Raymond James Financial, Inc. (RJF) Earnings Call Transcript & Summary

Hi, good morning. Thank you for joining us. Before we begin, I would like to remind listeners that you can submit your questions through the webcast portal. And also for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. Okay, with that out of the way, we're pleased to have with us Raymond James' Chairman and CEO, Paul Reilly; and CFO, Paul Shoukry. Paul and Paul, thank you for joining us.

Good to see you. Good to be here.

Thank you.

Great. So maybe you start, you had your first post-pandemic Investor Day late last month. You had a pretty exciting story to tell about the firm's positioning and growth prospects over the next 5 to 10 years. I do want to delve into your growth agenda, but maybe to start, you can give us a quick high-level overview of your top 3 strategic priorities for the next 3 to 5 years.

Yes, it's still focusing on kind of the same story with maybe a little twist. So first, we've really been focused on organic growth. Our strong -- the key to our success, I think, has been 2 things. First, is the culture, retaining people. We've stayed, since I've been here and well before, under 1% regretted attrition a year. And that's key. That's a measurement of our environment. I think people have to remember that our FAs own their books. They can leave any time, even the employees. They're here because they want to be here because there's no strings. We don't have a fight over protocol, they can go. And that helps us really keep the special environment we have. And then on top of that, that helps us recruit. And I believe if you can't grow organically, there's something wrong with the model. So organic growth has been our center. It will continue to be our center. When you recruit people one by one, they're coming because they want to be here. They fit in the culture. We get to interview them, and we know it grows the family. The second area is through strategic M&A. And that strategic M&A is really -- and historically, we focused on it. It has to be driven by culture. It has to be a culture fit. Second, it has to be strategic. There has to be a reason to do it. Third, we have to integrate it. And fourth, has to be good ROE for shareholders. And we've broadened that. I think we've been more aggressive in our corporate development function and expanded in areas what I call outline technologies, instead of just looking at people, is how do we also use technologies and acquire them to make us better and more efficient. And third is continuing to develop our technology platform. I think I hope at the investor conference, everyone saw. And again, everyone talks about their technology. And the reason we've listed all the awards was this is third-party endorsement, not just saying we have it, but you could see year after year. We really have been, I think, a leading-edge on the adviser's desktop, and we did that on purpose. Advisers desktop first, and now we're turning a lot of that over into the client side versus the adviser side, and we think can still have a very strong best-in-class platform for what we do. So those remain the 3 broad themes. And of course, there's a lot of detail, a lot of implementation under it.

Great. Yes, I do want to delve into each of those, but let's start with the Private Client Group. Let's start with organic growth there. You've generated about 7.5% of net new money growth over the last year. It's been even higher at 9% annualized in the last 6 months. That's sort of a pretty high bar already. I know it's difficult to put a number on where this can go going forward. But talk a little bit about what you're trying to do to sustain this high level of growth?

Well, Manan, as you know, you've been covering the industry and us for a while. It's -- part of that, I wish I could take the credit for, but certainly constructive markets help, a high Dow and a rising Dow certainly help organic growth numbers. So what we can really focus on is our recruiting and retention. Again, our retention numbers stay very strong. And our recruiting has been very strong, except the employee channel had slowed down, and we just did not raise with a very competitive market. We didn't have to do that in the independent side and the RIA side, but we needed to do it on the employee side. And again, we didn't go up to what everyone else did, but our recruiting is now ahead of last year. So if you look at joined and commits, some commits will fall out, it's a backlog. And some commits will stretch out. They won't join this quarter, they'll go to next quarter, next quarter, but we have a pretty good history that we're on a pace higher than last year, which is a very strong year. So all those are really what grows that number, as well as the productivity tools we use for advisers to build their business. So we never forget the most productive, the most beneficial growth is advisers growing their business. There's not any real cost to us. That means the clients are happy. That means the advisers are growing, they're happy and we're happy. So again, those productivity and technology tools have been essential, both in generating that number and attracting and retaining new advisers to our platform.

Great. So maybe as a follow-up to that. You mentioned you recently upped your transition assistance payments, and you're seeing the benefits of that. But the market is pretty competitive right now, right? Markets are elevated, a strong rebound is underway. Everyone's looking to grow. Do you think that you might need to do more in the future? Or how do you think about growing the adviser base right now?

So far, so good. I mean our onboarding's pretty full. We have room for people, but I mean, we're doing very, very good. We're exceeding kind of the goals we put ahead in front of the year, which weren't small. We thought we're fairly aggressive. Yes, we do lose some people, but there are people that pay a lot more, but we're close enough. And we've always -- this has always been the case, is we've always lost people to dollars, but we got more than we lost. And we believe it's kind of a positive self selection of people willing to join us for a little less money, but believe in the long term, in the culture, they're here for a good reason. And from our standpoint, it's a good return and we think fair to the shareholders and the advisers. So we stay focused on that. So there's no doubt that there are people that we could have gotten that just matched this deal, but we believe some of those deals are uneconomic, and it's easy in a cycle when you're at peak cycle and even it grows for a year or 2, when you have a correction all of a sudden, you're paying out something on a really high bar, on a really high asset level. It goes down, you're paying an awful lot during those correction periods. So we take a pretty long-term view. And I think our growth is very good. We could accelerate it by paying more and losing those that we're losing for dollars. But I think our pace is really good. And yes, we have done enough.

Great. Another area of growth for the industry has been customization. And you've spoken a lot about the importance of personal advice, more holistic planning beyond just investment advice, stuff like tax planning, legacy planning, et cetera. Do you see clients looking for higher levels of customization right now, especially in the high net worth, ultra-high net worth space? And if so, what level of customization are you offering clients today?

Yes, we're finding them in a lot of spaces. So I'll give you examples in the alts space. Almost all of those notes and other products are customized. There are some more mass instruments, but a lot of them, especially the ultra-high net worth, we customize the notes we have and products. We have a whole group, that's all they do. And that's probably essential to really compete in that ultra-high net worth group. We have in mortgages. I never thought Raymond James, when I joined 10 years ago, would do a $50 million home work, which we do for the right -- we have for the right client. And again, slightly customized because you get the assets on that size. Sometimes, it's not just the home collateral, it's other collateral. We have a customized lending group in the bank. And they focus on structured lending, and that mainly hits the high net worth and ultra-high net worth folks. And I think that we learned with Alex. Brown, when they brought in, we had more ultra-high net worth clients than Alex. Brown had, but they brought a concentration and then a practice that had a focus. And they really helped us strengthen a couple of years ago now that platform, where we have an extremely competitive platform, both on the product side and the lending side. So we have to do that to compete, and we like the business.

Great. I do want to delve into the lending side of the bank. But just staying on the PCG side, talk a little bit about private markets. What are you doing to give your customers, particularly your high net worth, ultra-high net worth customers, access to the private markets? And talk a little bit about the growth opportunity there.

Yes. So we started, when Alex. Brown joined us, a private investment desk, where we actually show our high net worth clients and ultra-high net worth clients private deals, deals amongst our clients that they have an interest and we match them. And a lot of customized products. And that group has continued to grow. We are eventually -- we are originally going to do that in a joint venture, and that was going too slow. So we took it all in-house in the first year, and it's been a great area for us. So again, even if ultra-high net worth and high net worth families, they like to see deals, whether they invest in them or not. Sometimes they do, but they like to be in the flow of deals. So between our -- both our investment banking group and our PIC desk certainly show a lot of, what I call, unusual or specific deals that have been structured for them or someone wants to sell and refer it to someone who has an interest in that area. So it's been, again, important for our growth and certainly helps us competitively.

Great. And maybe this is a good time to talk about your tech investments in the PCG segment. You've invested steadily over the last few years in the Advisor app, you're now more focused on the Client app. Can you talk about, what are you aiming to accomplish here? Anything you can share on what's in the pipeline on the client side?

So we're not ready for any announcements, but we believe that, first -- when Robo came out, we said, look, it's table stakes that everyone's going to have to have similar retail technology. Then I would say that it was true on the wealth planning side, but we took -- we made a decision, almost it's 8, 9 years ago now, that we're going to set a road map. And the road map was how are we going to have the best client desktop. And we were going to focus on that first because we felt we had time. Even when Robo came out, we said we have time to really make sure we have the best experience for the advisers. Now the focus is how do we translate that on to the client side, that the clients have the best experience on their apps. And we're having a demo in augmented reality, which isn't ready now. But what's the future looking way out, not just to say how do we compete but how we make sure we're really competitive in the future. And so it's exciting for our folks. But I believe part of it is table stakes. But if you have table stakes, you can just do the minimum or you could go and, again, try to make it a recruiting, retention and growth tool. And that's really been our focus on the retail side. And that's been the plan. But we, again, at Raymond James, the difference, we focus on the adviser and they're the advisers' clients. So we want to make sure that they were equipped ready, and now we're ready to connect the clients to those advisers. And again, our plan isn't to go around the adviser like many of those apps do, it was to go through the adviser, even if they direct trade, let the advisers see them, give the client the 24/7 experience to play with their own portfolios and models and communicate with the adviser kind of directly, either meeting or in a virtual meeting or in whatever communication system they choose. So it's an exciting time, but I think it's the necessary time to compete in the future.

And what does this do to your tech budget? I think you spend about $400 million a year on technology. What happens from here? Does the tech budget go up? Or does it stay flat or maybe even down, given that you're seeing efficiencies from some of the prior investments that you're making?

Yes, that's the problem with tech, right? You could spend unlimited amounts of money. So how do you spend it really well and make sure what you do pays off. So our cash investment in tech has been flat the last couple of years because we wanted to make sure we got the projects out. Now the P&L impact because of the amortization of projects that have come online has been a little higher, but we've really been pretty modest. If you look at the percent of revenue, our tech spend has been down. And so it will go up as we do these projects. It may be delayed because as you're developing things like the new client app or stuff they won't hit until they're ready for distribution. But I don't know in this world, how you hold down tech and compete. It's just you can't. So the key is, how do you spend it really well. We have competitors that are much bigger. We have tech competitors that don't worry about P&L in the short term, that may -- short term may be 5 years, 10 years. So we have to be really smart and really focused on the execution. And I think we have a unique positioning kind of in the industry with our advisers, and we need to focus on that length and the client length and make sure it's very, very impactful. And there are areas that, because we're not a retail bank, we don't have to worry as much about the payment systems. We can integrate other tools. We can do things, but we really got to focus our investment over that adviser-client relationship, and that will continue to be our focus. And I'm sure dollars will go up.

Great. Maybe switching gears to the Investment Banking, Capital Markets division. You've grown fixed income revenues 50% over the last year. Jim Bunn recently laid out the investments that you're making on the equity side. You have an eventual goal of getting to $1 billion in advisory revenues. I guess the question here is, the entire capital markets business is about 15% of your total revenues. How large do you see that business becoming?

I don't know if we see major changes in the percentage of the business unless we do some type of acquisition that's on balances because we're investing everywhere. We want to be as large as it can possibly be in the way we do business. So certainly, some of that growth, especially in M&A, has been market share, yes. But the market is also up. So everyone's grown. And so we need to focus. If there's a downturn or volatility goes away or there's a market crash, I'm sure that's going to impact, well, the equities part of the business historically, then the fixed income business may go up. So those businesses are usually countercyclical. We're in an interesting period where both on the sales and trading side have actually grown at the same time and are profitable. So all we can do is do our best. I mean, the market certainly impacts that. I remember years with no M&A almost in the market, and now we're in a robust M&A cycle with very good backlog. So again, we build for the long term. I think our model is good that even if there is a downturn, it's pretty well hedged. Sure, profitability would be down in a down market, but I think we'd outperform given our model, and that's been our history. So we want to continue to grow it. If they get -- if they can grow to 20%, 25% of the business, good for them, as long as they do it within our model. So we don't give on those types of targets to hit because they'll hit the target if we get it to them. They're really good at what they do, but we want to do it in the right way, thoughtful and for the long term. So -- but my guess is in the next couple of years, you're not going to see a major shift unless there's something I don't know about happens and some kind of acquisition or some kind of technology company that does stuff that changes those numbers.

Got it. Let's move to the Commercial Bank. Can you talk about your risk appetite for growing the bank? Right now, most of the bank industry is flushed with deposits and loan growth has been hard to come by. And as you laid out at the Investor Day, you are looking for some pretty strong loan growth at the bank. Can you talk about what you can do to get there?

I can, but I'm going to let Paul do the same. I'm going to say, we have both the capital and the risk appetite to grow the bank, we think, and what we're doing has been very attractive, and we've shown good growth rates, but I'll turn it over to Paul for kind of those details.

Yes. And as Paul said, we do have an appetite to grow the bank significantly from here. But to your point, Manan, it is a competitive market environment. There's a lot of cash chasing, much fewer good risk-adjusted return opportunities. So we're going to be patient, but front footed. And if you look at one of our favorite asset classes, the securities-based loans, that has grown over 35% for us year-over-year. And it's our favorite -- I say it's our favorite asset class because it's good for our Private Client Group business. It's good for advisers and their clients. And it's also good for the bank. These are fully secured, overcollateralized in most cases with marketable securities. And so the risk-adjusted return that they generate for the firm overall is very attractive, and we see more opportunity to grow that portfolio as well. Residential mortgage growth has also been strong, as clients and advisers are taking -- helping take advantage of this interest rate environment. And we're back on growing the corporate loan portfolio. Obviously, we took some time off last year with the pandemic and the elevated uncertainty. We actually even sold corporate loans at a time where not many other banks were selling corporate loans. In hindsight, being 2020, we wish we didn't sell those corporate loans because the recovery happened a lot more rapidly than we expected, but it was the right thing to do at the time. But now we're back into selectively growing the corporate loan portfolio, particularly in industries that are not as exposed to the COVID pandemic, which it seems like we're close to hopefully getting out of here, but still some work to do. So we have a lot of appetite to grow the bank's balance sheet. The one area we get a lot of questions on, I already had a lot of questions on this morning, was the appetite to grow the securities portfolio. I would say we have an appetite to grow that substantially as well. We grew at $2 billion in one quarter. I think it was in the September quarter last fiscal year. But then again, there's a lot more demand than there is supply for that paper, particularly in the shorter duration, kind of 3-year average life space that we're comfortable investing in because the Fed is still just such a dominant player buying a lot of those short-term securities for their own balance sheet. But again, we're going to be front footed, but patient and deliberate. We're not going to invest in loans or securities if we don't think that they could generate good long-term, risk-adjusted returns for our shareholders.

And anything you can share on the penetration levels of SBL and mortgage loans within your PCG client base?

Yes, Manan, we've done some great work looking at the kind of peer universe and showing and highlighting that there is headroom there for us to continue growing the securities-based loans if you look at some of our peers. But what I would tell you, unlike some of those peers, we're not going to have quotas. We're not going to be overly kind of aggressive and trying to increase "penetration." At the end of the day, just like all other investment products, the securities-based loan is a great product and a great solution for a lot of clients, but not for all clients, not all clients need securities-based loans. So what we want to make sure we have in place is a competitive product with a competitive rate and educate advisers and help them educate their clients as much as they can, but we're not going to have quotas to try to increase penetration. So it is a big opportunity for us. We're investing a lot in the technology for the securities-based loan platform. We're also investing a lot, adding to the operational processes and the bandwidth there because, with over 35% year-over-year growth, we obviously want to ensure that we still preserve high service levels for advisers and their clients. So that's something that we're investing in as well. And we think that these investments will continue to reap benefits over time as that portfolio will continue to grow.

And then maybe as a related question. You have about $25 billion in deposits with third-party banks. As these contracts come up for renegotiation, I would presume that there's going to be less demand for these deposits. Talk about what alternatives do you have to deploy this cash? And how large are you willing to let the bank grow if all this cash goes into the bank?

Yes. I would tell you, you're absolutely right. We do expect that if nothing else changes in the demand for deposits, which we all know can change very quickly and has changed just in the last 3 to 4 years a few different times in a very quick period of time, quicker than anyone would ever anticipate. But assuming that doesn't change, we would expect continued headwinds for those third-party cash balances as the entire banking system is flushed with cash. Now we are in an almost completely unique position as far as I can tell in our industry in that we have 2 things that not a lot of other competitors have, none that I can actually identify. One is a bank charter, and now there are competitors with bank charters, but we also have a bank charter with ample excess capital to utilize our bank in a much bigger way than we're utilizing it now. And that's the flexibility that we're getting criticized for 2 years ago. But again, we always try to make long-term decisions to give us ample flexibility for whatever the market environment throws at us. And so yes, we do have an appetite to grow the bank, if appropriate. And some of the governors we put in the past on bank growth was really at a different time when our bank was focused almost exclusively on corporate lending. We now have a much more diverse balance sheet. I just talked about securities-based loans, which have a totally different credit dynamic than corporate loans. We talked about the securities portfolio, almost all of those are agency-backed securities. So we don't really have those governors that we put in place 10 years or actually some of them 20 years ago, aren't as relevant as they are given our diverse balance sheet. And so we do have an appetite, and I think an opportunity to continue growing the bank's balance sheet from here.

So yes, that's a good segue to capital. You have $1 billion-plus in excess capital today. I mean I know the first priority for that is organic growth. But maybe let's talk about the bull case. Let's say the -- that market stays strong for longer and earnings continue to ramp up. In that environment, you're going to be accreting a lot more capital. So how would you think about deploying excess capital given that backdrop? And at some point, do buybacks become a necessity?

Yes. And the good thing about Raymond James is the way we think about capital deployment is consistent in bull and bear cases because, again, we make the decision over 5- to 10-year periods, and we don't try to time the cycles. And so our capital prioritization framework, which I went over a couple of weeks ago at the Analyst and Investor Day, has really remained unchanged since our founding, which is, first and foremost, investing in organic growth, as you pointed out. Secondly, looking at growing the business through acquisitions. We've just announced a handful, again, smaller acquisitions, but I would tell you, as Paul Reilly said earlier on the call, we're very focused on looking for acquisitions across almost all of our businesses. So we remain focused there, the ongoing dividend, and then finally, repurchases. And as far as repurchases goes, we have been much more consistent and focused on at least offsetting the dilution every year, which is about $200 million per year. You saw that last quarter at what were record stock prices at the time. But again, we want to show our commitment to offsetting the dilution. And then because that's our fourth priority on the capital prioritization framework, we do have a relatively low -- a high threshold in terms of when we would want to buy incremental repurchases after -- beyond the dilution. And so -- but again, as we showed, I think it was 2 or 3 fiscal years ago when we bought $750 million of shares in 1 year in the 70s, we do have an appetite and a willingness to buy back stock when the price gets opportunistic. But just by the nature of our approach, it's not going to be linear. It's going to be just inherently more opportunistic and episodic with those incremental opportunistic repurchases.

And then maybe on the dividend side, you have a target range of 20% to 30% dividend payout ratios. You're a little under that right now. How are you thinking about operating on the low end versus the high end of that range in this environment?

Yes. We try to manage it right in the middle of that range, frankly. The earnings -- and we set that -- the Board actually sets that, obviously, every November or December, depending on when the Board meeting falls. And we have a long history of doing it really once a year. I think one time in our history, we've done it off cycle. So you're right, we're below that, and that's something that the Board will just continue to look at going forward, given kind of where earnings are now for us.

Great. And you touched on M&A. You made several bolt-on acquisitions recently. What areas are you looking to supplement your existing product set through M&A outside of wealth management?

I'll hand it back to Paul -- back over to Paul Reilly to discuss our M&A strategy.

Yes. I don't think it's -- obviously, Private Client Group is our biggest business, and it's been our highest priority. So we've been looking there. And again, the hardest part of that is both in the U.S., Canada and the U.K., there are -- we certainly have firms that we think fit our culture, would help us strategically, they'd be integratable, but they're not for sale. They're generally private and not for sale. So we just have to stay at them and stay close to them in all 3 of those markets. The -- and our history is we've been good at that, 3Macs, I think my first meeting was 9 years before they joined us. And so that was staying close a long time. There are certainly people in the industry that are committed to be private. And unless there's a change of heart or that regulatory and systems costs become so high they're willing to look at join us, which is usually what happens, then we're ready, willing and able, and we think we'll be their first or only call. So that part of the strategy hasn't changed in the private client group. We've scoured for opportunities. I remember I got asked, recall a while ago, how do you feel about the opportunities you missed this year, and I don't think we missed any opportunities this year. There are things that transact that -- the average adviser productivity is $300,000. That's kind of our minimum adviser productivity. And so why would we acquire -- I mean, I'm not criticizing the firms that did. They have a different strategy. But we have a wealth-driven strategy. We used to think of $1 million adviser. When I joined -- when I started 10 years ago, it was big. Now it's just every day. I mean, our average is getting there. So we're disciplined on it. We want to grow the Private Client Group, but we want to grow it in the right culture. If we do something just for size, we'll increase our turnover and destroy the culture we have. So we're doing -- we're not trying just to get bigger. We want to get better with the right types of advisers. Outside of Private Client Group, you've seen our appetite in -- certainly in the capital markets area in M&A. We continue to talk to a large number of firms. Pricing or terms have gotten in the way. Sometimes you can have a firm who has a founder and now the equity is with the producers, and you got to figure you're going to buy something, how do you get retention in, how do you get -- they're all complicated, but we're very, very active. And I think we've done a good job in that area. And the same in fixed income as we've looked at expanding into certain areas and looking at technology in both of those sectors, technology-oriented companies, we've been very active on looking in the last year, maybe 2 years now. So in asset management, we know we're not going to compete with the large-cap active manager. We just don't have that scale. And it will be -- we'd have to do something transformative even to get in the game. And I don't think we'll see that, but we'll continue to add, we think, boutique, hard-to-replicate types of strategies. We've been successful at it. We have a new CEO in Carillon Tower. Bob Kendall joined us, I guess, about a month ago now, and so we'll be kind of rolling out the sharpened focus on growth there. So -- and the bank you've heard. Even the bank, we're open to M&A charters. I mean we've looked at multiple charters, but the bank would have to be unique. Our bank is one location and 2 ATMs and no plan to double either. We are really servicing our Private Client Group. And we've looked at banks and would continue to look at it as a good source of capital if they have the right type of loan balance sheet, they had similar approach and an expanded depository gathering that may help ours. And you may ask why would you do that now? Right? Gosh, in the last 3 years, I remember 2 times when everybody was crying for cash and then they went back and had too much and they are crying for cash, now we have too much. And then we may go right back again. You can't just assume that you're not going to have to be able to gather deposits in the future at higher costs, if rates start going up and there's a band. So we want to position well. So we're really open and looking all the way across. The business is very disciplined, but much more aggressive in looking and asking than we were in the past.

You mentioned technology. Is there anything specific that you're looking to buy versus build? Or is that something that you'd be more opportunistic on?

We've always -- our -- we have a proprietary platform, but there's a lot of things that we buy versus build-in there, and we weave it in. So -- and the key is, and some of those in the planning tools that people from all the firms, the wirehouses, have joined us in the last year, and they say, we have the same tool, why is ours implemented so much better? Because I think we implement it towards how is the adviser going to use it, not what's good for corporate. So we've looked at -- really it's -- on all those technologies, it's almost better to rent it than to own it. But the technologies that can drive businesses, whether they're in sales and training or in support like our NWPS acquisition, getting into the 401(k) administration and other client administration. It gave us not only a way to grow the business because we have -- we're opening up thousands of those every year. And all we have to do is capture 20% or 30% of the custodians to grow it, but they have great service, and that's what our advisers look for. They know it's at Raymond James. So we've done that with producers choice, which we did the same thing in the insurance industry. And we do it for other firms, like we all -- one thing about our industry, we all use each other's product, services, lending, banks are lenders to us, vice versa. So -- but we've looked at those kinds of utilities that make us better and are spin-offs of our natural business. So it's across the board. And we're working very hard and challenging people to think out of the box and work really hard. So we're -- we've had some exciting opportunities and continue to work hard. And it's a hard space, a lot of competition in it, but the right thing we're willing to pay up and make the bet for the right thing.

Great. So we're almost out of time. So maybe as a last question. On your pretax margins, the last time that rates were at 0, you were generating 14% to 15% pretax margins. And now today, even though rates are at 0, you're beating your current 15% to 16% pretax margin targets. Can you talk a little bit about where do you see margins going as rates rise? When we get into the next rate hike cycle, should margins rise above the 18% levels that you saw during the last rate hike cycle?

Yes. Manan, let me touch on this one. All else being equal, which we can never count on in our industry because we're in a lot of different businesses, and we have a lot of different macroeconomic impacts to our businesses. But yes, all else being equal, the interest rate increases will help our overall earnings and our overall margins. So that's why we showed that slide, I think it's somewhere around $450 million of potential upside to pretax earnings from an instantaneous increase of 100 basis points in short-term interest rates. But we saw in the last cycle, once you get much beyond 100 basis points, then you start seeing pressure on cash balances because there's other higher-yielding alternatives. So just pointing out one of the many variables that impact our overall results in our business. So we are a larger firm. And as Paul said at the Analyst and Investor Day, we've always been a firm that's focused on generating revenue growth that exceeds expense growth over time and realizing operating leverage. So we are a bigger company than we were 1, 3 and 5 years ago, when you look at our client assets, just eclipsing over $1 trillion. And so we would expect us, again, all dependent on the performance of all of the different businesses we have, but overall, over time, we do expect to generate operating leverage in our business.

Great. That's a good place to end. Paul and Paul, thank you so much for joining us.

Thank you, Manan.

Thank you so much.