), manages $58.9 billion of assets which are included as assets under management. Our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 were:

                                Three Months Ended September 30,       Percent        Nine Months Ended September 30,       Percent
                                    2012                 2011           Change           2012                 2011           Change
Revenues                     $       251,752       $       233,227         8  %   $       730,887       $       703,480         4  %
Expenses                             198,262               182,091         9  %           575,510               543,790         6  %
Income from operations                53,490                51,136         5  %           155,377               159,690        (3 )%
Net gain from investments              3,708                (1,418 )     N/A                7,577                 3,912        94  %
Interest income, net of
interest expense                       1,375                 1,274         8  %             4,028                 3,895         3  %
Equity in earnings from
unconsolidated affiliate              24,928                23,908         4  %            74,970                82,387        (9 )%
Income before income taxes            83,501                74,900        11  %           241,952               249,884        (3 )%
Income taxes                          32,415                25,256        28  %            90,892                88,087         3  %
Net income                            51,086                49,644         3  %           151,060               161,797        (7 )%
Less: Net income
attributable to
noncontrolling interest                 (343 )                (412 )     (17 )%              (797 )              (1,234 )     (35 )%
Net income attributable to
SEI Investments Co.          $        50,743       $        49,232         3  %           150,263       $       160,563        (6 )%
Diluted earnings per common
share                        $          0.29       $          0.27         7  %   $          0.85       $          0.86        (1 )%

In our opinion, the following items had a significant impact on our financial results for the three and nine months ended September 30, 2012 and 2011:
• Revenue growth in the three and nine month periods was primarily driven by higher Asset management, administration and distribution fees from improved cash flows from new and existing clients and the net market appreciation during 2012 despite the market decline in the second quarter. Our average assets under management, excluding LSV, increased $10.6 billion, or nine percent, to $127.8 billion in the first nine months of 2012 as compared to $117.2 billion during the first nine months of 2011.

• Sales of new business in our Institutional Investors and Investment Managers business segments as well as positive cash receipts from new and existing advisor relationships in our Investment Advisors business segment contributed to the increase in our revenues and profits.

• Our proportionate share in the earnings of LSV increased in the three months of 2012 and declined in the nine month period of 2012. The increase in the three month period was driven by market appreciation of LSV's assets under management and performance fees. The decrease in our earnings in the nine month period was primarily due to the market decline in second quarter 2012 which negatively affected the value of LSV's assets under management. Our earnings from LSV in the three and nine months of 2012 were also negatively impacted by a decrease in our ownership percentage from approximately 41.2 percent to approximately 39.8 percent during the second quarter 2012. The reduction in our ownership percentage is described in greater detail under the caption "Equity in earnings of unconsolidated affiliate" later in this discussion.

• Our operating expenses related to servicing new and existing clients of our Global Wealth Services solution implemented on the Global Wealth Platform increased during the three and nine months of 2012 as compared to the similar periods of 2011 as we continue to build out the operational infrastructure. These increased operational costs, mainly related to personnel, primarily impacted the Private Banks segment. The increased operational costs are included in Compensation, benefits and other personnel on the accompanying Consolidated Statements of Operations.

• Our consulting costs incurred for the development of the Global Wealth Platform, excluding amounts capitalized, have declined during the three and nine months of 2012 as compared to the similar periods of 2011 as we transition our efforts from development to support and maintenance of the platform. These consulting costs, which are expensed as incurred, are included in Consulting, outsourcing and professional fees on the accompanying Consolidated Statements of Operations.

• Our operating expenses related to our hedge fund and separately managed accounts solutions of our Investment Managers segment increased during the three and nine months of 2012 as compared to the similar periods of 2011. These increased operational costs, mainly related to personnel, resulted from servicing new and existing clients and are also included in Compensation, benefits and other personnel on the accompanying Consolidated Statements of Operations.

• Sales events, net of client losses, were significantly higher during the first nine months of 2012. These sales events resulted in an increase in sales compensation expense of $8.1 million when compared to the first nine months of 2011. Also, incentive compensation expense increased in the three and nine months of 2012 as compared to the similar periods of 2011.

• Amortization expense related to capitalized software increased to $24.9 million during the first nine months of 2012 as compared to $19.3 million during the first nine months 2011 partially due to continued releases of the Global Wealth Platform. Additionally, we decided to discontinue the use of specific functionality within the platform and incurred $2.7 million of amortization expense related to the remaining net book value of the component during the three months ended September 30, 2012. This expense was recognized in our Private Banks business segment.

• We recognized gains of $3.4 million and $7.3 million from SIV securities in the three and nine months ended September 30, 2012, respectively, as compared to losses of $0.8 million and gains of $4.1 million in the prior year periods.

• Our effective tax rates for the three and nine months of 2012 were 39.0 percent and 37.6 percent, respectively, as compared to 33.8 percent and 35.3 percent in the prior year periods. The increase in our tax rates was due to the accrual of taxes on the cumulative undistributed earnings of SEI Asset Korea as well as tax planning strategies which benefited our tax rates in 2011 (See the caption "Income Taxes" later in this discussion for more information).

• We continued our stock repurchase program during 2012 and purchased 5,648,000 shares at an average price of approximately $20.10 per share in the nine month period.

Ending Asset Balances
(In millions)
This table presents ending assets 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. These
assets are not included in our balance sheets because we do not own them.
                                                      As of September 30,      Percent
                                                       2012          2011       Change
Private Banks:
Equity and fixed income programs                   $    17,960    $  15,442       16  %
Collective trust fund programs                             147          476      (69 )%
Liquidity funds                                          5,342        5,529       (3 )%
Total assets under management                      $    23,449    $  21,447        9  %
Client proprietary assets under administration          11,611        9,845       18  %
Total assets                                       $    35,060    $  31,292       12  %
Investment Advisors:
Equity and fixed income programs                        30,864       24,757       25  %
Collective trust fund programs                             370        1,392      (73 )%
Liquidity funds                                          1,868        2,653      (30 )%
Total assets under management                      $    33,102    $  28,802       15  %
Institutional Investors:
Equity and fixed income programs                        59,852       46,259       29  %
Collective trust fund programs                             153          510      (70 )%
Liquidity funds                                          3,272        3,356       (3 )%
Total assets under management                      $    63,277    $  50,125       26  %
Investment Managers:
Equity and fixed income programs                            65           64        2  %
Collective trust fund programs                          15,433       10,896       42  %
Liquidity funds                                            396          195      103  %
Total assets under management                      $    15,894    $  11,155       42  %
Client proprietary assets under administration (A)     240,965      223,620        8  %
Total assets                                       $   256,859    $ 234,775        9  %
Investments in New Businesses:
Equity and fixed income programs                           534          490        9  %
Liquidity funds                                             29           41      (29 )%
Total assets under management                      $       563    $     531        6  %
LSV:
Equity and fixed income programs                   $    58,886    $  49,444       19  %
Total:
Equity and fixed income programs                       168,161      136,456       23  %
Collective trust fund programs                          16,103       13,274       21  %
Liquidity funds                                         10,907       11,774       (7 )%
Total assets under management                      $   195,171    $ 161,504       21  %
Client proprietary assets under administration         252,576      233,465        8  %
Total assets under management and administration   $   447,747    $ 394,969       13  %

(A) Client assets under administration in the Investment Managers segment include $38.0 billion and $43.2 billion of assets at September 30, 2012 and 2011, respectively, that require limited services and therefore are at fee levels below our normal full service assets.

Average Asset Balances
(In millions)
This table presents average asset balances of our clients, or of clients'
customers, for which we provide management or administrative services through
our subsidiaries and partnerships in which we have a significant interest. These
assets are not included in our balance sheets because we do not own them.
                                     Three Months Ended                      Nine Months Ended
                                       September 30,          Percent          September 30,          Percent
                                     2012          2011        Change        2012          2011        Change
Private Banks:
Equity and fixed income programs $   17,527     $  16,592         6  %   $   17,145     $  15,646        10  %
Collective trust fund programs          230           505       (54 )%          354           547       (35 )%
Liquidity funds                       5,401         5,210         4  %        5,366         5,059         6  %
Total assets under management    $   23,158     $  22,307         4  %   $   22,865     $  21,252         8  %
Client proprietary assets under
administration                       10,867        10,364         5  %       10,570        10,800        (2 )%
Total assets                     $   34,025     $  32,671         4  %   $   33,435     $  32,052         4  %
Investment Advisors:
Equity and fixed income programs     30,032        26,658        13  %       29,187        27,667         5  %
Collective trust fund programs          532         1,442       (63 )%          918         1,558       (41 )%
Liquidity funds                       1,886         2,224       (15 )%        1,902         1,793         6  %
Total assets under management    $   32,450     $  30,324         7  %   $   32,007     $  31,018         3  %
Institutional Investors:
Equity and fixed income programs     57,763        49,115        18  %       55,010        50,358         9  %
Collective trust fund programs          284           505       (44 )%          376           556       (32 )%
Liquidity funds                       3,253         3,416        (5 )%        3,388         3,450        (2 )%
Total assets under management    $   61,300     $  53,036        16  %   $   58,774     $  54,364         8  %
Investment Managers:
Equity and fixed income programs         62            52        19  %           61            30       103  %
Collective trust fund programs       14,797        11,292        31  %       13,257         9,713        36  %
Liquidity funds                         287           200        44  %          237           192        23  %
Total assets under management    $   15,146     $  11,544        31  %   $   13,555     $   9,935        36  %
Client proprietary assets under
administration                      237,155       236,953         -  %      230,525       238,584        (3 )%
Total assets                     $  252,301     $ 248,497         2  %   $  244,080     $ 248,519        (2 )%
Investments in New Businesses:
Equity and fixed income programs        530           525         1  %          543           555        (2 )%
Liquidity funds                          35            42       (17 )%           36            48       (25 )%
Total assets under management    $      565     $     567         -  %   $      579     $     603        (4 )%
LSV:
Equity and fixed income programs $   57,164     $  54,679         5  %   $   57,453     $  59,964        (4 )%
Total:
Equity and fixed income programs    163,078       147,621        10  %      159,399       154,220         3  %
Collective trust fund programs       15,843        13,744        15  %       14,905        12,374        20  %
Liquidity funds                      10,862        11,092        (2 )%       10,929        10,542         4  %
Total assets under management    $  189,783     $ 172,457        10  %   $  185,233     $ 177,136         5  %
Client proprietary assets under
administration                      248,022       247,317         -  %      241,095       249,384        (3 )%
Total assets under management
and administration               $  437,805     $ 419,774         4  %   $  426,328     $ 426,520         -  %

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. Assets under management and administration also include total assets of our clients or their customers for which we provide administrative services, including client proprietary fund balances for which we provide administration and/or distribution services.

Business Segments
Revenues, Expenses and Operating Profit (Loss) for our business segments for the
three and nine months ended September 30, 2012 compared to the three and nine
months ended September 30, 2011 were as follows:
                                    Three Months Ended
                                       September 30,          Percent        Nine Months Ended September 30,       Percent
                                    2012           2011        Change           2012                 2011           Change
Private Banks:
Revenues                        $  92,076       $  87,697         5  %   $       268,367       $       262,279         2  %
Expenses                           91,209          85,893         6  %           263,612               254,570         4  %
Operating Profit                $     867       $   1,804       (52 )%   $         4,755       $         7,709       (38 )%
Operating Margin                        1 %             2 %                            2 %                   3 %
Investment Advisors:
Revenues                        $  51,384       $  46,798        10  %   $       150,227       $       144,674         4  %
Expenses                           30,114          28,051         7  %            88,440                82,825         7  %
Operating Profit                $  21,270       $  18,747        13  %   $        61,787       $        61,849         -  %
Operating Margin                       41 %            40 %                           41 %                  43 %
Institutional Investors:
Revenues                        $  58,081       $  52,216        11  %   $       167,293       $       160,132         4  %
Expenses                           29,654          25,524        16  %            86,494                79,883         8  %
Operating Profit                $  28,427       $  26,692         7  %   $        80,799       $        80,249         1  %
Operating Margin                       49 %            51 %                           48 %                  50 %
Investment Managers:
Revenues                        $  49,311       $  45,585         8  %   $       142,235       $       133,478         7  %
Expenses                           32,122          29,412         9  %            92,711                86,693         7  %
Operating Profit                $  17,189       $  16,173         6  %   $        49,524       $        46,785         6  %
Operating Margin                       35 %            35 %                           35 %                  35 %
Investments in New Businesses:
Revenues                        $     900       $     931        (3 )%   $         2,765       $         2,917        (5 )%
Expenses                            3,698           2,429        52  %            11,080                 8,474        31  %
Operating Loss                  $  (2,798 )     $  (1,498 )     N/A      $        (8,315 )     $        (5,557 )     N/A
Operating Margin                      N/A             N/A                            N/A                   N/A

For additional information pertaining to our business segments, see Note 10 to the Consolidated Financial Statements.

Private Banks

                                  Three Months Ended                      Nine Months Ended
                                     September 30,         Percent          September 30,           Percent
                                   2012          2011       Change        2012          2011        Change
Revenues:
Information processing and
software servicing fees        $   60,435     $ 55,236         9  %   $  172,972     $ 166,269          4  %
Asset management,
administration & distribution
fees                               25,767       24,214         6  %       75,947        73,443          3  %
Transaction-based and trade

Revenues increased $4.4 million, or five percent, in the three month period and $6.1 million, or two percent, in the nine month period ended September 30, 2012 and were primarily affected by:
• Increased recurring investment processing fees from new investment processing clients and from new and existing Global Wealth Services clients;

• Increased one-time project revenue from new and existing bank clients;

• Increased investment management fees in the three and nine-month periods from existing international clients due to higher average assets under management from improved capital markets in late 2011 into the first nine months of 2012; partially offset by

• Lower recurring investment processing fees due to price reductions provided to existing clients that recontracted for longer periods, client losses and lower transaction volumes; as well as

• Decreased transaction-based fees due to lower trading volumes across the majority of our bank clients.

Operating margins decreased to one percent compared to two percent in the three month period and decreased to two percent compared to three percent in the nine month period. Operating income decreased by $900 thousand, or 52 percent, in the three month period and decreased by $3.0 million, or 38 percent, in the nine month period and was primarily affected by:
• Increased amortization expense related to the Global Wealth Platform due to continued releases and the discontinuation of specific functionality within the platform resulting in $2.7 million of expense recognized in the third quarter 2012 for the remaining net book value of the component;

• Increased direct expenses associated with increased investment management fees from existing international clients, mainly distribution fees;

• Increased sales compensation expense due to new business activity and other personnel costs, mainly salary and incentive compensation;

• Increased non-capitalized development costs, mainly personnel costs, relating to the Global Wealth Platform; and

• Increased operational costs, mainly personnel costs, for servicing new and existing Global Wealth Services clients implemented onto the Global Wealth Platform; partially offset by

• An increase in revenues; and

• Decreased direct expenses associated with the decreased trade execution fees.

Investment Advisors
Revenues increased $4.6 million, or ten percent, in the three month period and $5.6 million, or four percent, in the nine month period ended September 30, 2012 and were primarily affected by:
• Increased investment management fees in the nine month period from existing clients due to higher average assets under management caused by the net market appreciation during 2012 despite the market decline in the second quarter and an increase in net cash flows from new and existing advisors.

Operating margins increased to 41 percent compared to 40 percent in the three month period and decreased to 41 percent compared to 43 percent in the nine month period. Operating income increased by $2.5 million, or 13 percent, in the three month period and declined slightly in the nine month period and was primarily affected by:
• An increase in revenues; partially offset by

• Increased amortization expense relating to the Global Wealth Platform as well as spending associated with building the necessary functionality and infrastructure for servicing financial institutions and investment advisors in the United States; and

• Increased sales compensation expense due to new business activity and other personnel costs, mainly salary and incentive compensation.

Institutional Investors
Revenues increased $5.9 million, or 11 percent, in the three month period and increased $7.2 million, or four percent, in the nine month period ended September 30, 2012 and were primarily affected by:
• Increased investment management fees from existing clients due to higher average assets under management caused by improved capital markets in late 2011 and through the first nine months of 2012 as well as additional asset funding from existing clients; and

• Asset funding from new sales of our retirement and not-for-profit solutions; partially offset by

• Client losses and lower basis points earned on assets under management.

Operating margins decreased to 49 percent compared to 51 percent in the three month period and decreased to 48 percent compared to 50 percent in the nine month period. Operating income increased $1.7 million, or seven percent, in the three month period and increased slightly in the nine month period and was primarily affected by:
• An increase in revenues; partially offset by

• Increased sales compensation expense due to new business activity and other personnel costs, mainly salary and incentive compensation;

• Increased direct expenses associated with higher investment management fees; and

• Increased discretionary marketing and promotion expenses.

Investment Managers
Revenues increased $3.7 million, or eight percent, in the three month period and increased $8.8 million, or seven percent, in the nine month period ended September 30, 2012 and were primarily affected by:
• Cash flows from new clients of our hedge funds and collective trust fund solutions; partially offset by client losses;

• Net positive cash flows from existing hedge fund clients due to new funding along with higher valuations from capital market increases in late 2011 and through the first nine months of 2012; and

• Increased accounts from our separately managed account program due to new clients and existing clients involved in mergers.

Operating margins remained at 35 percent in both the three and nine month periods. Operating income increased $1.0 million, or six percent, in the three month period and increased $2.7 million, or six percent, in the nine month period and was primarily affected by: . . .