Q3 2025 Raymond James Financial Inc Earnings Call

Good evening, and welcome to Raymond, James financials. Fiscal, 2025 third quarter earnings. Call this call is being recorded and will be available for replay on the company's investor relations website. I'm Christy W, senior vice president of investor relations. Thank you for joining us.

Paul Shukri: With me on the call today or chief executive officer, Paul, shukri and Chief Financial Officer Butch oarlock.

Paul Shukri: The presentation being reviewed today is available on Raymond James investor relations website.

Paul Shukri: Following the prepared remarks, the operator will open the lines for questions.

Paul Shukri: Calling your attention to slide 2. Please note that certain statements made. During this call, May constitute forward-looking statements, these statements include but are not limited to information. Concerning future, strategic objectives. Business prospects Financial results, industry or market conditions anticipated timing and benefits of our Acquisitions and our level of success in integrating acquired businesses.

Paul Shukri: Anticipated results of litigation and Regulatory developments and general economic conditions.

In addition, words such as beliefs expects, anticipates intends plans, estimates projects forecasts and future or conditional verbs such as May will could should and would as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements.

Paul Shukri: Please note that there could be no assurance. That actual results will not differ materially from those expressed in these statements.

Website.

Speaker Change: Now I'm happy to turn the call over to CEO. Paul shukri Paul.

Paul Shukri: Thank you, Christie.

Paul Shukri: Good evening, thank you for joining us.

Paul Shukri: We are holding this call from the firm's annual summer development conference in Orlando Florida, where financial advisors and our employee Channel, along with their families. Come for Education, networking and activities.

1 of the great tradition of Raymond James and unique to our culture.

Paul Shukri: I really enjoy being able to spend time and hear directly from such dedicated professionals.

Paul Shukri: Our results, this quarter marked. The firm's 150th consecutive quarter of profitability.

Paul Shukri: Since our Inception, the firm has endured thriving in good times. But also persevering through challenges including recessions financial crisis, and events such as the pandemic and other Global threats.

Paul Shukri: this long-term record of resilient profitability, reflects the strength of our diverse and complementary businesses in our ongoing commitment to always putting clients first

Paul Shukri: As current market in macroeconomic conditions, remain uncertain, we continue to adhere to strategies that have supported consistent success over the past, 150 quarters.

Paul Shukri: Guided by our vision, to be the absolute best firm for financial professionals and their clients.

Paul Shukri: I'm also excited to share that. Raymond James has topped, the JD Power Rankings in its annual us investor satisfaction study as the number, 1 wealth management, firm for advised investor satisfaction.

Paul Shukri: The Firm also, ranked as the most trusted and highest in the studies individual metrics on people, and products in Services, as well as strong rankings in the JD Power. Financial advisor, satisfaction rankings in each of the employee and independent advisor, surveys.

Paul Shukri: This recognition is purely a reflection of what all advisors Branch staff and corporate Associates do every day to serve clients. So well,

Paul Shukri: So thank you. These are well-deserved honors.

turning to our financial results for the quarter, the firm's values based client focused approach continues to generate steady performance

Paul Shukri: Quarterly net revenues of 3.4 billion dollars grew 5% over the prior year quarter pre-tax, income of 563 million declined, 13% compared to the year ago quarter results. This quarter included a 58 million Reserve. Increase associated with a settlement of illegal matter related to bond underwriting for specific issuer.

Paul Shukri: Sold to institutional investors between 2013 to 2015.

Paul Shukri: Although the firm maintains, it had strong defenses and denied any liability. Given the complexity of the case in the unpredictability of litigation outcomes, we determined to resolve the long-running dispute without admission of wrongdoing.

The first 9 months of fiscal 2025, we generated record net revenues of 10.3 billion dollars in record pre-tax, income of 1.98 billion, dollars up, 10% and 5% over the first 9 months of fiscal 2024.

Paul Shukri: These solid results were attributable to our diverse and complementary businesses anchored by the private client group in augmented with the capital markets, asset management and Bank segments.

Across our businesses. We have achieved consistent success retaining and recruiting Financial professionals, who provide high-quality advice to their clients.

Paul Shukri: In the private client group, we ended the quarter with a record 1.57 trillion dollars of client assets under Administration.

Representing year-over-year growth of 11%.

Paul Shukri: Over the past 12 months, we recruited into our domestic independent contractor and employee channels financial advisors with 336 million of 1212 production in 52 billion of client assets at their previous BMS.

Paul Shukri: Including assets, recruited into our Raa and custody services division. We recruited total client assets over the past 12 months of over 60 billion dollars across all of our platforms.

Paul Shukri: Quarterly domestic net. New assets equal to 11.7 billion representing a 3.4% annualized growth rate.

Paul Shukri: We saw net new assets improve throughout the quarter with June activity, producing annualized growth in the high single digit level. Based on our robust, recruiting Pipeline, and strong level of commitments, where even more optimistic, about our momentum and growth over the coming quarters.

Paul Shukri: Advisor and client focused culture coupled with leading technology, and solutions continues to resonate with advisor, across all of our affiliation options.

Paul Shukri: Additionally, our strong balance sheet, and commitment to Independence is increasingly becoming a differentiator as well.

Paul Shukri: To continue retaining and attracting the best advisors. We are continuing to make investments to in our platforms and offerings.

For example.

Paul Shukri: In the private Wells space. We remain focused on providing education, training, accreditation, and enhanced capabilities, and product solutions to allow advisors to meet the needs of their most sophisticated clients.

About 370 advisors have completed or are enrolled in our private wealth advisor program, which continues to attract strong interests from advisors due to its client benefits and contribution to business growth. We also continue to invest in technology, including AI to drive. Continued, operational, efficiencies and improve. Advisors productive capacity. We are making Investments to automate and streamline processes. Which in turn frees up Associates and advisors to do what they do best which is to engage human to human and deepen relationships.

Paul Shukri: Add more value, and importantly, have more capacity to grow their businesses by attracting new clients.

Paul Shukri: In the Capital Market segment, the investment banking pipeline is strong.

And we are becoming more optimistic about macroeconomic conditions relative to the near-term. Although the environment remains uncertain

Paul Shukri: However we are confident that we are well positioned with motivated buyers and sellers along with deep expertise across the industries. We cover whenever the market does become more conducive

Paul Shukri: We remain committed to an enhancing the platform by broadening and deepening. Its capabilities. Whether through strategic hiring or acquisitions,

In the asset management, segment net inflows into managed feed based programs in the private client group. We're strong during the quarter annualizing at nearly 5% in the complimentary impact of our successful recruiting efforts.

Paul Shukri: In the bank segment loans in the quarter at a record, 49.8 billion dollars, primarily reflecting strong growth and securities based lending, balances, yet another synergistic impact from our growing Private Client Group business. As we are able to deploy. Our strong balance sheet in support of our clients.

Paul Shukri: Importantly, the credit quality of the loan portfolio remains strong.

Paul Shukri: Turning the capital deployment, our long-standing priorities have remained unchanged and that starts with investing in growth.

Paul Shukri: First organically and complemented with strategic acquisitions.

Paul Shukri: We continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit it, evaluations, that would generate attractive returns for our shareholders.

Paul Shukri: During the quarter, we repurchased 451 million of common stock at an average share price of 137.

Paul Shukri: Year to date. We have returned capital of over 1 billion dollars through common dividends and share repurchases.

Paul Shukri: As previously, discussed in recent quarters. The capital deployment plan is to repurchase shares on a consistent basis. Throughout the quarter with total amounts expected to be similar to the fiscal third quarter.

Paul Shukri: This approach is expected to maintain Capital liquidity levels, which provide ample capacity to fund organic growth initiatives and execute future acquisitions.

Speaker Change: now, I'll turn the call over to our CFO butcher or log to review or financial results in detail but

Speaker Change: Thank you, Paul.

Speaker Change: I'll begin on. Slide 6.

Speaker Change: The Firm reported net revenues, a 3.4 billion dollars for the fiscal third quarter.

Speaker Change: Net income available to Common shareholders, was 435 million with earnings per diluted share of 2.12.

Excluding expenses related to Acquisitions adjusted net income, available to Common shareholders equalled. 449 million resulting in adjusted earnings per diluted. Share of $2.18 and are adjusted pre-tax margin with 17.1%.

Speaker Change: We generated annualized return on common Equity of 14.3% and annualized adjusted return on tangible, common Equity of 17.2%.

Speaker Change: Solid results for the quarter, particularly given our conservative Capital base.

Speaker Change: quarterly, net revenues of 2.49 billion results were driven by higher PCG assets under Administration, compared to the previous year, the result of Market appreciation, and the consistent addition of net new assets,

Speaker Change: Pre-tax income declined year-over-year primarily due to the impact of lower interest rates.

Speaker Change: Fiscal year to date PCG generated record revenues.

Our Capital markets segments, generated quarterly, net revenues of 381 million and a pre-tax loss of 54 million.

Speaker Change: Net revenues, grew 15% year-over-year.

Speaker Change: For the primarily by higher Investment Banking fixed income and Equity brokerage revenues.

Speaker Change: However, sequential results declined 4%, largely due to lower m&a and fixed income brokerage revenues.

Speaker Change: Which were partially offset by higher underwriting and affordable, housing investments revenues.

Speaker Change: Pre-tax income was negatively impacted by the 58 million. Legal Reserve, increase previously described,

the asset management segment generated record pre-tax income of 125 million on net revenues of 291 million

Speaker Change: Results were largely attributable to higher Financial assets under management, compared to the prior year quarter due to Market appreciation, over the 12-month period and Strong net inflows into pcgc based accounts.

Speaker Change: We had Strong net inflows of approximately 2.1 billion dollars into managed programs on our platform.

Speaker Change: The asset management segment generated record revenues and pre-tax income fiscal year to date.

the bank segment generated net revenues of 458 million and pre-tax income of 123 million,

Speaker Change: On a sequential basis Bank. Segment, net interest income grew 5% driven by continued lung growth. And a 7 basis point expansion of net interest margin to 2.74%

Speaker Change: resulting from a favorable shift in asset, mix along with a higher portion of lower cost deposits,

Speaker Change: Turning to Consolidated revenues on slide 8.

Speaker Change: Third quarter, net revenues, grew 5% over the prior year and were flat sequentially, asset management and related. Administrative fees of 1.73 billion through 8% over the prior year and were slightly higher than the preceding quarter.

Record PCG, fee-based, assets equalled. 944 billion dollars. At quarter, end up 15% year-over-year and 8% over the preceding quarter.

Speaker Change: As we look ahead, we expect fourth quarter, asset management and related administrative fees to be higher by approximately 9% over the third quarter.

Speaker Change: primarily due to higher PCG assets and fee-based Accounts at quarter end and 1 more business day during the quarter brokerage revenues of 559 million, through 5% year-over-year, due to higher revenues and capital markets, and PCG,

Speaker Change: Investment Banking revenues of 212 million increased 16% year-over-year and decline 2% sequentially. The sequential decline, reflected lower m&a and advisory revenues

Speaker Change: While underwriting and affordable housing, investments results were higher in the quarter, moving to slide 9.

Speaker Change: Client domestic cash, sweep and enhanced Savings Program, balances ended the quarter at 55.2 billion.

Speaker Change: Down 4% compared to the preceding quarter and representing 3.8% of domestic, PCG client assets.

Speaker Change: Program balance is increased by nearly 1 billion dollars in the month of June after seasonal, declines for client tax payments, and fee, Billings resulted, in decreases early in the quarter.

Speaker Change: In July domestic cash, sweep and enhanced Savings Program. Balances have declined today in line with July's record quarterly fee Billings of approximately 1.7 billion dollars.

Turning to slide 10.

The decline in rjb DP. Third-party fees was more than offset by higher net, interest income.

Speaker Change: Net interest margin in the bank segment through 7 basis points to 2.74% for the quarter.

The result of the factors I described earlier.

Speaker Change: The average yield on rjb DP, balances with third-party Banks, decreased 4 basis points to 2.96%.

Speaker Change: Primarily due to deployment of incremental cash sweep program, balances from third-party Banks onto the bank. Segment balance sheet based on current interest rates and quarter, end balances, net, a fourth quarter fee Billings. We would expect the aggregate of knee and rgbp third-party fees to decline approximately 2% in the fourth quarter, largely the result of the lower beginning of the quarter, sweet balances held by third-party Banks.

Speaker Change: Keep in mind, there are many variables which will influence actual results, including any interest rate actions during the upcoming quarter and factors affecting our balance sheet, including changes in our loan and deposit balances.

Speaker Change: Turning to Consolidated expenses on slide 11.

Speaker Change: Compensation expense was 2.2 billion dollars and the total compensation ratio for the quarter was 64.8% excluding acquisition related compensation expenses. The adjusted compensation ratio was 64.5% better than our 65% Target recently shared at our investor day.

Speaker Change: A good result especially in a challenging Capital markets environment.

Speaker Change: Non-compensation, expenses of 633 million increased 20% sequentially.

Speaker Change: adjusting for the previously, mentioned legal matter, Reserve in the quarter non-compensation, expenses of 633 million increased 20% sequentially

Speaker Change: Adjusting for the previously, mentioned legal matter, Reserve in the quarter non-compensation. Expenses were 575 million up 9% sequentially.

Speaker Change: While the third quarter typically experiences, higher seasonal costs related to conferences and events.

Speaker Change: A large portion of this quarterly increase also supports firm white growth initiatives, including advisor recruiting professional fees associated with increased underwriting activity and higher Investments of advisory fee expense.

Speaker Change: Is the first 9 months of the fiscal year. We are on track with our guidance for full year. Non-compensation expenses of approximately 2.1 billion dollars, excluding the bank loan provision for credit losses, unexpected legal, and Regulatory items, and non-gaap adjustments presented in our non-gaap financial measures.

Speaker Change: On slide 12. We provide Key Credit metrics for our bank segment.

Speaker Change: We grew loans during the quarter by 3%.

Speaker Change: primarily in support of our clients with this loan, growth continuing to be led by a Securities based lending and Residential Mortgage Loan growth,

Speaker Change: these 2 loan categories, represent well over half of our total loan book, reflecting 36% and 20% of the total

Speaker Change: The credit quality of the loan portfolio remains strong.

Speaker Change: Criticized loans as a percentage of total loans held for investment or stable at 1.14% at quarter end.

Speaker Change: And non-performing assets, remained low at 34 basis, points of Bank segment assets.

Speaker Change: The bank loan allowance for credit losses, as a percentage of total loans held for investment ended. The quarter at 93 basis points, consistent with the prior quarter level the bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.96%, we believe the total allowance represents an appropriate Reserve, but we continue to closely monitor economic factors that may affect our loan portfolios.

Speaker Change: Slide 13, shows the pre-tax margin Trend over the past 5 quarters.

Speaker Change: Which demonstrates the resilience of our diverse business mix and its ability to consistently deliver strong margins.

adjusting for the legal matter, Reserve impacting the quarter as well as acquisition related expenses, our pre-tax margin would be approximately 19%

Speaker Change: Adjusted pre-tax margin largely due to the challenging Capital markets environment.

We remain committed to investing to support growth across the business while maintaining discipline over a controllable expenses.

Speaker Change: On slide 14 at quarter end, our total assets were 84.8 billion. The 2% sequential increase resulting primarily from loan growth.

Liquidity and capital each remain, very strong, rjf corporate cash at the parent, ended the quarter at approximately 2.3 billion dollars. Well, above our 1.2 billion Target with a tier 1. Leverage ratio of 13.1%, and a total Capital ratio of 24.3%, we remain. Well above regulatory requirements. Our Capital levels provide significant flexibility to continue being opportunistic and our pursuit of strategic Acquisitions and to invest in organic growth.

Speaker Change: The effective tax rate for the quarter was 22.6%.

Speaker Change: Reflecting the favorable impact of non-taxable corporate owned life, insurance gains that arose during the quarter for the fiscal year 2025.

Speaker Change: We estimate our effective tax rate for the year to be approximately 24%.

Slide. 15 provides a summary of our Capital actions over the past 5 quarters. We returned over 550 million dollars of capital to shareholders during the quarter and nearly 1.8 billion dollars over the past 5 quarters.

Speaker Change: Through either common, dividends paid or share repurchases. We remain committed over the long term to operate our businesses at Capital levels in line with our stated targets.

I'll now turn the call back to Paul for some final remarks.

Speaker Change: as we enter the fourth quarter, we are encouraged by the strong Tailwind, arising from fee, based assets of 8%,

Speaker Change: net loans, hired by 3% and strong pipelines for growth across our businesses,

Speaker Change: our advisor recruiting pipeline is growing significantly across all of our affiliation options.

Speaker Change: The Testament to our unique culture and robust platform that is resonating with advisors. We are laser focused on providing a seamless transition as advisers affiliate with our platform, while importantly maintaining excellent, service levels to existing advisors and their clients.

Speaker Change: While the investment banking environment is uncertain based on the current Pipeline and activity levels. We believe the next 2 quarters should be better than the prior to

Speaker Change: Lastly, we have plenty of capital support, organic growth and Acquisitions as well as continued share repurchases at a level similar to this quarter.

As illustrated by a recent JD Power. Number 1 rankings.

Speaker Change: Putting clients first has been the Cornerstone of Raymond James's values since our Inception and that commitment remains at the center of everything we do. This prestigious honor demonstrates a client-centric culture and our steadfast dedication to supporting advisors in empowering them with sophisticated resources, support in technology, our results, reflect the many contributions of our Associates in advisors and financial professionals across the firm.

Speaker Change: Thank you for contributing to 150 quarters of consecutive profitability by providing outstanding advice and service to your clients.

Speaker Change: That concludes our prepared. Remarks operator, will you please open the line for questions?

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad, if you would like to withdraw your question, simply press star 1 again,

We ask that you please limit yourself to 1 question and 1 follow-up.

Speaker Change: Please ensure that your phone is not on mute when called upon thank you.

Your first question comes from Michael Cho with JP Morgan. Your line is open.

Kind of the right pace for now. Um given what? You're seeing the pipeline.

Speaker Change: Thanks Michael. Um, yeah, what I, what I would say on the recruiting pipeline is, you know, in terms of the acceleration of activity, the number of events that we've hosting the number of advisors that were meeting with, uh, the entire team really cross all of our affiliation options. Um, you know, when we speak to the teams, who have been with Raymond James, uh, for a long time, we really haven't seen this type of acceleration, uh, in activity since the financial crisis. Um, and of course, the advisors that we're talking to now, uh, are much larger than the advisors that were talking to us during the fight, you know, after the financial crisis, as a, uh, Safe Haven, uh, given all the disruption that was going on in the industry. So, uh, we're really excited about this opportunity, it's all Hands-On deck, both, uh, recruiters, and also want to, uh, give a lot of credit to our transition teams because, uh, we and we've invested in the transition teams as well, uh, given a more capabilities and capacity.

Speaker Change: These to to really help with the uh uptick uh to ensure that we have seamless transitions uh of the uh new advisors that are affiliating with the platform uh but also ensure that we provide. Uh, and this is really important uh exceptional service to our existing advisors uh and their clients as well. So we don't

Speaker Change: Want that service level to fall off? Uh, you know, they're satisfaction is very high right now is uh, evidenced by the the number 1 ranking in the JD power award for service and trust. And so we want to make sure we don't dilute that as we bring on uh, the new advisors who are affiliating with us.

Speaker Change: Great. Thanks for the call as well. Um, if I could just switch to the, to the balance sheet, real quick, uh, you know, saw some nice growth this quarter you called out Security, based lending. Um and also some growth across CRA and and cni just wondering if you could just um, you know, how your framing the trajectory of of balance sheet growth, AC some of the key segments, uh, for the remaining there of the year. And, and then just on the other side. If we think about, you know, the third-party Bank mix, you know, how how should we think about the, the normalized level? Uh, oh, over time as you uh, continue to experience, maybe better balance sheet engagement, thanks.

Speaker Change: Yeah, I think it was around this time last year um, that we were saying that uh, clients are getting used to sort of the, the new level of interest rates and that, uh, we were were expecting, uh, higher utilization of Securities based loans after, uh, really kind of 2 years of, uh, a lot of pay downs and payoffs. And and that's exactly what we experienced though. Year-over-year security is based loans to Private Client group. Clients are up 20% across the firm. Uh, so really exceptional growth and even more mortgages, uh,

Or up 8% year-over-year, um, across the firm. So, uh, really using the balance sheet to support clients and client demand, uh, and particularly clients of the Private Client Group business. And so, uh, we, we don't know what the trajectory is going to look like, going forward, the momentum and the pipeline for security space lending, uh, continues to be strong. Uh, and so we fortunately have a strong deposit base and a diversified deposit base to continue supporting that growth going forward.

Speaker Change: Next question.

From Dan Fannon with Jeffrey's. Your line is open.

Speaker Change: Great, thank you. Uh, 1 more on just, uh, organic growth. So, so Paul your comments, you know, this quarter seemed, you know, a little bit more bullish but generally, consistent with what we've heard for the last few quarters.

Speaker Change: But yet the nna both on a dollar basis. And on a percentage growth basis is still below where you were last year and and other periods. So what is the disconnect or could you talk to what? Maybe the negatives are that are maybe drawing down the overall growth levels?

Speaker Change: Well, I mean hopefully you're hearing us sound more confident about our recruiting uh pipeline because that's the intent. I mean we the activity levels are accelerating and picking up. Uh, and so we are uh, increasingly while we have been very consistently and uh and successfully recruiting advisors across

Speaker Change: You once the new advisor, affiliates with the firm, there is lag in terms of when that shows up into nna, because then they have to bring over their, uh, clients and they have to bring over their assets. So, um, it's not a, a just in time impact to nna, you know, from the time. We feel good about a pipeline to the time, we see it in an a, it could be, uh, 369 months. Uh, just depending on how quickly that pipeline is converting. Um, we are still seeing pressure on the, uh, existing advisor base, you know, private Equity. Um, you know, we, we always say with the rollups, you know, and the absence of a value proposition, uh, they compete with big checks. And so while we're seeing that moderate a bit, as I think some of the valuations have just gotten uh so lofty that I think across the industry. A lot of the participants are questioning uh the valuations and the prices that these uh, private Equity. Back rollups are paying, uh, for so

Speaker Change: Certain advisors I think some firms are taking breathers but they're still uh you know handful of aggressive firms out there. Um and from time to time that is disruptive uh particularly in the independent Channel. But aside from that retention morale, service level. Satisfaction levels have been very good and our pipeline, uh, continues to accelerate

Great. And that's helpful. And then as my follow-up just within brokerage, can you talk about the fixed income, um, Outlook and and what type of environment is best for that business to to Really accelerate

Speaker Change: Yeah, I mean, our our biggest business in fixed income brokerage and this is, uh, important distinction from the, the bigger bulge bracket Banks, uh, and warehouses who've had really strong Quarters on, you know, the much higher volatility that you get with commodities and currencies and interest rates. Uh, especially in the environment we saw last quarter. We're really not, uh, heavily engaged in those. Uh, higher volatility, uh, sector segments within fixed income. I mean, we're really serving our biggest, uh, uh, client base in the fixed income business our depositories, you know, Banks and Credit Unions, uh, helping them manage their Securities portfolio. So, an environment where, uh, their deposit rich and uh, there's uh, a lack of loan demand and an opportunity to earn more uh by investing in Securities out on the spread on the on, the curb is an environment, that's conducive most conducive for us in fixed income. Uh, when they're spread volatility that helps our

Speaker Change: Uh, some Ridge business, uh, that that, that technology enabled businesses, really driven more on, uh, on spread volatility and spreads have been actually fairly tight, uh, and resilient. And so we haven't seen the volatility that you may expect given sort of the, the macro uncertainty surrounding it. Uh, so that that business hasn't really seen the type of Tailwind uh, that you would have otherwise expect with higher spread volatility.

Speaker Change: Great. Thank you.

Speaker Change: The next question comes from Devin Ryan with citizens. Jmpp, your line is open.

Uh, great. Um, how's it going Paul? But, um, first question just here on, uh, customer cash balances. The decline was, you know, maybe a bit more than we'd expected. And I know there's a lot that goes into that with taxes and then advisory fees and investors leaning into the market. Um, but, you know, it's a bit difficult from the outside to parse through kind of what's cash, sorting versus other Trends so just be good to get an update on what you're seeing, um, around, um, your client Behavior there. Uh, maybe what you've seen through July, if you can share that. And then also, just what you're expecting in the back half of the year, just giving what you talked about with kind of accelerating organic growth. So, you know, how much that could help for kind of rebuilding, some of that transactional cash. Thanks.

Case this quarter, but yeah.

Speaker Change: Yeah. Thanks Devin. Uh, as we as we talked about on on last orders called the there's a seasonal element to uh cash balances in this quarter. Um uh client tax payments, um, and especially in the month of April. Typically you uh, have have an adverse effect on client balances and in the short run. And so we certainly experienced the uh, that um uh, as well as uh um, you know, the industry at large and um, what we've seen uh um, in the month of June. And and we're encouraged by the month that, uh, by the month of June, is what we've seen is, we've seen, uh, 1 billion dollars of, of growth in, in the balances, in the, uh, that occurred in the month of June, um, kind of, um, as those, uh, seasonal factors kind of, uh, reverse. And so, um, we're hopeful that, that, that, uh, portends, a, a positive trend for the, uh, the balances, uh, upcoming

I mean in the fourth quarter but but as Paul mentioned, when you look at those balanced levels on a on a year-over-year basis, I mean there there's uh continues to be relative stability in those balances year-over-year.

Speaker Change: Uh, thank you. The great color there. Um, and then is my follow-up. Um, you know, I called the press release on. Um, you know, in the Canadian business you recently announced what you framed, as a significant investment fnv to accelerate the digital transformation of the wealth management, uh, infrastructure and then Elevate the advisor client experienced Nationwide. And so, I appreciate Canada as a smaller piece of Raymond James today, and maybe the word significant was relative.

Speaker Change: To the Canadian platform to get my attention centers. Love the incentive of of, if you can kind of the sizing and strategy of that investment, and make it more broadly, uh, you know, in this world where outright Acquisitions in the space have been really competitive and and maybe pricey could we see more of these strategic Investments, as maybe an outlet for uh, for excess Capital. Thanks.

Speaker Change: Yeah, we we've been in the Canadian market for a very long time. Uh, and it's certainly an important market for us, uh, particularly, uh, in wealth management. But also in capital markets, uh, and we have, uh, a profitable business and wealth management and generates a good profitability, uh, and we have a Best of Both Worlds. Value proposition in Canada. That's very similar to the value proposition that we have in the US, uh, where you know, we're competing against the big 6 Banks up there. And we offer, uh, a more uh, advisor Centric, uh, culture, uh and, uh, all the capabilities that uh,

Speaker Change: The advisors that have, uh, mostly of the most of them come from those banks have, uh, become accustomed to having and so that value proposition resonates up in Canada. It's a very attractive market for us. It's 1 that we're committed to, uh, and we're going to continue just like we do in the US and in the UK to can continue to invest in their resources. Uh, the press release mentioned a new technology uh system for them that uh we're really excited about and the advisors they are excited about as well. So, um, I I'll just continue to be and we look for Acquisitions in the Canadian Market as well. There's not as many, it's not as fragmented as the, the us all the US has become a lot less fragmented too. Uh, so, but we would be, if we find a, a firm up in Canada, on the wealth side, that's a good cultural fit strategic fit, uh, and at a price, that makes sense. We, we would, uh, welcome inviting him to the Raymond James family.

Uh, okay, uh, that's great. Thank you.

Kyle void: The next question comes from Kyle void of KBW. Your line is open.

Speaker Change: Hi. Good evening. Um, so it sounds like some positive momentum on the, recruiting side. Paul, you mentioned some easing Dynamics. Very recently of maybe some firms in the in the industry taking breathers on transition, assistance rates or recruiting packages.

Speaker Change: But just curious, how you would describe the current, um, environment competitive environment, even after that, easing versus where we've been over the past, you know, year or 2. And then also wondering if you could comment on whether Raymond, James has changed, anything in terms of How It's approaching recruiting pack packages in recent periods,

Speaker Change: Uh, pee back, uh, Roll-Ups cropping up everywhere. Um, and you know, over the last 3 years in particular they've been extremely aggressive and, you know, trading and paying at higher and higher multiples. And that I think they're getting to the point now, uh, somewhat of a, uh, inflection point. I think in that business where they're trying to figure out what's next, you know, how much higher can those multiples go especially when you compare them to public company multiples? I mean, it's uh, significantly higher in many cases than public company. Multiple. So they're I think they're looking at what's next. Is there, is there a public market for that type of multiple other strategic buyers for that type of multiple is there another private Equity buyer or continuation fund? And so that's just uh, I think surfacing those type of questions but I I don't want to overstate the impact that's having uh, on the competitive environment because again, it only takes 2 or 3 firms that are earlier in their stage of deploying, their Capital that they've already

Speaker Change: Raised to keep that competitive environment uh, you know, sort of, uh, frothy. And so that's that is still a competitive environment out there. Um,

Speaker Change: But I do think that the the tone I that I'm hearing is a little bit different from some of those, uh, roll up firms, uh, than maybe it was a year or 2 ago.

Speaker Change: That's very helpful, um, maybe just staying on the recruiting topic and just regarding your earlier comments about the largest acceleration and activities since the financial crisis. Like, do you think this is an industry-wide Dynamic where you'd expect to see overall industrywide? Turn levels increase over the next 12 months, or do you think it's more idiosyncratic or something about Raymond, James's positioning in the market? Currently, that's made the platform, uh, more attractive and, and, and it has caused you to see this acceleration recently.

Speaker Change: No, I think I mean, there's certainly been, uh, m&a driven Catalyst. Uh, particularly in the independent side of the business that, uh, you know, is you all are well aware of. And so I think that, uh, again, the the success that we're having though is not concentrated only, uh, you know, from that particular Catalyst where, uh, we're seeing success from a, a lot of different firms across our affiliation options. Uh, but you know that Catalyst, uh, certainly, uh, is has, uh, led to or contributed to the acceleration, uh, in our recruiting Pipeline and our recruiting activity,

Speaker Change: That's great. Thank you.

Speaker Change: The next question comes from Bill Catz of TD. Cowen, your line is open great, good evening everybody. And thank you for taking the questions, um, maybe sticking on just so the dynamic of accelerating financial advisor and that new asset growth. I was wondering, could you talk a little bit about? Does that have any structural impact on your comp ratio? And also, I was wondering what the assets that are coming in giving that the teams are larger. Does that have any kind of adverse impact on the client cache as percentage of those assets that are coming in the door?

Speaker Change: I, I would say again we have

Speaker Change: 1 Point uh over 1.6 trillion dollars of client assets. So for uh for anything to really make a meaningful uh change to any of these firmwide ratios, it would have to be, you know, really substantial. So, um, I would say it would be more of a Glide path than a, uh, a sudden change in any of the ratios, uh, across the board with what we're talking about. Just giving the, the size of the base and the magnitude of what you would have to bring on to change to move the needle, uh, given the size of the base.

Speaker Change: Okay, and this is my follow-up. Thank you for that. Um, just from a big picture down, uh, at your investor day, you were pretty, um, um, pretty rich in terms of looking at the market and saying, seem seem a little heavy for an m&a perspective and pricing. And you had seemingly passed on a few things. Um, wondering if you could update us on your thoughts about how the Strategic backdrop is looking from an m&a perspective and where you might be most focused. Thank you.

Speaker Change: Yeah, we we continue to stay very, very busy in our corporate development function. Um, and so we're uh,

Speaker Change: Bank, you know, we already have 2 Chargers. Um, and so you know that and we have 1 branch and 2 ATMs across those 2 chartres. So we have a, you really a utility Bank to serve uh clients and uh not brick and mortar type uh uh, business structure there. Um, and so, you know, we would continue, we continue to remain active across all of our businesses and, uh, develop relationships again across the Spectrum from, you know, early discussions, preliminary discussions to more advanced discussions, but most importantly, we're not going to do a deal to just do a deal. Uh, it has to meet our 3 criteria first being a good cultural fit, no matter how good the revenues and profits are. If it's not a good cultural fit, it's not going to work in our business. Uh, and and if it's a good cultural fit, then it has to be a good strategic fit where, you know, 1 plus 1 gives us a chance of being more than 2. Um, where we make them better and they make us better, uh, in our history of Acquisitions. We've always tried to retain the managed

Team and we have a great track record of doing that our Public Finance and fixed income. Business is still run by the leaders that came over from Morgan Keegan back in 2012, for example. Um, and so we want to be better after the acquisition, not just add assets or revenues uh, and then finally, if those first 2 boxes are checked, then the valuation has to make sense for us and it has to make sense to the selling party. Um, and so those we're going to remain disciplined in that regard.

Thank you.

The next question comes from Alex Blowin, with Goldman Sachs, your line is open.

Hey, good afternoon, thank you. Um, I wanted to ask you guys a question, um, around is the margins and the quarter but also the targets and sort of relay that back to your Capital markets commentary from early in the call, so 19% for the quarter. As you mentioned, it's running a little bit below. The 20% Target that you guys are are shooting for, uh, is the pipeline in banking, uh, where you see right now and stuff that sort of tangible enough to get you guys into that 20 plus percent pretext margin goal, uh, that you outlined uh, at the investor day.

Speaker Change: Yeah, you know, you know um, with respect to the the the current quarter. Um you know we we were pleased with the 19% pre pre pre-tax margin for the quarter given

Given the the softness and the Capital Market segment for the, you know, for for the quarter that we experienced and um you know, although we're you know we continue to see the capital markets business long term, as a as a mid-teen, uh uh uh uh margin uh type of business. We we do, we do uh, continue to expect uh, to be able to achieve that. And and and just with with uh uh Improvement in in the capital markets environment um it would foretell well.

Speaker Change: For us to to, to be able to deliver on that, on that pre-tax margin. Target of 20% that we, that we uh, shared, uh, at investor day. Um, and it it, uh, as, as as we previously mentioned, you know, we feel also feel good about the, the tremendous, uh, Tailwind that we have in, in the, in the Private Client business with, uh, uh, the upcoming quarter with, uh, the uh, uh, 8% increase in fee billable assets. And so, you know, we continue to to, to feel good about the opportunities to, to improve on the margin from from this quarter.

Speaker Change: Got it. Thank you. Um, second question for you guys, just around opportunities to better leverage. Uh the wealth platform as you think about incremental revenues, um related to the alternative platforms alternative businesses that are out there. Um some of you up here is especially on the larger cap side. Uh do quite a good quite a good job. Monetizing that opportunity where effectively shelf space payments

Speaker Change: How are you thinking about that for AJ? It feels like the opportunity to increase penetration of alternative products private Market strategies continues to expand. Um, so maybe some some guideposts in terms of what percentage of the acid base is in private strategies today. Um, what you guys think that could go and again the revenue opportunity uh, attached to that over time?

Happening, we're providing a lot of education and resources and a broader and deeper set of uh, products Alternatives in that in that, uh, in that space. And so, uh, we'll continue to invest in it. We have, uh, new leadership team in that space that we put in place uh, for months ago, or so. Uh, and uh, they're really um, investing in in the education and the increasing the awareness of the solutions to the advisors and the increasingly High, net worth clients that, uh, you know, these products make more sense for. So we have a lot of in summary. I would say, we have a lot of Headroom where we've got a lot of investments in these areas. Uh, we have a great set of products across the Spectrum, but we are not going to have quotas or push products or, uh, create sort of variable incentives to try to drive growth in those products. It's just not uh, the type of culture that we have at Raymond James

Speaker Change: Yep, all makes sense. Thank you very much.

The next question is from Jim Mitchell. With Seaport Global Securities. Your line is open.

Jim Mitchell: Okay, thanks. Good afternoon, guys. Um, maybe, uh, you mentioned a couple of times strong inflows into fee based Assets in PCG. I know you don't disclose that data, but can you kind of, give us a sense of at least a ballpark of the level of growth you're seeing in Feebas, flows? And is that materially better than nna and maybe just talk about the dynamic between the 2.

Jim Mitchell: Yeah, I mean, the fee based blows have been stronger than, uh, the overall flows. Uh, and you see that with just the, the level of client assets. I mean, overall if you look year-over-year client assets under Administration, uh, overall, for the firm have grown at 11%, uh, where fee based assets have grown, uh, 15%. Uh, and so, you know, that's the best way I think to just Dimension. Um, the, the relative growth of fee based assets versus overall assets at Raymond James and, you know, we're now at 65% or so of our asset overall assets in the private client group, uh, our feed based. Uh, and so we've always really led the industry uh and feed based uh penetration. Uh and so, but we also, when it makes sense for clients, we also want to continue offering a competitive and robust, uh, you know, brokerage solution as well.

Speaker Change: So you don't think it's like a difference in client mix that that sort of gap between the 2 is is really organic growth and Feebas being a couple hundred basis points, higher than na growth.

Speaker Change: Well, I mean, uh, advisors over a long period of time have been shifting their business to, uh, more fee based business and advisory based, uh, relationships. But, um, you know, a lot of clients have both a fee based account and a commission based account because they have, uh, assets that have, uh, you know, different uh, objectives and priorities around them. And some of those assets might maybe be better invested in a brokerage account or uh and some of those assets may be better invested in a a advisory relationship and a fee based account. So, um, it's it's not that, uh, any advisor any client just does 1 or the other. It's a mix and it's really driven by what is the best for clients.

Speaker Change: Yep, all all fair. So just maybe a follow-up on the recruiting pipeline is a pretty broad base to cross all affiliation options or is it more concentrated in in 1 specific segment?

No, I would say we're seeing good success, um, you know, across all of our affiliation options, the, you know, there's certainly the acceleration rate uh, within the independent, uh, channel. Uh, is probably higher, uh, but we're still seeing very good success, uh, in the employee affiliation option and the independent ra option as well.

Speaker Change: Okay, great. Thanks.

Your final question comes from Michael Cyprus of Morgan Stanley. Your line is open.

Michael Cyprus: Great. Thanks for taking the question, uh, just on the investment banking side. If you mentioned that, you expect the next 2 quarters to be better than the prior 2 quarters, just curious. If you could elaborate a bit on what you're seeing, how the magnitude of pipelines has evolved, and what you're seeing from an environmental standpoint, supporting your confidence, versus say a month and a half ago at your investor day.

Speaker Change: Yeah, I think.

So as time has passed as deals, have been struck by the administration as the Administration has pivoted on deadlines and uh shown uh, a willingness to to negotiate with the countries. And and uh, come to a good, you know, overall, uh, hopefully positive solution. I think the shock that we had in early April has, uh, not fully worn off and and again, we could be shocked again, tomorrow, who knows? But, uh, certainly the, the markets sentiment now is more positive than it was, um, in early April, uh, and so and there there's a lot of pent-up demand and there has been for several months now, because of 2 years of really lackluster Investment Banking business across the industry. We have a lot of motivated, buyers and sellers, uh, particularly private Equity sponsors which represents 60% of our m&a, uh, activity in any given quarter a year, roughly 60% and so they they have

Speaker Change: Companies that uh, are sort of beyond their original timelines, in terms of being sold out of the portfolio, so they could distribute Capital back to their LPS. Uh, and then they also have, uh, bought on the buyer side. They have Capital that needs to be deployed. So there's a lot of pent-up demand and I think as, uh, there's more certainty and less shock in the system, uh, and more certainty around tax reform, which you know, has was successfully implemented, uh, in the tariff reform.

Speaker Change: Uh and and now maybe around interest rates to some extent um as long as there's certainty around those things uh no matter what the outcome is, I think uh there'll be a better environment for uh that pipeline to convert to realizations.

Speaker Change: Great. And then just as a follow-up question, more bigger picture. I was just curious. If you could, just give us a little bit of an update thoughts around digital asset. Stable coin strategy. How you're seeing the opportunities for Raymond James? What steps might we see you guys take say over the next 12 months, as it continues to Garner more attention across the marketplace.

Speaker Change: I think we're encouraged. I mean, what we've been asking for for the last couple of years, really is for the regulation and the regulatory framework to catch up to the demand, uh, and to sort of the, uh, actually penetration and, and utilization of these type of products. And so we're encouraged. I think there's a lot more even as as recently as last week. Um, our trade associations. I know, which we have senior leadership representation on were very engaged on the hill, on trying to help regulations catch up to uh, the demand and interest, uh, for these type of products. And so, uh, in the meantime, we've been, you know, as you can imagine, very deliberate. We we want to protect clients first and foremost and and until the regulations catch up. Um, you know, the the clients um, are at some level of, uh,

Risk. That's a disproportionate to the, the other Securities where the regulations have been in place for a very long period of time. And so, uh, you know, we're not bleeding edge, uh, on these type of products, but we are monitoring them, very closely. We have teams that are focused on understanding what other competitors are doing and what's available and what's not yet available, what may be available. Uh, so we're studying it very closely uh, and being try trying to be as responsive as we possibly can to our advisors and their clients.

Great. Thank you.

Speaker Change: Great. Well, I think that was the last question. Just want to thank all of you. Uh, for your time and interest in Raymond James, we certainly do not take it for granted. And I also want to thank all of our financial advisors Bankers Associates, uh, and clients, uh, for trusting, Raymond, James and for doing such great work across the country, so we really appreciate it. Uh, and we wish all of you, well,

Please today's conference call, thank you for joining. You may now disconnect

Speaker Change: Please wait the conference will begin shortly.