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

Good afternoon, everyone. I'm Kristie Waugh, Senior Vice President of Investor Relations, and welcome to Raymond James Financial's 2026 Analyst and Investor Day. We're really pleased to host many of you in person in our brand-new Corporate Experience Center. Hopefully, you guys will have a little bit of a chance to walk around and get a feel for this tremendous space where we're holding a lot of terrific events. So again, thank you for taking the time. I know we don't take it lightly that you guys travel to be here, and we really do appreciate that. We also want to welcome the many people who are joining us over the webcast, and we look forward to continuing to work and hear from you guys even from afar. So over the next few hours, you'll hear from leaders across the firm as they share insights on our long-term strategy and the key strategic initiatives. We do have a lot planned, so we're going to go ahead and just jump right in. Today's presentation, which was posted earlier, is available on our Investor Relations website. Speaker biographies as well as non-GAAP reconciliations are available in the appendix. Calling your attention to the safe harbor statement shown on the screen. Please note certain statements made during this presentation 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 and general economic conditions. In addition, words such as believes, expects, plans, will, could and would as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q, which are available on our website. We will also use certain non-GAAP financial measures to provide information pertinent to management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the appendix of the presentation. Turning to the agenda. In a moment, CEO, Paul Shoukry, will open with a strategic overview. Following Paul, we'll have Tash Elwyn to review our largest business, Private Client Group; and Scott Curtis will cover Asset Management. We'll then hold a joint Q&A with Tash and Scott and follow up that with a 15-minute break. After the break, we'll be joined by Jim Bunn to review our Capital Markets businesses. Steve Raney will discuss the Bank segment, and Andy Zolper will discuss the overview of our technology. We will also follow up those sessions with another Q&A session. Finally, Butch Oorlog will provide a financial review, followed by our final Q&A session where we'll cover strategic and financial matters with both Paul Shoukry and Butch Oorlog. So please keep in mind, during those Q&A sessions for those of you in the room, we do ask that you wait for a microphone and state your name and firm before stating your question. We also would like you to hold to one question initially so we can make sure we get to everyone. With all that out of the way, it's my pleasure to introduce our first speaker, Paul Shoukry. Paul is CEO and a member of our Raymond James Financial Board of Directors. He previously served as the Raymond James President from 2024 to 2025 in preparation for assuming the CEO role and was the firm's CFO from 2020 to 2024. Please welcome Paul Shoukry.

Thanks, Kristie. Good afternoon. Good to see everyone. Welcome to sunny Florida. I was expecting to see at least one New York Knicks jersey. So I see you guys have come pretty conservative today. But here you have a basketball team making it pretty far in the playoffs. So it will be exciting to see. But welcome. We don't take -- as Kristie said, we don't take your time or interest in Raymond James for granted. So thank you for making the trip down to Florida. And also thanks to everyone who is listening to the virtual call as well. So we appreciate your time and interest in Raymond James. I'll start the conversation off today with where we always start, which is our core values. These values dictate and drive all the decisions we make as a firm. And that really starts with putting clients first in everything that we do. And I'm sure all the companies that you cover say they put clients first. So I'd say the proof is really in the pudding. What does it mean by putting clients first? As you all know, we were criticized as one example for maybe 8 or 9 years for not taking on more duration risk and leverage on our balance sheet. And we refused to do so, not because we knew that interest rates were going to go up 500 basis points in 2023, but because that bet had nothing to do with serving clients. It was a proprietary bet on our own balance sheet. Just like during the financial crisis, we didn't take wholesale funding to buy what people thought were AA-rated structured products because it had nothing to do with serving clients. And by focusing on servicing clients and not taking those type of proprietary bets, which don't benefit clients, it positions us well for times like we saw during the financial crisis or that we saw with a few banks that went out of business over -- almost overnight in the spring of 2023. So again, words are easy to say and easy to present at the Analyst Investor Day, but I always say the proofs in the pudding, it really has to be evidenced in the decisions that we make each and every day to put clients first in everything that we do. Making decisions for the long term. We don't care what happens today, this quarter, next quarter with -- we're making decisions for the next 5 to 10 years, and beyond. And that alignment is really important because we spend a lot of time -- I spent 70% or more of my time traveling the country, meeting with financial advisers. I never hear financial advisers say, I'm really concerned about what happens to my business next week or next quarter. They're focused on the next 5, 10 years and beyond in their business and building their business and serving their clients. And when I meet with their clients, very rarely do I hear the clients -- if ever, have I heard their clients say, I'm really concerned about my portfolio return next week. Their clients are focused on their estate planning, their succession planning, their -- how they're going to pass on their wealth in a tax-efficient way to their heirs, 5, 10-plus years and beyond. And so having that long-term focus aligned with the firm the financial advisers and the financial professionals and the end clients is so critical. So people a lot of times ask me, how do I think about the new emerging entrants of private equity into our space that are rolling up firms. I said they're really not competing the same way we're competing, right? Because their time horizon isn't aligned with the financial advisers' time horizon that I meet with and the clients' time horizon that I meet with. They're in and out of investments in usually 2 to 3 years, right? So that adviser and that client is going to have to go through another form of disruption in 2 or 3 years. And so having that long-term focus that's aligned with the adviser and the client is so critical to our long-term stable strategy. We value independence. Even on the employee side of the business, we tell advisers, it's called the adviser bill of rights that you own your book of business. And if you leave on good standing, we'll help you move your clients to your new firm. No one on the employee side does that. It's actually becoming increasingly difficult to find on the independent side. I think the single biggest mischaracterization of what's going on in our business today by the trade pubs and even on the analyst side of the community is that we're referring to advisers selling themselves out as a movement to independence. That's not a movement to independence. When you sell yourself to private equity, you're actually doing the opposite of going to independents. A lot of the RIA custodians that are benefiting from the growth of the private equity aggregators, sometimes that's described as a movement to independence. That's not a movement to independence. That's a movement to actually, in a lot of cases, being employed by a private equity firm that's controlling your P&L, controlling your resource allocation. So it's actually the opposite of that. So what our -- the trend that we're benefiting from at Raymond James is a true movement to independence across all of our affiliation options where advisers really want the independents to run the business to serve their clients without cross-selling goals and requirements, without a fear of having to change platforms in 2 or 3 years when there's a liquidity event, et cetera. So that long-term focus on preserving the advisers' independence with their business is becoming increasingly unique as we have more and more competitors in our industry. And then integrity, a lot of people say integrity is what you do when no one is looking. That's a pretty good test. But we say integrity is what you do when everyone is looking and cheering you on to do something that's inconsistent with the values on this page. And that happens in markets sometimes. I brought up the securities bet that a lot of people are rooting us on to do for 7 or 8 years, and we refused to do it because it wasn't consistent with these values. And by the way, we were wrong for about 7 years and 11 months, right, because interest rates didn't shoot up. But it only took us 1 week to be right when interest rates went up a lot faster than everyone thought. So that's what integrity is what you do when everyone is cheering you on to do something that's inconsistent with your values. Our goal is quite simple. We want to be the absolute best firm for financial professionals and their clients. And the word their is so critical. And whether it's our financial advisers, whether it's our investment bankers, we want them to feel that sense of ownership of serving their clients. It goes back to the value of independence. And if we're the absolute best firm for financial professionals, their team and their clients will continue to be successful. So we look very closely. Tash will show you the satisfaction scores that financial advisers gives us. It's the highest it's been in years. That is so critical, but we still take the 2% or 3% that aren't satisfied very seriously because we want to make sure that every adviser is satisfied with their experience here at Raymond James. We have diversified and complementary businesses anchored by the Private Client Group business, which is 68% of our revenues as we report it, but have significant attributions to the rest of the business even beyond that. But it's complementary. We'll show you how all the businesses work together to better serve clients. Financial strength. This is something, again, we're 16 years into a bull market. Sometimes we get criticized for being too strong -- having too strong of a balance sheet. We have over 2.5x the regulatory requirement to be well capitalized in our capital, over 2x the regulatory requirement. We have $3 billion of cash at the parent. We have a lot more cash on a consolidated basis, but we're looking at the cash at the parent. So plenty of flexibility on the liquidity perspective, as Butch will mention later, and A rated with all the major credit rating agencies. So again, we want to be a source of strength and stability for our financial professionals and their clients. We don't want to be a source of concern when the unexpected surfaces in the markets. We unveiled a refreshed value proposition with our annual report a few months ago, and we refer to it as The power of personal. The leadership team has a lot of conviction, and we actually surveyed advisers and clients and everyone has a lot of conviction that what matters more than ever today in this world of AI and technology and private equity and ROIs and cash-on-cash returns, what people need more than ever today is a deeply personal relationship. And counterintuitively, what's harder to find today than since our founding in 1962 is a firm that's willing to invest in a deeply personal relationship. When's the last time one of you got a handwritten letter, it matters, deeply personal relationships really matter, and that's the foundation for all of our success in all of our businesses. And so while we will invest in technology and AI, Andy Zolper is going to talk to you a lot about our AI investments and technology investments, we're doing it all through the lens of how can we empower our financial professionals, how can we give them more time to develop even more deeply personal relationships with their clients. And we truly believe that, that alone will differentiate us amongst our competitors. And as we do that and as we continue to do that, we'll continue to generate good results. So this shows 153 consecutive quarters of profitability. No other financial services firms that we can find can show this slide, for 153 consecutive quarters. We're profitable every quarter through the financial crisis. In fact, the only quarter we lost money since going public in 1983 was Black Monday in 1987, and that's because Tom James said, we need to keep the trading desk open. All of our competitors closed their trading desk. Tom James said, we need to keep it open because clients need us today more than ever. And we lost $100,000 that quarter. But beyond that, we've been profitable every single quarter since going public in 1983. Our strategy remains pretty consistent. It's to expand market share in all of our businesses, increase collaboration to better serve clients, to better meet their financial objectives, invest in tools and resources across the organization to better enable financial professionals to serve their clients and to enhance the infrastructure. And we spend -- Andy Zolper will go into this in great detail, but we spend a lot of money on making sure we have a solid infrastructure as possible. And none of these things would matter unless we hired, retained and developed the very best people. We are in the people business. That's true at home office. That's true in the middle office. That's true in the front office, and that's true with the clients that we serve. So we have to have the very best people to be competitive in our business. And then we also have to leverage AI and technology to provide scale and efficiency in our business to remain competitive. Going through each one of these strategic pillars, expanding market share, our organic growth has been phenomenal in all of our businesses. We're uniquely positioned. Each one of our businesses, we have the critical mass required to make the investments to remain competitive. And at the same time, we have plenty of headroom to continue growing, doing what we're doing. We see a lot of firms that are bigger that have the critical mass necessary to make the investments, but they don't have any headroom to grow doing what they're doing. So they're trying novel things. They're going outside of their core to expand into new businesses or they're cutting costs or forcing their advisers to sell certain products. That's not a sustainable strategy for us. And then you got the smaller firms that have plenty of headroom to grow doing what they're doing, but they can't invest over $1 billion a year in wealth technology like we can. They just don't have the size and the scale to remain competitive and with the demands that continue growing with financial professionals and their clients. So we're uniquely positioned with both. And you see it in each one of our businesses. In the Private Client Group business, last year, we had a record recruiting year with $407 million of recruited trailing 12 production, advisers that had recruited trailing 12 production at their prior firms of $407 million. That was a record. This year, we're on track to exceed that record for fiscal '26. The pipelines across our affiliation option, Tash will show you the segmentation. It's very strong across all affiliation options. Some people ask, and I've been running Investor Relations. I ran investor -- started our Investor Relations function in 2012. And the questions that we get every single year since 2012 is you guys have best-in-class leading growth in the industry, but is it sustainable? Or is it just event-driven? Every single year since 2012, we've gotten that question. And the answer has been, if you look back over those -- that period, it's been pretty darn sustainable. Why? Because our values have endured. The value proposition has endured. The competitive environment has actually gotten further away from our value proposition, not closer. And that long-term focus has continued to attract advisers across all of our affiliation options, which gives us the largest addressable market in the industry in the Private Client Group business. Again, we have scale and long-term history serving in all of those affiliation options. Not many of our competitors can say that. Domestic net new assets first 6 months of the year of $54 billion. Again, that's a leading result in the industry from a net new asset perspective. And that's not only strong recruiting, but that reflects really strong and solid retention as well, especially given how competitive the environment is. In Capital Markets, we continue adding to our resources and capabilities to better serve clients in the Capital Markets segment. One such example of that is the acquisition of GreensLedge, which provides securitization advisory and placement capabilities. In the Asset Management segment, again, we continue to add to their capabilities. We just acquired Clark Capital, which provides wealth-focused asset management and model portfolio capabilities are based out of Philadelphia, and they do a great job serving financial advisers, something we love and know well. They partner with financial advisers to help pitch clients and serve the clients' needs. And they've generated very strong organic growth based on those strong relationships with those advisers and their clients. And then the bank. The segment is continuing to focus on supporting clients with their lending needs. You see it in securities-based lending growth of over 31% year-over-year. I mean, phenomenal growth in securities-based loans, which is an asset class that we really like because we believe it generates good risk-adjusted returns, well secured with marketable securities with daily repricing. Most importantly, while we're generating this really terrific organic growth across all of our businesses, another differentiator for us is that we focus on sustainable growth versus growth at all costs. And all of you know that there is some level of focus on top line growth and NNA. And there's a pretty good degree of appetite for adjustments to non-GAAP earnings and other things across the industry. Certainly, you see it with the private equity-backed companies as well with adjusted EBITDA that they report when they -- certainly when they look for liquidity events. That's a sign of being pretty long into a bull market, 16 years in. I don't know if we could go another 16 years, but the scrutiny and the rigor around balance sheet strength has not been under the microscope for quite a number of years, even with financial advisers, financial adviser came to our home office a couple of weeks ago, and their cards face up. They said, I'm evaluating you versus this other firm. And I said, well, how would you compare the 2? Because I didn't see a lot of comparison. We have the same industry category. But other than that, I didn't see the comparison. And they went through it and I said, well, what about their balance sheet? And they said, "Gosh, I'm embarrassed to say because I lived through the financial crisis that I did not look at their balance sheet yet. Is that something I should do? I said, well, you lived through the financial crisis. Is that something you wish you would have done before the financial crisis and, like, absolutely. I mean they literally were embarrassed that they hadn't looked at the balance sheet. But again, it's been a long time since we had balance sheet-related issues in our industry. But we all know at some point, they resurface. So having that balance sheet strength I showed you earlier, having quality, sustainable growth is so critical, profitable long-term growth that we can support with high service levels versus growth at all costs, even going back to the value of having integrity, even when the market is rooting you on to generate growth at all costs. It's not sustainable. It's not consistent with the values that we have. Collaborating. We have these diverse and complementary businesses and collaborating with each business. Each speaker today will talk to you about how their businesses relate and support the other businesses to ultimately provide more robust, holistic financial advice to clients. That's what it's all about. We don't talk about cross-selling at Raymond James. We talk about bringing all the capabilities we possibly can to better serve clients. There's not one cross-selling goal in the entire firm. Management is not compensated based on cross-selling. That's not something that we push at Raymond James. We want to sell ideas. We want to sell solutions. We want to offer the products and solutions that advisers and financial professionals might need to better serve their clients, but we never want it to be a mandate. We never want it to be a forced push. One such example of successful collaboration that we've had across the firm is what we call IBex. It's where investment banking and the Private Client Group businesses are working together, and we're literally providing training and content and education to financial advisers focused on business owners who might be experiencing a liquidity event in the not-too-distant future. And we've partnered with law firms, accounting firms, consulting firms. We have a whole network, even other investment banks because some of these business owners are doing deals that aren't good fits for our investment bank, we can't provide them the best service and solutions. And they literally have business owner forums and help educate business owners on how to prepare for liquidity events. And that turns into investment banking referral opportunities, and that turns into ultimately wealth and liquidity events, which help build the business for the financial advisers. So that's just one example of having a full-service firm helps deliver better, more holistic, robust advice to financial -- to clients. Investing in tools and resources. I don't want to steal Andy's thunder on the technology investment. That's going to be a big area of focus today. A lot of questions around that, really ultimately the focus on increasing productivity. AI can't have a presentation, certainly can't have an entire Analyst Day without talking about AI. But we're looking at AI in 3 different categories. There's the back office, the middle office and the front office. It's the easiest way to simplify it. In the back office, AI is going to create more efficiencies for us. We launched Raimond with AI in the middle instead of a Y. Raimond is a -- it's -- we're rolling it out to financial advisers. We've put in -- we fed it with over 1 million transcripts to our call centers. And so now advisers and their sales assistants can self-support them, they can ask a question to Raymond anything about customer accounts and get responses real time. And it's a dynamic -- almost like ChatGPT, dynamic conversational support center and the advisers who have piloted has said it's a game changer. This is a game changer. This is going to save so much time. This is going to be a huge enabler for our business to be able to ask 24/7 Raimond any question they can about customer accounts. So we're going to continue to feed it more and more transcripts from different service areas. So it would be a one-stop shop to self-service to provide self-service. We're also using in the back office AI to facilitate cyber protection as well. Cybersecurity risk has continued to increase. We all read about Mythos and the concerns there over the last several weeks. And really the only way to protect yourself against AI is with the use of AI. That's the only way. And even then, it's going to be a huge race to protect yourself, but we're using a lot of AI, and Andy will get into that in much more detail as well. In the middle office, when you look at global wealth solutions that support our financial advisers with financial planning, tax planning, all sorts of support to better provide to their client -- financial advice to their clients. AI can help provide a better gearing ratio between those financial professionals. A lot of that's manual. Estate planning is a manual thing, reading estate documents. AI can help those professionals gear up and provide scale in their businesses so they can support more advisers and support them with more tailored advice for their clients. And in the front office, it's again about saving advisers' time so they can spend more time developing deeply personal relationships and also giving advisers tools to provide at scale more tailored advice to their clients. So we're -- Andy can get into all of these in more specifics, but we're using AI across the back, middle and front offices across all of our businesses and really providing a lot of education and training around it as well. Infrastructure, we spend $82 million a year just on cybersecurity technology to protect clients' data, clients' information. And when you add the infrastructure to it, it totals almost $120 million a year. That's why I would go back. You have to have critical mass in our business to be competitive. There are some firms that we compete against that their total technology budget is not a fraction of $120 million, right? So you need to have that scale to make these type of investments to remain competitive in our industry. And for those smaller firms that can't make those investments, if they're good cultural fits, those become acquisition opportunities for us over time. That's something I spend a lot of time on is meeting with other CEOs who would be good cultural fits, good strategic fits that may want Raymond James to be a good home for their family down the road in the future. That gets to M&A. My closing slide, it has to be a good cultural fit. We're in the people business. No matter how good the business is, no matter how good the financials are, if they don't run the business with the same values that I showed you earlier, putting clients first and making decisions for the long term, it's not going to work. The only -- the reason so many deals in financial services historically haven't worked is because too many of them haven't focused on the cultural fit first and foremost. It's not a good cultural fit, the deal is not going to work. So we don't even look at the package if we see the company and we know the company doesn't make decisions that put clients first over the long term. And then strategic fit. 1 plus 1 has to give us a chance of being greater than 2. We're not a cost-cutter M&A type firm. We bring families together, families that can make Raymond James better and Raymond James can make that family better as well. We keep management. Look at Morgan Keegan. We acquired them in 2012 from Regions. Their fixed income and public finance business and most of their finance fixed income professionals are still based in Memphis from the Morgan Keegan acquisition. 14 years later, you just don't see that in financial services anymore. But that's the way we do it. We're really looking at bringing 2 families together to make both of us stronger versus a cost-cutting type strategy that so many of our competitors pursue. And it has to be financially attractive. If it's good cultural fit and good strategic fit, then we really can lean in on valuation to make it a win-win for both Raymond James and the sellers and owners of the business that we're looking to join families together with. So with that, I want to thank you again to recap, we're in the people business, making decisions for values based on our values each and every day. All of our businesses are positioned for consistent growth going forward. And we have the financial strength not only to be defensive in a downturn, but also to be opportunistic and front footed. And we made our best investments, Morgan Keegan, as an example, during a downturn because we had the balance sheet strength to get that deal done. So with that, Christy said I'm not allowed to answer questions now because in prior years, I steal everyone else's thunder. So we're going to transition to Tash as the next speaker. Tash Elwyn is the President of our Private Client Group business. And then I am going to do Q&A with -- but at the very end, so I don't steal everyone else's thunder. So a little bit of a new structure this year, but look forward to joining forces with Butch here at the end.

Thank you, Paul. All right. Well, I think you've already been introduced, Tash. So next up to cover the Private Client Group is Tash Elwyn. He has been President of the Private Client Group since October 2024. And before that, he led the Raymond James & Associates, our employee affiliate model. So please welcome Tash Elwyn.

Okay. Great. Thank you, Christy. It's terrific to be here with all of you this afternoon, and I'm excited to provide an update to you all on the Raymond James Private Client Group, which as Paul Shoukry noted at the onset, is the largest of the 4 primary businesses at Raymond James. And as we look holistically across the Private Client Group, you'll see that there's nearly 9,100 financial advisers that are affiliated with Raymond James across our various affiliations in the U.S., Canada as well as the U.K. And those advisers as of March 31, are managing collectively on behalf of their clients, approximately $1.7 trillion in assets under administration. As we focus on growth in the Private Client Group, it's important to recognize that, that growth always begins with the retention of the advisers that are already affiliated with us. Providing them with the tools and the capabilities that they need to really make a difference in their clients' lives. And as a consequence of that, for them to be rewarded with business growth and revenue success. And we see that exemplified here with the 14% CAGR in overall PCG assets going back over the past 5 years. And then more specifically, as we look at fee-based assets, we'll see a 16% CAGR there as well. That then obviously leads to the strong revenue as well as the pretax income growth success as well. On the net revenue side, we've had a 13% CAGR over the past 5 years. And then when we look at pretax income, a 26% margin in the Private Client Group over the past 5 years. Looking forward, I want to share the Private Client Group vision, which is intentionally short on words, but each and every one of these words was selected with great importance, and it's to inspire and empower the world's best financial professionals. And to take just a moment this afternoon to unpack that, inspire and empower our differentiators at Raymond James. And so rather than as it exists at so many of our competitors where there's a much more firm-centric approach to cross-selling and a prescriptive and directive and template approach to how they expect advisers to engage with clients at Raymond James, again, always being client-centric, always being adviser-centric, the focus with this PCG vision is how do we inspire and empower and position financial advisers as they should always be as the ultimate arbiters of how best to weave together the capabilities and the resources of the firm in such a way that they can really make a difference in our clients' lives. And again, as I noted just a moment ago, to be rewarded with continued business growth and success. On the topic of success, there's 3 real reasons that we see the Private Client Group continue to be as differentiated and as successful as we have been. And I'm going to do a deep dive into that in a moment here. And the first would be that as you look at how barbelled the industry has become over the years and that barbelling is through consolidation and collapse at one end of the barbell. You have global firms, national banks, wirehouses, et cetera. And these are firms that to varying degrees have capabilities. But many of them have either grown to such an extent or as some advisers would say, lost their way to such an extent that they culturally scarcely resemble the types of firms that advisers have grown up with and really cherished as partners. You go to the other end of the barbell, start-ups, boutiques, regionals. And these are firms that to varying degrees may have culture, but they just don't have the scale, the breadth and depth to really help an adviser make a difference in clients' lives and grow their businesses. And so it's not quite as binary of a picture as I may be painting, but it's almost as if in the industry today, advisers feel forced to choose between culture or capabilities. And at Raymond James, we hear time and time again from the advisers that continue to be affiliated with us as well as the advisers that are choosing to join Raymond James that we represent the best of both worlds, that we have the culture, but we also have the full capabilities. In addition to that, our commitment to what we refer to as adviser choice, adviser choice being the full array of affiliation options from employee to independent to RIA and custody services means that Raymond James is uniquely positioned to benefit from the broader industry movement to independence. And independence being much more so less channel-specific, and it's more of a cultural decision that advisers are making about how best to affiliate with firms. And Raymond James is positioned again with the spectrum of adviser choice to be able to meet advisers where they are, meet them where they are both today as well as to be able to provide, importantly, ongoing optionality to them in the years ahead. As a consequence of this, with this asset allocation, if you will, across affiliations, we've demonstrated really strong asset growth across each and every one of these affiliations. And so whether it's the employee channel, the independent channel or the RIA and custody services, you can see the representative CAGRs here over the past 5 years. And with it overall blending in at a 10% CAGR, very strong asset under administration growth. On the topic of growth, there's 3 primary drivers as we see it of growth within the Private Client Group. The first is adviser retention. The second is experienced adviser recruiting. And then lastly, it's helping the advisers that are already affiliated with us be even more productive in serving their clients. Beginning with retention, I'm very fond of saying that the real key to growth always begins with retention as your foundation. And whereas it's so many of our competitors, we've seen over the years that it's almost as some have referred to it, an expensive prisoner swap or a revolving door. Our most important focus at Raymond James is treating the advisers that are already affiliated with us as our clients and ensuring they have all the tools and capabilities to be able to make a difference in their clients' lives. And we heard Paul Shoukry make reference a moment ago to our latest Voice of the Adviser Survey, where 97% of the advisers that were surveyed as part of that reported that they're satisfied with the service that they receive from Raymond James. And as I say 97%, I'm reminded of one of my favorite quotes I've heard over the years that comes from Vince Lombardi, where he says, if we chase perfection, we just might achieve excellence. We're chasing perfection in this regard as unattainable as that may be. But obviously, the high praise that we received from the advisers that are affiliated with us is a great testament to the value and the service that we're providing, but in no way do we ever rest on our laurels at Raymond James. In addition to service as a retention tool, we've long supported advisers with succession planning, practice acquisition through our consulting teams internally within the firm. Very excitedly, this past year, we also introduced succession and practice capital solutions, where we're now able to be that trusted provider of capital to independent advisers and employee advisers that are affiliated with Raymond James. Whether that capital needs to be for growth capital to help them continue to take their business and their practice to the next level or that capital is part of a long-term succession plan within the firm. Advisers are really excited about the opportunity for Raymond James to now be that capital partner to them versus the threat of having to go externally to private equity and so forth, where you may have, as many advisers have told us, a long-term misalignment of values and objectives in terms of what's best for their clients, what's best for their business and what's best for their successors. And having just introduced Practice Capital Solutions this past year, we've already committed $50 million in capital in the first year of the program, and we're continuing to see tremendous interest across the affiliations at Raymond James. Adviser recruiting. Obviously, adviser recruiting is one of the most headline-generating aspects of how our firm grows. And while Raymond James has been able to demonstrate year in and year out that we're one of the true industry leaders in this regard, I can't stress enough to all of us the importance of always putting quality ahead of quantity. We heard Paul make reference to some competitors that it may be more of a growth at all costs. And don't mistake this in any way for lack of fire in the belly. We are a growth firm. We're committed to growth, but we're even more committed to our values and ensuring that each and every adviser that's invited to join Raymond James is going to be a great reflection of those values in terms of how they serve their clients and how they serve their community. We've got some great quotes here on the screen. I won't go through each of these, but these are quotes from advisers that have recently joined Raymond James speaking to everything from, again, going back to that best of both worlds the benefits of being affiliated with Raymond James, not only in terms of culture, but also the importance of having the robust capabilities that we do as well. You've heard me reference a couple of times now the importance of Raymond James being diversified and asset allocated, if you will, in terms of the many different ways that financial advisers can affiliate with us. And we see that play out very importantly in our recruiting success as well. Paul made reference to last year's record recruiting year of $407 million in affiliated trailing 12 revenue. And that record came on the heels of a $335 million record just the year prior. And as Paul noted, we're excited and confident for where we believe we're going to arrive this year as well as we continue in the second half of fiscal '26. But what I think is also important is, as you look at the bar chart on the right side of this, is to look at how this recruiting breaks down year-over-year between our 2 primary affiliations of employee and independent. And while year in and year out, the markets have always delivered some sort of a recruiting opportunity to us, whether that be a macro event that's happened because of consolidation, could be ongoing compensation changes at competitor firms. It could be micro events. They're having their third branch manager in 5 years, whatever the case may be, we can count on year in and year out that there will be some sort of a confluence of macro and micro events that position Raymond James across all of our affiliations to be able to capture this and capture it not only successfully, but continue to capture it in a way that's aligned with our values. So as Paul said, as we look back over many time periods, we've been able to demonstrate our ability to be a very strong and consistent recruiter, and we remain confident that, that future is going to continue to be bright as we look forward. As we think about then the ability to retain advisers as well as we do and then pair that with our ability to continue to be one of the leading recruiters in the industry, you see that play out as well through not only adviser headcount, but even more notably, you see that play out through our net new asset growth. That's been a 5.9% CAGR since fiscal '22. This year to date, we see that at 7%. And it's been exciting to see the uptick year-over-year in that regard as we've continued to extend on our recruiting successes that I just described a moment ago. Other growth drivers, adviser productivity. We've introduced under Paul's leadership this past year, adviser time, Adviser time being an intentional extension of adviser choice. The idea behind adviser time is for us to make it even easier than it already is for the financial advisers that are affiliated with us to serve their clients and grow their business. Even easier in no way suggests we're going to abdicate any of our supervisory or regulatory responsibilities. But anywhere we find opportunities for efficiency to continue to eliminate bureaucracy, to leverage technology, to give the back office and the middle office even more capacity to serve advisers and to give the front office, as Paul described it a moment ago as well, more capacity to serve their clients. This is what adviser time is about and giving advisers additional productive capacity to go deeper in making a difference for existing clients and to have more ability to be able to focus on client acquisition. The second focus in terms of strategic growth drivers for us is that of private wealth. And Paul spoke about the importance of collaboration across the firm a moment ago. And as Paul noted, and I'll reaffirm now, that collaboration isn't about what's best for the firm. It's not about cross-selling. It's about how do we continue to educate advisers in such a way that, as I said, with the PCG vision, they're inspired and empowered to determine how to weave together these capabilities to make a difference in the lives of their clients. And a great example of that would be the focus we have on private wealth. That's been a long-standing area of commitment for the firm, but dating back about 3 years ago, we doubled down on that commitment to private wealth. We introduced the private wealth adviser accreditation program. We've graduated nearly 400 advisers from that program since launching it. And in that program, advisers are even better exposed in developing fluencies and how to work with business owners, how to work with high net worth and ultra-high net worth families, again, to weave together capabilities from our capital markets teammates, from our colleagues in asset management, our colleagues at Raymond James Bank to go deeper with clients, to make a bigger difference in their lives and again, to be rewarded with business growth as a consequence of that. So to recap, it's all about how do we inspire and empower the world's best financial advisers. It's leveraging the uniqueness of our multiple affiliation options, as we've described them, the power of personal really doubling down on that personal connectivity, the power of personal between advisers and their clients, but also the entirety of our home office to the advisers and then continuing to leverage the adviser-first culture, the client-first culture that, again, is one of the differentiators, leveraging the stability and the conservatism of Raymond James, which is always valued and appreciated by advisers and clients during the best of times, but even more so when inevitably the markets and the economy cycle and then also extending the differentiator of book ownership of treating the adviser as our client, recognizing that they're here by choice. And that as part of that, we need to continue to make sure they have all the tools they need to make a difference in clients' lives. Christy?

All right. Thank you, Tash. Now I'd like to invite Scott Curtis to come on up. Scott will be covering the Asset Management segment for us. He is Chief Operating Officer of Raymond James Financial and also the President of Asset Management, a role he's held since 2024. And so prior to that, he was President of Private Client Group. So please join me in welcoming Scott. Thank you.

Thank you, Christy. Nice to be here with all of you. Thank you, Devin. I get one very quiet applause. It was kind of a golf clap, but I appreciate it. Thank you. Nice to be here with all of you. I'm going to follow on to Tash's remarks and take you through the Asset Management segment of our firm. At a glance, it includes our asset management services area, which is really advisory solutions for advisers, Raymond James Investment Management, which is our institutional asset management business. I'll go through that later. Clark Capital, Paul mentioned that we acquired Clark Capital as of the end of April, so April 30. So Clark's numbers are really not included in these slides. And as many times as we looked at these slides before stepping up here today, I noticed that the $282 million, hopefully, all of you realize that's $282 billion. So that should be a B, not an M. I cannot believe we missed that. It's a B and all the rest. But if you look at the asset management space, the asset management business for Raymond James, you can see it's an attractive 12% CAGR over the last 5 years. And when you look at net revenues, that's been an 11% CAGR. So if we dig a little deeper, as Paul kicked this off, the collaboration between our different business units, the asset management business is no different. There's strong collaboration between Asset Management services and our Raymond James Investment Management group. And for both of those business units, there's strong collaboration with the Private Client Group and the capital markets businesses. We have access to unique portfolio managers. They could be third-party managers or internal managers. And for our Private Client Group business here domestically, the access to those managers is much easier when they're kind of part of the home team versus being a third-party manager. But we provide access to those managers for our financial advisers in either instance. If we look at the snapshots of these 3 different business units, Asset Management services, as I said, provides portfolios for financial advisers to utilize with their clients. Those could be discretionary portfolios that are managed by the AMS team. They could be third-party portfolios and the AMS research associates do the due diligence on those third-party portfolios and then we add those to the platform. We are in the coming year, expanding the number of portfolios that are available on the platform. So the primary clients of asset management services are Raymond James Financial advisers and their clients domestically. The revenue drivers for that business, no surprise, how many advisers are utilizing fee-based relationships with their clients. That number has continued to grow that you'll see in the subsequent slides. And the market impact, we have a nice -- we've had a nice tailwind in terms of equity markets over the last 10-plus years that have certainly benefited the assets in that space, the fee-based assets. Raymond James Investment Management. I'll go a little deeper on this, but that business as well has benefited from the Raymond James financial adviser count continuing to grow that Tosh described and as we've continued recruiting, having success with retaining the advisers and having success with adding advisers to the overall platforms. So the trust business, which I'm not really going to address today, in terms of financial reporting, that is part of the Asset Management segment, but in terms of reporting lines, that actually reports into the bank, so that may be included in Steve Raney's remarks that you'll see later. But when you look at the segment and the business overall, attractive growth and attractive margins for this business. You see for the Asset Management Services business, the most recent period, the most recent fiscal year-to-date this year, up 43% pretax margin overall for our Asset Management segment. So when I mentioned the consistent growth of this business, you'll see whether it's Asset Management Services or it's Raymond James Investment Management. Clearly, the stronger driver of that growth, the 12% compounded annual growth over the last 5 years has been the Asset Management Services segment or the advisory solutions group as I tend to refer to it occasionally internally. And you'll see the addition of Clark Capital there out on the far right at $36 billion of additional assets to the total platform that will be reflected in the upcoming quarter. So through that growth, that clearly, it's going to drive revenue growth and operating leverage. Now if you look at -- you can do the math here, but when you see the pretax income going back to fiscal year '20, the pretax income was at a 40% margin. When you look at the more recent period, 2025, that margin bumped up to 42%, and then in the most recent half year, as I mentioned before, it bumped up to 43%. So as we continue to grow, we are actually getting operating leverage out of these businesses. And the biggest driver of that margin is our Asset Management Services group. When you look at the value proposition of Asset Management Services, for financial advisers, we have teams of people, we call them regional consultants, internal and external, and they educate and support the financial advisers with the products and the investment solutions that are available on the platform for advisory accounts. We also have, as I mentioned, the research professionals who do the due diligence on the separately managed accounts. And then in addition to those resources, we also have a team of people who help the advisers who are managing accounts with discretion on behalf of clients, those advisers, and their clients, that team is a separate team, and we do special educational forums for the advisers who are managing with discretion to help them with managing their client portfolios, benchmarking and understanding which economic indicators may influence their portfolios in the coming year and the coming period, depending on how they're thinking about it. So it's a strong value proposition for financial advisers to utilize the resources that we have internally at Raymond James. And as you can see, this has been a significant driver of that growth with 16% compound annual -- growth over the last 5 years. And we've actually seen an uptick this year in utilization of the separately managed accounts, and that's largely driven by direct indexing, and driven by tax optimization and tax overlay on some of the portfolios that we manage -- we actively manage internally. So the strategic initiatives. We have significant work streams here in each one of these areas around enhancing the platform, modernizing pricing and optimizing processes. This is where AI really is starting to be a bigger factor for us in this area. As we think about modernizing or optimizing processes, we've taken some processes that used to be 2 days or even 3 days and turn that -- shorten that time period down to 24 hours, and we're focusing on how do we get that down to less than a day. So perhaps same-day process. And some of that has been process reengineering and some of it is applying technology and to get down to same-day processing versus where we were at 2 or 3 days for some of these processes, that's going to take technology as well. On modernizing pricing, we're benchmarking against the other platforms that are out there in the industry, whether they're third-party Asset Management programs or their regional firms or their other independent firms. How does our pricing compare to the other platforms that are out there, making sure that we remain competitive for financial advisers who are with Raymond James already, and those who are considering joining us., and then enhancing the platform, as I managed -- as I mentioned before, not only expanding our separately managed account platform but adding that tax optimization and direct indexing, which has become more and more popular. We now see in terms of new flows into the products, north of 40% of the new flows are going into portfolios that are either direct index portfolios or our portfolios that have tax optimization or both. And I asked Doug Brigman, who is President of the Asset Management Services group, how does that compare to other firms and based on the information that he has, it sounds like that's a higher percentage. So it's clear to me that the educational programs that we're doing or the outreach to the financial advisers is making a difference and ultimately making a difference for clients, whose portfolios, they've entrusted with those advisers. So there are some industry trends that are driving higher penetration of advisory accounts. There are clients who prefer that sort of pricing. I mentioned direct indexing. I mentioned tax optimization. And for financial advisers who are working with their clients, this may be a cleaner way to price the relationship between the 2 versus based on transaction activity, the traditional -- more traditional commission, not saying this is right for everybody, but for a number of client relationships, that certainly works better for them. Now you'll see on that pie chart, the managed program assets is about 27% -- is 27% of the total, which means there's still 73% of total advisory assets that are not in a managed program. And as we've introduced direct indexing, as we've introduced tax optimization, for the advisers who are operating with discretion, that's much harder for them to affect tax optimized portfolios, much harder for them to affect, what I would call direct indexing. If there is a certain holding a client doesn't want to have in a portfolio, or there's a certain sector, a client doesn't want to have in a portfolio, that's harder for financial advisers to manage at an institutional level within their office versus entrusting that over to the Asset Management Solutions group. So we're picking up share there. Pivoting over to Raymond James Investment Management. As you can see, it's a collection of boutique managers, Eagle, Reams, Chartwell, ClariVest, Scout, et cetera. Each of them has a specific discipline that they're focused on and the entire enterprise works well together because of the complementary focus of each of those portfolios. Now with the addition of Clark Capital, Clark Capital will be a little bit different and that it will be available to Raymond James financial advisers, but their primary market is outside of Raymond James, independent advisers and RIAs and others, operating through third-party Asset Management programs and operating with independent broker-dealers. It's much more aligned with the same client base of TriState Capital Bank, which I know you'll hear about in a little bit. So it's complementary to what we already have, opportunity for Raymond James Investment Management portfolios to get into Clark Capital, opportunity for Clark Capital to manage portfolios within Raymond James. When you look at the asset mix of Raymond James Investment Management, and we look at the CAGR of the overall advisory accounts and even Private Client Group, with Raymond James Investment Management, because such a high percentage of the total assets are in fixed income, they haven't -- RJIM has not benefited from that equity markets tailwind that we've seen over the last 5 to 10 years. So the CAGR has been a little bit slower than it has been overall for the Asset Management segment. So for Raymond James Investment Management, the value proposition for financial advisers internally as well as externally, who choose to utilize our portfolios with their clients, we have had consistently good performance across a variety of portfolios. So we are winning business externally as well as winning business internally. I think you saw on the prior slide, the division between institutional and what we call intermediary is about 50-50, and that mix has continued. So it's a diversified mix of portfolio managers that complement one another, and we offer higher touch service than some of the larger Asset Management firms out there, easier access for our advisers and easier access for some of the third-party advisers who choose to utilize Raymond James Investment Management for their clients' portfolios. So to recap, the primary driver of our growth in the Asset Management segment has been the Private Client Group within Raymond James, no surprise. So strong collaboration with Tash and the team. We're continuing to expand product breadth and leveraging the direct indexing capability, leveraging the tax overlay capabilities that we have to meet those needs of advisers, and their clients and that multi-boutique structure that I described for Raymond James Investment Management has really served us well in terms of accessing different advisers, different firms and being appealing to different segments of their businesses. So with that, I'm going to invite Tash to come back up with me, and we'll start the first Q&A.

So question on the RIA platform. So seeing remarkable growth it's a newer space for RayJay. So -- and it comes with thinner yields on the client assets. Why is that not part of the operating leverage sort of struggles that we've seen here more recently as that's grown and needed some investment? Is there a tipping point that we're going to be approaching with that business as it scales? And are we getting to that level where we start to then start to see more leverage, and what's the right way to think about scale in that business?

Yes. It's a terrific question. And as you think back to one of the charts I showed, obviously, where we look at the recruiting across affiliations, we look at the asset growth across affiliations. The RIA and custody has been our fastest-growing over the past 5 years. Some percentage of that has been internal movement as part of adviser choice, and that's something we celebrate because far better for us to be able to retain it even at differentiated margins than it would be to see those advisers and those assets go externally. And then a significant percentage of the growth within RCS is obviously our ability to compete externally and to be able to attract assets. And in terms of a tipping point in terms of do we hit scale at some point and so forth, it's a great question. As we look at RCS, while it's our fastest-growing, it's still the smallest of the affiliations. And so I still think we're several years off from that. Devin?

Devin Ryan, Citizens. We zoom out and think about financial advisers over decades. They've always been pretty resilient group, and how do you evolve their businesses and what they do for clients pretty dramatically if you go back 20, 30 years, obviously, a lot of focus today is on artificial intelligence and what technology is going to enable them to do versus what could be disintermediated from what they do, and can they charge for that? As you look out over the next decade, how do you think advisers are going to have to adapt with technology? And I think my view is you could kind of flip it on the other side and say, the technology is going to enable them to cover a lot more clients, manage more assets. They're going to have to do a lot more. Maybe they're helping navigate what are the better AI tools to help advisers -- help clients with, but how are you guys thinking about kind of -- because the pace of change is so dramatic right now? And then also, you talk to clients, the clients of the advisers. And why are they going to continue to want to pay for that personalized service in the future when maybe some of these things could be done with an agent or could be done by going to ChatGPT or other tools from AI?

Sure. Yes. So a lot of great things to unpack there, Devin. I'm happy to chat about that. I would love to hear Scott's thoughts as well. And my first thought in response to that would be to agree with you and that as we look back over the past many decades, there's been adaptation and there's been competition. And I think back even when I first started in the profession when arguably, if we oversimplify it, for many advisers and really stock brokers at that time, the competitive advantage was access to just information. Somebody even wanted something as fundamental as a real-time stock quote, they had to call an adviser. Obviously, the Internet changed that. We saw disruption. Advisers evolved their value add to then focus more on Investment Management, asset allocation. You saw the next evolution in iteration into financial planning and now it's private wealth, et cetera. And so with each additional evolution in technology, and I don't say that in any way to diminish how revolutionary these changes may now be, we've seen the industry, the firm and advisers adapt. And as you look forward, and I think we've all seen the data from the likes of Cerulli and McKinsey and others that suggest that over the next 10 years, there could be a shortage of as many of 100,000 advisers in the industry. And that shortage, if accurate, as forecasted, is a combination of both adviser demographics and retirements, coupled with forecasted growing demand for wealth and advice. And so against that backdrop, what really excites me as I look ahead is how we can leverage technology, how we can leverage AI to help advisers deliver more complex advice to more clients than ever before against that backdrop. And to that end, I heard a quote a few weeks ago, which was that AI won't take your job, someone that knows how to use AI will take your job. And in the extension of that being AI won't replace financial advisers, financial advisers that use AI will replace financial advisers. And I really believe that's the future state in that financial advisers that are AI-empowered are going to have more capacity to double down on what we heard Paul Shoukry described a moment ago, which is that power of personal. And while there will always be some segment of the investment space that value self-service or omnichannel in some way, we believe that there's not only a persistent need and a persistent value for advice, but that there will be a persistent need and value for human advice, even as that human advice becomes more AI-enabled.

I think that's well said, Tash, and I would provide an analogy perhaps regarding tax preparation, and you think about all the ways that people could do it themselves today using TurboTax and other online tools to do their own taxes and yet the majority of people still choose to rely on competent professional tax preparer to do their taxes. And the complete picture of wealth management for any client is significantly more complex than simply having your taxes done. So I think Tash's point is a good one. Those clients who have successful businesses executives, corporate executives, doctors, accountants, et cetera, the likelihood that they're going to choose to leverage a tool, an online tool or a tool that's on their phone to manage their complete wealth picture. I'm skeptical that that's what people are going to turn to when they're busy, and they want to utilize their free time to do things they enjoy rather than focusing on something like that. So I think we remain both optimistic of the future of our business, but for financial advisers, it's the competent financial advisers who will succeed and those who are not as competent, not working with clients with the more complex situations. I think over time, those people will struggle as they get tested against AI tools where any client could ask an AI agent, plus you, an AI agent, how is this advice for me given my situation. And so I think you're going to have to be able to hold up well against what those tests are or explain why there's a difference.

I actually had a question around the Asset Management business. Scott, this one's for you. So the growth in Asset Management Services, to your point, has been pretty impressive. So I wanted to double-click on a couple of things there. One, the 27% of total, and you mentioned, obviously, a lot of runway for growth there. What do you think is the proper benchmark that you look across the industry that you hope to get to in terms of like total client assets where that could go? Second is, you mentioned modernizing price. Can you just speak to what that means high or lower? And what kind of competitors are you looking at? And third, I think you also mentioned allowing third-party managers participate more in that solution suite. So I'm just kind of thinking through like what are the monetization economics through which you guys could further drive this business?

Yes. So maybe let me take one of those, and then remind me which one I forgot to answer because you asked a few of those. When it comes to pricing, I think it's a couple of things. One, we're focused on how competitive is our pricing for the ultimate client. And are we lining up well against what other firms are showing clients? So if we have a portfolio today that is -- I'm going to make up a number here, 25 basis points, but clients are able to access at another firm at 23 basis points, how do we -- or 22 basis points, how do we close that gap? What are the things that we can do? And what are the different levers that we can pull comprehensively across the firm? So that's just one example. And we have done a fair amount of analysis to date, and there are some opportunities for us to sharpen our pricing in the areas where we think we already have an advantage versus some others, we probably won't touch those, but there may be some where we, in fact, have to lower pricing. So then we have to look comprehensively across the organization, how do we do that and stay at least -- and stay economically neutral without disadvantaging clients or disadvantaging advisers? So that's an effort that we have underway right now. And the other one you were asking me about the portfolio manager?

Well, so just the benchmark, you said 27% of total client assets, lots of runway to go higher. If you look at your peers in the industry, what are some of the benchmarks that you would compare yourself to say that could go to 35%, 45%, 50%, like what's kind of the goalpost?

Yes, a really good question. So I mentioned that the new flows that are coming in are almost 40% that are going into the direct index portfolios and the tax overlay portfolios. So whereas those assets today are at 27% that are in managed portfolios, we see that number continuing to tick higher as more advisers when they have awareness of these other portfolios, they may elect to utilize -- it's almost like an outsourced CIO, utilize the professional institutional manager rather than continuing to do it themselves when they evaluate the amount of work that they're doing and the cost of doing it through a third party. There also is an opportunity potentially if we have full access to the advisers' portfolios that we could trade on behalf of the advisers and apply our own tax overlay on top of their portfolios, while at the same time, they can give us instructions on what trade. So they would be still acting with discretion, but we would be affecting trades on their behalf and potentially applying the tax overlay on top of it as well. That's also something that we're exploring.

Michael Cho, JPMorgan. Scott, just a follow-up on the Asset Management discussion just now. I think some of this you've touched on, but just on ETFs in general, I think you've made a couple of senior hires over the last 9 to 12 months in the ETF business launched an active suite, not that long ago. I know, it's only a handful of strategies out there, but just kind of curious what you're thinking longer term as you think about ETF business, the active ETF business and where your hands at in terms of...

Thank you, Michael. We've launched 3 income-oriented ETFs actively managed. And I would say they're off to a really good start. And so now we're looking at what are the other areas where we have mutual funds today. We're going to do a conversion of one of our mutual funds to an ETF that's underway right now. And we're also looking at what are the other areas where we should either establish ETFs or if we have existing funds, existing managers who are popular, creating an ETF that's not a clone, but an ETF that would, from the adviser's perspective, leverage the background, leverage the track record of those managers. So it is something that we think is a real opportunity and almost a must-have of a direction that we need to go in the Investment Management space to launch more of the ETFs and recognizing that the mutual funds business surprisingly, we're still getting net positive inflows. When you look across the landscape in the industry, mutual funds for years have been in net outflow. But for us, this year, we're actually still positive in terms of net inflow. But we don't think that's going to go on forever. So we're being really mindful about identifying where should we see new ETFs and get those going, the transition of one of the mutual funds over to an ETF is the first one that we're doing, and we'll have other subsequent ETFs coming. That's where the growth is.

Mike Cyprys, Morgan Stanley. A question for each of you. Scott, you mentioned expanding the managed portfolios. How broad-based are the platform -- or the portfolios today? When you look at the platform, you mentioned expanding the number. How many do you plan to add? Or what's your sort of vision for that? How do you see that evolving? And then Tash, I think you mentioned $50 million in the first year of the program for succession. Can you speak to how you see that scaling and ramping over the next couple of years? How big could this get over time? And what are the types of advisers that this is resonating with most?

Sure. Yes. So Michael, thank you for the question. So on the separately managed accounts platform today, we have well over 100 portfolios. And what we've said is we want to double the number of portfolios on the platform. Each of the portfolios that are on the platform today are researched and recommended by our team. And what Doug has challenged the team with is, let's move more in the direction of how we've approached ETFs and mutual funds at the firm where we have a recommended list, but then we have a much broader platform. So let's expand the platform and provide some level of due diligence on the products or the investment solutions that are available on the platform, but continue to have a recommended list consistent with what we have on ETFs and mutual funds, but also a broader platform so that advisers can elect to utilize whichever one of those SMA portfolios they choose rather than I would say, limiting it to what we have real strong conviction about. And when we've had conversations with advisers about moving in that direction, it's music to their ears. So they're happy to hear that, but it's a decent amount of work to move in that direction and decide, which of the asset classes where we want to add more options, and that's underway right now, but I think that will be -- that expansion will occur over the coming months. It's not going to happen all at once, but we'll just continue to add the portfolios and continue to fill out what's available on the platform.

And on the practice capital topic, and I appreciate the question there, too. As I described in my remarks, having just launched Practice Capital Solutions this past year, we've already committed $50 million in capital, and we've been very flattered by the overwhelming interest that we've seen from advisers in this space. And given Raymond James' ability to step in and be a trusted provider and source of capital, versus having to go outside to private equity or any other source of capital, the interest and the demand for this internally has been incredibly flattering. And so as we look forward, we're continuing to staff up the team from a consulting standpoint to ensure that we have the scale of expertise to be able to continue to facilitate those conversations with advisers, whether it's succession capital or growth capital. And then as you think about the $50 million already committed, and where do we go from here? I think we have opportunities in the coming years, plural, to see that exponentially grow as we continue to be really thoughtful about how we deploy capital to both retained advisers, but also help advisers continue to scale and grow.

Others, yes, Michael.

Just one for Tash. Just on one of the slides on the recruitment trends, I think it was recruited production over the last 12 months. The part that stuck out was last year, the independent broker-dealer contribution, the recruitment efforts jumped quite a bit. I mean, I guess, we can all guess at what's happening in the industry, but kind of curious to hear in your words, and your view of what really drove that? How much of that was, I guess, "sustainable," and how is that mix trended midyear through this fiscal year as well?

Yes. It's a great question, Michael. And as we look at the most recent year, you're absolutely right that as we look at recruiting contributions across the affiliations, we've seen a really strong contribution on the independent contractor side, and that's not to suggest in any way that the employee channel hasn't seen really strong interest and growth itself because it has. And I think what this really speaks to is the importance of taking a step back and looking more broadly at our recruiting success over a period of years. And thinking about it in that context of, as I described earlier, recruiting is always event-driven. And we see some firms come in and out of recruiting whereas at Raymond James, it's a persistent committed activity on our part. And so there's always going to be events that may drive the employee channel ahead 1 year, the independent channel ahead the other. But when we reflect on the sourcing of these joints, these affiliations, it's not just any one event. And it's not just any one firm or any one opportunity, but it's much broader, and we think it's much more durable and much more persistent. And so we'll celebrate the opportunities as we're able to take advantage of them, but more so, it's that ongoing year in, year out commitment to recruiting is what really drives so much of the success because it's not something you can be in and out of opportunistically. You have a question on the front.

Ben Budish from Barclays. Scott, I think in your prepared remarks, you were talking about direct indexing, tax optimization strategies. A big topic of discussion, some of your competitors as well where you read the press, it's growing so quickly that they're pumping the brakes. How big is that for you today? How are you thinking about how much balance sheet capacity you're willing to allocate? What do the economics look like to Raymond James, all that would be helpful.

Yes. I -- from a balance sheet perspective, I don't -- as I think about -- because these are typically third-party managers where we have our own tax overlay on the internal managers. So not much in the way of balance sheet impact, and something about the other part of your question was just how much more do we think that can grow? I think it can grow pretty considerably. If you think about a client who is in a taxable account, if you can have a tax overlay that minimizes your tax bill that's due at the end of the year. If you can have an overlay that costs you 10 basis points or potentially less versus having a portfolio that is not tax optimized. if I'm the client and the benefit is greater than 10 basis points or greater than whatever the cost is then sign me up for that. I'd rather have that. So I think we're still in very early days of tax optimization. And the popularity has grown pretty considerably in the last few years with Raymond James financial advisers. And so we -- as many education sessions as we do, the advisers talk -- the advisers speak with each other. And if someone's having a great experience with a certain portfolio or a certain portfolio manager, they're going to tell their friends, here's what I'm using with my clients. The clients are loving it. Here's what the after-tax returns looked like in the most recent period, and they tend to sell themselves. So I think the utilization is going to continue to grow. And as I said, with this -- that 27% penetration of managed assets versus non-managed, I think there's still a lot of upside. Yes, Brennan, I can repeat it rather than wait.

Brennan Hawken. You hear a lot about recruiting intensity competition. And I was thinking about and reflecting as you guys were making some comments about that, some of the things that we heard from Paul to open up your approach over time, watching folks make mistakes, not straying from the culture. So when you think about what's going on today, where is the level of competition in your opinion versus history? And what do you think that we're basically seeing, yes?

A bit long question, yes.

You got all that, Scott. I'll start over. Brennan, I can be. So on recruiting, there's been a lot of aggression. A lot of people have talked about aggression. And we heard Paul weave in some of the comments about how you guys like to take the long view and watch other make mistakes. Are you seeing that? Do you think that the recruiting intensity has gotten to the point where people are making mistakes at this stage that could lead to opportunities down the road? How are you thinking about it in your positioning in the market? Tash, you spoke to the fact that you can't ever fully exit, right? So how are you trying to manage those different, sometimes counterbalancing factors?

Yes. So a lot of, I think, terrific points there, Brennan, and I'll try to touch on as many of those as I can. I would first note that with recruiting, they are both push factors and there's pull factors. And I think we've spoken quite a bit this afternoon, based on your questions and our responses about the push factors, those macro and micro events that inevitably happen year after year, but the pull factors are a really important part of this as well because the push means the adviser may be choosing a new home, the pull really determines who and where do they choose. And that's where the Raymond James value proposition becomes so critical, whereas for advisers that are very short-term oriented, they're focused on maximizing money in pocket day 1, dollar 1. That's not Raymond James. And while we're very fair, and we're competitive in our transition assistance, we're focused on advisers that have a much longer-term orientation that are most notably client-centric and they think long term about their practice. And that helps insulate us from some of these peak periods of over aggression in recruiting. And there are firms that 16 years into this bull market from a recruiting standpoint, from a TA standpoint, they are pricing those deals and pricing their business for perfection, if you will. And I've got enough gray here and lack of here in this room to know that never do the markets remain perfect. And that's why we take such a thoughtful approach to not only who do we invite to join the firm, but how are we deploying capital in that regard as well. And we see from one benchmarking study after another that Raymond James is rarely ever the highest deal, and we don't aspire to be. What we aspire to be as the best partner for clients and growth-oriented advisers that want to be fairly compensated long term. And that provides, again, a good degree of protection for us as cycle. [Break]

Okay, everyone. We're going to go ahead and kick things off again. All right. To kick off kind of our second session of the day. Pleased to welcome Jim Bunn. He is currently the President of Capital Markets and Advisory here at the firm. And previous to that, he was President of Global Equities and Investment Banking. Please join me in welcoming Jim Bunn.

Thanks, everybody, for being here. Really appreciate it and the opportunity to talk about our capital markets business. Let me just start by giving you a bit of perspective on who we are and how we compete, how we define ourselves in the market. So start with full-service platform. I'd like to think of us as having all the capabilities of a much larger firm. So think of JPMorgan, Bank of America, Goldman Sachs, but from a product perspective, but very much focused on middle-market companies. So we advise on M&A, sell-side and buy-side. We have equity and debt capital markets capabilities. We've got a very broad equity and bond trading capabilities. We have one of the best, arguably, the best small and mid-cap equity research platforms. I'm looking at Brian Alexander, who's our Director of Research and the audience here, who leads arguably the best small and mid-caps, mid-cap research platform in the Street, which is the epicenter of around which a lot of our business is orbit, but very much focused on mid-cap companies, and we support them in a broad range of ways we lead with advice and high-touch service. Very different from some of those other firms I mentioned. We don't lead with balance sheet. We don't lead with brand. Everything we do is very, very personally delivered, every banker, every research analyst, every salesperson, every trader, we hire. We're not hiring people to "deliver" the platform. We're hiring and looking for people who have relationships, deep expertise either in a sector or in a product and are driving business independently and on their own, irrespective of sort of the platform. That's how we compete, and that's the type of people we look for. We're successful in large part because I think we have a really unique culture, it's very entrepreneurial. We're big believers in hire really good people, point them in the right direction, let them do their thing, let them be successful. And I think that's the type of environment, a lot of people we seek to thrive in and people seek out, and a result of that, or in the lower right there, our retention among senior preproducers and all of our businesses have been pretty remarkable over the years, track record of retention. It's a very meritocratic culture. I'm probably a good example of that. There's a lot of people you meet at Raymond James who've been here 30, 40 years. They spent their whole career here because of these reasons. It's also a place where people can come and realize success and advancing their careers very quickly. We have a very strong track record of people join us, either through acquisition or hiring organically, proving themselves and being elevated in the organization, and taking on leadership positions very quickly. So it truly is a meritocratic culture, and it's very collaborative. Almost everything we do involves bankers, salespeople, traders, research analysts working across boundaries, across business units to drive success and ultimately deliver the firm for the clients. So a great example of that in the context of our capital markets business is what we're doing in the depositories or bank space. We're taking a tremendous amount of share. We're coming on very strong and that we have a couple of competitors, Sandler and KBW who are ahead of us. But since we brought our fixed income and equities and investment banking businesses together, leveraging relationships, both had great relationships with small and mid-cap banks. We're now sharing those relationships, are collaborating around those relationships. So I'm hearing all the time from those competitors that, geez, you guys are showing up a lot more effectively, a lot more often than we used to see you, and that's that collaboration, really driving the success of that business. We've got a growth focus. People like to be a part of a growing business. We've grown our M&A business, in particular, a 17% compounded annual growth rate over years. That's pretty hard to do. That's a pretty strong growth rate over that period of time. People are excited to be a part of something that's growing, that's taking share, that's having success, and we're -- I think we're only getting started in that respect. We have, as part of our long-range plan for the Board, I've defined a goal to grow our $1.8 billion of revenues to $3 billion. That's one goal. And with a higher-level goal, people hear me talk about them a big believer of big hairy audacious goals. I have a goal to grow our capital markets business to $5 billion of revenue. So people are excited and energized to be part of the business that's growing, that's moving forward. And so within the context of fitting nicely and really strongly within the broader ecosystem of the other Raymond James businesses, the Private Client Group, Raymond James Bank. Paul Shoukry talked about this a little bit before, but I'm going to touch on it, particularly as it relates to capital markets. If you look at that intersection from the top of the Private Client Group to capital markets, we do this better than anybody on the street. This is part of the secret sauce that makes Raymond James really successful, both in private client and in the capital markets business. A big part of that is the referrals going both ways. We have probably 15%-ish of our deal flow comes from financial advisers referring business opportunities to bankers. We also do a really great job of directing wealth capture opportunities when we're selling a company to sell a lot of private businesses. At times, those entrepreneurs, those individuals, those executives come into wealth, we can capture those assets within the Private Client Group. And that 2-way flow between capital markets and the Private Client Group is really sticky and drives retention in both respects. From the adviser's perspective, they're thrilled to be part of a firm for who middle-market business, middle-market corporations or the core client base. If you're an adviser at Morgan Stanley is a great business, but their investment bankers don't get out of bed for something that's less than $1 billion in value. Well, most financial advisers don't own businesses don't have clients that own billion-dollar businesses. They have they have clients that own $100 million, $200 million, $300 million businesses. That's very much right down the middle of the fairway and the sweet spot for us. And so that strong connection between the advisers' practices and the investment banking practice drives FA retention. From an investment banker's perspective, it's great because that's sort of the cherry on top of being here. If you're an investment banker at Raymond James, you're -- we're still looking to you to go out and find your own deals, but you probably get one extra deal opportunity a year that comes your way because of that relationship with the private client group and financial advisers, and that creates really sticky relationships for ourselves with our bankers. We also work really closely with the bank. There's sort of 2 thrusts to that. The bank is a strong supporter of on their own, some of our institutional clients, predominantly within the real estate, the bank tends to lend to larger companies. They do a lot of real estate lending. So within our real estate investment banking practice, long-standing very successful practice here. There's a big chunk of those clients that work closely with Raymond James Bank where Raymond James Bank as a lender and that drives a reciprocal relationship. But we also expanded that a couple of years ago now to allow us to leverage that capability into private equity relationships. We formed a joint venture with Eldridge Group, a big credit investment management firm, to form a joint venture to be able to allow us to provide capital in support of our investment banking business to those private equity-backed companies where we have a role. So that's been a really close partnership. Again, that's unique capability that our other competitors in the middle market don't have. Other -- the JPMorgan to the world are very frequently lending their private equity clients, our middle market competitors are not. So our ability to commit capital in certain instances where we're involved in a transaction is really unique differentiator and empowered by the partnership we have with Raymond James Bank. This is sort of a functional look at how our revenues are broken out. I'll come on the next slide to more of an actual as the business organized. But M&A advisory, about 35% of our revenue, $600-ish million of revenue. Last year is our largest source of revenue. Fixed income brokerage fixed income sales and trading, 22%, about $400 million, $450 million of revenue for us. Debt underwriting includes both our public finance business, our structured products business coming out of fixed income business as well as traditional debt capital markets. That's our third largest business, $250 million to $275 million, and you can see how the rest breaks down. From an operational standpoint, this is how we organize the business. So I think about the business as having 4 primary businesses. Investment banking M&A advisory, equity and debt capital markets, our equities business, fixed income, which encompasses fixed income capital markets, and our public finance business, and then affordable housing investments. And I'll talk a little bit more about each of those. And then RJ. RJ is our Canadian business that operates sort of many of these businesses, self-contained, up within the Canadian markets. That's a real strong growing business. Within investment banking, M&A, we work mostly with private companies, and those can be true private, meaning founder-entrepreneur-owned or private equity-owned. That combination of ownership probably represents about 85% of our clients that we work with are private or private equity owned, about 15% is public company work. The math behind how that business works is fairly simple. Number of revenue-producing MDs, times average -- times MD productivity drives your revenue. So we're very focused on driving both of those metrics. You'll see the growth we've had in a number of managing directors. Our productivity driven by our average fee size has increased quite a bit. You can see on the side there, key metrics, our average deal size and fee. These metrics look pretty dramatically different than they did just 5 or 6 years ago. I'd say 5 or 6 years ago, our average sell-side M&A deal size was about $100 million. Today, that's 250 plus. Our average sell-side M&A fee has exceeded $3 million in each of the last 3 years. It was about $1.1 million pre-COVID. So those met the platform is elevated quite a bit in terms of the size of transactions that we're working on. On the equity side, we have 50 research analysts, 330 total professionals, about 65 salespeople, almost 20 traders. We cover about 900 companies in equity research. And the real drivers of this business are research quality. We get paid for having good research. I said earlier, we think we have the best corporate access that we provide conferences. We have some of that -- we have our hallmark IIC conference in Orlando Institutional Investor Conference is one of the best conferences in the industry, and then we have a lot of smaller symposiums and sector-specific conferences throughout the year, and we've been increasing the breadth and depth of products that we offer. Within depositories, we have the largest sales force in the middle market. There's not a lot of things that you can say in any business, particularly ours that we're #1 at. There's 2 things on this page, I could say we are, in fact, the best at amongst our peer group. In fixed income capital markets led by Horace Carter, who's sitting back there somewhere where we are #1 amongst our peer group that is back in the corner, #1 amongst our peer group in terms of revenues, number of salespeople, number of traders productivity. We are the market leaders in middle market fixed income capital markets, that's a fantastic business. And public finance, we're coming on strong. That's been a real growth driver for us. We have 180 people total, 78 MDs. It's really a subset almost of investment banking, but instead of focusing on corporate clients, focusing on state local government municipalities. The drivers of that business tend to be the same in terms of number of MDs and productivity, but it has some additional sensitivities that factor into the activity levels of that business. It's probably a more interest rate-sensitive business in terms of issuance than some of other businesses, and state and local government spending dynamics can also have a big driver on that business. But that business has been on a really nice growth run. We've added a lot of good people over that business. And it's extremely synergistic with other parts of our business. As you can imagine, retail clients of the firm are big buyers of munis, which this group distributes as our banks, our fixed income sales force, their largest client segment is banks. Banks are big consumers of municipal issuance. So there's a real strong network effect and synergy there that drive success. The other business we're #1 is the affordable housing investments. We're the #1 syndicator of tax credits associated with affordable housing developments. It's not a massive market, so it's a harder business to sort of double or triple that business, but we do have opportunities and are taking advantage of opportunities to extend those capabilities into other markets where similar tax credit opportunities exist for companies to get tax offsets for investments. Renewable energy is one of those examples. We acquired a firm last year that has a strong presence in the renewable energy space, leveraging the systems, the infrastructure, the processes we applied to affordable housing into the renewable energy market, and that's a key growth engine of that business. Our revenues have been -- it's -- I love to -- I'm quite envious when I hear, Tosh, for example, talk about percentages of recurring revenue in his business. We don't have any of that recurring revenue. I'd love to have some or figure out how to get some, but we kind of start at 0 every year. And our business tends to ebb and flow with the markets a little bit. We try to outperform the market. We try to outperform our peers. We've grown revenues over a 5-year time frame and a 6.5% CAGR. If you roll that back to the year before COVID, it's closer to a 10% CAGR over a 6-year time frame. Our margins, not as consistent as I would like them to be, I'd say, almost none of those margins see to the left of the dotted line that are really reflective of sort of what I think of as a steady state 2021, '22, extraordinarily high productivity, coupled with very low business development, travel costs produced outstanding margins. As we came off that, we have -- there's a lot of operating leverage and inverse operating leverage in our business where we can't reduce comp and expenses as fast as revenues might fall in an environment like we find ourselves. So we've been sort of crawling back from a margin perspective to 12.5% through the first half of last year, about 12% in the full year last year, 7.1% in the first half of this year. We had a weak margin quarter in the first quarter. That was a tough quarter. We had some revenues that sort of got pulled from our December quarter into our September quarter. Sort of weakened that quarter a bit artificially. The March quarter, I think, is more reflective of a steady state where the business is. The margins, if you look more granularly at our margins, the fixed income business is a fairly steady margin business. The GEIB or Global Equities Investment Banking, that's where you have more margin volatility. But we need to drive. There's a tremendous amount of operating leverage in that with a little bit of tailwind from a middle market M&A perspective, and a stronger ECM environment, which we're thankfully starting to see a little bit in the second half here. This is a 15% plus margin business. We need a little bit of tailwinds to start to see that, and we are seeing. We do see it in months. If I look back in 5 of the last 12 months in the capital markets business, our margins have been mid-teens or better. In 3 of those months, our margins approached or exceeded 20%, but we get hurt in those months where activity is slow. When launch of war in Iran and everything sort of grinds to a halt, and that stuff kills us. We need some stability in market environment and a little bit of deal tailwinds to drive to that mid-teens margin that we target and expect. So how are we growing? Handful of things that sort of underpin our strategy. Recruiting and acquiring to deepen and expand our footprint within investment banking and capabilities. I tend to often view recruiting and acquisitions a little bit fungibly. A lot of things we do, we could be -- we're evaluating organic builds versus an opportunity to acquire to establish or enhance our presence in a certain sector at a capability. So we view those things a bit interchangeably and often are evaluating them in parallel. Growing our capabilities across the fixed income business, the GreensLedge acquisition is a perfect example of that. We had a world-class structured products trading business, trading and you talked about securitization in the secondary market, we did very little origination. Well, origination and secondary trading naturally fit together. The more you have one, you can sort of win the other and they feed off of each other, but we didn't have a real organized effort or team originating structured products. GreensLedge. On the other hand, we're world-class at originating structured products and securitizations. They didn't have much of a distribution engine. We had actually used us as a distribution partner on a lot of their CLOs. So by marrying those two, we think we bring an end-to-end capability, and both businesses can grow and even be more successful. And we're already seeing that. It's early days. We're a few months post-close, but they're performing very strongly. And importantly, we're seeing a lot of synergy between the GreensLedge team outside of the fixed income business, but with our investment banking clients, many of whom undertake securitizations, just not with us. We never had that capability to go talk to them about it. We do now, and we're starting to win some business with the GreensLedge team working with our investment bankers. Equities is all about leveraging the research team and the investment we have there as broadly as possible. So over the last several years, we've been adding several new products such as electronic trading, a mini prime service allowing us to provide a form of prime brokerage without using our own balance sheet, program trading, all of these things contribute very high incremental margins, often sold into the same clients that we're doing our traditional high-touch trading with, but carrying a high incremental margin on that revenue, and that's been a very successful part of that strategy. We've been taking share in the equities business faster than any of our direct competitors and moving up the big tables quite a bit over the last several years. And together, that scaling some of the recently acquired businesses, track in the renewable space and GreensLedge as I was talking about. To drill a little bit deeper into that. On the investment banking front, we have -- I'd sort of separated into more established and mature practices on the left side of the page and newer or less mature practices on the right. We have opportunities to grow in both. We just think about them a little bit differently. We have a pretty strong presence in consumer financials, industrials, tech Europe, but there are still opportunities to go deeper. Last year, industrials for the first time in our recent history was our largest contributor to investment banking revenues, but we still have opportunities to grow that, just to pick an example, take a sector like chemicals or packaging. Several years ago, we didn't have any presence in that sector. Now we have a presence, maybe a single managing director, best-in-class in that -- one of those sectors might look like 3 or 4 managing directors covering those sectors. So that's where the opportunities come to go deeper and grow our market share. And then there are newer, less mature practices like debt advisory, biotech, private placements is a capability we just added last year that we have opportunities to grow from a very small base to $100-plus million businesses. One we're really excited about, we just launched an ESOP advisory practice this year. That's advising private business owners on undertaking an ESOP formation as an alternative to a traditional sale of the company, that natural fit with financial adviser relationships. They have a lot of their business owners are very open to thinking about an ESOP structure as an alternative to a traditional M&A transaction. We hired a banker and a team to start that practice earlier this year, and their phones are ringing off the hook as we sort of advertise that capability to the -- within the PCG and financial advisor network. So revenues, we grew a lot, '20 to '22. We topped $1 billion in investment banking revenues, took a step back, and then sort of resumed that nice growth trajectory, been adding managing directors pretty consistently. Again, that's close to a 10% CAGR in MDs if you roll it back a little bit before 2020. But what really makes me excited and optimistic about how we can perform if we have just a little bit of tailwinds in some of our businesses is we have 40% more managing directors than we had going into the COVID '21, '22 time frame, and where we did $1 billion of revenue. So -- and I'd say our average quality of managing director average productivity is much higher. So if we just get a little bit of tailwind, I'm super excited to see what we do with 150 managing directors as compared to the 100 we have when we did that $1 billion of revenue a couple of years ago. So that's what gets me really excited about growth opportunities that we're going to see when the markets -- as the markets start to become more favorable to us. We're growing our fixed income and equities products pretty broadly. I mentioned the GreensLedge. That's been the perfect example of that of expanding that business electronic trading, some -- that applies to both businesses. The SumRidge business we acquired a few years ago was sort of pioneering in our middle-market fixed-income space. And then we organically built an electronic trading product in the equities business. That's grown tenfold over the last few years. Program trading, a good example of a capability that leverages a lot of our research-driven equity sales relationships to drive incremental revenue. And then an opportunity we're looking at now is within the fixed income business, we're really strong in depositories. We're really strong in munis. We're not as strong in an area like yield or spread-based products. Often traded with asset managers, hedge funds, that's a bit of a gap for us and one we would seek to address as we move forward, an opportunity to grow into some of the white space that exists in our fixed income business. So to recap a bit. We think we have very much a full-service investment banking business and institutional trading platform, but it's not built on leveraging balance sheet. It's built on advice, very high-touch service, continuing to add to that. Growing and scaling our existing business, adding new talent, going to continue. We expect to be active on the acquisition front. And it really -- the business really fits and operates very effectively within the broader Raymond James ecosystem, particularly with the private client group and our partners at Raymond James Bank.

Next up, I want to introduce Steve Raney. Steve oversees the firm's Bank segment and serves as Executive Chairman of Raymond James Bank and also sits on the Board at TriState Capital Bank. Please welcome Steve Raney.

Thank you, Kristie. Great to see everybody. I see a lot of friendly faces in the room and a lot of folks that have covered us for a long time. So we really appreciate your strong interest in Raymond James. One of the things that we probably take the most pride in, and take with a great deal of seriousness is the level of capital that is invested in the Bank segment, we have a little over 40% of the firm's equity invested in the bank, and we have a preponderance of the risk that needs to be managed in the bank, and we take great pride in how we oversee that risk. And that's probably the thing that we're most proud of. But the thing that we've probably been also working on over the last decade plus is the integration with the rest of the Raymond James businesses, and you've already heard Tash, and Scott and Jim referenced that to a great deal. And those integrations with how we can really bring to bear the full capabilities of Raymond James to our clients, both institutional as well as clients of our Private Client Group business has been a big focus for us. So that's really been where our primary responsibilities lie and biggest focus. But I know you're going to hear get some financial updates from Butch later on. But just real quickly, as of March, about almost $70 billion of the total, $92 billion of total assets in Raymond James reside inside of the two banks. And of that, almost $70 billion, about $55 billion of that is loans at the two banks, and we'll get into some of the details along those lines. You've heard Paul earlier in his intro, talk about the strong growth rates in our private client banking. That's been a big focus, both securities-based lending as well as our residential mortgage business and continued penetration of advisers using those private client banking programs that we've introduced over the last few years. Continue to have a resilient net interest margin that we'll get into a little bit, and I mentioned earlier our diligence around credit and the selection around the types of loans we're making that's resulting in a very low level of nonperforming loans. So that's produced over the last few years, a nice growth rate in revenues as well as pretax profits that we're very proud of, and on a good trajectory. I would highlight on the far right, the pretax income, in particular, over the last year, is benefiting greatly from this strong credit performance. We've really been able to grow in these lower-risk asset categories in our lending book that don't require a lot of reserves, and that's resulted in even better credit performance, and therefore, lower provision expense and credit charges over the last couple of years that's produced even higher profitability for the bank segment. I mentioned the growth rate in loans. We did benefit, as you know, next week, we're going to celebrate 4-year anniversary since we combined forces and TriState became part of the Raymond James family. So they -- when we -- they became part of the family 4 years ago. They were around $15 billion in assets and they're now about $24 billion and about $20 billion in loans, and that's contributed nicely to and diversified our loan book as well. And I mentioned the resilient net interest margins that we've enjoyed. You see a little bit of a track record here historically going back to fiscal 2020 in a much different rate environment. I know you've seen this slide already, but it's something that we are all kind of joined arm and arm together. So we're completely aligned in terms of trying to bring the entire firm to bear for our client base and a lot of the loans that we get the benefit of are coming from Jim Bunn's investment banking business. A lot of them are coming out of the Private Client Group business, and we'll talk a little bit about what we've seen in terms of the growth rate that's contributed to TriState as well. So we've got this very nice favorable asset mix that we've been talking about for some time now. You see now a breakdown of the almost $70 billion in assets as of March 31. So private banking loans now make up $34 billion of -- so roughly half the bank's balance sheet is in private banking loans as well as we've got very low risk, securities with low duration as well. And so I feel very good about the asset mix and the risk management practices that have built that. And just a little bit more breakdown on the loan portfolio now, we're at now 62% of the portfolio is in these lower-risk asset classes, securities-based loans at both banks, and then about $12 billion in residential mortgage loans that are at Raymond James Bank. So -- and we still have a very strong-performing corporate lending book and commercial banking business that's at TriState as well, many of which -- and you're going to see a continued increase of what types of commercial entities have a connection to other parts of the Raymond James organization going forward. So another thing that we're really proud of and part of the attractiveness of having TriState join our organization was the diversification of the deposit base and the funding sources that we've got. So if you look back, not even that long ago, just to a few years ago, we were very reliant on and almost exclusively funded with client cash balances, sweeps and otherwise, they were coming into at the time, Raymond James Bank. And we've done a lot of things to grow that business, but also diversify the funding and the TriState team in a more traditional way had several different levers and several different groups that were out raising deposits, something we call the national sales team that calls on large institutional depositors in a variety of different industries. They've got a great business there. And then they have a traditional commercial banking, treasury management platform where they're going out and seeking deposits and fee income, many of whom have a relationship with their commercial banking team and lending business. And then 3 years ago, a little over 3 years ago in March of 2023, we launched the enhanced savings program at Raymond James Bank now, and we're now a little over $13 billion in a brand-new deposit source, but it's coming from Raymond James clients where we're offering an attractive rate to garner that additional funding that's going to be necessary and an integral part of the growth story for the bank segment going forward. So in our value proposition, this is going to be consistent. I know you've seen this before, but just the bank's orientation that is completely aligned with the Raymond James service-first culture. So I'm very proud of how we face off with and with tremendous amount of great attitude and enthusiasm in terms of how we embrace dealing with these high-value clients of our Private Client Group and the 9,000 advisers that we do business through and with their clients ultimately. So -- and tremendous respect for those independent financial advisers. Even the employee advisers are very independent around Raymond James. And we have tremendous respect for how we interact with them and how we deal directly with their clients and make sure we're communicating effectively with those clients. And then we've continued to grow the solution set and the product offering over the years. We introduced what we called tailored lending a few years ago inside of Raymond James Bank that involves being able to do a more robust underwriting of a high net worth or ultra-high net worth client that may have some traditional assets, stocks and bonds and ETFs and mutual funds that are part of our traditional securities-based lending business, but they may have alternative investments or some less liquid assets, but they have the financial wherewithal that gives us comfort in how we go about underwriting that, and we're going to continue to see that product solution set evolve over time. So I just wanted to hit on some of the things that we're focused on going forward, continued expansion of securities-based lending at both banks support for the institutional clients in Raymond James, and you heard Jim's growth story, we want to be an integral part of that, and then continued laser focus on managing the credit risk in the portfolio. So some of the things we're doing on the SBL front -- we've -- in the last 9 months or so, we've added some additional banking consultants that are out in the geographies. There are 16 of those individuals inside of the Raymond James organization now assigned to a territory, calling directly on those adviser offices. We needed to have strong connectivity as we've grown the adviser base. We need to make sure we've got enough resources to manage all the communication and connectivity that we need to have with those advisers. Continued automation is an important element of this, having a look and feel of how the bank information appears on an adviser desktop as well as how the client sees the bank information relative to their mortgage loan, relative to the securities-based loan, and is it integrated in terms of statements and how they can gather their information. That's been a big focus of ours. And it's been part of the reason that we have such a large percentage of advisers that are now using the bank. And I mentioned the expansion of the SBL product solutions that's going to continue to evolve as well. So we've got a lot of opportunity, although we've had tremendous growth rates, there's still an opportunity because we have a relatively low percentage still of clients that with assets that are eligible to provide -- we are eligible to -- where we could provide liquidity against those assets, so we can continue to grow that particularly because we also are adding advisers inside of Raymond James. You've heard about the recruiting success. Virtually every adviser that joins Raymond James is bringing loan opportunities to us where -- from the firm that they're exiting. So we have a dedicated transition team to make sure that we handle those clients as they're moving over. And then also, similarly, at TriState, they've got a lot of wind at their back as well, the same dynamic that they're working with, with their third-party custodial firms that are attracting new advisers is driving their securities-based lending growth. So we now have over 22,000 advisers at these third-party custodial firms that TriState has a long-standing relationship with where they can -- where they're connected to what we call the digital lending platform, which is the securities-based lending technology platform that the TriState team uses. We've added over 1,000 advisers to that connection point that we were only at 21,000 at the beginning of the year. We're over 22,000 now. So you can see the opportunity for a lot of growth inside of the TriState organization as well. On the corporate lending front, there's a lot of things that we're doing with further integration with Jim's business, you heard him refer to the private credit venture that we announced a little -- about 18 months ago. Here in the next couple of weeks, we will close our sixth transaction as a result of that effort with Eldridge. It's about $220 million in total loans that have been extended. Once again, all of that, all 6 of those deals are directly attributable to referrals and us working with investment banking, where we've now got a much tighter relationship with the sponsor as well as making sure that we are getting all the M&A fees related to those transactions. So it's -- and also, I'd just say anecdotally, from a credit standpoint, Eldridge has proven to be a very good partner. They're very aligned with us in terms of how we view credits. So there's a lot of other opportunities inside of investment banking, the verticals that Jim referenced. Not all of them are completely compatible from a risk standpoint for RJ Bank, but many of the things that Jim's capital markets and advisory team is growing aligns perfectly with what we're doing at Raymond James Bank. And then you heard about the GreensLedge recent acquisition that provides CLO and securitization advisory work. We think that there's some opportunities to work alongside of them to be supportive of their clients, and as a result of that, we think that their business is going to grow quite nicely by having, in some examples, some ways to work with the bank along those lines. So talking about the strong credit metrics, you see here, part of this is asset mix related as the low-risk residential mortgage assets grow as well as securities-based lending. It's driven down our allowance to total loans. We feel like we've got very adequate reserves against the loan portfolio that we have, and a very low level of past dues. I mentioned our residential mortgage loan. We have a little over 13,000 residential mortgage loans from Raymond James clients. We have 8 past-due loans over 90 days right now. I think one of them is a dead guy. And I don't even think that's an excuse to miss your loan payments, but so anyway, we're very pleased with the results of that portfolio and continue to want to strongly support our clients with that residential offering. So just to recap, high-quality focus on our wealth and our client lending. We can -- we've got the capacity to further continue to support our institutional clients and a continued focus, we're now 62% of total loans in what we call private client banking. That trend has been as recently as maybe 1.5 years, 2 years ago, it was like 50%. We're on our way to increase that percentage even further.

Next up to review our technology is Andy Zolper. Andy is our Chief Information Officer and a role he's held for, I think, a little over a year or so, maybe 2 years, sorry. And before that, he was Chief Information Security Officer. So please welcome, Andy, to the stage.

Thank you, Kristie, and great to see everyone today. It certainly is a very exciting time to be working in technology, and we continue the very robust path of investment here at Raymond James, a 14% CAGR over the last 5 years. And we continue to deliver solutions to our advisers, to our bankers, to our product managers to all of our analysts, and their clients to make sure they have the capabilities they need to be successful. And certainly, we focus a ton of that attention on wealth management. And I'll talk about the competitive advantage that we feel we're generating with our technology platform here as I go through. But I think more so than how much we spend, it's making sure that we're spending that on the right things and really targeting that investment where it can make a difference. And so for us, as technologists, that starts with the same integrated view of the firm, as you've heard from a number of our business leaders. As technologists, making sure we have a really deep knowledge of our business areas and that we have very, very tight alignment to the business plans and strategies that you've heard from our leaders today. And that really starts with a very disciplined formal methodology to engage with our business areas and develop solutions for them based on what they need, what they're asking for, what we're capable of. And we pioneered this with our Private Client Group and we've now expanded this across all of our business areas, again, to make sure that what we deliver is fit for purpose and that we're maximizing the return on our technology investment. And if you think about the Private Client Group, certainly, we can't talk about that alignment and voice of the adviser, and its importance in delivering solutions without touching on our advisory councils. These are advisers who volunteer their time to help us identify opportunities, solve problems, pilot solutions, gather feedback, make improvements and plot out our prioritization for a fiscal year and doing that, not just representing their own voice, but representing the voice of all advisers and bringing that to the table for us so we can really make sure we're dialed in on what's more important. And today, we have our tech advisory counsel or TAC, representing our Chairman's Council Advisors, our strongest, most successful, most respected advisers, but also our next-generation counsel, representing those advisers, obviously, much earlier in their journey of growing their business. So this holistic picture really makes sure that what we're delivering is fine-tuned for those advisers. And our feeling is this turns into competitive advantage for us. And again, much like the story of Raymond James overall, we're big enough to have all the capabilities that we need. We have scale in people. We have scale in platforms. We have scale and capabilities, but we're also nimble, flexible joined at the hip with our business areas to make sure we're delivering what they need. And so certainly, again, when we look at the Private Client Group, that translates into the numbers. When we look at retention, when we look at recruiting, we hear from our advisers that the technology is making a difference, Cerulli in their recent broker-dealer marketplace study, the cited technology is the most frequently cited driver around decision-making in an adviser deciding on a firm to move to. In our own internal surveys, we see it in the top 3. So we know that, that's making a difference in moving the needle. And the feedback we get from advisers, again, is an integrated platform that has all the capabilities they need, including AI capabilities built into that. That makes a difference in how they deliver capabilities, solutions, great advice to their clients. I actually picked this is an unsolicited quote from a financial adviser, who recently joined Raymond James. We get these up, frankly, on an ongoing basis. I picked this one because I thought it was particularly appropriate for what I've just mentioned, "both the AI and the overall FA tool set within Raymond James is truly integrated, which saves us so much time throughout our day." During the home office recruiting visit, you demonstrated integration like the ability to right-click and send a note from trading, rebalancing or adviser mobile to RJ CRM. I was skeptical. Would I really be able to do it myself? And now I really can't. The integrations at RJ are real, and it follows how an adviser works, really impactful to us in the field, recent recruit just in the last 2 months. So when we get that kind of testimonial, we really know that we're hitting the mark in terms of what advisers need in terms of technology capabilities. So when we think about our technology road map, continue to deliver digitized low-friction efficient processes to support all of our producers in the firm, make sure all support areas are as efficient and accurate and fast as possible in supporting the firm, certainly make sure we're delivering on the promised adviser time, and today, as you can completely understand, scaling our AI capabilities and other automation capabilities to extend across the firm. I'll talk about some examples in just a minute. But undergirding all of that is making sure that our core platforms, our enterprise platforms are modern, up-to-date, are secure and highly performing. And probably none of those is more important than data. So I want to spend a little bit of time talking about data. You've probably heard the expression data is the new oil. And in fact, what a lot of the organizations are finding out today is that crude oil doesn't cut it. And this needs to be refined in order to be the fuel that's going to drive AI forward. And if you think about Alex Karp and the value proposition of Palantir, they talk about oncology, what's that, that's having the business context of your data and having that data being clean and structured and organized and defined. And that's really becoming the holy grail of enterprise AI deployment on proprietary data is you need that data in its proper order in order to be effective. Well, for us, we're a decade into delivery of an enterprise-scale data platform that's driving our Private Client Group business and all of the complementary businesses associated with that. So that data is structured, it's defined, it's mapped to business context and process. It's quality checked on an ongoing basis. So that platform is there. Today, that platform is driving our business applications. It's driving our advanced analytics use cases. It's driving our AI. It's a petabyte of data available, both on-prem and our native cloud implementations, and we're servicing 1 billion data requests every day from our platforms across business applications, analytics and AI and delivering that value today. So we definitely see that as a huge competitive advantage for us that our momentum in delivering capabilities is driven by this capability that we've previously invested in. So when we talk about AI solutions, then we can think of having our governance in place. We have our proprietary data in place. We have our Agentic framework and platforms in place and so we can concentrate on delivering capabilities across the 3 areas that Paul touched on before. So just some very quick examples. Of course, in the back office in my own shop, over 800 AI-enabled engineers working every day. Our code production deliveries increased over 20% just in the last year. Our velocity of change, how many system changes we make, is 2.5x higher now than it was just 5 years ago. And we have over 30 use cases in production in IT today. We have AI agents doing code reviews. We have AI agents doing digital forensics investigations, all with human in the loop. We have an operations agent supporting our operations areas and client new accounts and margins, for example, and making sure they have the correct information to do their jobs. And so back office, a lot of efficiency and productivity opportunities. In the middle office, making areas like supervision more effective with their e-com surveillance, compliance reviews, product specialists and analysts across the firm using custom GPT agents to make their work more efficient and productive, are all geared to delivering better, faster service to all of our producers. And then finally, in the front office and some of these capabilities, we've recently announced our Client 360 platform for our advisers. We've recently rolled out a smart statement scanning solution. We've rolled out multiple AI-enabled smart e-mail management tools, all geared again to freeing up adviser and producer time, enabling them to build deeper client relationships, have better data, more personalized solutions all along the line. And I'll just pick one example. Of course, we've been -- we've rolled out an AI-generated meeting summary capability almost 2 years ago now. We've integrated that into our CRM platform. But if I just look at the first 5 months of this year, our advisers and their teams are generating over 10,000 meeting summaries a month. That's the clip, right? So if you do the math, we're -- according to them, they're telling us they're saving 15, 30, 45 minutes per meeting in organizing what they previously would have done in organizing those meeting notes and sending follow-up e-mails and generating tasks for their teams. So 15, 30, 45 minutes per meeting that they're saving, you're talking about 60,000 minutes saved a year just from that one capability that we've rolled out, not to mention integrating that into CRM, automatically generating task follow-ups, et cetera, et cetera. So a lot of great capabilities here and our momentum continues to build. We -- speaking of AI governance, just in the last 2 weeks, we entered an additional 14 use cases across the business that have been identified, look like high-value opportunities, plugging those into governance and starting to analyze those to make sure that we can address them appropriately. And our big announcement recently was around Raymond. Paul mentioned that before. This is delivering to our advisers and their teams all the information that they normally would have maybe made a phone call, an e-mail, tried to [indiscernible] our intranet and get the right answer around running their business, compliance information, operations-related information. And now that can be served up through Raymond, and they can get the right answer the first time. So this is based on our agentic platform. You can think of one agent orchestrating, finding the correct answer from multiple available proprietary data sets inside of Raymond James and bringing back the right answer and serving that up to the adviser. So phenomenal feedback on this thus far, and we'll continue to add additional data sets over time. IT help desk will be our next great example of what normally would have generated a phone call or a lookup, for example, in ServiceNow, you could then query when is the new laptop showing up for my assistant, for example. So that will be yet another great boost to this. And again, we'll add more over time. I want to couple as well with thinking about how we are educating our users in how to use AI properly. There's a ton of news out there about new AI capabilities being delivered. You don't hear nearly as much about, well, how are we engaging the workforce in how to use these tools. So we recently made an announcement about Raymond James AI Academy. It's targeted specifically to our private client group, advisers and their teams. And we had someone suggest to us recently that we should have a mandatory training approach, like make everyone take the training. And I would argue the workforce wants to know how to use these tools. They want to get the benefit. They want to be more effective. They want to be the adviser that was mentioned before, the adviser that is leveraging the tools as opposed to the adviser that gets left behind. In our first month of AI Academy, we've had over 6,500 session participants. That was in the month of May this year. At our recent conference for our independent channel, we had over 4,000 session participants in our tech education sessions, which was a 36% increase over the previous year. So there's a ton of enthusiasm and hunger for these educational opportunities, and we really see that as a giant tailwind behind delivering AI capabilities across the firm. So pulling all that together, we're looking at technology as something that can help our businesses be successful with their business strategies, make our advisers and their teams more productive, build deeper relationships with their clients and deliver on the promise and power of personal across the firm.

Thanks, Devin Ryan, Citizens. Yes, I'll start with you, Jim Bunn, just [indiscernible] for the others as well at some point here. But Jim, when we think about the growth algorithm for investment banking, you mentioned obviously, MD headcount and then adviser productivity. So the MD headcount has been growing, I think, 6% CAGR. There's been a little bit of M&A in there as well. But I guess on that point, is that the right kind of way we should think about potential future growth? Or could that go higher or lower? And then on the productivity side of the equation, obviously, there's some cyclical element to it. But as you think about the structural piece, how do you think -- what is the right growth rate of productivity? You mentioned average deal fee of $3 million versus $1 million not too long ago. So there's like this natural inflation, you're getting network effects from offering new products and connectivity with clients. So just like what else do you need to do to drive the productivity per banker higher structurally? And what do you think that growth could look like?

Sure. So to your first question, you're asking about a ceiling, is that in bankers or...

MD headcount. So I'm thinking about the algorithm of investment banking.

[indiscernible]

Revenue growth -- so you've got MD growth and you've got productivity growth. So I'm trying to isolate both of those and spend 6% on headcount growth.

Yes. So it's an interesting question. How many MDs can you have? And had this debate with some of the other CEOs around the industry and some of the other public companies you track. And in my head, I kind of think like, okay, we're going to be close to 150 at the end of this year. I could see us getting to 250, 275 before people start to sort of trip over each other and you start to put people in two narrower boxes. So maybe you could double it from here. But then I know Scott, I also know [indiscernible] would disagree with that. And he'd say you can have 750. And he's got more than we have at that level. I think they tend to put people a little bit narrower swim lanes and that can have implications. But I see room to get to 250, 300 before we start to have to worry about constraining the entrepreneurialism and some of what -- some of what people like here is, yes, in freedom, you get a fairly wide running lanes and swim lanes and within reason, but you have coverage boundaries that are maybe wider than you might find in some other firms. I think we can double before we start to run into having to rethink that, but it's sort of an opportunity to double. From a productivity standpoint, our peak was in 2021, we hit close to around $9 million of revenue per MD. That's a pretty heady number. You'll start to see maybe -- to get over that, you really -- your average deal size needs to get closer to probably $1 billion. I think you'll see an Evercore probably get to maybe $10 million of revenue per MD. But if we look around our peer group, $5 million, $6 million is sort of a neighborhood where a lot of people live. $7 million starts to become a little bit differentiated. $8 million, $9 million is achievable, but those are pretty strong and probably not sustainable over a multiyear cycle. So I think we're running today 5%, 5.5%, something like that. And that's back to an environment without a tremendous amount of tailwinds. So I think with a little bit of tailwinds, I could see that getting to in the 6% to 7% range, something north of that becomes a pretty stretchy goal, I think. Does that answer your question?

Yes. Yes, it does. And I guess part of this is just the natural inflation. So you went from $1 million to $3 million in fees. If deal values go up over time, companies get bigger and markets -- there's an inflation to the market. So like just that element of -- in the future, as you're getting to this $5 billion of total capital markets fees, investment banking is going have to be a big component of that, I would suspect. And so -- but there's a natural inflation to the productivity just as time goes by because deals are bigger, markets are bigger. And as you add more capabilities to the platform.

Yes. So if we get to 300 MDs and we're at $7 million, we're north of $2 billion of investment banking revenue. That's double where we are today. That would go a long way. Was there a second part to your question I didn't get to?

No, I think that...

Okay.

Jim, also a question for you. You mentioned that your advisory business is heavily skewed towards obviously private companies, middle market private equity. I think you said 80-ish percent or so. That continues to be probably the most challenged part of the kind of M&A industry. We've seen the corporates being quite active. The sponsors have not been. And then there's a lot of structural questions just around the valuations of the portfolios. And effectively, that's why the assets haven't really moved. So how are you thinking about that as a risk to kind of the back book of your business within investment banking that such a large percentage of your client base might just be kind of stuck in the mud for some time? And what do you hear from your clients in terms of what could ultimately unlock activity levels within private equity?

Yes. So it's hard for me to see how we don't, at some point, enter a sustained period in a period of very high transaction activity levels. And what I mean by that is there's a lot of bankers who kind of will look sort of blissfully back at 2021 and say, oh, man, that's as good as -- if you're a middle market investment banker focused on PE, that's as good as it's ever going to get. There's never going to be more deal activity in the market than there was that year. And I just look -- if you look at the number of portfolio companies sitting within the portfolios of private equity firms, that's about 60% higher than it was going into COVID. And if you look at the amount of uninvested private equity capital that got to give it back or invested. That's almost double what it was going into the COVID boom that lasted about 2 years. So think of that as sort of the backlog of deals that the industry is going to participate in, in some fashion. Those are way higher than they were. And if you just sort of do the math on, okay, those have to come out either they're going to go bankrupt or they're going to get sold or there's not a whole lot of other options. They have to get monetized or go out of business in some form or fashion, and that's going to create opportunities for us. And if you can extend your hold period, the hold periods are extending. But at some point, those monetizations have to occur. And when that happens, you just do the math, it's hard to see how you don't have a multiyear period where a number of deals occurring in the industry are meaningfully higher than they were in 2021. I've made that -- I've asked people tell me how I'm wrong. What pros in that case? How does that not happen on all these companies go bankrupt, in which case we need to bolster our restructuring practice to take advantage of that. So it's coming. The wheels have been pretty clogged up. You have sort of this nasty cycle of -- it's very hard for private equity firms to raise capital because they're not returning enough capital. They're not going to return capital until they have confidence in the ability to raise more capital. So you have this GPLP dynamic sort of stare down of we're not going to give you more money into you return capital and that needs to start happen. So at some point, private equity is going to have to start monetizing some of those assets. There is going to be somewhat -- I sort of draw a distinction between what's the future of middle market private equity. Is it overpopulated? Are there too many firms? Yes, the world doesn't need another $1 billion generalist private equity firm. That's a pretty hard business to be in. So I do think the number of sponsors is going to narrow because they're not going to be enough to raise capital. But that doesn't address the -- first, that doesn't make the first point any different, which is there's this massive glut of portfolio companies that have to get monetized, and that's going to be an opportunity for us. I do think that doesn't mean M&A deal flow will go away because there's fewer private equity firms. They just be a little bit more concentrated amongst the successful firms, and they will grow larger.

Great. Mike Cyprys, Morgan Stanley. A question for Andy on the tech side with AI -- with Agentic AI and technology more broadly. Just curious to what extent you feel you're moving fast enough in terms of development, innovation and deployment of overall AI and Agentic AI capabilities? How do you know you're moving fast enough? What gives you confidence on that front? What are some of the limiting factors that might be holding back from moving faster? And when might we begin to see more meaningful impact to Raymond James' growth and bottom line results from these AI tools?

That's a great question, Michael. And honestly, I'd be a liar if I told you that I didn't wake up every morning and think I hope we're going fast enough because certainly, velocity of technology change in the world around us is sort of hyperspeeding, and we want to feel like we're keeping pace with that. At the same time, if we think about the value proposition in Private Client Group, and as Kristie mentioned, I have an information security, cybersecurity background, we don't want to do anything that jeopardizes the trust relationship between our advisers and their clients, between our bankers and their clients. And so we want to be judicious in steps we take and be really confident that in deploying something, it's ready. And that's super important, right? So number one. And then number two, somewhat related to that, I often tell the team, it doesn't matter what we rolled out Saturday night. If we come in Monday morning and things aren't working, our value proposition is shot, right? And so providing performance, stable and secure systems is really job one for us. So do that and then innovate as much as we can and make sure that our workforce is ready for that, right? And so I don't think it's either/or. It's sort of a connected triangle of making sure that you can move as fast as you can. It has to be secure. It has to be available, and that's how I think about the equation.

[indiscernible]

Say that again?

[indiscernible]

In terms of technology delivery and what we expect to happen to the bottom line and revenue?

[indiscernible]

My job is to make sure we're aligned with the business plans and strategies of the business areas. And so each of them talks about the technology enablement and their plans, and that's where my impact shows up.

Mike, just can I add -- I'm Vin Campagnoli, by the way. On the speed, what -- we're measuring that with our end users, right? So that could be measured with the advisers' appetite to consume and leverage the tools. But Andy and Paul mentioned Raymond. Raymond is initially being deployed with operations. And we held it back and did numerous tests to make sure that the success rate of it was 98% before we were rolling it out. And that was the 1 million transactions that we brought in to digest before we released it. And that was test with numerous operations areas to make sure that it was successful. We're doing the same exact thing. Andy mentioned our tech Advisory Council. Everything we deploy to our advisers is tested well beforehand, and that goes with all of our technology, specifically with the AI stuff.

Brennan Hawken from BMO. A question for Steve on the bank. So there are multiple questions about bank funding. One closer to home for RJ, which is the wealth management cash optimization and whether that's powered by AI or accelerated. But also we've seen blockchain, CLARITY Act, a lot of other questions around bank funding. So when you think about that and you [ war room ] your team, how do you think about how those disruptions are going to work through for RJ Bank? And is it -- does that -- does losing low-cost funding meaningfully risk the ability for the bank to be part of the value proposition? Or are there pricing levers or other things that you can do?

Yes, Brennan, that's a great question. And we've got some working groups involved regarding blockchain, stablecoin and watching what's happening in the industry more broadly, there's several consortiums that are being created that we may wind up being a part of. As a reminder, we're at pretty record low levels in terms of percentage of client cash balances that are in our client accounts. And not really sure at this point how much the evolution and the growth and what may ultimately come out of Clarity -- the Clarity Act and stable coins ultimately and digital assets in general may have on that. We're evaluating it every single day and working through that as well as I'm glad that we've got the apparatus to go seek other deposit sources as well now. So -- and there are things we've been doing proactively. We have roughly $80 billion of positional money market assets that are kind of an alternative to cash sitting in an FDIC insured money market, for example. So are there things that we could do to maybe garner some of those -- some of that money market cash. So anyway, it's something that's very much being worked on now, but we also know that it's evolving so quickly and not exactly sure exactly how -- what that end game is going to look like in the next few years, but we're in the middle of working on it at this point. So intermediate, though, I don't see cash balances as a percentage of total client assets being impacted in the near term by that type of activity, at least not with our client base, but down the road, yes. Down the road, yes.

Mike Brown from UBS. Jim, I wanted to ask about inorganic growth. So maybe kind of building on Devin's question about that MD ramp over time. Now that you had GreensLedge on the platform. Maybe talk a little bit about how that early days, how is the integration going? How did that come about? What's kind of the cultural assessment you take when you're looking at going with an inorganic acquisition? And do you think that this could be a bit of an M&A muscle? Is this inorganic could be a bigger piece of the story? And then would something even more transformative ultimately make sense just as we think about the amount of excess capital Raymond James has, that could be an interesting growth avenue.

Yes, that was a good question. So I'll start with how do we assess in the cultural fit. So Paul said this earlier on, he had a slide on inorganic growth and acquisitions and you put cultural fit at the top. And I'd say that's incredibly important to -- arguably the most important thing for us and how do we get comfortable with that? It's case by case. But in the case of GreensLedge, we've known them for 12 to 15 years in a couple of respects. I mentioned earlier, part of the strategic rationale is they're great at originating securitizations. We're great at trading securitizations. You put those two together, there's a natural fit between there. But because they lacked distribution, they had a very small sales force, we had been a distribution agent for them for 10 years, meaning they got -- they were arranging a CLO. We were one of the key firms they would look to, to sell that CLO through. So we were seeing their deals. We're seeing their products. We knew we could sell them. Our professionals have gotten to know each other quite well. So there's a lot of comfort there in the business fit and that we could sell what they're producing and vice versa. And then when we formed the private credit joint venture with the bank, we actually engaged them. One of their businesses is they do that -- they advise firms like us on creating credit-oriented joint ventures. So they actually advised us on putting that joint venture together. We didn't just call Eldridge and form a partnership. We sort of ran a process. We worked with them to identify potential partners, put together materials describing our business, our objectives. We met with probably a dozen firms that they identified and sort of went through a process to narrow that down to GreensLedge. And so through that, we were working with two of their partners, their team. We got to see how they work, how they operate, got to know each other really well. So by the time we decided to pursue an acquisition, the two organizations had known each other extremely well, and there's a lot of comfort that this would work and we could fit together. So we don't always have that opportunity to get to know each other. But whenever we're considering an acquisition, like I'd say, the Financo transaction a few years ago in the consumer space has been massively successful for us. We spent -- these deals don't come together overnight. We spent 3 or 4 months getting to know their CEO before we ultimately engage in serious discussions. There was a lot of -- we use the golf net. I'm a golf nut. We went to play golf together a few times. You try to spend time away because you see somebody in an office and they're putting -- they're presenting their company to either you don't see all of it. When you get someone away from a work environment, you get to spend some social time with them, you get to know them better and how well you can gel and mix. And so through that, we've really developed a lot of confidence that, yes, this is a team and an individual we can work with. And I remember, it was shortly after we closed the Financo transaction, we had our Board occasionally, once a year, we go somewhere away from here to do a Board meeting. And when we do that, we invite a lot of people in the office wherever we are to come to sort of a social gathering and meet a lot of the Board members. And we did happen to do our Board meeting in New York. A couple of months after we closed the Financo transaction, and we had this sort of nice social gathering in this outdoor area in our office. And Jeff Edwards, who is now our lead Independent Director, had spent some time talking to John Berg, who is the CEO of Financo, now our Head of Consumer. And after talking to John, he came up to me and he's like, Jim, how long ago did we close Financo? Like it's only been like 3 months. I just spent 20 minutes talking to John Berg. It seems like he's been here for 10 years. He sort of talks like you guys, he just sort of feels like he's part of the team. And that's a sign we sort of we got it right. So we do try to spend a lot of time away from the conference room getting to know people to make sure that's going to work. I do think we've -- knock on wood, our track record has been pretty good so far in having these smaller deals work well, keeping the people, growing the businesses. We definitely want to continue to replicate that. But I'm excited that we have a couple of billion -- more than a couple of billion dollars in cash. And when there is an opportunity to do something transformative, absolutely. I don't get to my $5 billion BHAG by hiring a couple of MDs at a time. I think I can get to the $3 billion long-range Board target by doing the tuck-ins, doing the organic hiring. But to get to $5 billion is going to mean we take advantage of the position we have that many of our competitors don't have, and we do something more transformative. I get incredibly excited talking about that. One of the challenges has been it's -- a lot of you guys follow them, some of those bigger companies have been trading at multiples that honestly, I don't fully comprehend why that is the case. They're clearly trading a bit on forward expectations of this rebound I described occurring. So our goal is just try to stay positioned, get to know all the firms and try to position ourselves as a preferred partner of choice when one of those opportunities becomes actionable, and it's really hard to predict when those might come, but that's something Paul and I spend a lot of time on and get to know. We try to get to know everybody in the industry and figure out who fits better, who doesn't, where does that cultural fit exist and who would we want to prioritize if and when an opportunity like that comes up.

This is for Vin and Andy. When you think about the $1.1 billion of IT spend, how much of that is going toward automating like essentially spending on technology that's helping bend the cost curve across the broader organization where you're doing things with technology that are replacing manual labor historically. And then as you think about kind of like the step function that we're going into with AI and Agentic and like I'm not sure what your budget is going to need to be to execute on that, but like the opportunity to digitize more, automate more and ultimately drive expense savings across the organization. Like how do you think about that? And are there any examples of where that may be clear to you that that's an opportunity?

You want me to start? Or you want...

You go.

Look, it's a major focus for us right now. So on the AI front, I'll start, and I'll talk about overall technology. We're looking at use cases in any business area. So business and function. So I think Andy mentioned supervision before. So we went into supervision and put a team in there just to analyze where automation was needed and leveraged AI to eliminate roles and to get those folks to do more value-added stuff and to take those manual processes that have been in place for years and to automate it. We're entering right now into our prioritization season, right? So fiscal year-end September, we're already doing some of the planning. One of the big ticket items as we go and look at what we're going to fund is going to be automation. If you look back at our portfolio right now across everything, we have, I would say, 90% of the spend in operations is on automation. We call it a back-office modernization program. That is all about taking manual processes and automating them. You look at all of our functional areas across risk, AMS, AML, the major focus of that spend is automation. So there's also a spend -- I don't know what the percent is, Devin, to be honest with you. All I will say is it's a major focus of the firm and a major focus of IT as we work with our colleagues in all the businesses and functional areas. It's also on the revenue side, right? So we're looking at -- if you look at Private Client Group, I answered the question before around the consumption of AI for advisers. We're saving them. I just got an e-mail from an adviser that we announced some of the capability of the integration with meeting manager and CRM. That's automating a process that they would have to manually put in, in the past. And now that's in the trigger a summary. She just went, wow, you can't believe how many hours and resources this is saving me. So will that generate more productivity on her behalf? Hopefully. But we're really focused on looking to save time and especially advisers.

I would just add to that. On the first part, Scott Curtis mentioned process improvement before. And when we look at these workshops and going to each business area, Devin, it's really bringing together technology specialists with process specialists and that business knowledge to attack the problem. The technology can automate a bad process, right, where it can automate a cleaned up efficient process. And so again, industry buzzword now around four deployed engineers. It's really bringing that process knowledge together with the automation technology approach. And so that's the technique that we're deploying, number one. And number two, yes, it's hard to parse out. Sometimes we -- again, Scott -- to cite Scott's area, implementing Salesforce actually in Raymond James Investment Management, it's hard to parse out what there is an automation benefit from a marketing benefit, from a sales benefit, and we don't necessarily do that in the business case.

That's all the time we had. Thank you. All right. Our last presenter is Butch Oorlog, our CFO, a role he's held since 2024. So we'll let Butch take over. Thank you.

Thank you. Thank you, Kristie. Good to see everybody. Again, I want to reiterate Paul's comments. We don't take your interest in Raymond James for granted. So I appreciate [indiscernible] faces. Raymond James has a solid track record of producing strong, steady financial performance over the long run across various market cycles. Our long-term results reflect the consistent application of our core values, which shift the financial decisions we make every day and result in the firm being positioned to weather the unforeseen market conditions that are sure to arise from time to time. Over the next few minutes, we're going to review our consistent revenue growth with the contributors to that growth occurring across our business units. Our focus on controlling base expense growth while still prioritizing investments in sustainable growth. Our consistent track record of generating increased operating leverage over time and how growth expenses impact that metric in periods of incremental organic growth. Our strong current balance sheet and capital foundation, which is a source of confidence in getting our capital deployment priorities, which remain focused on growth. We have the financial resources and flexibility in our balance sheet to shift as market conditions shift, meeting our client needs where they are with liquidity and capital to execute on the growth opportunities and initiatives you have heard about today from our business leaders. We have produced strong revenue growth, reflected by a 5-year CAGR of 12% over very different interest rate environments impacting that period. Despite the environment, our revenues grew annually in each period. Recall that in fiscal year '20, interest rates fell to near zero. And in late '22, interest rates progressively started rising until September of '24 when the easing cycle began, and that has continued in fiscal '25 and so far in '26. The natural diversification and resiliency across our businesses has produced steady revenue growth throughout those years as puts and takes occur across our businesses in response to interest rate changes. So what can be a headwind for one business can be a tailwind for another, and that reality is what underpins our continued revenue growth across the interest rate cycles. Fiscal year '25 represented our 16th consecutive year of record revenue growth. Over time, our percentage of revenue arising from asset-based revenues, which is 79% in the first half of fiscal '26, reflects a solid base for that resiliency, reflecting a base of recurring revenues. In the first half of '26, we are off to a strong start with 9% period-over-period growth in revenues. On the cost side of our business, it's important to note that a significant portion of our total expense is variable in nature and moves in proportion to revenues. For example, 62% of our total expense in the first half of fiscal '26 was a combination of financial adviser compensation and firm-wide incentive compensation. 82% of our total expense is compensation related. Of the remaining 18%, which are non-compensation expenses, the highest component is communications and information processing expense, which includes a portion of our technology investment you just heard about. There are variable components of this noncompensation expense category, including occupancy-related expense, which increases as we grow our footprint; business development expenses, which include our recruiting expense that is incurred directly as a result of successful growth; investment sub-advisory expense, which generally moves in relation to changes in client assets and successful recruiting; and finally, elements of other expenses, which include items such as FDIC insurance, premiums that increase as our bank deposit balances increase. As it relates to our pretax income performance, we've had a 5-year CAGR of 21% through fiscal '25 on both a GAAP and adjusted basis. Fiscal year '25 was our fifth consecutive year of record pretax income performance on both a GAAP and adjusted basis, demonstrating the resilience of our businesses over time in those very different interest rate environments. We are off to a solid start midway through fiscal '26 with a 3% increase in pretax income on both a GAAP and adjusted basis period-over-period. The adjusted pretax margin for the first 6 months of this fiscal year of 19.9% is just under our prior year guidance of 20%, and that margin includes higher growth-related expenses this year. We are a growth firm, and some of the costs we incur across our businesses are a result of incremental and in some instances, costs directly related to recruiting successes, where the timing of the impact of those costs on our P&L doesn't match up with when the related revenue begins contributing favorably to the P&L. Taking a look at our firm-wide noninterest expenses, so this includes both compensation and non-compensation expenses. We think of cost as being either associated with our base of operations. So think of that as running our existing businesses versus expenses, both compensation and non-compensation, incurred directly related to growth. Amongst our business segments, these base versus growth considerations impact our PCG and Capital Markets segments. What we have presented here is how our expenses in those two base versus growth categories are growing at very different growth rates over the past two fiscal years. You can see that when just considering base expenses, our revenue growth over the past two fiscal years exceeded the increase in our base level expenses, indicative of positive operating leverage on our base ongoing expenses. With respect to expenses directly associated with growth, which includes the investment in new technologies and capabilities, the growth rate associated with those expenses over the past two fiscal years has been nearly twice the rate of the base expense growth. Growth expenses also include incremental recruiting-related compensation, which we began presenting separately on the PCG segment P&L starting in Q1 and also includes non-compensation-related recruiting fees, account transfer fees directly associated with successful recruiting and incremental investment sub-advisory fees. So the takeaway here is that as we continue to grow organically in the short term, costs we incur can pressure our firm-wide margin as many of these costs that result from our recruiting successes are upfront. The revenues associated with this growth will benefit future periods. Given our organic growth, keep in mind that if we were to incur the same type of cost as part of an acquisition. The cost to bring on client accounts to our platform would be a non-GAAP integration-related adjustment similar to how acquisition-related retention would be treated. Since we have been growing organically, there are no non-GAAP add-backs in our measures for such costs. Our adjusted margins are bearing the full load for these growth costs. Similar concept being presented here. But with respect to the PCG segment and for a different period, this is for the first half of fiscal '26 versus the first half of fiscal '25. And this is just the non-compensation expenses as we have already provided the financial adviser recruiting and retention-related compensation in our PCG segment reporting. In the PCG segment, looking only at the non-compensation expenses in the first half of fiscal '26, we incurred an incremental $28 million of growth-driven non-compensation expenses such as recruiting fees, account transfer fees, incremental sub-advisory fees, driven solely by successful recruiting. So for the first 6 months of this fiscal year compared with the prior year period, although non-comp expenses grew 10%, adjusting those non-comp expenses for the growth-related expenses incurred in each comparable period, the non-comp expense growth would have been under 6% in PCG for the first half of the year, reflecting an increase in operating leverage period-over-period. These recruiting activities are attractive growth opportunities for the firm. We underwrite these opportunities from an ROI point of view, not how they impact our P&L quarter-to-quarter. Revenues in future periods will benefit from those costs already incurred. Turning to our returns. Solid performance of our businesses and prudent management of our balance sheet results in strong returns on common equity. In the last 5 fiscal years, each producing returns on equity in a range from 17% to over 18% on a GAAP basis. Our adjusted returns on tangible common equity over the same 5 fiscal years reflect returns of over 21% in each fiscal year. In each case, we've delivered returns slightly in excess of our guidance for such periods. These are solid returns, especially considering the conservative capital levels reflected in our business over these periods. Turning to the balance sheet. As of March 31, '26, our total assets on the balance sheet amounted to $92 billion, up about $4 billion or 4% from the September 30, '25 total assets, with the increase primarily driven by loan growth. With our nearly $3 billion of cash at the parent or $1.8 billion in excess of our $1.2 billion target level, a Tier 1 leverage ratio of 12.4%, which represents $2.1 billion of excess capital over our conservative 10% Tier 1 leverage ratio target, we have ample capital and liquidity on hand to deploy in our strategic pursuits. At the parent level, our senior notes have long maturities at attractive rates to us as the borrower with a weighted average remaining maturity of about 19 years. The first of the maturing tranches of those senior notes does not mature for another 4 years. With our relatively low total debt-to-book capital ratio of 22%, we have plenty of capacity to access debt capital markets should the need arise. Each of the three major credit rating agencies recently completed their annual reviews, and we maintained our strong investment-grade ratings and stable outlooks. We believe that the firm's financial strength continues to be a relevant and differentiating factor that advisers and their clients are once again taking the time to research and understand. We have a relatively simple funding liability side of our balance sheet. And looking at our balance sheet as of March 31, '26, Steve discussed the diversified nature of our bank deposit gathering and noted that 84% of our bank deposit balances in aggregate across our two banks are FDIC insured with 95% of RJ Bank's deposits being FDIC insured. Clearly, an important metric helping to anchor funding stability. We don't have to look too far back, specifically March of '23 to highlight the importance of solid, stable funding. Also note with the TriState Capital addition in fiscal '22, we have diversified our deposit base over time with additional capabilities to gather deposits. Further, Raymond James Bank introduction of the enhanced savings program in March of '23, which added a high-yield deposit program offering up to $50 million in FDIC insurance for the deposit has proven to meet clients' needs and provide a stable funding source since its inception. Our domestic client sweep balances in our program have stabilized over the past few years. Our program directs some of the deposits onto the balance sheet of our two respective banks, providing them a stable and relatively low-cost funding source. Additionally, we direct a significant portion of those deposits to third-party banks under our RJBDP sweep program. Those balances at third-party banks were approximately $13.6 billion at March 31, '26, directing a portion of those deposits to third-party banks as a part of our ability to offer up to $3 million of FDIC insurance coverage to our clients under this program. We generally need to maintain about $10 billion of deposits with third-party banks to maintain that level of FDIC insurance for our clients, which leaves us with about $3.6 billion of contingent funding as of March 31, '26, which is immediately available to bring on balance sheet should we need it. Since fiscal '20 and through March 31, '26, we generated $10.8 billion in additional capital through earnings and returned over $6.2 billion of capital to shareholders through dividends and share repurchases. That's 57% of capital generated over that period returned to shareholders. And for the trailing 12 months ended March 31 of '26, we have returned 94% of earnings back to shareholders in the form of dividends and share repurchases. This consistent capital generation provides fuel to grow our businesses, both organically and through acquisition. Net of returning capital to shareholders, over that 6-plus year period, we retained $4.6 billion of equity to deploy in the growth of our businesses. Our consistent capital priorities are focused on growth. I mentioned our excess capital of $2.1 billion as of March 31, '26. We have consistent priorities in deploying our excess capital. First, to support organic growth initiatives. Those include deploying capital in support of financial adviser recruiting, the succession and capital solutions initiative that Tash described, loan growth in each of our banks and in support of adding and growing verticals in investment banking and other capital markets businesses. And finally, of course, investments in technology in support of our financial advisers. Next, we evaluate M&A opportunities, applying our criteria of, first, the target being a good cultural fit. We won't compromise on our culture for the sake of an acquisition. Secondly, the target must represent a strategic fit, an opportunity that makes both the target and the core business better. And if those two boxes are checked, then the transaction has to be financially attractive to create long-term value for our shareholders. The fiscal '26 GreensLedge and Clark Capital transactions demonstrate our active and disciplined deployment of excess capital. We've increased our common dividends at a 5-year growth rate of 15%. Effective for '26, our Board increased the quarterly dividend by 8% to $0.54 per share. We have a target dividend payout ratio of between 20% and 30% of earnings, and the increase aligns our dividend with the low end of that target payout range. In January of '26, the firm deployed capital by redeeming all remaining outstanding shares of its Series B preferred equity amounting to approximately $80 million. And as a result of this redemption, there is no preferred equity remaining within the components of RJS capital stack. Amongst our capital deployment priorities, our lowest deployment priority is with regard to share repurchases. We remain committed to repurchasing share-based compensation dilution. That amounts to about $50 million a quarter or $200 million annually. Over a year ago, we communicated that in an effort to manage growth of our Tier 1 leverage ratio, we intended to repurchase shares at a rate of about $400 million to $500 million per quarter. And since then, we have been disciplined in executing at that level. Our capital deployment priorities are unchanged, and we believe we will continue to have more than sufficient excess capital to deploy towards all of those priorities, including capacity to make acquisitions, which meet our disciplined criteria, such as those acquisitions completed so far in fiscal '26. Turning to targets. We continue to believe the financial targets we shared with you last year remain appropriate as we look forward with only minor changes, subject, of course, to our assumptions. We expect continued volatility in the markets due to geopolitical factors with a lack of clarity around even the direction of future short-term interest rate actions, much less magnitude. However, assuming April month end equity market levels and the continuation of current short-term interest rates, we presume some modest improvement in investment banking revenues at a mid-single-digit rate in the forecast period over the trailing 4-quarter level, supported by our strong current pipelines. We assume adviser recruiting costs to continue at their current pace. We've assumed consistent share repurchases at the levels which we shared previously. We expect the adjusted compensation ratio to be approximately 65% and the adjusted pretax margin to be approximately 20%, the adjusted return on common equity to be at least 17% and the adjusted return on tangible common equity to be at least 20%. We have not changed our balance sheet targets from the prior year levels. We expect to operate the business over the long term at a 10% Tier 1 leverage ratio, which is still 2x the regulatory minimum. Our cash at the parent target level of $1.2 billion is unchanged, reflecting our intention to utilize liquidity in excess of the target in support of our strategic growth plans. Our debt-to-book capital ratio at March 31, '26 of 22% reflects that even after our late fiscal year '25 debt raise of $1.5 billion, we remain relatively underlevered, meaning we could continue -- meaning we continue to have significant capacity to take on additional debt and still operate within our 32% or less management-defined target debt-to-cap ratio. All of these metrics demonstrate significant capacity to deploy capital and liquidity in pursuit of our growth objectives. A year ago, we announced our goal to be generating at least $20 billion of revenues by the year 2030, and we are tracking on course to meet that goal. To recap, we continue to demonstrate strong financial performance, which, coupled with our strong balance sheet and disciplined management approach provides us plenty of fuel to continue to invest in growth and deploy capital in accordance with our established priorities.

Great color on multiple fronts. I wanted to start out with the question around profitability and fully acknowledge that the targets are kind of next 12 months, and you've been sort of operating in this 20% range for quite some time in a variety of different environments. But when you zoom out, cash revenues feel like they've troughed back to your point around just kind of the cash levels. We talked a lot about capital markets business being potentially a little bit better on the [indiscernible]. And also you spent quite a bit talking about AI and productivity and all sorts of things that will come out on the back of that. So why isn't the margin larger and higher over the next several years? Are there offsets that we need to contemplate more in this guidance? And I understand like this is next 12 months, but beyond this period.

Yes. Well, I'll start, and then I'll hand it over to Paul to the strategies. But as we think about the margin, the real -- the upside to the margin is the performance of the investment banking business, which you pointed out. We've been pretty conservative in our modeling. We modeled mid-single-digit investment revenue growth in capital markets in our forecast period over the trailing 12 -- 4 quarters. And on a variable contribution basis, growth in those revenues will have a significant positive increase on our pretax margin. And so -- and also better leverage on our comp ratio. So there's upside there. And as we're thinking about the businesses long term, we talked about opportunities to increase our operating leverage through creating these efficiencies. We're just not in a position yet with these AI technologies to be able to project exactly what kind of savings we think and costs we might be able to drive out of our system. But believe me, we're very focused on them, and we're prioritizing our AI initiative projects with an ROI mindset in terms of -- but it's just early days in terms of the life cycle of those projects to really be able to reliably commit to those sorts of savings. So we do expect to get them and to bring that efficiency that will also help grow the top line and create positive operating leverage that way. But it's just too early for us to be able to know exactly what those components are going to be.

Maybe the only two things I would add or 2.5 things I would add is interest rates are lower. So that has obviously, versus where we were last year, been a headwind to -- because that all goes to the cash spreads all go to the bottom line. It's a very high-margin business. So with lower short-term rates, just like we saw all the benefit with rates going up, rates are much lower now than they were a year ago or 2 years ago. And so that's been a headwind. And then Butch mentioned the growth investments. I mean, the record recruiting results that we've had have been remarkable. And unlike a small or midsized acquisition, they're all flowing through the P&L into the margin that we're talking about, whereas we did that same thing through an acquisition, the ACAT fees, the transition fees, the retention would all be non-GAAP. So that's why we're breaking that out and giving you that much more disclosure. And then the truth of the matter is the other side of the AI investment is that a lot of the investment is front-loaded and the savings are coming in on the back end. So how long it takes to generate and realize those savings, time will tell. But in the meantime, you're giving more people licenses, you're buying more tokens for the capacity. The token prices are going up because everyone is fighting for the same capacity. And so it's pretty expensive upfront to get to the savings that Butch was talking about down the road.

Devin Ryan, Citizens. Echo, thank you for today and I think a lot of really good content here. As we think about the growth of the platform, a lot of the day today was about the integration and kind of the power of what that integration means for the firm. But when we think about the value of -- you've doubled private client assets over the past 5 years, investment bank is much larger. Like are there ways that -- as you think about evolving monetization of the value of the platform, people getting access to all the advisers where it's more competitive, getting access to all those assets, other ways within the business, are there ways you're thinking about adding new monetization mechanisms within wealth management, for example, where you can better leverage the value of what you've really built here? Are you thinking about evolving the monetization of the business, which has happened over long periods of time? Just love to get some thoughts on that given that you've evolved and grown so much.

Yes. I think the way the value of all those features manifest itself is in what Tash talked about earlier, where we don't have to be the highest bidder to attract new advisers to attract new financial professionals to do M&A. We're a good home for folks that want to come here and grow and thrive in their business and serve their clients in a way that allows them to grow faster than where they're currently growing. I mean the number of e-mails we get from advisers who joined us 2 years ago, 3 years ago and say, I have grown 75%, 150%, 200% since affiliating with Raymond James because of all of the capabilities, the products, the support, the by invitation-only visits where they meet with executives here at our home office, the IBEX program on and on, on that I just didn't even realize I didn't have at my prior firm, and they come here and they grow their businesses substantially. And so the value -- the way we monetize the value and the differentiation on the platform is we don't have to be the biggest check. I always say in absence of a value proposition, the only way you can recruit is signing the biggest check. And so -- and that's true with acquisitions, too, if you think about it, right? I mean when -- that's why we don't do very well with PE -- competitive PE acquisitions because once private equity gets involved and the firm says, okay, we're selling to the highest bidder, no matter what, that gives us the least amount of structure and least amount of protections, then we're not usually the good home. Where we're the best home for and the best acquisitions is where they come to us and say, hey, we really care about keeping this family intact in the future. And we want to join Raymond James and put the two families together and look back 5 to 7 years from now and say we still have this great family, and we've actually become a stronger family as part of Raymond James. And not that we joined either purchased by private equity or join another firm that sliced and diced us and we don't even recognize the culture that we built -- that special culture that we built here. And that's hard to describe at an Analyst Investor Day, but it's not hard to describe to a founder, CEO, entrepreneur or a leader of an organization who's built something special and they want to make sure that they preserve it and they want to find a good home for it. It's very easy to describe that over a dinner table. It's also very easy to read when you're having that conversation and they're not -- they're dismissive of that. They don't really care about it. That's usually not a good fit for us on an M&A front. So that's how the value proposition really resonates.

But in terms of like additional fee streams, whether it's charging product manufacturers more for what you've built or even maybe not the venue to do it, but advisers potentially sharing more given that you're helping them grow much faster, maybe you can show that on a relative basis to where they're coming from or other firms? Like it would seem that maybe as you get bigger that there's more ways to monetize what you've built. That's really the question.

Yes, we absolutely use the scale to our advantage. So the product manufacturers is a perfect example. We continue to go back to our product partners and find ways to add more value and create more value that's economically a win-win for both them and for us. So that's a perfect example. The other levers, payouts and fees, it's all a very competitive marketplace, right? So we monitor what's happening in the market, and we all have to be competitive on that front as we as we continue to focus on retention and recruiting financial professionals.

Brennan Hawken. I actually want to follow up on that question and drill down a little bit, Butch, in the slide on base and growth -- expense growth. Maybe could you just -- what's the message on that, right? Because when I look through the growth, several of those were kind of durable, the two related to recruiting, the investment sub-advisory fee, it feels like those are sort of now just maybe the new cost of business. So am I reading that wrong? And then if I'm not, how do you balance the idea of the increased cost of recruiting with growth? Like how do you think about those ROIs?

Yes. Well, certainly, the elements -- there are elements of recruiting costs that are structurally to the extent we continue to succeed at that level will become structurally part of the cost base. But in periods where we are growing through that inorganic and succeeding at a disproportionate level, then those costs are going to impact those earlier periods disproportionately. And so what we're trying to break out for you is to give you some numbers to be able to assess that, that's part of what is driving our adjusted pretax margin performance in the current year. But we've also -- we're very conservative by nature and the types of costs that we're calling out growth would be kind of the clear case obvious, I'm incurring this cost because I've had this incremental revenue occurring over here. So we believe that over time, we'll continue to get positive leverage on those revenues because we haven't seen all those revenues reflected in our P&L yet.

I mean the simple reason we're showing that slide is because we get questions from the analyst community, both on the sell side and the buy side saying, gosh, we're looking at your growth in expenses over the last 2 years, and it's higher than your competitors. And we say, yes, because our recruiting last year was up 21%, and it's actually going to be another record this year. And so when you're growing recruiting that rapidly, there's costs associated with it that our competitors are not dealing with because they're not growing at that pace or if they are growing at that pace they're doing it through acquisitions and non-GAAPing it. So that's the only reason we're describing that to answer the question that we get a lot to say, gosh, how is your expenses growing certain line items growing 14%. It's like yes, because our recruiting has grown 21% year-over-year. So we're just trying to break that out to provide that granularity. It's actually -- if you're just focused on P&L management, it's actually a lot easier to do an acquisition, even if the acquisition has a much lower return from a P&L perspective because you just break it out non-GAAP and you guys -- people wouldn't ask the question around it because it'd be all non-GAAP.

And how do you think about the cost of growth, given that recruiting is so intense right now, and how do you balance that and think about the ROI?

It's the same return hurdle we've always had. We really want to generate over 15% type returns on an ROI basis, an IRR basis, and that's whether we're recruiting, making a technology investment, making a loan, doing an acquisition. So we've had that target for a very long time. Now we've -- in good markets, we exceed that target, and we use conservative assumptions when we're modeling in that target, but that's kind of the way we look at it. And so even if the P&L impact is worse, if the returns are higher, we would rather pursue that organic strategy than an acquisitive strategy where we say, well, the returns are lower, but the Street may never know that, right, because we'll just non-GAAP it and hide all the cost. We're not going to do that. We -- again, the long-term focus that we have, the transparent nature of our -- the way we do things, we're just going to focus on true economic return, not necessarily how it could be reflected on the P&L, both GAAP and non-GAAP. And by the way, the GAAP and non-GAAP difference, we've seen it over the last 10 to 15 years in different industries, it doesn't matter until it matters, right? So the GAAP to non-GAAP difference will start mattering when people start focusing on cash flow and focusing on balance sheet. That's when people say, okay, what's your true earnings? But we haven't been asked that for a while. So the GAAP really hasn't mattered in the last few years. So that's another thing to keep an eye out for.

Mike Cyprys, Morgan Stanley. Thanks for all the content and perspectives here. Just a question on AI tools. Just curious when you think about the tools you're going to be rolling out and the ones you already have, I guess, which ones -- which use cases do you see the biggest ROI over the next 12 months versus what potential use cases do you see the biggest opportunity over the next 3 years? And then I realize it's a bit early maybe in terms of quantifying the benefits of this. But like on a multiyear view, if you kind of look out, how do you think about AI expanding the TAM of Raymond James and wealth management? And what portion of the incremental, say, profitability do you anticipate may fall to the bottom line versus has to be reinvested versus gets competed away? So ROI, TAM expansion and then how do economics ultimately get split for you and for the industry?

Yes. I mean where a lot of the AI investments are focused now is more on the large language models. I mean our Raymond tool that we showed you is essentially a large language model that is taking in a lot of data, a lot of content and able to essentially synthesize it when you ask a question. And that saves people a lot of time. ChatGPT is another version of that, that we all use in our personal and professional lives, and that creates more efficiency and productivity. Where it will evolve and get used more is with Agentic AI. But I think there's limitations to Agentic AI. It's still early innings. And everyone -- any time a company comes out with an Agentic AI announcement, everyone gets really nervous and says how is this going to impact the business. But that's the same kind of reaction, maybe not as in the same magnitude -- but 7 or 8 years ago, that's what RPA was, right? Robotic process automation was supposed to take everyone's jobs, right? And robotic -- any job that could be automated on the robotic process automation, those stocks went up a lot at that time. And then what we found out was that as -- and we being the corporate -- the industry found out was that, one, it costs a lot of money to implement an RPA; and two, it costs a lot of money to maintain an RPA, right? And so you have to have enough scale in a function that's homogeneous in order for the ROI and RPA to work out. Now I think Agentic AI is going to be smarter and be more -- maybe that ROI hurdle goes down, but it's still going to cost a lot of money to develop an Agentic AI solution, and it's going to cost a lot of money to maintain an Agentic AI solution. So to think that you could just go across every function in the firm and have it be a good ROI. Based on what we know today, I think that's an overstatement, right? And so -- but that -- there will be functions that will be made more efficient and productive through the Agentic AI tools that will become available and become smarter. Where I think I see where I'm most excited, I mean, there's a lot of great things happening in the back office and certainly in the front office with saving advisers' time, recording transcripts of meetings and creating summaries and creating checklists and action items and agendas for the next meetings, all those type of things and having it all be automated to save advisers. One adviser I met with 3 weeks ago said they're saving 6 hours a week on just taking notes of meetings from meetings because it's all done through the AI-driven transcript service and it creates a summary of the meeting, puts it into the CRM. It's an integrated, fully recruited process for supervisory purposes. And then we're working on getting it to a point where it can create the agenda for the next meeting. That saves advisers lots of time, that workflow there. And we're -- that's in process. 80% of that's in process, and we're working on getting the rest of it integrated. But really, the -- there's a huge opportunity in what I call the middle office. So supporting advisers, we have a global wealth solutions team, which is a large team, and they're doing very high-value support services for advisers to support their clients. So when there's high net worth cases that advisers need help on, when there's estate planning cases, trust cases, all the cases that advisers need help on that are highly complex that require lawyers and paralegals and financial planning experts to support them on that. Tax is a whole another area that we would love to provide more support to advisers on. AI will provide a lot more leverage and scale in those middle office support functions. So now, I mean, I'm making up numbers, but let's say you need one lawyer, a state lawyer to support or one institutional consultant to support, 10 advisers that are doing 401(k) plan and consulting services. Well, with the use of AI, hopefully, that gets to from 1 to 10 to 1 to 20, again, hypothetical numbers, but because they will be able to analyze and synthesize more information quickly with the use of AI. So that's why it's puzzling to me when we see a reaction to, oh, well, there's a new AI tax product out there and you see a reaction in the wealth space, like that's going to take over wealth is like, no, that's going to augment wealth. That's going to help our advisers provide a solution to their clients that they can't provide today in a scalable way. And frankly, the industry needs an AI tax solution because there's a shortage of CPAs across the country that have -- that can provide tax advice. That's why all of your tax accountants are hiking the fees and pushing you down to lower cost, more junior people when you do your taxes because there are just fewer CPAs out there that are senior that can do this in a cost-efficient way. So we need AI. We need AI for -- as Tash brought up earlier, we need AI to provide more productivity and efficiency so we can serve more clients with more bespoke and high-quality advice. That's more broad as well. So I'm excited about the opportunities in the middle office in particular. I think that's the one that's most overlooked by the experts in the space. But it's still early innings. I mean the tech software, we're looking at three or four of them now. They're all headed in the right direction. And I think it's kind of going through their preteen and teenage years, but it's not ready for prime time in terms of putting it out in front of high net worth clients and advisers that serve those high net worth clients. But it will get there. It's just not there yet.

Okay. No more questions. All right. Well, that concludes the Q&A portion.

Yes. No, I just want to thank all of you again. Upfront in the opening presentation, I said that the absolute most important thing we can do is hire, develop and retain the very best people. One of the reasons I'm so grateful and excited as CEO is you got a preview of all the great leaders we have in the company. And there's great leaders that work alongside them and on their team. So we really have a top-notch team. I'm confident it's the best team in financial services. So really excited about the future. And thanks again for your time, and look forward to enjoying the evening. Thank you very much.