Morgan Stanley ($MS)

Thanks, everyone, for coming to this session with our very own Dan Simkowitz, Co-President of Morgan Stanley. Thanks, Dan, for supporting us one more year. Before we get started, I'm going to read the disclaimer. The discussions may include forward-looking statements, which reflect Morgan Stanley's management's current estimates and is subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements. This discussion, which is copyrighted by Morgan Stanley and may not be duplicated or reproduced without their concern, consent is not an offer to buy any security.

With that, I guess we should start with the current environment. The market has seen quite a bit of volatility, whether it was AI a few weeks ago, geopolitics at the moment, private credit has also made the headlines. And only 2, 3 months ago, it felt like we're in a bull market. How do you see the environment based on the conversations you're having with clients? And given the volatility we've seen, how do you see the capital markets environment playing out? And to what extent that's affecting the pipelines?

Sure. Well, first of all, thank you to everyone here. I've been at the conference since yesterday afternoon, and congratulations to you and your predecessors and your partners, but mostly to everybody in the room and all the companies are presenting. It's just a phenomenal event and venue to pull all this together. We really appreciate everyone taking the time, both people in the audience, but also all the firms that have done and you got the all-star crowd, and I'm like the side show here. But what I would say is I think what's remarkable in a period of maybe uncertainty and unease because I think you touched on at the end there, the pipeline is how resilient the capital markets have been, the M&A announcements have been, as I said, in a period of uncertainty and unease. And I think it's worth at least getting our perspective on where the core of that uncertainty and unease is. And I'm going to say it almost independent for the moment around the conflict in the Middle East because some of the economic impact there, especially as it relates to the U.S. economy is sort of -- it's not hitting yet, and so it's still in front of us. So if I think about uncertainty and unease, which I would argue stretches back to the last month or 1.5 months or 2. I would first start with MSCI world is up over 40% in the last 2 years. So right there, I think both people in this room, and I used to run asset management, people in this room as asset allocators and investors, but also our team around risk management, your awareness goes up after 2 successive years in that sense. So I think you're on your toes in that context. And -- but on the other side, I would say the primary driver this year is a recognition that the transformational productivity power of AI is right in front of us, and that creates sort of somewhat unclear outcomes in some elements. When we look at it at Morgan Stanley as a user, for example, there's going to be extraordinary value in how we deliver service to our clients, service to more clients, service to more clients more efficiently and with more productivity and with sort of higher margin and across a broader swath. If we take that extraordinary value that we are seeing and the tools that we're seeing from some of our partners are accelerating and then we extrapolate that to other industries, this is really extraordinary productivity tool. And it's pretty clear to us that, that's going to have a lot of -- it's going to have a lot of client value. It's going to have a lot of shareholder value to Morgan Stanley. I think it's pretty clear in the marketplace. We hosted our conference. We have a comparable conference for TMT, just to put in context around Morgan Stanley franchise. We had 3,500 attendees at that conference in San Francisco 2 weeks ago. I would imagine everybody in this room had peers representing that. I interviewed Dario Amodei at Anthropic, and we had Jensen Huang at NVIDIA. Jensen's point is compute and really as it relates to both our revenue as well as our expense base is really going to be extraordinarily powerful. If you extrapolate that, there's real value I think the chip makers, memory are all going to win. I think a firm like Morgan Stanley and people who have real client relationships and domain expertise and in our case, just a truly incredible advice platform will win. But there is a little bit of angst between whether the LLMs, the data center players and the enterprise technology players, who's going to win in that? And how does that play out plus the societal impact. And so I think that extraordinarily powerful productivity tool combined with a beta that's moved 40-plus percent 2 years creates that environment. And so against that backdrop, plus at least the near-term impacts of the conflict in the Middle East, the capital markets and thus, our pipeline have been really resilient. And so it's -- I think it's important to repeat -- we raised since the conflict in the Middle East started, I believe, $6 billion for Galderma, which is probably the most successful LBO in European history, a reinsurance equity offering measuring in the multi, multibillion dollars. The largest LBO that had gone public in December was Medline, and they came back in 2 months, and I think raised $3 billion. We've raised $75 billion in the last 6 weeks with hyperscaler debt, $50 billion of that just in the month of March after the conflict. And you're seeing some of the private equity LBO financing starting to move through the market. And just yesterday, we announced a big M&A deal in the real estate storage space. So in essence, the underliers and the receptivity to go do capital are pretty strong. And so in that context, it gives us confidence that the pipelines that we're seeing in investment banking, again, capital markets and M&A are really robust. And the underlying fundamentals around that are very much intact and people are executing and there is demand against that. And again, just to repeat those underlying fundamentals, and Betsy, I think, is here, your colleague. She does a lot of work on M&A volumes and M&A activity versus GDP. But for 2.5, 3 years, we're way off the trend line, and we're just on a sort of grind to get back to trend line. And we're seeing that translate in M&A volumes. We're seeing it translate also because of the regulatory environment in the U.S. around M&A approvals. We're seeing it also because despite -- and I'm sure we'll get into it, headlines around credit, the actual credit markets that are supplying capital to M&A are functioning as well as we've ever seen them, absent -- presumably we'll talk a little bit around software as an example. So all of those are ingredients there. And then private equity firms have a lot of dry powder to deploy, but having run the asset management business, it's hard to deploy the dry powder if you haven't sold some of your backlog and you got to go sell your backlog. And the backlog, you need to sell for 2 reasons. So the urgency is building. LPs want capital back. I think there is an increased focus across both the equity market and the credit market on liquidity, but also the junior partners at all of these private equity firms, they don't get paid on marks. Private equity only gets paid on cash. And there hasn't been that much cash return in its entirety. And if you're a founder, it's okay, you made your money in the past. But if you're a junior partner, you haven't been paid in 5 or 6 years. So there is some level of urgency we're seeing and that private equity market is also facilitated a bit by the fact that the IPO market is starting to work. And so I mentioned Medline, I mentioned Galderma. There was a deal we did over the last 12 months for StandardAero, which is owned by Carlyle, all went public. And so you don't have to just rely on selling it to a strategic investor or selling it back into the private equity market. Even if you don't use the IPO market, you now have choices in that context. And so again, pipelines are strong. I will say the IPO market this quarter street-wide is down versus the fourth quarter, but I think there is some element there around seasonality and just deals come at different stages in their element, but it's pretty clear to us that you'll probably see some of the largest IPOs in history in the next 18 or 24 months as an example, especially in the United States, there's a sense that being public is great again to borrow a phrase and that, that has been an emphasis out of the SEC and Secretary Bessent. And so you're going to start to see some of the companies that stayed private for a long time come into the market. And so that resiliency, I think, has been something that I've been quite sort of impressed and surprised, maybe not surprised, but I guess, impressed about in our -- and then that plays through the pipelines and the environment. And I think there is still some time to be had before that could change against some oil shock implications that come out of the conflict in the Middle East.

Great. You touched on private credit, which has been in the press. Can you maybe clarify how that touches each part of Morgan Stanley?

Yes. And I think it's also important just to take a step back. I think, first of all, if we have a recession, and this is the thing that we watch probably the close -- we watch the risk markets and the capital markets, particularly close when you have 2 years in a row, 40% beta move, but you also do it as you see credit spreads tighten and all the rest. But the real play in credit is if there's a recession, what credit is going to have defaults. I mean credit is not risk-free, right? You're getting a spread for taking some risk, and that risk has manifested itself at least at the total -- at the end result around defaults. And so the real play is to keep an eye on recession elements. And so if you're a recession, you're going to have private credit hit, you're going to have public credit hit, you'll have bank balance sheets hit. It's sort of across the board. I wouldn't lose sight of credit risk is credit risk, whether regardless of the structure it's in and whether it's liquid or illiquid and whether it's on an asset manager sort of a fund or on a bank balance sheet. I think that is fundamental to the way we think about the marketplace. I think in the case of -- in private credit and having seen it from a public equity market management perspective, our own public credit market perspective in Morgan Stanley Asset Management and also servicing the asset management industry, I think this is largely going to be an asset management issue, not a systemic issue. And I'm going to make a plug for the Morgan Stanley Research Department. Tomorrow Vishy, who is our credit strategist, is running a panel here at the conference, I believe, and then on April 9, he's running a full day element on this. He's done a lot of great research in this perspective. But just like we've seen in bank allocation of credit, insurance allocation of credit, public market allocation of credit, you're always going to have scenarios where firms will overdo it on terms or overdo it in a sector or win too much business and get a little relaxed. That has happened every cycle for my 35 years in watching asset management. And this is sort of that moment in maybe private credit. And so I think what you saw to a degree is private equity probably got a little overexposed to software. Private credit within that probably got a little overexposed to software. And then certain firms relative to other firms, both in the private credit market, but also versus maybe a public credit benchmark also got a little overweighted. Their returns will suffer because their default rate will be higher than either their peers or their benchmarks. And as their returns suffer, their flows will suffer. But I don't think that will translate into anything systemic because if you look at it at the real core of where people's concerns are today, and again, ex a recession, the real concerns are in software. And if you just run through the math around that, around about 1/4 of the private credit market is software. And so then you run a default rate assumption and then you run a recovery rate assumption and you think about what that does, that doesn't create systemic issues. It just creates return issues and especially relative return issues. And so I think that's something to think about it. In the context of Morgan Stanley, again, software being the one place, if there is no software, if private credit is less of a deployer of capital, a couple of things will happen. We are not seeing any impact to our M&A pipeline and the ability for M&A to be executed. The public credit markets are so robust still that they can easily support and we're already supporting the M&A market and our clients' M&A ambitions. So that would be number one. The sort of related element to private credit is software. The software IPO pipeline at Morgan Stanley is in the single digits. So it's not really relevant. And then as it relates to direct credit exposure to software, we're de minimis as an example. So from a Morgan Stanley perspective. And then our private credit around the Street lending to sort of private credit funds, the protections are -- at least in our case, where the exposure is quite modest, the protections are really very, very strong around marks, around structural protections and all the rest. And then the last element, I guess, would be in Wealth Management. And what's interesting in Wealth Management and Wealth Management has seen at Morgan Stanley 20 or 30 years of experience around this, including real estate funds in and around COVID, the key to a Wealth Management relationship in the private markets, and we've experienced this with hedge funds and then real assets and private equity and now private credit is the discussion you're having with the client has to start with a liquidity budget. So you first have to start with a really intense discussion on liquidity budget. And once -- and not until you're finished with the liquidity budget conversation with the client, do you move on to a risk and return conversation with the client. And then you start to have a pretty, I would say, intimate and holistic asset allocation conversation and recommendation. What's interesting around Wealth Management, just in the month of March, right, which is probably sort of peak private credit news flow, the flow into private markets at Morgan Stanley is up over 35% where -- and I think credit is still up -- is still positive. But real assets is up, I think, about that amount as an example. And if you think back to real assets coming out of COVID, a lot of the same issues that are being debated in the press around liquidity and all the rest were happening in the real estate market coming out of COVID. And so I think in that context, the market and the impact to us is relatively small. But the shakeout, and that may be too strong word, but the relative winners and losers, not disasters, but relative winners and losers in credit asset management and private market asset management, that's going to come around to who is good investors, who is disciplined, who is staying true to sort of good risk management tools that's in front of us as an example, but we don't see it as a systemic challenge. We see it as a classic asset management flow. Asset management alpha return and flow issue and then the business dynamics that come out of that.

Okay, clear. I want to touch on in January, one of the highlights of the strategic update was how the equitization of global markets, institutionalization of credit markets and cross-asset innovation, how those were opportunities to drive further durable gains, which is the main goal. Can you unpack what the opportunities across those -- each of those?

Yes. Look, we've had a lot of debates over the last 10 years, let's say, especially when I was running asset management and then even before when I was running capital markets and some elements of the trading business around deglobalization. I don't know about everybody else in this room, but all of our clients, both asset managers and asset owners and corporates and relatively affluent individuals, they're as concerned about the interlinkages of the world that I've ever seen in 35 years. And so I think where we are gaining share is having built -- already built and there are places where we're investing, but we already built an institutional advisory business, whether it's to asset managers, asset owners or big corporations, sovereign wealth funds that is both for the prior conversation, public and private, multi-asset class. So equities, fixed income, importantly, in the environment we're in, commodities, as an example, both micro and macro, if I had to split it that way as well, but probably just as importantly, global. And so our ability then to lever both some of the hedges that are embedded in all those combinations that I just mentioned, but also different growth rates and different flow elements around the world has been really important. But our client base, both asset management and corporates, in particular, but the asset owner sits sort of in the middle of that, they want to know where to allocate assets and where we are seeing trend lines. And so our ability to take our best technology, for example, in equities and deploy it in Brazil or in Greater China or in India or in the Middle East or remarkably in Japan, which had an equity market that was really dead and deployed against our best clients in the markets where we can get paid the best margin because we're providing the highest value versus the competitive set, that has driven share. And the ability to help a U.S. pharma company think about how to do licensing and other JVs in China, there are very few investment banks, as an example, who could do that to help a multi-strategy hedge fund get set up to trade Japan after not being there for 15 years because the market was dead or get access to the market in Brazil or even in the last week or two trade the UAE and Saudi around events, that ability to serve the client wherever they want in a global context with the best technology and best advice has allowed us to gain share. It wasn't that long ago that we were worried about like Chinese investment banks or securities firms being our competition. The competition set, including people who are no longer here, right, Swiss Bank x, not here, other people's other firms pulling out of equities and prime brokerage, the competitive set has actually been stable and declining and our ability to lever all those existing investments across those multi-dimensions has been really quite powerful. We're not standing still. I think there's a technology investment around -- continuous investment around staying on top of our lead around electronification in equities and applying that to fixed income, which has been helpful. And then we're investing primarily in investment banking talent in the U.S., which is a little surprising, but we see the brand and the depth of that market as still a real opportunity for us to go capture share.

You've touched on Asia, EMEA, sort of LatAm regions. How do you think about the international opportunity set more broadly? There was a slide for the full year, I remember that's showing Asia and EMEA business is growing faster than the Americas. Where does that -- does that global footprint, having that global footprint show up in your ability to win business and serve clients, do you think?

Yes. I think, again, we see macro themes that we want to go take advantage of and deliver value to clients around the world. And so as I said, there's equitization in Japan. We think there's the potential of equitization here in Europe, but in particular, in Germany. There's equitization, as I mentioned, in Latin America. There is reallocation of risk and equitization in Greater China. We have a leading market share in that context. And so the ability to service clients in that context, you're seeing real robust volumes and capital formation. I was with a big private equity firm here on Monday. Their largest IPO monetization market in the last 1.5 years has been India. We have a huge franchise, both trading and investment banking in India. And so our ability to take our experience and our technology around all of these global markets is really important. And the MSIM business is very global in both where it raises capital and where it deploys but I would say even in Wealth Management, we have a very strong ability to take offshore assets and deploy them in the United States. There is still a view, especially in this kind of geopolitical environment that U.S. assets custodied at a really high-quality firm like Morgan Stanley with really high-quality advice is still a very attractive place to go. And so we run a very, I think, high-quality, high-growth offshore Latin American business out of Miami. We have a pretty high-end private banking type of business in both Hong Kong and Singapore. And so that ability to go capture wealth that wants to get invested in the United States with the premier advisory brand is still really, really powerful as well.

I want also to touch on the bank opportunity. The firm has talked about the bank being part of the strategy in the past and has moved more assets onto the bank. Can you give us an update of what you're doing?

Yes. If you take a step back, we have a pretty powerful deposit franchise in the United States. It's not branch-based, it's client-based in that deposit franchise. And so that deposit franchise emanates out of Morgan Stanley Wealth Management. It emanates out of E*TRADE and the ability to run a digital bank on the deposit side. It has the ability in certain circumstance to get corporate deposits. So we've got a deposit franchise that were -- has built and really developed well over the last several years. But from a structural perspective, we were not set up like many of our peers on the asset side. And so what we've done over the last 12 months is to optimize that so that we are really running a really high functioning, high quality, high profitability, both asset and liability matched bank. And so what we've done is taken the fixed income derivatives business which used to sit on the broker-dealer at Morgan Stanley, and we've merged that and moved that into the bank balance sheet. And then we've taken our ISG, the securities business lending in Europe and also merged that into our bank construct. It has 2 main benefits. The first is there's just a funding benefit that accrues by having that set of assets and activity on the bank. And the second one, which is, I think, just as important but not always well understood, we were operating in a -- as the only firm running that fixed income business off of a broker-dealer versus all of our peers. And so from a structural perspective and a complexity perspective, we look different. We look different to our counterparties, whether those be asset management counterparties or corporate counterparties. But we also look different versus -- to our regulators. And so the ability to take that complexity, complexity down, funding costs down through work we've done with the regulators around the world has been really important. This was an agenda item that we are focused on, but it was always sort of next year or a different regulatory scheme. And Ted really put this at the highest agenda to push forward. And what's fascinating is we were able to push forward. We had to recontract all of that business. And so some people in this room were part of that. Thank you, across all of our client base and do it seamlessly and do it in concert with the regulatory environment. We think it's a big deal as it relates to our overall integrated firm and the approach that we're taking.

We've got to touch on AI. Several members of the management team have been very vocal discussing the benefits of tech and AI from an operational perspective. How impactful do you see it being across the integrated firm?

Well, again, I started with the view that our ability to service clients, service clients better, more productively more clients, more clients in the Wealth Management business, more clients in the sort of corporate investment bank, private equity part of an investment bank, more clients in the trading parameter because to a degree, Morgan Stanley, if you go back to all of our DNA, we were at the top of the institutional market or even the top of the Wealth Management market. And some of the challenges around moving, taking that intellectual property, that technology and that experience and deploy it down a client set, we were just economically unable to do so. What we're seeing in terms of the power of the tools to be able to deploy that at the customer level and broaden, in essence, our own intellectual property, our own trust and advice across a broader set of clients and do so really powerful is pretty extraordinary. At the same time, I don't think we endeavored to have the largest -- one of the largest law firms or the largest software development companies or one of the largest finance departments in that sense. And so the efficiency that we will be able to build in some of the support functions is also going to be pretty extraordinary. But I'll give you a Wealth Management example. Through the acquisitions and then some of the organic growth around Solium and then E*TRADE, we went from 3 million households in Wealth Management to 20 million households as an example. If we didn't have AI tools, the ability to match up that incremental client set with advisers and drive what you're seeing, which is really dramatic growth in our advisory AUM and advisory assets. The AI technology to be able to match that is pretty extraordinary in that context. But also the ability to just give the adviser more time. So in essence, what we did, and we were early and we had our first meeting with Sam Altman, I believe, was in the fall of '21. There was a little COVID break when we got out of the office. We had OpenAI and Sam come to the Morgan Stanley Board in May of '22. I think it was before ChatGPT had even been released. So some of these tools, we now have 3 years' worth of experience around taking it and allowing our advisory teams to really get more value out of their time. We -- as we move from $3 million to $20 million, we were about to become one of the largest physical call center companies in America. The tools that we've received in the last 9 to 12 months meant we were able to stop that into tracks because no one is employing us because we would be one of the largest call center employers in the United States. So the ability to stop that and allow it to be technology-driven with much -- with really high quality has been a huge sort of productivity and client service benefit, just as an example, in the marketplace. We're seeing tools coming out of the partners we have. We're lucky at Morgan Stanley because of our advisory capability, because we're a big company, because we're a big financier of the marketplace. Gemini out of Alphabet, OpenAI, Anthropic, xAI. These are all incredible partners. The engineering talent that we're being provided, including just sitting on a trading desk so that we're able to now design so, in essence, our own at-the-desk software capability to either solve problems that we've had on our desk for years that just weren't rising to the top of the technology budget is pretty extraordinary. So back to our bullish view on overall TAM, when we see what we're able to do and then I talk to executives in pharma or defense or industrial or other elements of the economy, it's why we do think this is pretty powerful and why it's going to extend our client base and extend our margin throughout the firm.

I think the theme takes us nicely to Wealth Management. The business continues to show strong net new asset trends as the benefit -- the model benefits from that scale, the funnel that you've touched on with Workplace and E*TRADE. Where do you see the next leg of growth? And what would you say to some of the fears around AI and wealth?

Well, it's interesting. I think one of our peer firms who does pure Wealth Management and then does a whole bunch of RIA servicing went down a lot on a press release, I think. To a degree, that press release, which talked about account statements and a little bit of tax back to my comment around OpenAI being here since May of '22. what was released in that press release, I think, in January and February and caused that other stock to go down a lot. We've had those tools on the desktop at the FA for years as an example. And so in essence, our value proposition to the client is deep advice and trust and a brand that's built on trust. And then we're not seeing any -- really any attrition out of FAs we like at all. And so they're not going away. And then what we're seeing is as you get to a certain level of a guy -- a net worth and complexity, you want advice. And people talk about, I think, intergenerational. Again, that big generational shift in wealth is going to come out of people who are 70, 80 and 90-year-olds being given to 50-, 60-year olds. It's not being given to the 25-year-old. And so we have the ability to build real connectivity all the way through the generational element. And I think what's important, and Jed Finn talks a lot about this and so does Andy Saperstein, the way our advisory business is now built is not individual FAs. It's built on teams. And those teams now have a technology specialist, so someone who can use the tools that I mentioned already. They have people who are varying of ages. And then the tool -- the other tool they have is they have a digital tool in E*TRADE. And so as an example, back to growth, because of the workplace, we are getting client engagement with people in their 30s and 20s, 30s and 40s that we never had access to. So if you're an employee at a big technology company and you get your first vesting of stock at 30 years old, it automatically goes into an E*TRADE account. We have enormous market share in that market. We don't -- and it's not just public companies, it's private companies. So then that is -- that asset is sitting in an E*TRADE account. We now own the responsibility of keeping that with the tools that we have around AI and the other algorithms that we've been running now for a couple of years, we see what the formula is to success to retain that client through their 30s, when they compound and they have complexity in their 40s, make it an advisory client. And we put out a slide not this year, but the year before in our strategy deck, once we have a client as an advisory account, we have 99% retention. And so that is as close to an annuity growth business. And what I would say is in that progression from 3 million households to 20 million households, we're in the very early days of monetizing that element. And again, I think in a world of AI, the accrual of benefits is to really well-capitalized scale players who can take advantage of that technology. To take advantage of that technology, you have to have access to the client. We have access to the client that is unrivaled in the industry because we have access to Workplace. There's only one other firm that has a Workplace business in the United States in scale. They have to wait until someone becomes 59.5 and does a 401(k) rollover. I know because I'm 60. So I did my 401(k) rollover right into the Morgan Stanley Wealth Management system. But the Morgan Stanley Workplace system, and it's been added to because of our JV we have with Carta, we get those clients when they're stock vests. And so we have decades where we can build a relationship, use technology, meet the client where they want to be met, whether that's digitally, or with advice and go extrapolate that. And I think I've said it to you before, in my role as Head of Strategy and then at MSIM, I saw Wealth Management platforms, asset management platforms, I now run the securities business. The best scaled growth opportunity in all financial services is Morgan Stanley Wealth Management in the U.S. Even though we're #1, the market is not fully served. Our market share is, I think, low double digits. So the ability to take advantage of 3 million to 20 million households, but then take 20 million up and do it on the back of technology tools is pretty extraordinary.

I think we've gone over the different businesses. One of the big focus has been delivering the integrated firm more systematically. What are you doing differently? And how do you measure success internally?

Yes, I think we came out of the last 10 years having done a fair amount of M&A. We bought E*TRADE, we bought Eaton Vance, we bought Parametric. We really loved all the component parts. We felt like to just run those as silos or try to buy new things, we loved what we had, but it was the linkages that we felt like we could do a lot more with. And just in what I was describing, again, if the Workplace is the big driver of the Wealth Management engine, where is that Workplace? That's at a corporate client. If the corporate -- so the corporate client is delivering a Workplace opportunity, which is delivering NNA and advisory flows to wealth management, there's a linkage. If we are the largest allocator to asset management industry in the world, right? Because we're close to 10 -- we're $8 trillion of wealth management assets on our way to our goal of $10 trillion combined with asset management. We're the largest allocator to the asset management industry because we've got this Workplace thing, which comes from corporates, we do have a holistic relationship with the asset management industry that is quite unique. And so what we did, there's a long history of collaboration and good culture at Morgan Stanley, but what we felt was formalizing that. Formalizing that and going to extract that value from those relationships was better than doing just some -- the next random M&A deal as an example. And so we took one of our most senior and capable executives, Mandell Crawley, and we put them in a formal role and putting together these processes is already paying off. It's paying off in more Workplace mandates. It's playing off in more holistic asset management relationships. At the corporate level, we're now going to the CEO and saying, we can be your adviser, not just on your balance sheet, not just on your historical defined benefit pension plan, not just on your M&A, we can help you with your employees. We're going to give you financial literacy at the employee base to help you hold on and retain talent. And then what do we get for that? We get those relationships so that when that stock vests, we now have a client, and it's on us to hold on to the client.

Maybe a good last question to finish up on capital. The firm has 320 basis points of excess capital. There's now more certainty on the regulatory outlook. How is management thinking about deploying that excess capital? Is this about doing more business with existing clients? Or what are the new opportunities to deploy capital that you see?

Yes. Again, I think on the capital side, we like to be in a position of capital strength because what it allows us to do is continue to invest the capital in supporting the businesses. And right now, with SLR reform and the capital buffers that we've built, we can be quite sort of front-footed in investing in the client business. We can be quite sort of positive as we look forward around dividend growth. We can opportunistically buy back stock, and we also have the ability to sort of think about both organic and inorganic opportunities that a market environment may present us to us without having to feel like we're against the wall. And so in that context, we feel like there's real continued growth in both business and dividend around the capital elements. And I think that's important as you see sort of varying market environments. I mean, again, we are seeing, as I said, a really good pipeline over the next couple of years, but there is going to be dislocations that we can take advantage of in that context. And you'll see elements around that. To a degree, we took advantage of when E*TRADE, when Schwab took commissions to Zero and Ameritrade left the table, we were able to say this is an opportunity, a partner that we always wanted. Same is true with Eaton Vance. It was on the top of our list with Parametric and then COVID happens and the opportunity presents itself. You're going to see -- even right now, you see situations where the market has some challenges. For example, our transactional volumes in retail are off of a record fourth quarter are a little lower this quarter, but then they're going to come back up. Can we take advantage of opportunities along the way that capital provides us that flexibility.

I think that's perfectly timed. Thanks very much again, Dan, for joining us one more year, and it's a very insightful session. Thank you.

And thank you.