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

Good afternoon, everybody. Thank you all for coming. I'm Kristie Waugh, Senior Vice President of Investor Relations. Welcome to Raymond James Financial's 2023 Analyst and Investor Day, taking place in St. Petersburg, Florida at our corporate headquarters. We're really excited to have so many people here in person, but also we appreciate those of you joining virtually as well. We hope you'll enjoy the next couple of hours as we really focus on our long-term strategy and also the areas of focus for the firm. Looking at Slide 3. First, I do want to call your attention to our forward-looking statements. Safe harbor statements shown on the screen. Certain statements made during this presentation may constitute forward-looking statements. Forward-looking statements include, but do not limit -- or not limited to information concerning future strategic objectives, business prospects, financial results, anticipated timing and benefits of our acquisitions, anticipated results of litigation and regulatory developments or general economic conditions. In addition, words such as believes, expects, plans, will, could and would as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-Q and subsequent Forms 10-K -- 10-Q available on our Investor Relations website. We'll also use certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the appendix of this presentation. Now turning to the agenda. In a minute, Paul Reilly, Chair and CEO, will kick things off and provide a strategic overview. Following Paul, Scott Curtis will review our largest business, Private Client Group; and Paul Shoukry will provide a financial review. We'll then just take a quick short break and then we will conclude with a Q&A panel with all 3 of our presenters. The presentation today has been made available on our Investor Relations website and biographies of our speakers, along with non-GAAP reconciliations can be found in the appendix. Now I'd like to introduce our first speaker, Chairman and CEO, Paul Reilly. Paul joined Raymond James in 2009 and became CEO in May of 2010. He has served on the Raymond James Board of Directors since 2006 and became Board Chair in 2017. Please welcome Paul Reilly.

Thanks, Kristie. Well, good afternoon, and I really appreciate you guys coming down. We debated whether to have something virtual. We know how busy travel is and -- but we felt with -- especially as we've had so much change in the market starting in the beginning of the year and more in March, and now we're waiting for a debt ceiling. We figured it's probably good to get face-to-face and give you the opportunity to ask questions. Panel will be a little different. I'm going to do a shorter presentation in my time because I know you're more worried about Paul's guidance numbers and talking to me, you know who we are. But we're going to do all questions and answers at the end. So because often, the questions are going related what we figure with all 3 of us up, we'll be able to answer them more fully. So every presentation inside or outside, we always start this slide on our core values and who we are. And it really pays off in times like these that you'll hear reference that we put clients first. It's not words here, and we'll show you some slides how we've put that in action and how it's really helped us in March and April at the times -- during the banking liquidity concerns. Hope we're known to be pretty straightforward. I know you think we're conservative when we low ball. We just try to make sure we tell you when we do something, we really think we can do it. We started talking about a liquidity on a call a year ago March if people remembered about cash and what we thought was going to happen when a lot of people thought we were crazy. We can talk about that later, the signs we saw back there. We always think long term. I know sometimes we get criticized that we weren't buying stock at $120 or we had too much capital or we weren't buying long-term fixed income treasuries even as soon a lot of those comments even as late as January of last year, but we just take a very long-term view. And it doesn't pay off through all the periods of a cycle, but it certainly pays off in periods like this. And hopefully, we act independently what we think is best really for the business and our investors. And we're investors also as management. You know the firm, about $11 billion in revenue. This -- some of these stats are hard for me. We never had and when I joined even a thought of being in the Fortune 500 much less than the Fortune 400. We just honestly slowly grew our business and just focused on organic growth and certainly helped by a few acquisitions, but really became of size. We've had 141 consecutive quarters of profitability. The only one quarter we lost money, Black Monday, we lost $100,000 that quarter. '09 was our worst year. We had a 7.9% return on equity when most banks weren't making money. We made money every quarter. And so it's taking that long-term view that in the late parts of upcycles, we look like we're just being way too conservative and cycles like '09 or hopefully, this cycle will pass us, but it may not. We may be -- you never know if you're at the beginning of it or if it's going to be a short blip, that ceiling gets fixed and life goes back on. We don't know. But we're certainly in a great position to be able to do things now or after the cycle when other firms will limp through it. So it's been us for a long time. A little over a decade ago, we put out this mantra, we wanted to position ourselves to be the premier alternative to Wall Street. We were put in as another regional kind of firm. That's how we were thought of. And we wanted to say we wanted to grow to be large enough, not as large as the big Wall Street firms, custodial firms in terms of services we could offer but still feel like a family firm where we had low turnover, people feel like they belong and a culture where people want to stay. And I really think we've basically have achieved that kind of positioning. And this isn't a slam on Wall Street. It was a descriptive word. We're talking about now being the best of both worlds, having those firms that have great technology, products, service and capital, yet still feel like a small firm. And if you walk up and down the halls, even people that know us and get -- and talk to people they're just surprised they held friendly, how nice. And that actually extends into our back office. People really do care about their advisers and their business and the clients when they call. They get to know them. And it's just -- that's what helps us with our regretted turnover being less than 1% during COVID. Our turnover of people doubled and we talked to our peers and they said, well, our is double too, but we started where you are now. I mean, yes, it went up, but people tend to be very, very loyal here, and we are to them, too. So it's been a big factor in growing our business and keeping this steady economy. We also have a diversified model. I guess it's kind of diversified when 2/3 of our revenue is coming from the Private Client Group and maybe 80% directly or indirectly is generated by it. But it is a model where the Private Client Group feeds the bank, it's deposits. That bank finances with SBLs and mortgages, our Private Client Group with C&I loans in our equity capital markets businesses. And on and on and on our asset management business, half of that business is really internal funds we run for advisers that want to use them. The other half is our Raymond James Investment Management for the external. So these businesses really are here to support -- started to support the private client groups, but they've been really great businesses on their own. And we've had to grow them over time, Morgan Keegan, where our fixed income leader horse was from, really added to making that a world-class business. We've grown the investment banking and M&A businesses. We'll talk in a minute. But really, again, Private Client Group tends to be the center. That variance in business has really helped us keep earnings steady through all cycles as some businesses are up, some businesses are down, but they consistently outside of maybe this year, where mostly institutional businesses are challenged has really helped to keep earnings very, very steady. Our focus has always been to be conservative over the long term. We always are. It doesn't mean we're not willing to take bets. TriState was $1 billion acquisition that people questioned at the time and it's really been a good payoff. They're way ahead of where we thought they would be. They fit right in. So we will take bets, but we take what we think is good measured bets. We talk about the long-term focus, and we always have been, where SVB had 14% of their deposits insured. We had at Raymond James Bank, 95% of our deposits FDIC insured. Part of that's nature of our business being more retail, but it's a lot more than that. We had sweep programs that gave insurance up to $3 million. So if you were in our sweep, you were insured up to $3 million that cost us money, but we thought it was the right thing to do for clients. And you can see the industry is around 60%. And I believe the retail -- most of the regional banks, they're doing very, very good. They're doing what they're supposed to do. It's just we're in a period where people are afraid of banks, but I believe they're well operated, and we've had a couple of outliers that aren't in business anymore. But everybody worries about, well, no bank, JPMorgan couldn't withstand the running deposits. It's a great institution. Now the flight to too big to fail hasn't made them happen. But all banks depend on deposits really being relatively stable. So we have gone through this period of being afraid. But we've always, because we treated right, clients right, have had this high degree of FDIC insurance. And even with TriState, 88%. We've increased their FDIC insurance as they've joined us through our sweep programs. They had a high level too before coming in. But it's just the nature of what we do. And it always pays off long term when you focus at the clients. And again, 7 or 8 years ago, it was a cost. No one was worried about FDIC insurance at that point. No one talked about it, but it's just the nature of the way we do business. We all know about our capital that one of you wrote that we don't mind Raymond James being in Island. We'd like to see you from shore talking about how much excess capital we have. We've worked that down. We're committed. It's up a little bit as Paul will go through in our Tier 1 leverage ratio, but part of that is just cash that's come off the balance sheet as sweeps and other things have the shift in the industry cash sorting has really caused. But our commitment is to operate near that 10% Tier 1 line, which is still well capitalized, but it's where we think we should be. Our cash sweeps, like everyone else. We had a lot of cash and more cash than we know what to do with for a long period of time. Now when Fed dropped the rate to 0, it became profitable cash but we never assumed it was going to be around forever. We had a long-standing role back when cash was in the kind of pre-COVID in the 60-ish kind of level that we wouldn't invest more than half of it in the bank. Why? Because we didn't want a cash event or a movement of cash out to affect our lending. We moved that up a little bit as it came down. But a lot of banks, a number of institutions put 90% of their cash in their bank. So what happens when you have a movement of cash out when you're lending 92% of your balance sheet out, you've got to raise cash at any cost, you have liquidity confidence. And again, we used it to -- we want the bank to grow. We want it to be profitable. We don't want to grow it too fast, and we didn't want it to be an undue stress on the system. So even when we drop down to the $50 billion level, we still had excess deposits. We certainly had additional lines, Federal Home Loan Bank Board and other things we weren't tapping at all. But as we rolled out our ESP and other programs, you can see as of May 19, we're back up to $55.8 million probably at the expense of deposits today that's -- it's more than enough. But we'll continue to try to make sure until this liquidity questions over. We always figured you can always raise the cash. If it's excess, you can always run it off, drop the rate a little bit or other things, but we'd rather have it than not have it. So again, you'll see us continually take a conservative view on funding, just like we have on capital and liquidity within the parent itself. Taking just kind of a longer-term view, our story is the same. We want to be a growth firm. We never try to be the fastest growth firm. We've achieved now for a long time, kind of a low double-digit growth rate on the top and the bottom lines. And again, if you don't grow -- if you grow profitably, you can invest in people, technology, businesses and products. If you do that, you should be able to improve your service and your offerings to clients, that should generate growth. If you don't grow, you got the opposite, especially in an inflationary environment in a technology environment where people want more and more. And if you don't grow to provide that, you start shrinking because you have to cut costs, you have to cut investments. But we don't try to be the fastest. We just want to be a good, strong grower, both top and bottom line every year just like we've been now for really a few decades. Where are we going to drive that? We still have our #1 focus on organic growth. And we -- our biggest growth has been in all of our businesses just person by person in our Private Client Group. It's been the great recruiting balanced by retention and M&A. Yes, we've done some -- we'll talk about some of the acquisitions. But again, most of that growth has still been person by person. We've spent a lot in technology going from a technology spend from about $100 billion to about -- $100 million all the way into $750 million. And we believe we've gotten great returns on that. We'll talk about that a little later. And we still focus on looking for M&A acquisitions. I know for a couple of years, people said you had capital, but you're not doing anything. You can't time when that hits. The internal M&A activity for us the activity is still is high. It's just can you get the firm with the right culture. Can you integrate it? And is there a price? And again, we are not going to do things, shareholders' money unless we think there's strong returns for it, but we're still active in that area also. Private Client Group is really about if the advisers love it here, we think we can recruit more advisers. So our regretted attrition less than 1%, well longer than I've been here is a measure that people just don't leave. We want to make sure we deliver the resources. Scott will talk about this. We've had strong recruiting and retention and the recruiting pipeline has really picked up, I think, is very strong right now. And our technology -- forget the awards, we -- every group we come through here when we recruit from all the firms is always blown away by the technology. They say it's just better than what we have and that's all the firms. So -- and it's really developed for the advisers. We focused on adviser technology and to make sure they have the best platform, we made the bet that we had time for the end client. And I'll talk a minute about that. The technology, I think we just rolled out and is coming is really going to be world-class also. One of the differentiations that we have which is subtle, and the people who have been around here a long time, I now understand it is, we are totally adviser focused. And the culture is like a small firm. So over here, we say we're like a boutique that people know we care about them, that we're here, that we honor really their independence. We have no incentives in our systems for them to buy products. We don't have any -- I mean, not just in their comp, we don't have it in their trips and award trips, their managers don't have quotas. I mean we really tell advisers they should be doing what's right for their clients. And we don't compete like some of the big firms do. We don't have direct channels that compete against them or brands professionals. Our trust department and our bank can't call on a client. They can only call with the adviser. So everything we do is focus that we are not competing with the adviser. We're here to help them grow their business. And in fact, in our employee advisers, we put in their letter when they join us, you own your clients. And if you want to leave, we'll help you move. None of us have contracts. I don't have one. None of us are prisoners. We're all here because we want to be here. And it changes the mood within the firm. And they really do feel they have the freedom to do what's right for their clients. I remember early on, I got asked by our then head of, Gosh, what do we call it an Eagle because it's been Carillon, now it's RJ Investment Management. You said, how do we increase our penetration of clients? I said just convince them the product is better, if you can't, they shouldn't use it. I mean it's that simple. There's no push inside or outside for them to use it. And it makes them feel good and it forces us to be competitive. I had the same conversation with the bank. How do we get them to use our mortgages. They said, be competitive in rate and have the best service. If they don't, they should use the Bank of America mortgage. And that's how we treat our proprietary products is to make sure our advisers use them and it forces us to be competitive, not that they have to use them. And so we have a better offering for our clients also. So this noncompetition that we don't have our departments competing, our bank can't even send a mortgage solicitation or credit card solicitation in the statements. Most institutions do. The adviser has to ask. So we make sure we're not forcing products and services, and it's really drives our retention. In our capital markets, we continue to expand our M&A platform. I'll show you kind of the slides what we've done in the past that may not seem so good this last quarter or right now. But we believe we've really built a very, very competitive platform of expanded new markets, a small acquisition in Europe has really exploded for us over these last few years in M&A, and we, of course, attracting people. You all know this slide, the market has not been good in the M&A business. But as you can see, even this year, now let me be clear, this the dumbest thing you can always do in financial markets is to take the first actual and try to annualize it. It's just to give you an example, if you annualize this year-to-date through 2023, that our M&A investment banking revenue would be like it was just before '21 and '22. And it's a measure of capacity. You can see on the other slide, we're up to 113 MDs, not only have we grown world-class MDs, our average production was over $9 million, which is competitive with any large M&A well-run shop. So they're very good. You just -- it's just hard to beat in this market. Our pipeline continues to build, but I can't tell you if deals are going to happen, both with financing the mark, the volatility. But the market seems to recognize there's a shift in pricing. We believe our professionals are very strong. But it turns when it turns, it always takes longer than you think. I think most luckily, most people in fixed income and capital markets are optimist or they probably would quit the business which is good for us because they're very, very good, but it's a tough cycle for them. In our Asset Management business, we continue to grow. Bob Kendall has been a great addition. We've looked very seriously and been active about trying to expand the product and use technology for growth. I won't spend a lot of time on that. The bank -- the SBLs have been the big drivers from both banks. TriState has been a big add. SBL balances are not growing as rates went up because when rates are up over 500 basis points, there's a sticker shock, but the loans aren't going away. They just aren't being utilized as much. And my guess is when rates settle and you can offset your cash rates versus those, they will grow. We're being much more cautious in the corporate loan business, especially now. Again, same tactic we use in '08 and '09, we're able to lend in '10 and had our best loans at our best spreads that really lasted us for years. So our focus right now is to stay liquid. We sold about $400 million of lower rated credits. We actually thought they were good credits. But again, preparing for liquidity in the balance sheet we believe spreads will widen and we'll have the chance to jump back in, but you need the dry powder to do that. So we're managing the credit risk in the cycle. I think the balance sheet looks very -- I mean, the credit profile is very strong, but it shouldn't shock you that Raymond James is going to wait in this kind of market cycle to be conservative. But just like we did in '09 and '10, we still had capital and liquidity, we were able to really jump start right after the cycle and our growth because we are able to. Technology, we talk about all we do. Our new client app, I would call competitive with the big bank apps that we all may use. But the generation of the changes that are coming at the end of this year and the beginning of next year, I think it's going to put it as a very unique for a client of a firm like Raymond James, not just in terms of what you can do on the app, but looking at your goal planning and monitoring, playing with it, using chat to set up meetings with a digital assistant. And I'll go on and on and on. We've also used -- I can't stand watching CNN. It used to be political. Now it's -- everyone is an AI expert like it was invented last week since ChatGPT. So I just have to turn it off sometimes. We've been using AI for a number of years. And I'm not going to tell you we're an AI leader and we're going to double our revenue based off of it. We first started using it in compliance and supervision get rid of, honestly, millions of kind of false positives and hits and the system learns what is something you really need to look at and what's not. And now to fast forward on the client-facing side, an adviser can wake up in the morning, have set their screen and AI will go and look for what we call opportunities. Tell me if these things are happening in the portfolio, flag them for me and tell me what some alternatives might be. So the simplest might be a bonds maturing, right? And how do you want to replace it? Here's -- but it can be much more complex on drift or investment parameters, and it's growing. When Bella joined us a decade ago, this was one of her goals was to have it out that long ago. The problem was between regulatory change and acquisitions that got moved back on the technology priority. But it's out now and running, and it's a game changer for advisers. Part of the reason we've been able to generate cash in our cash programs because where there was things coming due, we gave them alternatives and one of them they could look at is our own program. So the cash sweep programs around there and a lot of advisers chose to use it. So again, that part of AI will be growing on the desktop, not new. We're not using ChatGPT for anything. But we're playing with it. And again, last year -- a year ago, February, we had a board presentation in this room where the Board was able to have a financial planning session in the Metaverse. And to show them why that one going to work for a while, I don't think people are going to walk around with things as big and talk to something that almost look human. And then we had someone appear on the stage in a hologram. And I will tell you, it looked like they were in the room and it was on firm-line bandwidth. So we play with these technologies, working with Google and others. And some will be for prime time. Some are a ways off. And I don't think AI is going to replace the adviser in the short term. It's a lot of work, but it is going to be a great productivity tool. And so we say our goal has always been to make the future of advice. It was really kind of the bionic advisers to embed all these technologies to help them make smarter decisions to give them alternatives to see trends more quickly. And so we're doubling down the adviser. We're not doubling down on AI to replace the adviser. Talked about acquisitions. I think we've been steady in the last year. We had 3 pretty big ones for us, TriState, SumRidge and Charles Stanley. And I'll tell you our timing on TriState and SumRidge, in particular, have been really, really good. So SumRidge thrives on volatility. They certainly have had their share of volatility. They've been having record period of time with us. Great cultural fit. They're conservative. It's computer-assisted trading. It doesn't do it automatically. It does all the information that traders still has to push the button. It's been a great business. They're a great fit and from what we modeled, we're going to have a great return off of it. Present value works when you have a better start than if you have a slow start. But we're using that technology, looking expanding it to use computerized, assisted trading across our whole fixed income platform. So that was one of the reasons we bought it. They've been a great addition. We're still in the early days of that, but we think it has a great opportunity. TriState has had great growth. And again, great -- they fit in very, very well the organization culturally. Charles Stanley, we're going through still the FCA process of integrating. It's going well. And again, a lot of the back office part of our business, TriState -- I mean, sorry, Charles Stanley was better at than we were at Raymond James. They were just much bigger. They've been in business a couple of hundred years longer than us in the U.K. also. We're only there 25 years. And so that's going very, very well either. Retention has been extremely high in the U.K. So with that and the other parts for investors is our investment in the people, community, governance and sustainability. It's all in our CSR report. We're proud of what we do, especially in the communities where we've invested. We met -- we totally met our commitments to the Black community. We're going to expand it. We've met our 3-year commitment this year. We've paid out our investments and it's given us the opportunity to find out what's working and what's not. We're going to double down on what's working. As long as Raymond James Cares Month, which is just this month last year, we have great participation worldwide in all of our offices. So with that, back to the start, and I know the part you really want to hear is Paul's guidance. So -- and numbers. So Kristie?

Thanks, Paul. You're going to have to wait a little longer because next up is Scott Curtis.

Scott Curtis. So that's right.

All right. So...

It's a teaser for you, Scott.

Scott is President of our Private Client Group, a role he has held since 2018. He joined the firm in 2003 and prior to his current role, he served as President of Raymond James Financial Services, which is our independent adviser business. So please welcome, Scott Curtis.

Thanks, Kristie. This -- sounds like it's working. All right. It's on -- good. Paul set me up well, except for bating you with Paul Shoukry and instead, you have to sit through me for half an hour. So sorry about that.

That's all right.

As Paul said, in our Private Client Group business, now this is global. My responsibility is domestic here in the U.S., but that's the lion's share of the numbers that you're seeing up here. We reached $1.2 trillion in total client assets under administration. You can see we have a little over 8,700 advisers globally, roughly 8,000, a little under 8,000 of those are here in the U.S. I'll go through those numbers in a little bit. As Paul mentioned, in terms of regrettable attrition, and this is really the best indicator of how are we doing for our advisers consistently delivering on less than 1% regrettable attrition. Now for regrettable attrition, you have to leave the firm and go to another firm. So if you leave the employee model and move to the independent model, or you go to our RIA custody model, that's not regrettable attrition because in those instances, 100% of the clients' assets stay at the firm. And so that's not one that we call regrettable. And as you can see, I'll go into a little more detail on this one, too, a little over $21 billion in net new assets in the fiscal second quarter and I'll show that we've had a pretty good record now of delivering net new assets most recently. And that's a reflection of our recruiting success that Paul talked about and that I will talk about, but it's also a reflection of the organic growth that we're experiencing. And I would say largely due to the quality of the advisers we have at the firm how we're leveraging technology to surface up opportunities for them and how we're helping them really take advantage of all the resource and capabilities that we have at the firm. So in terms of assets under administration, you can see how we've grown over the last 5 or so years at about a 10% compound annual growth rate, a little bit of assistance there from equity markets. We haven't had that much assistance more recently. Interest rates have gone up, bond prices have gone down. So it's been a little harder to grow assets under administration, except organically and through recruiting. You can see in fee-based accounts, that historically has grown faster than overall assets at about double or 50% faster than overall. More recently, those have started to grow as it now represents about 60% or so of the total assets under administration, those are now tending to grow at about the same clip and I was having a conversation recently with somebody about where do we think that might peak out? Is it around 70%? Is it 75%? I think probably somewhere in the window unless we have a regulatory change that forces all the relationships to go to advisory but that won't necessarily be in all the clients' best interest. So my hope is we don't end up going there. I think this will be helpful. And I think this is probably the first time we've broken this out for you. And this shows where we've had that asset growth, where has it occurred in terms of affiliation options. And you can see going back 5 years, where we were at $650 billion, a little over that $653 billion in total assets, and how each of these channels has grown in terms of assets during that period of time. So the employee model, Raymond James and Associates and Alex. Brown, about 10% compound annual growth rate over that 5 years. And the independent contractor channel, slightly lower at 9% compounded annual growth, and I'll explain a little bit in terms of why. And then you can see in our custody business, a 27% compound annual growth rate, which is perhaps not a surprise. But that business is now closing in on $125 billion in assets or a little more than 10% of the total assets that we have under administration. Now last year, 1 year ago, this coming weekend, Steward Partners transitioned from being part of the independent contractor model to our custody model because that was what was going to make the most business sense for them. We priced it. So frankly, from our perspective, we were neutral on that transition. But those assets now are in that custody space that was around $18 billion last year when they transitioned, Thankfully, they've continued to grow, and we haven't seen any of those assets leave Raymond James. Consistent with some of the other independent advisers who perhaps they had an RIA, an independent RIA already were registered with us, and they elected to drop their FINRA registration and just move to the fully independent RIA space, again, custodying their assets at Raymond James. We haven't seen those assets leave. They may have established another custody relationship with another provider, but we priced it so that we were essentially neutral to that move that they made. So our expectation going forward, all of these businesses will continue to grow because the RIA custody business has a lower base than the others. Likelihood is that will continue to grow at a faster clip than the others. But we're frankly pleased with the overall mix that we have and expectation going forward is businesses will continue to grow, and that business will probably grow at a little bit faster clip. Switching gears a little bit to how is our growth, how is our growth compared to other businesses who we compete with. And you can see the Peer Median, whether it's the 1-year, 3-year, 5-year, 10-year, we've outperformed all of them in terms of client assets under administration growth over those periods of time. I'll dive in now on net new assets in the most recent year, you can see quarter-by-quarter, we've done very well here between -- at the low point, third quarter fiscal year '22 at 5.4% net new assets but really staying in around that 8% range, that's not a predictive prediction that that's what we will maintain going forward. But that reflects a pretty strong rate of organic growth. And again, that reflects our recruiting success that we've had, and it also reflects the organic growth on the part of the advisers who are affiliated with us. Now when you look at the number of financial advisers and how that's grown at roughly 3% per year over that 5-year window, that reflects that we've been able to attract high-quality advisers, bringing large books of business to Raymond James that we're supporting advisers who are having success growing. So we're much less focused on the quantity of advisers and much more focused on the quality of advisers. And I can tell you, last year, we had the first roughly $20 million team that joined Raymond James, and we are about to have another very large team, similar size join us, and we're in conversation with teams that range from $5 million to $15 million in terms of trailing 12. So while the number of advisers may not be the same sort of compound annual growth rate we've seen in terms of assets. We're completely comfortable with that, provided the quality of the advisers who are joining us or bringing over large books of business. And what we're finding too is the teams are larger than maybe what we saw 10 years ago in terms of number, larger numbers of people as well as larger asset bases and higher net worth clients, which is I'll get to why we've changed a little bit in terms of our focus there as well, and I know it was one of the questions. So no surprise here. Net revenues follows growth in assets. And then when you look at pretax, pretax reflects as well what we've seen in terms of interest spreads that I know you're all familiar with over the last year. So the 5-year CAGR of around 12% on both of those. More recently, the curve has been a little steeper in terms of pretax net income. As you can see, year-over-year, how that has changed for Private Client Group. And that's -- again, that's not one that I would project going forward that would be pretty aggressive. So looking further forward, A few years ago, as a senior leadership group of our Private Client Group, we got together to really put a stake in the ground and say, what do we want to do over the next 10 years? Where do we want to be? And -- so collectively, to get down to a single sentence that describes what is our vision for the future. And while it took us nearly 60 years or it took us 60 years to get to $1 trillion in assets. We said, let's put a stake in the ground and say, over the next 10 years, we want to exceed $2 trillion in assets. How are we going to do that? Well, attracting enabling and digitally empowering advisers and their clients so that through our multiple affiliation options, which we will continue to maintain to leverage the entire firm's resources and, as Paul talked about, our service first culture to help clients live their best lives. That's a mouthful, there's a lot in there. But we put that stake in the ground, and I've been using that and others from the Private Client Group leadership team who have been using that to communicate across the organization about helping people understand where we headed and where are we really putting our stake in the ground. As Paul indicated, that does not say that we're going to develop a direct-to-consumer business. Now a lot more technology that's client-facing. Clients are expecting more in the way of self-service capability than we've seen historically. And so we want to make sure that we're equipping them for that and equipping advisers for that so that they can interact with their clients as the clients prefer and as they choose to. So when we think about organic growth, I really boil it down to 2 strategic imperatives. One is digitally empowering advisers and their clients, and the other is leveraging the entire firm's resources. So for what does that mean in practical terms for advisers and for their clients. More and more clients want to be paperless. More clients want to be able to see all of their accounts on their phone or on their mobile device. They want to be able to affect simple transactions, moving money between one account and another. Most of our clients, the vast majority of our clients with very, very few exceptions, they're not seeking to trade online on their own, and that's not something typically that their advisers are interested in seeing. So short of being able to affect transactions that are trades on your mobile device or on your laptop, most clients are interested in being able to do simple things like, hey, if I can deposit a check at my bank, as Paul mentioned, I want to be able to easily deposit a check into my Raymond James account. So on our prior mobile site, client-facing site, it was not as easy to find whereas now the picture that Paul showed you just a little bit ago, it's front and center. And that's based on feedback from clients, based on feedback from advisers, help me more easily get to the vault, where I can store important sensitive documents and know that they're digitally secure and accessible for people in my family if they need to see them. So we've put that in place front and center for them. For the advisers, we want the advisers to operate as efficiently as possible. We've seen a big uptick and -- certainly COVID helped us, but we've seen a big uptick in the utilization of DocuSign, not sending pieces of paper back and forth, not relying on wet signature. Our expectation is that, that adoption will continue to grow. It's up above 65%, maybe 70% now. And our hope is that it will continue to move even higher as we get people away from paper and we get people away from handwriting checks. The last couple of years, we've processed over 1 million hard copy checks. And from my perspective, in 2023, 2022, that's almost unthinkable. Now to a large bank, that's probably a tiny little number. But to us, that's a lot of paper that's flowing through the branches and getting mailed in here when the clients could very easily deposit those on their own and not utilize resources in our branch to do that. Leveraging the entire firm's resources. What does that mean? We are a full-service firm. We have an investment bank. We have public finance. We have asset management, as Paul talked about. We have trust capabilities. So for clients who are today, perhaps they have concentrated stock positions with low-cost basis, but they're not utilizing a donor-advised fund for charitable contributions. As Paul talked about, the opportunities technology that we developed. That's another one of those phone calls or contacts to a client that an adviser can make to talk about that opportunity. And that's leveraging data that's resident in our systems today. So that's just one example, and there are many others that we have where we want to make sure that the advisers, number one, are aware; and two, if they are aware, thinking about where might this resource be applicable or this service be applicable to my client or to my clients where it makes sense. We don't -- we make those available in a very Raymond James way. It's more of a pull. We educate and then let them decide. We're not tying compensation. We're not tying rewards or recognition to what percent of the firm's resources they're utilizing with certain clients. It's just not a direction that we're going to go. So when we think about how we're positioned, as I said, we are a full-service firm. We have a number of strengths that you can see here on the screen or in your presentation. We also still feel like, boy, there are a lot of opportunities. Opportunities that go beyond recruiting. When we think about our market share, particularly out west in California or in the Northeast markets where there's a lot of wealth that's concentrated. We look at our market share at roughly 2.5% across the wealth management space in the U.S. And in those markets, in particular, our market share is less than that. So we still feel like we have a lot of opportunity to expand and grow in those markets, in particular. And so we are focusing recruiting resources, focusing our marketing efforts in those particular markets so that we can hopefully continue to grow our brand and expand our share in those markets. The other that I'll talk about here in terms of adviser preferences, advisers who are employee advisers, the majority of advisers who transition if they get frustrated where they are, they want to stay employee advisers. So we want to make sure we still have that option and that those options are very -- that option is very attractive to the advisers. If an adviser wants to become independent, we have that option. If an adviser wants to move to the full RIA model and custody assets with us or roll up under our corporate RIA model and drop their FINRA registration, we have that option as well. So it might seem complex supporting all these different models. But given our shared centralized support services model that we have, it's worked well for us, but it does cause a little bit more work on the part of our technology partners. But we feel like we're really well positioned, continue to be well positioned, leveraging the firm's strengths and focusing on those opportunities that we have. So in summary, when I think about where are we really focused nearer term, maybe over the next 5 years in terms of strategic growth priorities or strategic growth initiatives. Organic growth, I talked about already with digitally enabling and leveraging the firm's resources. Private wealth, which I didn't really talk about, we did a study a number of years ago. And in that higher net worth private wealth space, our market share is lower than our overall market share, perhaps not a surprise. So we said that's a real opportunity for us to put together an education program, a designation program for our advisers, where they can actually hold themselves out as a private wealth adviser. Earlier this week, we had roughly 40 advisers here for in-person training. They have to complete online training first. This was our third cohort. In each class or each cohort, we're targeting 40 to 50 advisers to put through the program, they opt in. And for those who have already gone through the program, they've helped us improve it. Now they are more expert than they were before. Many of them were already servicing higher net worth clients, ultra-high net worth clients. They feel much better equipped and they understand much better the firm's capabilities and resources that can help them with those clients. So our expectation is that we will end up with -- where we'll get about 150 as these go through. But in the coming years, we want to get up north of 400, maybe 500 advisers who've completed this program and are able to hold themselves out as a private wealth adviser. Clearly, we're going to continue to focus on recruiting, that's where a large part of our growth will continue to come from. And the RIA space, as I talked about, our expectation is that going forward, more advisers will probably move to that space, and we want to make sure that we're in a position to be able to custody those assets and provide them with a great and competitive custody experience. We're not going to become Schwab. We're not going to become fidelity. We're not going to become purging for the advisers who are interested in affiliating with a company that has a widely respected brand and has an integrated suite of solutions and technology tools for them, we're a great option for them to talk to. And those tend to be the wire house, the employee advisers, the regional firm advisers as well as some independent advisers who are looking for that solution rather than having to piecemeal it together on their own. Now all that -- we want to make sure that all that is delivered, leveraging the culture of the organization and the values that Paul talked about. And this is really just a word cloud of what I think about our proof points of that culture that we talk about. And I've used this slide, and I know others have used this slide, reinforcing with our associates, what we're all about here at Raymond James. So with that, I'm going to pause. I will hand it back to Kristie and she can introduce Paul Shoukry. Thank you.

Thanks, Scott. All right. So we're moving right through. So our next presenter is Paul Shoukry. Paul is our CFO. He joined the firm in 2010 and became CFO in January of 2020. Prior to that, he served as Treasurer and also Head of Investor Relations. Please welcome, Paul.

Thanks, Kristie. All right. Hopefully, you guys can hear me. Well, first off, I just want to thank everyone again for taking the time out of your busy schedules to fly down or over to Florida depending on where you're coming from to spend some time with us. We know all of you are very busy. We know travel is not very easy. So we really appreciate your time. We don't take it for granted. We also thank those of you listening on the webcast -- on the live webcast now. A lot of my updates are pretty consistent year in and year out despite what goes on in the markets. And certainly, that's true with our financial priorities. First and foremost, in terms of how we think about deploying the capital and the investment in the firm. It's as Paul said, really focused, first and foremost, on growth. And we think that generates the best long-term returns for our shareholders. You'll see that in some of the historical numbers and returns. And we focus primarily on organic growth first. That's how we prefer to grow the company is hiring an individual at a time that we know would be a good cultural fit and a productive person at the firm. And so we complement that, as Paul said, with acquisitions. We've done 6 acquisitions in the last 2 years. Acquisitions have to be first, a good cultural fit, just like a new recruit to the firm, a good strategic fit and only then will we actually look at numbers in valuation. We do have a track record of generating operating leverage. I know sometimes because of our -- because we are a growth firm, we do invest heavily in recruiting people over to the firm and providing excellent service for our advisers and other producers. And so sometimes when compared to firms that aren't growing as steadily as we are, it looks like we have higher levels of investment. But I think part of that reason is because we are a growth firm and there's not a lot of firms in our industry that are generating the type of growth that we're achieving across all of our businesses, as Paul described earlier. The other reason I think sometimes it looks like we're not generating as much operating leverage as some other firms is because we don't take as much risk as a lot of the other firms take. For example, Paul referenced, not taking duration to boost short-term profitability and short-term margins, which we were criticized for up until last March. And then, of course, that certainly worked out well for us. We're really focused on trying to preserve as much flexibility and optionality in -- to be both opportunistic and defensive in various market cycles. And that really leads to our strong balance sheet, having plenty of capital, plenty of cash, funding to, again, be opportunistic and defensive in any type of market environment that we can reasonably expect and to give us as much flexibility and optionality as possible. We always prioritize the long-term optionality and flexibility even if that hurts short-term results or doesn't optimize short-term results, again, we think that produces the best long-term returns for our shareholders. Okay. Good deal. Consistent capital priorities, we talked about the organic growth. And for us, organic growth actually starts with retention. A lot of people talk about the recruiting results and the recruiting results across our affiliation options have been truly best-in-class. But what we're most proud of is the retention across our affiliation options, as Paul said, less than 1% regrettable attrition. The most expensive thing we can do is lose advisers and try to replace those advisers that we lose. So we really do focus on making sure that the advisers on our platform are pleased with the product service and services that they're receiving from Raymond James. Acquisitions, we -- Paul mentioned, too, that we are doing very well on in the last year, TriState Capital and SumRidge. I think the secret to our success -- long-term success in acquisitions is it sounds like common sense, but so many firms get this wrong, is not destroying the franchises that join us. And it's -- and again, it sounds like common sense, but we really -- and that starts with having firms join us that we believe are good cultural fits and strategic fits, therefore, we don't feel forced to destroy the franchise that comes over. We keep the people, we integrate them into our leadership. Horace is here. He joined us from Morgan Keegan in 2012, he now runs fixed income after John Carson retired a few months ago. And so that's really the key to our success and truly differentiated if you look at our industry in particular. Common stock dividend. We target 20% to 30% of earnings, probably on the low end of the range now, just given the growth in earnings and wanting to be prudent with that capital outlay. But again, consistently growing dividends over time. And then share repurchases. This is our intentionally last on the list, again, because we are a growth oriented firm and a growth-focused firm. We prioritize as far as our capital priorities go, repurchases are last on the list. Although we do have a history, as I'll show you in a minute, of doing opportunistic repurchases when we feel like the price is attractive. And this year, we announced that we are targeting $1 billion of repurchases to offset the issuance associated with TriState Capital. That acquisition, we did 80% with equity because the team really wanted -- believed in the long-term upside of the combined organization. And so, we wanted to essentially offset that issuance as well as 2 years of share-based compensation dilution, which we do -- try to do every year, but while we were under an agreement to purchase TriState, we were not able to buy back stock given they're a public company. You see this history of buybacks and dividends, again, very consistent dividend growth, buybacks, more opportunistic at attractive prices. So far this quarter, we bought back just north of $170 million of stock. So we're staying true to our target of buying back $1 billion this fiscal year, which would put us at somewhere around $300 million, $350 million for the quarter. And we purchased that stock this quarter at a price less than $90 on average. And again, we can accelerate or decelerate that based on market conditions and other things, but just showing that we're staying consistent with the target that we laid out. Long-term track record of very attractive revenue growth, 12% during this period, 4% year-over-year over last year's record, almost surprising that we generated record revenues for the first half of the fiscal year, given what's going on in the markets and given the relatively soft capital markets results. So we're pleased to be able to generate record revenues for the first half of the year in a tough market. As Paul said, really a testament to our diversified business model. We were able to generate record revenues and earnings in a near 0 rate environment. And now we're doing it with much higher rates, but softer capital markets activities. That, again, gives us consistency in growth in earnings. Significant portion of our expenses are variable in nature. Again, another important aspect of our long-term consistent profitability is that a lot of our expenses are tied to variable compensation. And so you see here, 60% almost of our expenses are payouts to financial advisers and incentive compensation. And so this is key attribute. A lot of questions this year in particular around capital markets. They generated losses for the first half of the fiscal year. Obviously, we do not like generating losses in any segment or any business period, but truly unusual. You saw the bar chart with the revenues declining so rapidly across the industry for M&A, but certainly for us as well. And I think one of the things we didn't do a good enough job explaining is some of the fixed expenses embedded in Capital Markets. Given the success we've had over the last couple of years, we have about $70 million to $75 million this year on an annualized basis of deferred comp amortization that were paid out to bankers in the prior couple of years that are hitting this year, that's a fixed compensation expense. Again, when you go from over $1 billion of revenues to something much lower, that fixed expense is a huge drag to your profitability. Some other firms don't defer compensation the same way we do, so they don't reflect it the same way or they account for it differently. We put it all in the segment. You see it embedded in those numbers. [indiscernible] also been growing -- continuing to grow the investment banking franchise. I think Paul's slide showed 113 MDs at the end of the fiscal year. We're up to 125 MDs now. We really expanded our healthcare group. And so we have about $40 million to $50 million of kind of growth expense in the number for capital markets, again, annual number in terms of recruiting expense and those kind of things. So just those 2 expenses right there, $125 million, which is a significant portion of their base and what a driver -- a primary driver of the loss. But with that being said, I don't want to make excuses. We are focused on getting capital markets back to profitability. And hopefully, the activity levels are strong. Hopefully, the market comes back, financing comes back and we see the productivity because not only do we have more MDs, but the revenue per MD and the quality of the MD is much higher than it was 3 or 4 years ago. And then the operating leverage, I said we had 12% revenue growth during this period. You see we had 17% earnings growth, 14% if you look at it on an adjusted basis. I laugh because I think we're one of the only firms that would show you a lower adjusted number than the actual number, but again staying true to our transparency and consistency. But both of those are higher than the revenue growth of 12% over this period. And again, year-over-year, we had 4% revenue growth. We had almost 22% or 18% depending on how you look at it earnings growth. Again a lot of help from higher short-term rates, but again we generated record earnings with near zero rates. So we're able to perform relatively well or have been able to perform relatively well in different market environments. And you see the operating leverage here too with the growth in the pretax margins so far this year being at north of 20% at 21.8% on an adjusted basis and 21.4% on a GAAP basis. And then a return on equity. This is a key metric to us. This is what we believe we're really returning back to our shareholders. And you can see here with a return on equity north of 19% on our strong capital base is really a great result in this challenging and choppy market environment. So we're really pleased with the return on equity that we have consistently been able to deliver to our shareholders while having that long-term view, while having that strong balance sheet and not taking undue risk. Speaking of the strong balance sheet. Corporate cash at $1.8 billion, well over our target of $1.2 billion. You saw Paul mentioned the Tier 1 leverage ratio 11.5% over 2x the regulatory requirement to be well-capitalized at 5%. Our target is much higher than our target is 10% and that means we have today about $1 billion of excess capital. And I know there's a lot of noise in our industry because some of these capital figures at our peers are impacted by held-to-maturity, underwater securities, et cetera. We don't use held-to-maturity categorization. So we don't have any held-to-maturity securities, and we'll talk about the limited duration we have on our balance sheet. So again, all those are conservative things, long-term decisions we make are not just talk. They're embedded all the way down to our accounting classifications that others have used to transfer so many of these securities to held to maturity to hide the losses. And then the rating agencies being A-level rated by all 3 rating agencies. Fitch came out, I think a week after Silicon Valley and reaffirmed our rating, which was amazing. Really a testament to our strong balance sheet and our conservative business model that they were willing to do that. And Moody's recently came out, I think a week ago, with an updated report, there was an official reaffirmation, but it certainly was a complementary to our sort of risk management practices that position us well for that March period. The capital base is fairly straightforward. We have about 70% of the funding is bank deposits, of which 88% are FDIC insured. Again, at Raymond James Bank, it's more like 95%. If you look at our shareholders' equity, we acquired some preferred stock from TriState Capital, but other than that, we have never issued preferred stock. So we have a lot of capacity there for when that market returns, but a very straightforward capital base with shareholders' equity and our senior notes, only 3% of the overall funding on the balance sheet. We took the opportunity before rates started rising to extend $750 million, another 30 years at 3.75%. So our duration is on the senior notes we have is on average 21 years, so a very conservative balance sheet. And you see how conservative is relative to peers with our capital ratios, just looking at the risk-based ratio and the leverage ratio, very conservative relative to all of our peers. And again, I think it's even more conservative when you looked at -- well, I know it's more conservative for many of these peers when you look at the unrealized losses that aren't reflected in many of these ratios. Deposit funding, I don't want to get -- this is really reference material throughout the year for new investors that really want to learn how our funding works. So I'm not going to get into too much detail in the next couple of slides. Other than to say with the TriState Capital acquisition, it really helped us diversify our funding sources. I remember a lot of folks asking when we announced that acquisition, why don't we get rid of their deposit gathering mechanism. And we said, well, one day we'll want cash and one day, we'll want a diversified funding source. And frankly, I didn't think it'd be this soon, but certainly nice to have now. And then you see our Raymond James Bank deposit program, the reason Raymond James Bank has 95% FDIC insurance is because we're one of the firms that still allow clients to avail themselves to a higher level of FDIC insurance by waterfalling to several different banks, as Paul explained, instead of bringing it all onto our balance sheet. And so that gave clients up to $3 million of FDIC insurance a lot of folks said, well, why don't we bring all that cash to our own balance sheet, like the other firms are doing and invest in 7-year securities and we just refused to do that because we wanted, again, the optionality and flexibility to be opportunistic in any market environment. And this is just the sources of uses of funding that I'm not going to get into too much detail here. We have a big buffer with the third-party banks in the middle of $9 billion. It's actually about $13.5 billion now that's a funding buffer, but it's also -- gives us the ability to maximize clients' FDIC insurance, as I just explained. For the first time, we're providing the breakout of the purchase money market funds because with this cash sorting dynamic, it wasn't necessarily clear to the external world, how much of the cash was really staying on our platform and the key here -- and there are other alternatives. There's fixed income securities. There's short-term bond funds, there's brokered CDs. This is just the purchase money market funds, but you could see the vast majority of the cash stayed on our platform and a lot of it went into purchase money market funds as those sweep balances declined, which is what advisors should have been helping and should still be helping their clients do is reinvest those cash balances to the extent that there are investable cash balances in the sweep account, reinvest them into products that give you higher yields. And we launched enhanced savings program in March that gives clients up to $50 million of FDIC insurance or a reciprocal program happens behind the scenes with a technology provider. And that has grown very successfully since we've launched it, especially with clients heightened awareness and focus and desire to have FDIC insurance since that March period. And you see -- we said on the earnings call that we felt like we were closer to the later innings and the early innings and the cash sorting dynamic. And one of the reasons for that is because when you look at the average cash per account, the average sweep cash per account. It's about $14,000. And historically, that seems pretty like a reasonable level, especially because our average assets per account is higher than it was historically. Right now, it's around $300,000. So $14,000 of cash seems like a reasonable level to be at on average. Now averages can be deceiving. We're not declaring an end to the sorting dynamic. We're still being very defensive, I'll describe here shortly and we'll talk about in Q&A, I'm sure, but we certainly -- we showed the statistics through May. And you can see that at least for one month and always reminds us, we're not going to make decisions based on the 1-month trend. But for one month, it certainly seems to have abated somewhat. The loan portfolio, more questions around this as there should be in a more uncertain macroeconomic environment, but we feel really good about our loan portfolio. But understanding that in a deteriorating economic environment, we need to keep an even closer eye on the loan portfolio, but well-diversified. The largest category of loans are securities-based loans at 33% of total loans and that's been increased significantly by the acquisition of TriState Capital. Just as a reminder, securities-based loans are more than fully secured with liquid marketable securities have 0% risk weightings and have performed very well over our history. So we feel very good about those loans, but again on the corporate side, paying even more attention to those portfolios given sort of the economic uncertainty and the rapidly rising rates on those loans. Questions around real estate and office in particular, given the COVID impact on vacancies and particularly in central business districts. You see our office exposure is relatively contained is about $1.3 billion, which is 15% of our CRE and REIT loans, 3% of our total loan portfolio. And of that portfolio, 30% of the office loans are expected to mature in 2023 and '24, but a lot of those loans have extension options on those as well. So we feel good about our exposure here. But again, this -- the real estate lending, in particular, just like corporate lending is a property by property or individual loan-by-loan assessment and risk that you're taking. So we're keeping a very close eye on this, particularly in central business districts. We're about 1/3 of our exposure, probably $400 million to $500 million of our exposure is in central business districts, but even that is diversified across many of the major metropolitan areas. I think our largest exposure is actually in Toronto, which is performing pretty well right now, knock on wood. And the other central business districts, we feel really good about the sponsors we have there, pretty strong sponsors. So stepping back when you look at the loan growth, securities-based loans, which we believe generate the best risk adjusted returns given the 0% risk weighting in the collateral, the nature of the collateral. Over the last 5 years, growing at 40% a year, now again boosted by the TriState Capital acquisition. Those have been softer over the last couple of quarters with higher rates, they're floating rate loans. We've seen higher paydowns, but we think that we're pretty optimistic about the next year for these loan balances as well because people, I think, are getting to get used to where rates are, what they can earn on cash and start borrowing again for various cash -- various needs that they have in various cash utilization that they need. Mortgage portfolio grew -- has grown 19%. Vast majority of these are to our Private Client Group clients, very strong credit profiles, 65% type of loan to value is great credit history, but again we wanted to contain -- we actually slowed down this growth a little bit in the last couple of years because we were concerned about the duration risk associated with these loans. And so we wanted to contain the duration on the balance sheet. Certainly, there are more opportunities than we pursued over the last couple of years, even within our own ecosystem. And then corporate loans have grown 13% and that includes the acquisition of TriState. So again, our slowest loan category -- because we've always been cautious on credit and frankly in the last few years, the spreads have really tightened to a point where it was hard to generate a good risk-adjusted return. So we were deliberately slower and growing corporate loans. We did sell in the quarter so far, about $415 million of corporate loans at near 98.5%, very close to par value. We did that because we had -- and these are ones that on the credit spectrum were ones that were lower rated or higher rated, lower quality, but we did that because we really believe that the -- the loan market has not factored in the higher spreads that we are expecting due to the higher cost of funding, higher capital requirements potentially in the banking space. And so, we do believe that if we want to get back into these loans, we'll be able to in the next 2, 3 quarters with better pricing. So we did that on an opportunistic basis and again, we're being very cautious and deliberate and growing new corporate loans in this environment, not only because of the uncertain credit environment but because the spreads we don't believe yet reflect the realities of the higher cost of funding in the industry. And there's sometimes a lag between loan pricing and where loan spreads go relative to sort of the realities of deposit costs and other things. Key credit trends, again feel very good about it. We had 10 years of record low losses across the entire industry. So we're not naive to the fact that in a more challenging market environment, credit will all else being equal, deteriorate across the industry, but again, we feel very good about our credit and our underwriting and monitoring standards. Duration profile 66% of our assets with no duration on it. And you see we really contained the duration on the balance sheet, which has certainly served us well and has been in higher area focused over the last couple of months. Kind of a history of our financial targets as you all know, we -- as Paul said, we really want to be able to deliver on whatever we say and particularly in challenging and uncertain market environments like we're in now, we tend to be even more conservative with the targets that we put out. And so for the financial targets that we're putting out today, the adjusted compensation ratio of less than 65%, the adjusted pretax margin of 20% or above. Adjusted return on common equity of 17% or above and the adjusted return on tangible common equity of 20% or above. Again, I kind of submit these humbly to you because we are in extremely uncertain market environment. Capital Markets revenues are very subdued right now. Cash balances, they've settled out in the last 3 weeks to some extent, but still very uncertain with what happens with those. The forward curve is all over the place if you believe the forward curve, which I'm not sure why you would, based on what's happened over the last couple of years. So we're very humble in terms of posting these results and trying to err on the side of conservatism. Hopefully, we can deliver better for our shareholders if the markets are conducive and hopefully, it doesn't end up worse if the markets aren't conducive. And so this is our best guess at what we will be able to deliver to shareholders and then these are some other capital and liquidity targets. So again, appreciate your time. We'll take, I think, a break and come back for Q&A with both Paul Reilly and Scott Curtis, but thanks for your time. And also thanks for your support, your ongoing support to sell-side analysts. We really do value. We're in the business, so we really do value all the time you spend covering us and explaining our story to the Street. We appreciate it. We do not take it for granted. We know how critical that is to the capital markets and to the liquidity of our stock into the buy-side investors, the long-term investors that buy into our long-term view, we appreciate your support as well. Thank you very much for coming.

Thank you, Paul. So we are going to take just a quick break. We'll reconvene at 3:30 Eastern Time and then at that point, we'll have Q&A with all 3 of our presenters. Thank you. [Break]

Okay. We're going to go ahead and get started with our Q&A session. All right. We'll ask our 3 presenters to join us on stage.

Which chair is who's.

Before we get to the actual questions, I do want to just say for the webcast participants, if you guys here in the room, could just wait for the microphone and also state your name and firm before stating your question would appreciate it. But with that, the floor is yours.

Okay. Great. Devin Ryan, JMP Securities. First of all, thanks for doing this. I always enjoy the day. Two parts, maybe for Scott, just on the private client business. So it's on recruiting and the opportunity. I was reading the J.D. Power survey. I think it was from last year, but it talked about 15% of Wirehouse advisors thinking about leaving their firm over the next 1 to 2 years. And so just the thought of like churn could be increasing at least on the margin. And so just talk about what you guys are seeing in the recruiting landscape because last year, you guys did well, but the environment maybe churn wasn't quite as high. So what are you seeing there? And then I want to connect that to what you talked about and disclosed on the RIA side. I think it was $124 billion of RIA assets. And so I just want to understand like how much of that $124 million just moved within the Raymond James network where you're kind of capturing people that would otherwise maybe have left versus you're actually competing for those assets because that's a big part of kind of the industry movement. And what I'm, I guess, really just trying to understand is you also said that Raymond James is not going to be Schwab or Fidelity. But like what is the value proposition competitively? And are you competing because some of those Wirehouse assets are going to the RIA channel. So there's a lot in there, but just love to talk about that a little bit.

Yes. It's a great question, Devin. And I think if you look at industry statistics over the last couple of years including this year, we're at least seeing across the industry a slowdown in the number of advisors, who are transitioning. But as I was saying to a couple of folks at the break, similar to what we saw last year, whereas we didn't see as large a number of advisors transition to Raymond James, we saw larger teams transitioned to Raymond James. So when we think about recruiting success, we tend to measure that by assets and trailing 12. And so while the number of advisors perhaps wasn't as big as what we've seen in prior years, the quality, the size of the teams was larger. So from our perspective, another successful year recruiting and I would tell you this year is no different. We've seen some industry statistics where number of advisors transitioning is probably down around 20% versus what it's been but we're in conversation with and already have commitments from some very, very large, very significant teams. So on your question about the RIA, the custody space, what I meant when I said we're not going to be Schwab, we're not going to be Fidelity as we're not going to create a custody supermarket and try to compete with those organizations that are behemoth. They're way out in front of us and their business model is really not what our model is. We have an integrated suite of technology solutions that was really built for the advisors, who are employee advisors, the independent contractor advisors, who are affiliated with us and we don't have a great way to break that up and do our cart pricing. If you use this application, we'll charge you this and if you use this other application, we'll charge you that. So what we've -- how we've structured it is, we charged asset-based pricing. You have access to all of the resources, all of the tools that are available to you on our platform for a fee that is specific to your assets. So as your assets grow, you'll pay more and that seems to work very well for advisors, who are interested in it. As you think about Dynasty's platform, as an example, we're not like Dynasty because the assets are at Raymond James. Dynasty has multiple custody relationships. And by the way, they don't have one with Raymond James, but they're significantly more expensive than we are, but providing similar types of technology solutions for the advisors who want to be able to have the flexibility to custody assets at the various custody providers. So when we look at the advisors who have transitioned versus the advisors, we're recruiting as well as some of the firms who we support the large RIA aggregators who are on our platform who also continue recruiting. Historically, it was 50-50, but now we're seeing a larger imbalance toward advisors, who are joining us externally as well as advisors, who are joining a large RIA firm and custodying their assets at Raymond James, like a Steward Partners and like a couple of other names that we have on the platform. So our expectation is that we'll continue to see that platform grow. And for the advisors, who choose to move in that direction who are affiliated with us, thankfully, we have that net so that all the assets stay at Raymond James. We've had a couple of advisors, who were exploring, affiliating with what I would call an RIA aggregator who we do not have a custody relationship with and once they learn that we don't have a custody relationship with them and we're not interested in having a custody relationship with them, they elected to cut off the conversations with that firm and focus their energy on doing something different because they really don't want to see their assets and their clients get disrupted by leaving Raymond James. So thankfully, there -- they're big fans of Raymond James and they want to keep that affiliation with us. So that has really helped. We lose a couple who want to go outside, but it's a really small number every single year who decide I want to go RIA and I'm going to leave Raymond James all together. That's a small number.

We also -- as technology just becomes more and more integrated the value proposition as our systems, but for the independent advisors as well as the RIA advisors for integrating with the major third-party systems. It's just as people get big enough, they want to do that, they may want to use 1 of especially 3 big systems. They're generally good at something and a particular area that fits their practice. So we're connecting through APIs to those systems.

I just want to touch on some -- this aggregator dynamic that's really increased a lot in the last 3 to 5 years because we're learning a lot about that dynamic as well. Some of the firms on our platform have essentially evolved into that type of model and the reason I bring it up is because some of them, we just determined aren't good fits with our various affiliation options and we part ways mutually. And that -- to the extent that, that has happened, which we've -- or we've moved over to a different affiliation option or will happen, that could impact the advisor count or other things but it's long term good for us because the profitability, the effort, the fit wasn't there. So we'll highlight those for you as they come up, but that has come up from time to time. And I think there's one other firm that we're looking at that might be impacted by that as well. It wouldn't surprise you that we're very selective about the relationships that we bring on to the platform and we're not right for everybody and everybody is not right for us, and that's okay. There are other options for those people if we're not the right firm.

And the challenge on advisors when they go to the RIA platform, we count FINRA registrations when they're in the independent or employee. When they go to an RIA platform, they are a client. There are no FINRA registrations, we can't even tell how many advisors are in it, but we know how much assets are and we know what we're earning off of those assets. So it gets harder to report to you. We want to be as transparent, but we'd be making up the number because we really can't audit the number of people that are giving advice on those firms because they're not under our supervision.

Hopefully, that's helpful.

Thanks for the day. It was really informative. I know, Paul, you said that you're not declaring victory on cash with the encouraging trends emerging in...

1 month in a row.

Right. One thing I was curious about is, number one, -- if you go back to the peak of when a lot of the cash concerns emerged, which was in mid-March around a lot of the bank issues. Has there been a longer-term trend since then a general settling? And so what we're seeing in May is a continuation of that. I know April is always noise with taxes. So adjusting for that. And then -- are there any -- I know it's probably a minority of clients, but are there some clients that are worried about the debt ceiling and they might be avoiding some of those other cash substitutes, which could be causing a little bit of noise in May and is it possible to quantify that?

I would say it's harder to describe any longer-term trends since April. Big picture, we have seen a lot of activity after major interest rate increases. I think that's a natural catalyst for an advisor to talk to their clients or for a client to ask their advisor about what they can earn on their alternatives. And so to the extent that there are no further increases or catalysts, then perhaps that helps with the stabilization, but really too early to tell. As far as the debt ceiling and how that's impacting the kind of investment portfolios, it's hard to see that, frankly in any of the statistics or numbers either. A lot of the money market funds are their portfolios are extending beyond those maturities in June as well. So I'm not sure -- I haven't heard of clients and advisors bringing that up as a part of their investment process.

Our programs, as we showed in the slide, money never really left. It just got reinvested at higher rates, which you would expect to happen. So most of the inflows in our own sweep have come from the money markets back in. If you look at treasury maturities, we see when they hit because we get big days, but they pretty much have been reinvested. They come in on Wednesday's leave in front, we can see them there. I don't see anything that says they've matured and then they've kept them in cash in the system. They seem to get reinvested. I can't track exactly if they're back into treasuries or to other fixed income investments, but I don't think we've seen that yet. And it was interesting and we didn't have any cash flow off during March either. We didn't see people taking money off the platform. So it's just been really a sorting activity and chasing rate.

I would say the one thing is we have seen continued success in our enhanced savings program. It's up to north of $9 billion now. And even though we've seen some deceleration in settling, if you will on the sweep side, we're still raising those funds. We want to be there for our clients that are looking for that FDIC insurance and looking for the competitive rates. So we are keeping that capacity open even though we're not deploying it in higher yielding -- much higher-yielding assets now because we're being cautious on the asset side. We're still essentially breaking even on those balances as we sweep them to third-party banks or we deposit it with the Federal Reserve but we're going to err on the side of being heavy on funding and raising the cash until we really see longer-term stabilization in the one month in a row that Paul mentioned.

And a lot of those assets are net new to the firm. So that's been -- we did get inflows through that program.

Just a question on cash sorting another one, if I could get the $14,000 cash per account. When you look at that by customer cohort, which I imagine you guys look at. Just curious what sort of dynamics you see when you look at it at that level? How that has evolved and changed, for example, maybe you can kind of fill us in on how much of the cash relates to customers that have more than, say, $50,000 or $100,000, how that sort of breaks down what you're seeing there? I think I have a follow-up question after that.

Big picture is, I think we see -- to the extent that clients start sorting and they start off with $500 million or $1 million in cash in the sweep and they sort it. They become show up as clients with less cash in their accounts, right? And so the sorting activity sort of happens pretty upfront. It's pretty front-loaded I would say, to the extent that we see that in the metrics. And the earlier in the cycle when rates were lower, we saw the clients with the highest levels of cash balances on an absolute basis, be more price sensitive. And as rates got higher, clients with less and less cash balance got more price sensitive. So there's certainly -- the larger balances are most price sensitive to rate, as you would expect and then as rates got to north of 3.5% to 4% then that cut the attention of the rest of the client base, too. So again, we track it by account size, by client size, by advisor cohort and everything else. And I think what you've seen is sort of a cash sorting dynamic across the board over the last 6 to 12 months, which is what we messaged a year ago today at the -- or a year ago at our Analyst Day when A lot of other firms are trying to explain why cash sorting won't happen to their client base for a variety of reasons and we were being criticized for being more cautionary around that. We just said, hey, when rates rise, you should expect all clients of all types to look at their cash balances as they should and then to the extent they have investable cash balances, invest in higher-yielding alternatives.

Traditionally, the counts people with under $100,000 of cash, you would see very little movement. And you could see as sorting got rates moved higher. And quickly, I think 2 factors -- at even 2% or 3%, it didn't matter at 5%. It had some impact to them. Secondly, I think it got to be the talk, I'm sure it all cocktail parties and stuff here is my cash, what are you getting? What are you getting? And so we started seeing movement in that category, which we, gosh, in a decade, even post pre-'09 didn't really see movement in there. So I think both the height and the quickness of the rate investors and advisor got more sensitive to it. Right.

I think Paul Shoukry is giving more credit to the clients and not enough credit to the advisors because the likelihood is the advisors looked at the cash that was sitting in the client's account and what it was getting credited in terms of interest and said, that's a good reason to call my client. So when equity markets are going sideways or going down, you can call your client and say, I can get you 400 more basis points yield on your cash. We have this wonderful opportunity at Raymond James, let's move the cash. And so that, I suspect was a greater driver of the movement but once you get down to those balances that are much lower balances in cash, it's harder for an advisor to say, yes, that's a great reason to call my client that has 14 -- who has $14,000 in cash because the incremental yield may not actually result in incrementally a whole lot more money. It might be a feel good, but I think they become more selective about who they contact.

Just to follow I'm sorry, go ahead.

And a longer-term question, honestly, the industry is different since the 2000 to 2009, 2009 to now because we have banks, we think more like a bank in terms of service to clients in those segments. But pre-2009, clients got money market rates and their sweep programs. There wasn't until post 2009 when rates went down and people looked at their banks and started treating more like banks and segregating cash and pricing that it went and then, of course, the glut from 0 interest rates. So the question is where does it sort out? My guess is it will sort out somewhere, but before, I don't think it's -- we can look at the last 5 years as an industry and say, well, here's the track record but it's been since 2010, a very different market than it was pre '09. And so advisor client behavior and competition for cash as the Fed shrinks balance sheet has an impact on what people are willing to pay. So it's going to be interesting where this rate settles out. We don't know, but what we do is we have to be competitive with the market if you want to keep market cash. That's just...

Maybe if I could just follow up on that point instead of shifting gears to something else on the RIA side, but I guess what's the potential for that to change how the industry prices for advice, essentially where wealth managers are monetizing through the cash. You know coming back to your point on years ago, it was mostly swept to money funds and so that's not the case if we're in a higher rate environment for a longer. How does that sort of change the broader economic monetization for the industry?