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

Okay. I think we're ready to get started. It's right at 9:00. Good morning. I'm Kristie Waugh, Senior Vice President of Investor Relations. Welcome to Raymond James Financial's 2024 Analyst and Investor Day. We're so happy to host you here in person, and we know there's many, many more joining us virtually as well. I know it's been a really busy week and maybe some difficult travel for a few of you with many Investor Days. So really, it does mean a lot that you made the trip out here to spend the next couple of hours with you. Over the next couple of hours, you will hear from a lot of our key business leaders about their businesses, about our strategic growth initiatives and many of the key focus areas. We do have a lot planned, so I will just go ahead and get things started. First, I want to call your attention to the safe harbor statement shown on the screen. Certain statements made during this presentation may constitute forward-looking statements. Forward-looking statements include, but are 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 Forms 10-K and subsequent Forms 10-Q, which are available on our Investor Relations website. We also use certain non-GAAP measures to provide information pertinent to the management's view of ongoing business performance. These reconciliations to the 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 to provide a strategic overview. Following Paul, we'll have Scott Curtis review our largest business, Private Client Group; and Horace Carter to review our fixed income and public finance businesses. At that point, we will take a short 15-minute break, and when we resume, Steve Raney will be here to review the bank segment and we'll end with Paul Shoukry's financial review. The presentation should -- is now available on our Investor Relations website, and it does include biographies of each of our presenters and the non-GAAP reconciliations I mentioned a moment ago. We will have Q&A following each presenter. We will prioritize those in the room first, but we will be gathering Q&A as well on the web portal. If those joining virtually could just use the QA button, at the bottom of your screen, we'll see those and be able to bring those up as there's time. For those in the room, we do have mic runners, so please wait and we'd ask you to identify your name, firm before stating your question. And we will limit it to one question until we make sure we get through everybody. Now I'd like to introduce our first speaker, Chair and CEO, Paul Reilly. Paul joined Raymond James in 2009 and became CEO in May of 2010. He served on Raymond James Board of Directors since 2006 and became Board Chair in 2017. Paul, please welcome to the stage.

Well, good morning, and we really appreciate everyone making the trip here. Thanks, Kristie. And as you know, you've seen the presentation before, for those who have followed us, you'll see a lot of similarities. First, I'd like to welcome Cecily Mistarz, who's our newest director, and she wanted to stay and see what we did here. So where she has an extensive banking background which we thought would be a great ad on our Board. And also on the other side, we talk about Raymond James being a family, and we lost a member of our family, yesterday, a longtime friend, director, former CEO of Tech Data, who was with us Monday and Tuesday at the Board meeting and passed away in his sleep Wednesday morning, very surprisingly. So it's a personal impact on us and the community where his wife, his kids, his grandkids, all live here, and he's been a long-time leader. So it's taken a while for us still to recover from that surprise. But we've got a great Board and people like Cecily, who I'm sure we'll join and continue the great Board and the support of Raymond James. So I know when you come to an Investor and Analyst Day, you expect these big, huge announcements from Raymond James changing everything. So I don't want to disappoint you too much. You're going to hear a lot of the same messages. And what is unique is you see a lot of announcements from Raymond James on the change. The transition from me, from Paul to Paul, that will make it easy on you. But also a lot of announcements yesterday were you're seeing just in Raymond James people taking a half a step up. I mean they've been in these jobs a long time. They've gotten promotions and filling, the domino effect of one person leaving and everyone coming up. But the team, as I'll talk about later, is still committed, and it's the same really leadership and talent that you've seen here for many, many years. All formed by this, taking our client first, which is really sincere here. We really do put clients first, all of our debates, all of our products, we don't just say it. We focus on it. We treat advisers like clients. And we take a long-term view, which some of you like at times, some of you don't. But it is kind of in our DNA, and we will talk about capital. I know that's one of your questions today as you'll have many others. You know us, Fortune 400, a lot of equity on the balance sheet, a lot of liquidity on the balance sheet and continue our path for long and steady growth. Our mantra has been, starting about 10 years ago, we used to say the premier alternative to Wall Street, not a slam on Wall Street. What we're saying, what we want to be is the best of both worlds, large enough and having the scale to give advisers tools, capital support that they could get at a wirehouse, but still feel like a regional family firm, which we do in every way, and we work very, very hard at it. Our multifaceted businesses. Sometimes we get compared to pure Private Client Group businesses in cycles like this that do extremely well. Sometimes we get to the -- compared to more capital markets client -- Private Client Group businesses. But the truth is we love the mix. And they are synergistic and even there -- and it continues to grow areas like capital markets, where Jim put out a program to really interface with advisers to help them monetize the largest asset, many of their clients had, which were closely held businesses. And it's been hugely successful, something that the industry has struggled with. And that relationship has made a difference in the lives of our clients and our advisers, certainly the research and capital markets that we have. The asset management products, the bank gets lending to our clients, and we fund the balance sheet through client sweeps. And during different cycles, they have different contributions. And we don't have this slide, but you've seen it many times up this time that in different cycles, different of those businesses contribute to that profitability mix, but we're profitable in all cycles. We had records at 0 interest rates, followed by records right before with high interest rates and records with recovering interest rates and through the first 6 months records again. So looking ahead, we're still focused on growth. Growth is critical to our firm for a number of reasons. If you grow profitably, you can invest. You can invest in technology in areas where we've had an eightfold increase since I've been here in that investment. Products and services. And if you do that well, that helps you improve margins, help you improve your business and you have that growth cycle. The firms that struggle are the ones that can't grow, especially in an inflationary environment, costs are going to go up. And if you can't grow your costs go up, your margins get squeezed and that's a cycle that's hard to break, especially in this environment of increasing regulatory, increasing costs, increasing services demanded by our clients. So it's still our focus is to have that reasonable growth as we've defined, it's about a 3% net increase in advisers. And then with the market and with productivity continued the double-digit growth that we've experienced for a long time. So we're focusing on still driving organic growth, expanding our technology investments more and focusing on strategic M&A and their integrations, and we'll get into a little bit of that more later. And on the adviser side, the retention is really driven by best-in-class services. Our respect for advisers and their clients and their business, the closeness to the executives, which is very unusual in those firms that advisers know us. We go on all these trips and conferences and travel to see them, because we care about their business. They have personal relationships with us. And if you ask them and firms our size that doesn't exist. We've had a lot of people said they were on the same floor as a CEO for 10 years and never met them. And here, they all know us. And they can walk up to our offices unencumbered once you're in the building. So it is a very, very different culture, which has led to the strong retention and recruiting that we've had for so many years. Our technology by -- since we recruit from every firm, every adviser, whether they join us or not, tell us that we have leading technology. So it's not just the awards, it's not what we say. Time after time, again, they say it's the best wealth management platform in the industry. So we focus on financial advisers. We'll continue our technology investments, our service excellence, and we'll talk a little bit about how we're operationalizing some of that more through technology and process. Our focus is still in capital markets to expand our M&A platform, expand a lot of our market capabilities and attract and develop leadership. Jim has brought on some 17 advisers in health care, fixed income brought on 10 Citibank public finance advisers. So in downturns, most people aren't doing that. We're doing it because we have the capital and longevity to position those businesses that we like for the upturn. We know it's coming. It doesn't mean we're not managing the cost. It doesn't mean that we haven't downsize some of the underpinnings, but we're making sure that the people that drive the business are here and adding to those platforms, just like we did in '09, which really paid off for the next 5 years when other firms were afraid to do that. Our growth, this long-term driver in investment banking revenue. You can see the mix. Jim was on a great pace, but if you take out the 2 biggest years, despite the downturn, we're still making a good comeback, and we believe this business will return. And investments we made years ago, like a $10 million acquisition in Europe is now $100 million. Some of these firms have joined us in the last few years, doubled and tripled since being here. So we believe in the platform we're going to continue what we believe is a long and steady annualized growth. Yes, we've entered into a downturn, but we still see that if you look over this period of time and take out these big years, we still have a steady growth. In the asset management business, we're enhancing our solutions. We announced a partnership with JPMorgan Asset Management, installing 55 IP, adding tax rebalancing -- tax harvesting and rebalancing and all the enhancements that we put in our products, we're adding new products and asset management demanded by our advisers. So we continue and expect growth. And what's been a good driver for us is our internal asset management business. The bank segment's, SBLs are our focus, not just with Raymond James Bank, TriState, actually funding our competitors with SBLs. But those -- we like the SBL business, we like the risk profile. Certainly, during the interest rate rise, those balances dropped, those utilizations dropped, but we see them coming back now as people have gotten used to the interest rate environment. We're selectively growing corporate loans. It's becoming a smaller and smaller percentage of the balance sheet. We don't plan to get out. We just plan to stay disciplined, because it's a good earnings driver. And more importantly, we think given our balance sheet, we still have great credit metrics, because we look at balancing and managing those all the time. Technology has made a difference in the life of our advisers and frankly, in our ability to recruit and retain people. We made a bet almost 10 years ago that if we invested our money on the adviser's platform first, that we would win the recruiting and retention battle. And that was a cost at a little slower rollout for the client end user. But we knew if we empowered the adviser with the best technology, they would be able to provide more value to their clients than this their clients having a cool app. The technology now that we've embedded for the adviser's desktop is being rolled out to the client desktop. We did the first release, which is what I call very competitive to a banking app, but the release is coming at the end of this year and the beginning of next year, we think will put us in a unique position for that adviser connection. And the reason it will be different is most firms are trying to go direct to their clients and manage their clients or in banking apps. They're worried about cash movement and solutions. We're worried about the client-adviser relationship and how do we bring them better together. So the design is very, very different. Functionality will be similar on a lot of the banking cash movement apps. But the real focus is how do they communicate with their advisers. How does the chat function, calendar scheduling between advisers and clients for those who want to use it. And a lot of the functions that help bring them together, access to what they're doing, we think will be unique, but more to come as we roll out. We also have capital deployment. People have known us for recruiting, retention and kind of organic growth because of that. But M&A hasn't been an insignificant part of that business. And it goes from very, very many years. Some of them are more longer-term payoffs like in Canada, where our metrics in the Private Client Group are very similar to our metrics and profitability in the U.S. And we're right at the -- we're just bumping up now to the 6 largest banks in the Canadian system and have become a significant player with the Raymond James model of employee independent and they call platform. And so we're seeing that growth as we hope to get to the U.K. over time. But it takes time to do that. The other thing is capital deployment. I can still remember in 2021, the pushback we were getting, why was Tier 1 getting up to 12%? What are you doing? And we said we were looking -- we're positioning ourselves, because we believe there would be acquisition opportunities in the market. It took us a while until we got Charles Stanley, SumRidge and TriState all within months. But sometimes these deals take years. You don't know when they'll close. We believe today there's that same opportunity in the market. I can't tell you something is going to close tomorrow, but we think the opportunity is there, and we want to position the balance sheet to be able to execute. And if we hadn't, you'd hear big stories on buybacks. We don't want to hoard capital to hoard capital. We want to have a balance sheet strong enough that we can execute quickly. And one of our advantages over time is because of our capital, because of our liquidity and both from a regulatory standpoint and from a business standpoint, we can execute really quickly and commit really quickly. If it wasn't for that, we wouldn't have gotten Morgan Keegan versus private equity. One for that, we wouldn't have gotten Alex. Brown. But we could almost guarantee very quick execution. And our reputation in the market is, yes, we're conservative. But once we commit, we get it done. And we think we're seeing a market where we see those opportunities potentially becoming available for us. One thing about our industry is regulation, more regulation, and then it's hard to imagine when I started, where my job was percentage points, spending time with regulators what a big part of that job it is today. And it's hard to believe that there's a bunch more regulation still coming. It's -- some of that regulation, we believe that the courts have been favorable. We beat the DOL twice in court. And then they came out, as you know, recently with fiduciary law and that you will see industry litigation again, we think that the same principles and premise, the new rule was written was the same rule that the Fifth Circuit said that they did not have the authority to do it. The new rule changes are just tweaks different, and we didn't have regulation best interest, which covers a lot of the stuff they're trying to cover already. So again, I think the industry is looking to push back on some of those rules like you could see staying of a number of the rules like the SEC climate rules. To us, independent contractor rule, the first draft, we were really worried about what came out as a rule we thought is very workable. Others like FSI [indiscernible]. If it stays or goes away, we feel real comfortable. But we are fighting where we believe the regulatory agencies are overstepping. You can see the impact of that on Basel, right? You're seeing people slow down. It looked like a freight train that it was going to get passed. You see [ Powells ] and others saying, let's slow down, let's measure it. Let's make sure we know what we're doing. And hopefully, this last rush of regulation will end up in that kind of neutral position for us. But we're actively involved in spending our time in that. This is a picture of the second, the third and soon to be fourth CEO of Raymond James in 64 years. We should have taken it with picture of Bob in the boardroom. And yes, it's the change. Everyone worries about change, except Tom and I. We have the utmost confidence in the team here and the team is not Paul. It's him and the team that's with him. You all know, Paul. You know his thoughtfulness. His candor, his integrity being straightforward. His business acumen, he has that same respect here inside of Raymond James that he has with you. And he's not alone. He has a team of people who, frankly, we had options for CEO, very strong people in this organization. They've all committed to stay. They're all friends. They're all working together hard to continue to drive Raymond James growth. Most of these kind of contest, I'll call, people fight, they leave, they beat on each other. Here, it's just very different at Raymond James. They get along, they work together. That's our culture. And so yes, some people were disappointed. They didn't get the top job, but they all understand it. They're here. They've all got bigger jobs. And I believe we'll continue to grow it. So that's why I described this isn't this big change. It's half a step up. Now will things change under Paul? They better, some things better change. I mean they certainly changed when Tom was running it versus when I was running it. The market is changing, right? Times change. But the team together has the wherewithal the ability and the commitment really to continue the great growth the great long-term story. And with that same conservative bias, maybe not as conservative as I had it, but still compared to almost any competitor will be. We'll let Paul answer those questions. That transition was announced for a year. Sometime next year, we set at roughly a year. So whether that's December or February or it doesn't really matter. We're giving Paul the same blessing that I think I had of spending a year working under Tom. And so it was the greatest job, I was President with no direct reports. So I had all the authority and no responsibility. I just had my assistant reporting to me. So I could go and spend time getting to know people spending more time in the businesses. We want to give him some of that runway. So he has that luxury before he's charging full time. And so sometime in fiscal '24, we said to give us a range that transition will happen, but we're working closely together. We have for a long, long time. So I really -- it's minimal disruption where most firms, this is a big deal. So we start where you ended, the culture will carry on. Paul's committed to it. We're committed to it. And I believe that our -- with our positioning, our capital and the people we have, we just have a great opportunity in the market. In a good market or in a soft or hard landing as everyone's been arguing about for a few years, if it occurs, we tend to outperform in those markets, because of our balance sheet and our positioning and our long-term view. So with that, I think we're taking questions.

Now, Kristie? Is that Devin? You were first. That was quick. It's like a call right, who's dialing in first. Yes.

Devin Ryan, Citizen JMP. Paul, thanks so much for having us again this year and obviously for a great career here at Raymond James. So maybe the first kind of big picture question. Being in the seat for nearly 15 years, there's been a lot of change at Raymond James. But at the same time, the company still looks and feels very similar. I think more mature, but similar. As you look out over the next 15 years of the industry, I know that's a long period of time, but do you expect there to be significant change from here? Or do you think we'll just kind of evolve in a similar pace? Like I guess the question is really, is the pace of change accelerating? Where is it accelerating? And for Raymond James as a firm, does the benefits accrue to the larger firms. And so therefore, you can kind of accelerate your growth relative to maybe what you even saw over the prior 15 years? And I know that's probably more for Paul, but I'd love to get your perspective as well.

Yes. I believe there's lots of change, and we've changed significantly since I've been here, our technology investment certainly has been a big differentiator. We didn't have an RIA platform. We had one, but nobody was in it. And that was kind of the fastest-growing segment, and we've positioned that for growth. We could go on and on, Jim, has really made us a nonfactor to a player in the M&A space and capital markets. Horace and SumRidge and the technology that we hope to really leverage and integrate across our whole fixed income business. So yes, there's been lots of changes. And there's macro changes, the entry of private equity into the RIA space has had an impact. So you'll see our reaction where we'll start investing in some of those businesses. We've had businesses that left us, frankly, they didn't want to, but they wanted capital. We weren't -- we didn't have an RIA capital program, which we're rolling out now. And they say, we want to stay, just do it. And the returns are great. We just didn't want to be part of other people's practices. And we think we've come up with a mechanism where we can stay out of their business, be the investor, let them have the capital, have better returns. You've seen our competitors do it. We've been working on this for 18 months. I think we were the first, but in Raymond James way, we just step by step. And so that's going to be different investing in our own businesses. I don't know the sustainability of the capital pricing that private equity has put into [ RIA ]. I mean, numbers wise, we don't get it. It doesn't mean we're right. But it's a reality whether that sustains and it's put pressure on deals, we still can make good returns on, but pricing is going up. Or if that subsides because there's so many players that gets down to a few, because they all aren't going to make it in that same model. But we'll see. And that's something that Paul will have to measure, grow. It's certainly a changing dynamic. He has a big push on -- I'm not speaking for him, but just talking to him, you can ask them all the questions. We've used AI, putting in our back office last 3 or 4 years. It was more machine learning and now it's AI. But we're having a back-office system we call [ I Know ], where everyone in the back office is using AI to find when adviser calls in is what are the answers to some of the complex questions or where do you find them or who is the expert. After it's back there for a few years, we plan to roll it straight out to the advisers where they don't have to call the back office unless through AI, they're told they need a clarification or a permission or -- and that will greatly increase service and productivity. So there's going to be trends like that, that will continue. And you've got to stay on top of. Luckily, we were early adopters. We just didn't -- we didn't talk about AI because when ChatGPT came out, everybody thought it was invented and everybody was becoming a company. I mean it's been a long progression. And he's going to have to navigate them and the team all those different trends. But we feel really good on where we are. And maybe it'll have to move a little quicker than our steady approach on making some of those investments as the world turns quicker. But I don't think fundamentally, I know what won't change is this and that's really been why people stayed with us. That's why we don't have the turnover either in management or in the advisers that everybody else has experienced. Now having said that, we've had -- we are in the midst of repositioning some of our independent practices. Super OSJs are in the news. Some are great partnerships and work well for us. Some the economics just don't work for us or them. And so that may affect a little bit of the net new assets or adviser count in the short term. I mean just in the next quarter or 2. But fundamentally, recruiting is at a very high level. RJ will have a record recruiting probably this year. RJFS will hit its goal. We'll have a good recruiting year. We're recruiting in the RIA channel. But there may be a little disruption that you've seen a little bit in the numbers. But as we just -- we had a firm that we mutually parted ways with last year. And then we're actually making more money over the 60% that stayed in having 100% of the advisers on the platform. So we don't want to grow for growth's sake. We want to grow for earnings. And you'll see some of those adjustments and they'll have to manage. I'm sure things we haven't even thought of yet. Yes, sorry for the long answer. I've covered a few topics in one, I guess, I don't want to start sounding like Tom too much. I'd like -- sound like him on a lot of things, but not always on the length of the story.

Brennan Hawken, UBS. Similar vein. So when you go through transitions often inspires reflection. And from my perspective, I always feel like the mistakes you make, you learn more from. So when you reflect back on your 15-year career as a CEO, what big mistakes jump out to you? And more importantly, what did you learn from and how did you adjust accordingly?

I think the -- if you look back a few things, there was a lot of debate on RIA channel. And I kid, I said, when I got here, I think I had one supporter in the EC, but I think he was lying just to say he was backing me. And I wish I was more aggressive on that because the trends were clear. If we even had it invested more a lot earlier, we would have been good competitors. And we are now, but it's taken a long time. And the trend was clear. I mean if you go look at the last 15 years, you look at it now, it hasn't subsided. So it's moving. We had a period, you remember when expenses went way up when you build our regulatory structure out as we've gotten bigger. And the message there, it's better to stay ahead of it than play catch up. Now it didn't hurt us, but in an environment, it could. So how do you stay ahead and move aggressively on those trends? If you look at our private equity investments and that we'll be looking at in some of our practices, we knew it. We worked on it early. And again, our reflecting on our values more -- we don't -- we tell advisers they own their business. And if we own part of it, what's that story to everyone because it's their business. And so we had to come up with a model where they're going to still own it and run it, but we'll participate in it. So some of that, I say I wish we'd done it quicker. And outside of the RIA space, I don't look back and say, yes, we could have done it, but it wasn't a big change on that one, we could have positioned it much better than there 5 years earlier. And maybe you had a smoother transition and been a leader in a multi-custodial platform. The management complexity of having an employee and independent RIA channel is very complex, right? And that's why most firms don't -- or they announce they're having one but can't build it. I mean it is hard. And I give Scott, Tash and all the people in the past, their ability to do that. So -- but I really don't have any regrets. I almost didn't take the job. Tom convinced me that I should. I told him that I didn't want to work for a publicly traded company again, because it's too regulated. Look where we are today. But it's been great. It's been the best experience of my life. The people are fantastic. And I'll miss that probably more than the business. Although I'll be on the board for at least the foreseeable future after Paul takes over. Steve?

Steve Chubak, Wolfe Research. Paul, I did want to ask you on M&A, just given you highlighted a number of compelling opportunities to maybe grow inorganically. At the same time, you also acknowledge PE valuations, at least in the RIA space, pretty frothy. Rates at highs, markets at highs, where do you see the most compelling opportunities to grow by M&A or inorganically? And just speak to your ambition specifically outside the U.S. since you highlighted some of the potential benefits, even if it's a longer time line to scale that you've seen at least success in Canada and early stages in the U.K?

I think in our M&A strategy, we've taken -- we've had people, what we call join the family. That were underscaled had similar cultures and could benefit by coming to a similar culture, though you feel like you lose your independents, but we're really good about not saying. We -- a lot of firms will say we bought you. Here's the platform. Here's what we do. We say, we brought you into the family. You do things well. We do things well. Let's talk about this so we can agree and what we can do better. And it's not just been in the Private Client Group, where the pressures of regulation and cost and technology are going up. So I think smaller scale firms struggle with that. It doesn't mean they're all going to run to the market. But I don't think that's going to relent that scale matters. Jim has done that brilliantly in the M&A acquisitions, both here and in Europe. We've had the same success in Canada. In fact 3Macs was almost a virtually -- not only do we tell the story about Alex. Brown and Morgan Keegan, 90% of the advisers when they joined us 2 years out, which is unheard of. I think, 3Macs literally outside of 3 advisers that -- we're in a kind of a different business that left. It's been 100%, 7 years out. I mean, except people that have retired. And I think those kind of things are what make the acquisitions work or most of them don't. So you have to find them, and they have to be ready. Jim has found a lot of opportunities there. Scott, under his leadership has been careful and thoughtful in talking to people. And I think over time, they just pay off when there's opportunities. I can't tell you there tomorrow. We talk to people all the time, just I think in 2020, you didn't believe us that we're really going to buy something in 3 hit like that, but they take time. The focus will be North America first. Jim has a little wider mandate for M&A. But we don't plan any near-term to middle-term acquisitions and wealth in Europe. We want to grow in both Canada and here where we have mature platforms. Over there, we need to -- although we're close to top 10 in the U.K., we need that to mature a little bit more in the changes, very different regulatory environment with the FCA than it is here. So we've had to adapt to that, too. And they have to get to know us better, even though we've been operating there 20 years we're at scale now where they're really getting to know us. And it's all fine. So anyway. Okay, Kristie. I'm getting off. Great to see you guys, and I'll talk to you later. So thanks.

Thank you, Paul.

Thank you, Paul. All right. Next up, Scott Curtis. He is currently serving as President of the Private Client Group, our largest business. And he -- a role that he has actually held since 2018. He joined the firm in 2003. And prior to his current role, he was serving as President of Raymond James Financial Services, our independent adviser business. Please welcome, Scott.

Thank you, Kristie. Good to see everybody this morning. And thanks for making the trip. I understand that for some of you travel was a little disrupted, having traveled quite a bit recently. I'm familiar with that. It's not fun, but I'm glad to see everybody made it safely. What I'm planning to do this morning is take you through where we are today, where we've been and we can also talk about, as Paul did a little bit about how we think about the future and where we're headed. So as you look on the slide here, hopefully, none of these numbers are surprises to you. I think you're all familiar with this. Private Client Group, total assets under administration at about $1.4 trillion, which represents about a 13% compound annual growth rate over the last 5 years. Right around 8,760 advisers. That's globally, including the U.K., including Canada and clearly here in the United States. And then when you look at net new assets over the trailing 12 months at around $60 billion. And as I get into it, I'll take you through how that number can be a little bit lumpy quarter-to-quarter, but we still feel good. We still feel really good about where we are and where we're headed with that number. So good growth numbers. And here in a little more detail how we've done in terms of assets under administration and growing that since 2018. A 10% -- 5-year CAGR of 10%. And you can see, as I said, right around $1.4 trillion. Fee-based accounts growing at a faster clip over that 5-year period. But what I've noticed more recently as fee-based assets have become more than 60% of total assets is those numbers are starting to grow more and more in lockstep where historically, as more of the brokerage relationships we're transitioning to fee-based and as we were recruiting advisers, who are more heavily fee-based, the fee-based assets were growing more quickly. That's now tending to grow at about the same rate. And you can see that's right around $800 billion in total across the organization. As we compare how we've grown assets in the 1-year, 3-year, 5-year, 10-year period, versus our peer group median. We've outperformed pretty materially in each one of those periods. So it's nice to see, but we tend to focus really on where we headed more so than where we've been and how do we continue this track record going forward. If you look at net new assets, actually I thought it was a little unfair of Kristie to start with a quarter that was an outlier in terms of growth relative to the average at around 7.5%. So can't we back it up another year and maybe show a little more normalized. So we have an outlier at the beginning at 13.7%. And then the most recent quarter, I would say, is also a bit of an outlier at 3.2%. But as we look at this, over a longer period of time, around 7.5% net new assets, which is clearly faster than what we've seen amongst many of our competitors in that peer group. And when you compare that to a number of financial advisers, growing at a much slower rate around 2%. And there are a number of factors here. One of those that Paul touched on is when advisers transition from our independent contractor division or our W-2 model, Raymond James and Associates or Alex. Brown and move into our custody business, their head count falls away. So probably the largest of our firms that's in the RCS model today is Stewart Partners, which many of you are probably familiar with. When Stewart transitioned from the independent contractor division or RJFS, over to RCS 160 advisers dropped out of the head count, but 100% of the assets stayed at Raymond James. So we've had a couple of those types of moves where the assets stay at the firm, but the adviser head count drops away. We also had in the fourth quarter this past year, fourth calendar quarter this past year, you may remember from our first quarter earnings release, a higher than historical normal or historical average number of advisers retire in that quarter. So a number of different factors here, but that's a number that we track, but it's not a number where we really have an objective to have a certain number of advisers by a certain year in the future. We really focus on asset growth more so than -- and quality of advisers more so than number of advisers, which I think we've really benefited from. When we look at net revenues, you can see 5-year compound annual growth going back again around 11%. More recently year-over-year, 9% interest rates playing a factor there, equity markets, interest rates, all factors in that number. And then when you look at pretax, you can see the benefit last year of interest spread and how dramatically that increased over that 5-year period at 25%. Most of that occurred in the last year or so. And then when you look at pretax this year at up about 1%, that's frankly ahead of where we thought we would be. And again, that's largely attributable to a couple of things. One, the interest spreads that have gotten smaller, gotten tighter versus where we were a year ago as well as some increases in expenses that I think we've talked about on earnings calls and Paul Shoukry is going to dig deeper on expenses in his comments. Paul mentioned our strategic growth initiatives. These have really not changed a whole lot. The one that is new is private wealth, that I'll dive into. But recruiting continues to be our primary focus in terms of growth when we think about growth. But as we're looking forward and thinking about the number of advisers in our business, and that number, if you look at FINRA records, that number has actually not increased over the last few years. It's been relatively flat to slightly down in terms of number of registered reps. We believe organic growth will become a more and more important contributor to our overall growth. So as we focus more on organic growth, which is really around helping advisers utilize the resources of the firm, the technology tools and other resources to broaden their offering to their clients, hopefully bring in new clients and be able to compete with those high net worth clients, which takes me to the private wealth space. A couple of years ago, we looked at our market share of overall wealth in the U.S., and we looked at our market share of higher net worth clients, and there was a pretty big delta between the 2. We were around 2.5% share of what I'm going to call mass affluent. And when we looked at the high net worth space, we were under 2%. So we thought that looks like an opportunity knowing that we have all the resources to support those high net worth client relationships, whether it's lending through the bank, the trust company, investment banking to assist business owners with liquidity events, interest rate swaps when appropriate for a client who is borrowing to help fund their business. That was more popular, as you can imagine, when interest rates were lower, but that will come back. So we have the full suite of tools, alternative investments, unique investment opportunities. We have all the tools for those high net worth clients. We've done a much better job of packaging those in the last year or 2 as well as putting together a formal educational program for advisers, who elect to participate in that program. We actually had a group of them here earlier this week in this classroom, and it has helped them with competence confidence in being able to compete for the business for those clients, who have more than $10 million in assets. And then finally, when we look at the RIA custody business, which has grown pretty materially, I'll show you that in detail in the coming pages. As Paul said, we identified that as an opportunity, not without some controversy inside the organization, how would it disrupt our existing core businesses in the private wealth space. Nevertheless, we felt like we needed to be in that business. We have the capability. We just needed to build out some of the capabilities in that space to really be competitive with some of the others. We're not trying to become Schwab or Fidelity or Pershing. We're trying to stay true to who we are as an organization, but be able to support those advisers, who choose to drop their FINRA registration and operate as a fee-only adviser and remain affiliated with Raymond James. So I'll go a little deeper on that. So when it comes to recruiting, one of the things that is still unique about Raymond James is we have and support multiple affiliation options. If you're interested, your primary interest is being a W-2 -- continuing as a W-2 adviser, operating in a more traditional branch setting, we have that. And we've expanded our branch locations. One of the changes I think that's occurred in Paul's tenure over the last 15 or so years is the number of locations where we have traditional Raymond James & Associates, Alex. Brown, offices around the U.S. We have many more of those today than we had 15 years ago, which creates more potential recruiting opportunities where we have an office, and we can bring somebody in to an existing office. Our independent contractor business, which also includes our Financial Institutions division that represents about 20% of our independent contractors. That business has continued to grow and it is attractive still to many advisers, who are in that traditional either national firm, wirehouse firm model and they'd like to move to a firm that has the full suite of resources of a full-service firm as we do. And that differentiates us again a little bit from some of the other competitors in that space. And the philosophy of how we operate that business. We're here to support you. You are our clients, your clients are yours. And we want to do everything we can to help you be as successful as possible. The RIA custody business, as I mentioned, that's another way for advisers to affiliate with us. However, it is different, because they're running their own business and they have responsibilities that are different versus the other 2 models where we still have a FINRA supervisory responsibility for them and for their clients. So I'll go into each of those. Now the good news is, as we look at the growth of each one of those models over the last 5 years, each one of them is growing. Now if you look at that RIA custody business, the RCS, as we call it, that's growing the fastest, but it's also on a percentage basis, but it's also the lowest base. When we look at that in terms of dollars, absolute dollars, it's not the fastest growing. But percentage-wise, it is now at about $160 billion out of that total of $1.4 trillion. And our expectation is, going forward, will probably -- its growth on a percentage basis will continue to outpace the others. But when we look at absolute dollars, expectation is they will all continue to grow. But on a percentage basis, it's harder when you're at roughly $500 billion or $600 billion to grow at the same rate as a business that's at $160 billion. Adviser recruiting. We've really, I would say, increased our focus on this. You probably saw the announcement that we made last year that Jodi Perry, who was the head of Raymond James Financial Services was going to step into the role as Head of National Recruiting domestically for Raymond James, and she's already made a significant difference in that space for us. And having all the recruiters, who were previously focused exclusively on the independent contractor division, and now they're working more collaboratively with the Raymond James & Associates, branch managers and the other people who are involved with recruiting and thinking about doing that without bias, and helping advisers get to the right affiliation option depending on what their interest is. And we've really strengthened our relationships with external recruiters, our internal cold callers are also -- they've really upped their game in terms of referrals. So our expectation is that with that stronger pipeline of prospective advisers, that our overall recruiting results will continue to grow. And what we've seen this year, Paul referenced it a little bit this year in terms of advisers, who have already joined Raymond James and those who are committed, we're well ahead of where we were last year at the same time. So I think that bodes well for us going forward. That recruiting process, the recruiting process is fairly standard, but customized for each team or each adviser. And typically, that includes a visit here to Raymond James to really get a feel for who are the people who are going to be supporting you and what are our capabilities, we customize those. We don't bring people into a room like this, and it's one-size-fits-all. It's customized depending on what your interest is in terms of how you run your business. And ultimately, once someone does join us, there's a commitment. And then ultimately, when they do join us, it does take a little bit of time for them to transition their client assets over and that process repeats over and over again. I will say it's easier if you're already independent and you join us on the independent side, because you don't move your office. The clients are used to walking into the same location and meeting with you, it's really a change of where your account is custodied. So it does still take some time. It's a bigger change when you transition from a large national firm and a W-2 model or a wirehouse firm and come over Raymond James & Associates, because the brand is different, the office is different and it just takes a little bit more time. But ultimately, we've seen a high level of success as we look back and we track these the success of advisers transitioning over to us. And usually after 18 months, they've transitioned at least 100% of their assets that they had prior to joining us over to Raymond James. When we talk about organic growth, there are really only 2 ways, and this is a slide that, frankly, I've used with advisers. There are only 2 ways you can grow. Organically and not spend more money if you're an adviser. The first, leverage the technology and resources of the firm. And then the second is expand your value proposition. If there are areas of the firm that you're not utilizing we want to make sure that you are aware of how to utilize the trust company, how to utilize the bank. And what we've seen, the fastest growers, the top 1/3 of the growers perhaps no surprise, they are the best at leveraging the entire resources of the firm. Those who are in that bottom third or growing the slowest, those folks are much more narrow in their focus. And we have a number of measures or a number of variables, and this has been part of my presentation that I've shared with advisers this year about if you really want to grow and you don't want to spend more money and add to your staff, you really need to think about expanding your value proposition and tapping into different parts of that client relationship that you have that you haven't tapped into previously. And frankly, it leads to a higher level of client satisfaction, which leads to more referrals from them to your business. Private wealth is a very busy slide. But in essence, we have now had 200 advisers go through this program with a target by the end of next year of having over 400 advisers go through this program. And if you were to talk to any of the advisers who've gone through the program, they would tell you, it's not easy. It's not sitting in a classroom and just listening and checking a box and saying, okay, I went through the program. There's a lot of case study. And at the end of it, there is a real test. There's a real exam. It is in person and it's a hypothetical client situation where you're sitting across from a client, and you are graded. And the most recent class, we actually failed 3 advisers. And you have to prepare. But at the end of it, you are allowed to hold yourself out as a private wealth adviser at Raymond James. And it does also, if you want to become a certified private wealth adviser through the industry designation, it sets you up very well for that. So we now have a waiting list of advisers trying to get into this program based on the feedback from the advisers who've already gone through it. So what we've seen, these advisers who've gone through the program are now leveraging the entire firm's resources at a much higher level than they did before they went through the program. So benefits for the advisers, and I think as well, ultimately, benefits for the organization as we're in a much better position to service those high net worth clients. All right. Shifting gears to the last growth area, which is RCS or our RIA custody business. You can see the growth here, 24% compound annual growth over the last 5 years. Roughly half of that, I expect this question was going to come up. Roughly half of that has come from internal transfers from either the independent contractor division or Raymond James & Associates. And the other half has come from recruited advisers, who have elected to custody client assets with us, move from where ever they are now and move those assets over to Raymond James. No surprise, probably 84%, 85% of those assets are fee-based. We also have a very small number of correspondent third-party broker-dealer relationships. And as I shared with Kristie kind of reminded as we were talking about this, we have exited 45, almost 50 relationships over the last 3 years. We hired Greg Bruce to run this business. He's a 20-year Schwab veteran. We brought them in to run this business about 5 years ago. And we wanted to be -- we wanted to focus on quality firms and firms that we had a high level of confidence if something went wrong that they have the financial wherewithal to take care of whatever that was, even if it was a large trade error. And we had a number of relationships that we just didn't think strategically fit. And so we asked them to go find a new home. And if we look back over the last 3 years, that is roughly 50 relationships, including RIAs and including some small broker-dealers. So we really like our position now. If we look at average assets per RIA firm, we're right around $400 million, which is much higher than some of the other competitors in the custody space. And from my perspective, again, it's a different value proposition if you elect to do business with Raymond James versus some of the other custody options that are out there. So this is a little basic, I think, but for those of you who are not clear on what are the differences here, as I mentioned already, the adviser count -- however, many advisers are affiliated with those RCS client firms, they are not in our headcount. They drop out of the head count. There is no production revenue that's recorded. That is their production. It's not Raymond James. And therefore, there's no payout expense associated with it, because the production is not running through Raymond James. Now where do we make money? You can see the list of numbers here, but it comes from our cash sweep. It comes from mutual fund revenue sharing, networking fees, omnibus fees, lending, asset management, all those together create revenue for that business. And in transitions when we recruit teams to come over, there is not upfront money paid. If there is any money paid, it's on the back end. And it's a very small number. It's a basis points of assets. And honestly, a number of the RIA firms would rather not receive transition assistance money. They don't want to disclose it in their ADV, and they don't want to have a conflict of interest that they have to discuss with their clients about why did they make the move. They're making the move because they think it's good for their business and good for their clients. These firms are responsible for compliance, technology, cyber security. They have to have their own programs. And because the majority -- a vast majority of our firms are $100 million plus. Most of them are regulated by the SEC rather than their state wherever their business resides. So they have to have all these programs in place. And when the SEC comes knocking on the door and doesn't exam, you better make sure that you demonstrate that you can have all these things. Now we still have cybersecurity responsibility to a certain extent. We still have anti-money laundering responsibility to a certain extent as do the other firms in the custody space. So it's a lighter touch from a supervision standpoint, because we don't have that same final responsibility that we do in the other businesses. A few years ago, our senior leadership team, I think I shared this with you before. We put a stake in the ground and we said, okay, it's taken Raymond James almost 60 years to get to $1 trillion in assets let's see if over the next 10, we can exceed $2 trillion in assets by leveraging the total firm's resources to help advisers deliver the best client experience possible for their clients and continue to manage their businesses the way they want to, leveraging the full suite of resources and the great service that you get at Raymond James. So we put that stake in the ground, and we continue to stay focused on that. And I'm optimistic that we'll exceed that $2 trillion before we get to 2030, but we'll see. As Paul wrapped up with the focus on culture of the organization, I like to do the same and remind people what truly differentiates us as an organization is how we operate, the caring philosophy, putting clients' interest first, treating advisers as our clients, staying focused on the long term rather than what's next quarter, what's next year, but truly believing that what we do today and how well we execute today will benefit us 3 years, 4 years, 5 years from now, creating that environment that advisers don't want to leave. And so far, we've had great success doing that. And this culture or these proof points of our culture to me are the things that all of us have to make sure at a senior leadership level and mid-level management level within the organization that we stay true to this, and I'm highly confident that we will. We talk about it just about every day. So with that, why don't I stop, pause, and we'll take questions. Lots of questions.

Devin Ryan, Citizen JMP. Scott, thanks for the presentation. Just a quick one on the RIA solution. So I heard you say you don't want to be some of the largest firms that you mentioned in the market. And so I guess I'm curious why because you're seeing -- obviously, there is some internal migration, but you're seeing really good external growth. And it would seem like you have a differentiated solution in the market. There is really good secular growth into this market. So why not fully lean in and maybe exploit the opportunity that Raymond James has?

Yes. Great question, Devin. Nice to see you again, and thank you for that. I would say where we compete the best is for an adviser, who is either independent with another independent broker-dealer operating a business or for a traditional W-2 adviser in one of the large national firms or in one of the wirehouse firms. When those teams when those advisers are interested in dropping their FINRA registration and becoming fee only, they're used to an environment where they have a full integrated suite of solutions and technology tools, which is what we have available at Raymond James. So you don't have to go put together the different components that what I call middleware to connect a number of different technology applications to manage your business. And so when we recruit advisers over, to custody with us, those are the advisers who tend to have the most interest rather than someone who is already custodying their assets with one of the large custodian, Schwab, Pershing, Fidelity, saying, okay, we're going to take $200 million and move it over to Raymond James. That's unlikely. What's more likely in that sort of a scenario is that they establish a multicustody relationship and decide that there are certain features, certain products available at Raymond James, resources, capabilities that maybe they don't have through their existing custodian. And for that reason, they elect to open a custodial relationship with us. So we want to continue to leverage the capabilities and the resources of the firm and have a differentiated offering versus what you would find if you go to a Pershing, a Schwab or a Fidelity for custodial services. If we try to be like them, given their scale, given their size, that's going to be tough to compete. So it's a different value proposition.

Kyle Voigt, KBW. So Paul spoke earlier about the complexity of operating an RIA channel alongside the employee and independent contractor models as well. Can you just talk about how the RIA custody business is positioned to your existing advisers from a visibility perspective? And whether Raymond James is agnostic as to whether those advisers move into that RIA channel or not from a business and economic perspective?

Thank you, Kyle. Another great question. And I would say on the last question of does Raymond James care, it depends on your perspective. If you're -- and I say that seriously as well, if you're a branch manager in Raymond James & Associates managing a branch with 20 financial advisers, and there's a team that says, "Hey, we think we're -- we love Raymond James. We want to stay affiliated with the firm, want to drop our FINRA registrations. We're 90-plus percent fee-based, we want to open an RIA", if you're the branch manager, that's a tough message to receive. But at a firm level, if that's their interest and they're committed to staying in keeping their client relationships at Raymond James, we welcome that conversation. To walk them through what are the differences. Same is true if you're an existing independent adviser. We'll walk you through what the differences are, not just financially, but also what are the additional liabilities you're going to take on in going down that path. And some decide to continue down that path and others say, "That's not for me. I don't want to become the CEO of my business and the employees are now my employees rather than the firm's employees, the benefit plans, the real estate and on and on. I'm not ready to take that on." So advisers are certainly aware. We don't try to hide it. It's out in the open, if an adviser asks to have a pro forma run and really understand what are the questions that I need to answer as we've gone down that path with hundreds of advisers over the last few years, the majority of them elect to stay where they are or perhaps some of those will say, okay, I don't want to go all the way there now. Maybe I'll transition to the independent contractor division down the road, maybe my successors, if they want to go down the path of dropping that FINRA registration and going fully RIA, I'll let them decide that. But for me, I don't think that makes sense. But the most advisers who transition, if it's from another firm -- industry statistics that are borne out year after year, if you're an employee adviser W-2, for those who transition, roughly 2/3 of those who transition, transition to another W-2 model, they go to another firm. And roughly 30%, 35% will make that move toward independents. I don't know what the subset is now that are transitioning to fully RIA. But my guess is it's a smaller percentage, it's the smaller percentage of 35%, maybe 25% go independent and maybe 10% or less actually dropped their FINRA registration and go fully RIA.

Steve Chubak, Wolfe Research. I did want to ask on the competitive landscape -- some evidence of more aggressive behavior from some of your industry peers, whether it's upfront or just higher TA packages. I was hoping you could just speak to what you're seeing across the industry. How you're responding and how it informs at least your expectation around the sustainability of that 7% to 8% organic growth rate?

Yes. Another great question, Steven. And thank you. We absolutely have seen higher deals out there for advisers, who choose to transition or thinking about transitioning. And whether you're an employee adviser, making a move to another employee firm or you're an independent or your employee moving to independent, certain of our competitors have really increased what they're willing to pay. Having said that, while we have increased our deals to be competitive, if you look at and we look at industry studies, [ McGougan ], in particular, we remain well below where a number of our competitors are. And so the value of that culture that I talked about, the value of the full suite of resources and capabilities of a full-service firm, there's value in that. And advisers recognize that. And so it's not just about the money. Money is clearly an important factor. But we've remained competitive. And even though our deals are higher than they used to be, as Paul indicated and as I'm well aware, we will have a very good recruiting year this year, where it has become a little more challenging in certain instances for advisers who perhaps don't have a succession plan, and they're thinking about if I retire in the next few years, is that something I want to do at Raymond James or do I want to go external and maybe maximize the value of my business by going externally. And we have seen a little bit of that. Thankfully, it's still very small, but we've seen a little bit of that in particularly in cases where advisers don't have a succession plan. So the economics, the PE-backed firms in particular as well as some of our other firms as that number of advisers is flat or slightly down, that trend. There's more competition for those advisers, who are moving, and thankfully, we're still winning our fair share.

Mike Cyprys of Morgan Stanley. Maybe just sticking with recruiting. I was hoping maybe you could unpack some of the recruiting trends across the 3 channels, the independent contractor employee and RIA, any figures you're able to share with us? And then if you could elaborate on the pipeline as you see it here looking forward?

Yes. I -- when it comes to recruiting, and you've probably heard Paul and Paul talk about this in the most recent earnings call, the advisers, the teams we're talking to now are bigger than I can remember in our history. We had a $20-plus million team join our independent business last year. We had a $20-plus million team joined Raymond James & Associates the year before. And I can think back 10 years ago, if we were in conversation with a $5 million team, we probably all would have stopped what we were doing and focus on helping get the $5 million team over. So we are having success with these very large teams. Most of those teams are probably no surprise associated with the wirehouse large national firms. They have the largest number of advisers, and they have the largest number of high-quality, large teams. And in some of those organizations, there's a level of frustration that has just built up over time, and they're at, I would say, beyond the tipping point. where they want to go back to what they remember if they've been at their firm a long time from a culture responsiveness of a manager, responsiveness of their firm, respect for their business, how they run their business, their clients are theirs. They're not the firms. And that's what we represent. And so for many of those, who were in conversation with and who have spoken to their friends, who have already left and joined Raymond James, it puts us in a really, really good position. So I would say it's that -- at what point, when do you reach that tipping point where you say I've had enough, and I had a meeting this morning with a very large team at a competitor and they're at the point where they're really seriously thinking about making a move, and they've been with their firm for many years. Really high-quality team. And they're interested in going deeper and exploring what we have to offer, because their focus is really more high net worth clients, and they're feeling like the firm where they are today is lacking what they need to service their clients. So hopefully, that's helpful.

Okay. We'll do one more question and then...

And I'll be around at lunch if people have questions.

Yes, this will hopefully be quick. So Paul referenced some super-OSJ issues that are upcoming. Can you maybe help size that or how should we be thinking about the coming quarters and the impact from those issues? And also kind of underlying what's going on there?

Yes. Well, as Paul mentioned, there are some relationships with super-OSJ where economically as well as I would just say, business philosophy-wise, philosophically, it made better sense for them to move to the RCS channel or in a couple of cases, exit altogether. But I feel really good about the number of advisers who we will retain. So without knowing how many of those advisers will elect to directly affiliate with Raymond James when the super-OSJ moves to the new model. It's hard for me to really size what is that going to look like in the coming quarters. . And so I would say stay tuned. And the timing is a little bit hard to predict as well, especially on some of these relationships where they're large enough with a number -- enough advisers moving to another organization gets a little more complex and takes a little bit more time. So I'd love to give you a specific answer, but it's hard for me to really put my finger on exactly what that's going to look like in the coming quarters.

Okay. That's all the time we have. Thank you, Scott.

All right. Thank you, Kristie.

All right. Next up, please help me welcome Horace Carter. Horace serves as our President of our Fixed Income business, and he joined Raymond James in 2012 as the Head of Fixed Income trading along with our acquisition of Morgan Keegan. Horace?

Thank you, Kristie. And good morning, all. I'll try to go through this pretty quickly to make sure we got some time at the end for questions. So here's our vision statement. I'd showed this to a colleague of mine, and he said, yes, okay. But it's kind of a bland, right? I mean it could be the mission statement for or a doctor's office or something. And I thought about it, and I was like, well, it is kind of bland. Thought about it more and who we are talking about buying and selling bonds here. It's not like we're SpaceX or something. So bland it is. All right. Well, let's go back to this. What do we mean by this to start off with. The universe of fixed income clients, issuers or investors, range from multibillion-dollar issuers to the smallest municipalities, fast money hedge funds to individuals. And they all require or have preferences for the level of service that they get. And our goal is to cater to those preferences as effectively and efficiently as possible. And so how do we do that? It starts with distribution. Distribution is the -- it's the engine that drives our business, our ability to source and place bonds between a lot of different counterparties is certainly, among the best and effectively, the business revolves around that capability. If you want to service diverse -- a large diverse customer base, you need to have expertise in a lot of different product areas. Our business lines include all of the major fixed income asset classes. It also results in a lot of diversified revenue streams, because different bonds are driven by different market forces. And it gives the franchise a good bit of durability in different macroeconomic environments. It also inherently reduces our risk for obvious reasons. Our discipline around risk is very good. We're pretty conservative when it comes to deploying the balance sheet. And that focus on distribution requires us to recycle risk very quickly. So we do have strict aging limits that ensure that if we own something, we're able to place it within a reasonable time frame. And having a flexible service offering is essential if you want to address all these different needs. So we have clients that don't want anything from us except the price fast. And we have clients that require a lot of handholding very high service level and everything in between. And so we seek to and are effective at addressing the clients' preferences on their terms. Okay. This gives you a sense of how we think about the business from a big picture standpoint. These are the 3 segments that roll up into fixed income. Fixed income capital markets, I think traditional middle markets, bond dealer sales and trading dealing with institutional clients alongside the Fixed Income service platform for our Private Client Group, which is obviously substantial. SumRidge Partners, most recent addition, I think of them as a technology enhanced market maker in credit. And then public finance, obviously, investment banking for state and local governments and municipal authorities. I'll just give you an idea of the scale of the business and my comment that I will make on it is because of those diversified revenue streams, and the highly variable cost structure in years like 2023 with the strong headwinds that we were facing, which I don't want to see again, we're still able to come out marginally profitable. So we'll go through each segment here briefly. You get an idea of Fixed Income capital or if you get an idea of the size, size of the business, good-sized operation. The key drivers slope of the yield curve in a positively sloped yield curve, that's a positive environment for most of our clients. A couple of reasons for that. Depository institutions, borrow short and lend long, so the carry trade works in that environment and investors tend to buy further out the curve in the steep yield curve where the margins are greater. Obviously, liquidity in the financial system is important for our clients, have more money. They're more likely to invest. I would point to 2021 as a good example of that. And what we mean by the prevailing market sentiment is that in this, most of our clients in this segment are not what you would think of as flow trading. They're investors, and they're more likely to act if they have confidence in the value proposition in the market or they're comfortable with the level of rates. So in 2023, for example, many of our clients were inactive just due to uncertainty. In terms of the client concentration, I would highlight the depository institution base at 42%. In 2021, that was 67%. And so you can see the difference in the revenue there. We seek to not be as reliant on that client base as we had been, which is one of the reasons that we pursued SumRidge partners and their ability to address nondepository clients. And as far as the product sector goes, a few years ago, the combination of mortgage-backed securities and municipal securities would have comprised well over 50% of that graph. So we have diversified into obviously some different products here. And this graph, I think, illustrates why we think of this business not as a business but more as a collection of businesses. SumRidge Partners joined us in 2022, that was very good timing. If you look at the key drivers, you can understand why I would say that. So at a time when at a time when our traditional business was slowing substantially, the SumRidge business picked up substantially, and it created a nice offset for us. About 3,100 trades a day, that's with 12 traders. So you get an idea of how they're leveraging technology. And in terms of the percentage of positive trading days, that graph there, included that, because this is one of the key selling points and why SumRidge is such a good partner, obviously, that level of engagement with the market with that level of performance and consistency is obviously impressive. Public finance, top 10 underwriter right now. We're -- year-to-date, we're #6, $10.2 billion senior negotiated. The key drivers are pretty obvious. Talking a little bit about recruiting. We've recruited 30 bankers in the last 2 years. And I get asked the question a lot, why? What is it other than the people that are actually out, the efforts of the people actually doing the recruiting, what is -- what makes Raymond James such an attractive destination? And there are a few things. I think one is the core values that Paul covered earlier, that resonates with a lot of people. The other is the access to senior management, particularly people at big firms seemed to like that. But the main one, I think, is our ability to execute at a high level on any deal. We intend to place bonds with more clients than our competitors in the space. And I believe that, that capacity -- that ability just gives us a competitive advantage that is attractive. Okay. So to wrap it up, we'll look towards the future here. These are a few of the things that we think are going to help us continue to grow. SumRidge integration, I've talked a lot about them as we continue to incorporate that business into our traditional business. The focus is on getting it right as opposed to getting it done quickly. But as we continue to progress down that road, we should see a good deal, more penetration into our non-depository client base, which I believe is a very large untapped opportunity. In terms of expanding the service offering, in case I haven't driven the point home, we're trying to deliver services on a customized basis. As the industry evolves, those needs are going to change. And so we're constantly evaluating what our clients' needs are, what they're going to be and what our capacity to address them might be. Public finance recruiting. We've been doing it. We're going to continue to do it. There have been some high-profile exits in the industry lately. We've -- as the ground shifts, that's created some opportunity for us. I think that, that may continue. We have expanded into new geographies. We're in Pennsylvania now, Arizona, Minnesota, new specialty practices, debt restructure, K through 12 practice has been enhanced strongly. We want to continue to build that out, because this business is important to us beyond its own domain. It's important to our fixed income clients. It's important to our private client group. And so we're committed to it, and we'll continue to see it grow. In terms of technology, there are a lot of technology initiatives out there. I'll highlight 2 of them. Once again, the SumRidge platform, the technology suite at SumRidge is very sophisticated. And we see application for it across the entire platform. Once again, like the broader integration, we're going to prioritize execution as opposed to speed. But in certain areas, it could be transformational. And then finally, eFolio, eFolio is our web-based client-facing portfolio management system. It is -- it has been -- it has for many years been the best tool of its kind in the industry. And we're going to continue to invest in that application to maintain that competitive advantage. And with that, I got through it pretty quickly, so we do have some time for questions.

Michael Cho of JPMorgan. I'm just kind of curious what your -- you talked to the depositories being large segment, even bigger a few years ago, maybe '23 was a little bit more depressed than usual despite the addition of SumRidge. But I'm just curious what you're seeing and what you're hearing from them today in terms of types of volume and transaction activity? And as you see potential normalization in the yield curve ahead, how you think they're repositioning for that, how you think that might impact volumes and how you see kind of that path forward?

Yes. That's a good question. We're obviously paying close attention to that. The first thing I would say is that liquidity seems to be stabilizing as the as depository institutions, banks and credit unions have repriced their loans. Loan demand has gone down. So there's less concern about that. But I would say that they fall roughly into 3 buckets. The first are the ones that have decided to sort of -- this is mostly the publicly traded banks decided to take some action on restructuring the balance sheet, and we get back in business. It's our observation that those that have taken action are outperforming those that have not. The other segment is those that are still there's still -- they're still caught in that level of uncertainty that we're -- they're reluctant to move. And the third of those who are in the middle of evaluating what those next steps may be. I'm pretty optimistic in the intermediate term about the volumes in that space. We are seeing a pickup in some of the asset classes that are more favored by those clients, mortgage-backed securities, the whole loan trading. Those businesses are picking up a little bit. But it's not yet a trend. It's kind of -- it's lumpy. We have some clients acting some not. But as the -- I think that -- through the end of the year, we will continue to see it improve as more and more of our clients gain confidence about the state of their balance sheet and what the market is going to offer.

Mike Cyprys, Morgan Stanley. Maybe just coming back to the mix of the business, you've had tremendous success diversifying the business, depositories down to 42% from meaningfully higher just a number of years ago. I guess as you look out over the next 5 years, how do you see that mix evolving? Where -- which client sets do you want to continue to expand? Maybe any sort of views on corporates more broadly and just how you see the mix evolving from here?

So we do want to -- we do want to focus more on nondepositories. Our next effort is going to be insurance companies. We think that we've got a good offering there. One of the keys to developing a bigger service offering for different types of clients is going to be cooperation with our colleagues on the equity side in an investment banking, which has already begun and has started to bear fruit. So I would like to see a much more evenly balanced client concentration between insurance companies, asset managers and depositories. Those will be the focus. We -- but as I'd say, we want them all. We want all the clients, and we think that we can address whatever their needs are. But those are going to be the -- that will be the focus in terms of growth going forward for the near term.

Okay. Thank you Horace. All right. So that does bring us to our break. We will break for just about a 15-minute time. So for those of you on the webcast, we will return at about 10:45 or so, maybe a few minutes after. Thank you. [Break]

All right. Thank you, everyone. We're going to go ahead and get started so we can hopefully stay on time here. All right. Well, thank you. Our next presenter -- the next session will end with 2 more presenters. And the next one is Steve Raney. Steve is Chair and CEO of Raymond James Bank and also serves as Chair of Raymond James Trust. He joined the firm in 2006 as CEO. Please welcome, Steve Raney.

Appreciate it. Good morning, everybody, and thanks again for your interest and continued support for Raymond James. I appreciate a few minutes this morning. Yes. Just a quick snapshot of the banking segment now. Of the roughly $80 billion of client -- of assets on the Raymond James Financial balance sheet. A little over $60 billion of those assets are sitting inside of the 2 banks, Raymond James Bank and TriState Capital Bank. So we're approaching the 2-year anniversary of TriState becoming part of the Raymond James family. So roughly, at the end of March, $42 billion of those assets were at RJ Bank and roughly $19 billion were at TriState Capital Bank. So we continue to benefit tremendously from this very stable and low-cost funding through our Private Client Group, roughly 1.5 million households, all of who have accounts and virtually every account has some -- at least some small element of cash that's sitting there awaiting investment. And for a couple of decades now, we've been moving some of those deposits over to RJ Bank to fund ourselves and now TriState actually received some of those low-cost funding as well. So continue to have very strong capital embedded in the banks. I know Paul Shoukry will update you on some of our capital targets later, but we continue to make sure that we've got really very strong capital ratios inside of our banking institution. So a big part of our strategic focus is continued penetration inside of the client base inside of Raymond James. Our financial advisers. That's become a much more integrated part of Raymond James Bank's approach, both approaching our retail investors as well as many institutional clients. So a lot of our business is really predicated on supporting those businesses. And then even the TriState combination, there are certain things that we're starting to do, leveraging their very strong deposit gathering and treasury management offering that Raymond James did not have. That was really a very attractive part of the TriState combination. Now going back a couple of years that we're just now starting to leverage and seeing how we could put that in place for the clients inside of the Raymond James franchise. A very diverse loan portfolio, over $44 billion in loans at the 2 banks. I know that we've talked about this before, it continues to be a strategic focus of how we can grow our securities-based lines of credit, both at Raymond James Bank as well as the effort at TriState Capital. We've got a long track record at both banks really of having very conservative credit standards, very low level of problem loans and charge-offs historically. That's really paramount in terms of how we steward the capital at RJ Bank. We'll talk about our net interest margin, what we've seen historically in trends what we're looking at right now and maybe give you a little bit of a look at what we think is going to happen going forward. And I mentioned strong credit quality, very low level of nonperforming assets as we sit here today. Big part of the financial performance of the overall Raymond James organization is embedded in the 2 banks now rapid revenue growth over the years. You see this most recent history reduction, and that's a reflection of the reduced net interest margin in the current interest rate environment that we're in and that's driving a lower level of pretax income over the last short period of time. I would remind everybody part of the way how we reflect the financials in the bank segment is for the deposits that we're moving from our sweep and our client sweeps, we actually pay back to the Private Client Group. So it's one pocket or the other, but the bank financials all reflective of an internal transfer charge so that the Private Client Group is in effect made whole relative to what the third-party banks are paying for those deposits. And then a long history of growth and many of you, Devin and I were talking how long he's been following us, been with us a long, long time. Raymond James Bank, in particular, I think, has shown quite a bit of flexibility. We've had periods of time when we've grown loans much more rapidly and then there have been periods when we've actually reduced loans based on economic factors, the COVID period, clearly, when we're in a relatively challenging environment just right now in terms of just sheer loan demand, we're okay playing the long game. We're not going to push and look for riskier assets just to grow loans. So it's been a little bit of a muted loan growth story in the last year or so. Talking -- looking at our net interest margin, I was referring that to that earlier in terms of the rate environment we're in. This last quarter, it was 2.66% for the two banks on a combined basis. We're actually starting to see a little bit of lift in the NIM. That's reflective of some of our lower-yielding assets in the form of some of our securities as well as some of our legacy residential mortgage loans to our clients as they're making repayments and we're getting some reductions and those balances, those assets are going into higher-yielding assets. So that's seen having some small positive impact on our NIM going forward. Yes. Just a quick snapshot and an update on our deposit funding. You can see here kind of a chart of how the 2 banks are funded. Right now, we have about $42 billion plus of RJ Sweep Program, cash. And here's a snapshot of where we have those deposits deployed. RJ Bank has to not about $20 billion of that $42 billion. TriState Capital Bank has roughly $17 billion -- I'm sorry, about $3 billion of the sweep cash. And then the third-party banks have a little over $17 billion, and there's about 33 banks that are in that program right now that are receiving that $17 billion. That in effect is liquidity and funding that we could move over to RJ Bank and TriState Capital Bank to fund our assets. We just really like having that cushion that's there a contingent funding, if you will, at that third-party bank program. I think that's a very safe way for us to run the institution and having that level of liquidity at the third-party banks. The client interest program roughly has about $1.6 billion or $1.7 billion in it. And in effect, that is -- those are deposits that are over the $3 million of FDIC insurance that we offer through the Raymond James Bank deposit program, with that $1.7 billion, we're funding some of our margin debits with it. So it's a very low cost of funds to fund those margin loans in the broker-dealer. And then the other bank segment for deposits, that's become a bigger part of the equation. I know everybody is aware that March, a year ago, we launched a new, what we call enhanced savings program at RJ Bank that now has $14.2 billion in it. That's all client cash, roughly 28,000 accounts. 25% of those accounts are brand-new relationships to Raymond James Bank. So our advisers were able to take this new account offering and actually introduced Raymond James that will -- that are new clients of the firm and now we're doing other things with them and hopefully getting all of their investment business as well. I mentioned the TriState combination. One of the things I'm not sure we knew how quickly we are going to need to deploy it, but their deposit gathering apparatus is really impressive. And they've got roughly $14.5 billion of deposits that are inside of their system that are not in side of Raymond James in the form of a national deposit -- national account deposit gathering apparatus as well as treasury management offering that has a lower cost of funds. That treasury management offering, a lot of it is to borrowing clients of their commercial banking business. So that's a business that we want to continue to leverage inside of the Raymond James franchise as well as they continue to grow inside of their client base also. Yes, just a quick update. We talked about the asset diversification, $61 billion in assets, $44 billion in loans across a pretty broad spectrum of categories, securities-based loans, which is -- this is on a combined basis of RJ Bank and TriState is the biggest asset class that's been growing the most rapidly. We want to continue to focus on that asset class. I would mention embedded in that SBL balance at 33% inside of TriState, I think everybody is aware that they do business with a lot of institutions, the custody firms, many of which do not have a bank and have access to their own proprietary banks. So they're doing this on a third-party basis for their clients. We've not lost any of their clients. It's been -- they've actually added to the custody firms they're doing business with. And then they also have a cash value of life insurance premium finance business that they have, where they're offering this to a couple of select mutual, highly rated insurance companies to their clients. Their clients that want to maybe finance their premiums can do that through TriState Capital Bank, which is a great asset class. It tends to be a little bit higher yielding also than our traditional securities-based lines of credit where we're secured with, marketable security stocks and bonds and mutual funds. The C&I portfolio, 23% of total loans is a combination of Raymond James Bank, more syndicated financing. TriStates is more of a middle-market traditional C&I business in their geographies, and their commercial real estate portfolio is similarly situated to middle market real estate investors and developers, while RJ Banks is primarily focused on larger institutional syndicated opportunities. Although we've done -- one of the things that we have done, we're doing a little bit more direct business with our ultra high net worth and high note worth clients inside of Raymond James, where the adviser will refer their client to us, and we can do that loan on a direct basis. We have a big -- a relatively decent REIT business that's almost exclusively tied to our investment banking practice in real estate investment banking. Residential loans are predominantly loans to clients of Raymond James. These nearly 8,000 advisers in the U.S. refer their mortgage loans to us, and we typically are portfolioing 5 and 7/1 adjustable rate loan, jumbo mortgage to our wealthy clients. The tax-exempt loans is almost exclusively attached to Horace's Public Finance business. So our public finance bankers that are representing various municipalities and nonprofits, higher ed, hospital organizations. They are debating between doing a bond or a bank loan and we can solve that solution for them and wrap that client up. So that's been a great business for us now for 10-plus years. Yes. Just the growth rate over the last period or so. I know we've been focused on the SBL business. I want to continue to do that. That's been in this higher rate environment. We've seen -- that growth rate has been a little bit slower, but we're actually starting to see some traction now at both Raymond James Bank and TriState Capital Bank. This quarter, we're starting to see some advances on lines of credit, and we're attributing that a lot to the tax season in April, we see tax payments being -- SBLs being used for tax payments. But also Raymond James Bank, we had a little bit of a promotion for a couple of months that produced quite a bit of new volume in the February, March time frame and some of those new loans that are on our books now clients are starting to borrow. So that's a great asset class. We want to continue to focus on that. And needless to say, one of the big things that the securities base lines when we're seeing the balances is a result of new advisers joining Raymond James or in the case of TriState Capital Bank, new advisers joining the custody firms that they're doing business with. So as advisers are moving, they're moving their loans as well. So we have -- both banks have like a full apparatus to help those transitioning advisers move their loans as well. I know there's been a lot of focus on real estate, rightly so. Just as a reminder to everybody, the real estate portion of the 2 banks' balance sheets is relatively small. You see here the total portfolio of real estate in $9.2 billion and in particular, $1.5 billion of that is in office loans. I know that's been the asset class that's probably gotten the most attention. Both banks are actively working on the maturities that are going out through, let's say, at least through 2025 and even further to really proactively get in front of any maturities and trying to deal with any issues where what's happening in any of these loans, there's needing to be some equity that's being brought to the table. They're having to rightsize the loan based on today's values and cap rates. We're feeling pretty optimistic about it. We clearly have a few troubled loans that we're going to just need to work our way through, but we feel very good about the team that we've got. And if a loan is more troubled, we have a special assets apparatus in both banks that can deal effectively with trying to exit that loan and reduce our exposures as quickly as we can. Just a few comments on credit trends. I know we've got -- once again, both banks have this long history of really relatively strong credit performance, the low level of criticized loans currently high level of allowance to problem loans as well our nonperformers are a very manageable level. And I would say Raymond James is very proactive in downgrading loans and adding provision and adding allowance to -- for any future losses. So that's something that we've been particularly working on the last year or so. And you see these periods even like back in 2020 during the COVID period, we added a lot of provision during that period. We had loans that were greatly impacted by the pandemic. And so I just I think our team has been very stable and strong in terms of dealing with any credit issues and getting out in front of it. Just wanted to touch on the fact that we have a limited level of duration on the combined bank's balance sheet. And that duration really is residing in a couple of places in our securities portfolios of the 2 banks, the securities portfolio as a percentage of total assets is getting smaller and shrinking. Our residential portfolio, once again, these loans to clients is relatively short relative to mortgages, we're not doing 30-year mortgage loans on our books. We're typically doing these ARM loans. And then the -- I mentioned the public finance related tax-exempt loans has a little bit longer duration, but that's about $1.3 billion. That's usually about a 6- or 7-year fixed rate that we're -- that's embedded in here. So I would also mention, we've added actually some duration to the liabilities as well as our deposit mix has changed. We have a higher level of CDs, higher level of term deposits at both banks. So we feel like we've got very effective management of our duration, and we'll continue to watch this super closely. Just wanted to focus on what the priorities are going to be going forward, continued strong focus on things we can do inside of our private client group households, growing our securities-based lending business as well as residential mortgages. And once again, the TriState team has done a great job of growing their SBL business as well. Really maintaining our -- and continuing to maintain our conservative credit culture and a very active problem asset management as well. And we're going to continue to selectively grow our combined corporate and commercial real estate loan portfolio at both banks. So the growth rates of that asset class is going to be lower than our more private banking-oriented loans, but we do want to be in a position to grow those assets when the opportunities present themselves. And I would mention one thing in particular, you may have seen last week, we announced a new private credit effort that we're doing on a joint venture basis with a company called Eldridge, who's going to be our new partner, and we set this up as a way to really improve our opportunities inside of our investment banking M&A practice across several different industry verticals. These are going to be deals that are going to be typically riskier than what would suit our credit profile, hence, the need to have a JV partner that will have the first loss piece of these loans. We're excited about that opportunity. It was a long effort. We evaluated a variety of different firms to partner with, and we're ready to get rolling. That being said, it's going to be a relatively small part of our business. So it's not going to be anything that's going to be a massive shift in terms of our corporate lending additions or growth. But I'm excited to be able to partner with Jim Bunn's Investment banking team on being able to offer those credit solutions that I think will add incrementally to our level of M&A engagements that Jim's team is going to be able to obtain. So with that, why don't I turn it over to questions. Devin, you've got a question? Steven, do you want to get first since you got the mic?