Raymond James Financial Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
Is Raymond James Financial a Top Scorer Stock based on the Dividend, High-Growth-Investing or Leverman Strategy?
As a Free StocksGuide user, you can view scores for all 9,127 stocks worldwide.
StocksGuide Premium
StocksGuide Unlimited
Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $31.00b | Revenue (TTM) = $16.99b
Market Cap = $31.00b | Estimated Revenue = $16.05b
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $89.64b | Revenue (TTM) = $16.99b
Enterprise Value = $89.64b | Forward Revenue = $16.05b
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🧮 Calculation
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net Margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Raymond James Financial Stock Analysis
Analyst Opinions
19 Analysts have issued a Raymond James Financial forecast:
Analyst Opinions
19 Analysts have issued a Raymond James Financial forecast:
Raymond James Financial Events
Past Events
|
JUL
22
Q3 2026 Earnings Call
2 months ago
|
|
MAY
27
Analyst/Investor Day - Raymond James Financial, Inc.
4 months ago
|
|
APR
22
Q2 2026 Earnings Call
5 months ago
|
|
MAR
2
47th Annual Raymond James Institutional Investor Conference
7 months ago
|
|
FEB
11
Bank of America Financial Services Conference 2026
8 months ago
|
|
JAN
28
Q1 2026 Earnings Call
8 months ago
|
|
NOV
13
Wolfe Wealth Symposium 2026
11 months ago
|
|
OCT
22
Q4 2025 Earnings Call
11 months ago
|
StocksGuide Free
Raymond James Financial — Q3 2026 Earnings Call
1. Management Discussion
Good evening, and welcome to Raymond James Financial's Fiscal Third Quarter 2026 Earnings Call. This call is being recorded and will be available for replay for 30 days on the company's Investor Relations website. I'm Kristie Waugh, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shoukry; and Chief Financial Officer, Butch Oorlog. This presentation being reviewed today is available on Raymond James' Investor Relations website. .
Following the prepared remarks, the operator will open the line for questions. 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; anticipated results of litigation and regulatory developments and general economic conditions.
In addition, words such as believes, 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. 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 and Forms 8-K, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shoukry. Paul?
Thank you, Kristie. Good evening, and thank you for joining us. Over the past few weeks, we've had the opportunity to spend time with advisers and their teams at various conferences and recognition trips. These advisers exemplify the client-first values that have driven our consistent results since our founding in 1962. And speaking about steadfast values, 2 weeks ago at our summer development conference, I had the opportunity to honor Tom James for celebrating his 60-year anniversary with Raymond James. He still comes into the office almost every day and reinforces our long-term values that define his 40-year tenure as CEO and his incredible generosity of time, leadership and community giving that serves as an example to us all. .
I want to thank Tom publicly again for establishing the unique culture that has differentiated Raymond James and helped us continue to be successful over time. Turning to the quarter. Our results for the third quarter were strong and contributed to our record results through the first 9 months of the fiscal year. These results reflect the continued execution of our long-term strategies to drive growth, the resiliency of our diversified business model and our conservative approach to managing the firm. They also reflect the strength of our people-first culture and the commitment of our associates and advisers to serving clients with integrity.
In the quarter, we generated record quarterly revenues of $3.93 billion, representing growth of 16% over the prior year quarter and 2% above the preceding quarter. Pretax income of $750 million increased 33% compared to the year ago quarter and 2% over the preceding quarter. Client expectations are changing, innovation is accelerating and differentiation matters more -- now more than ever. But what sets Raymond James apart today is the same thing that has always set us apart, our culture and the way associates and advisers serve clients through deeply personal relationships.
In the Private Client Group, we ended the quarter with a record $1.86 trillion of client assets under administration, up 9% from the preceding quarter and 18% year-over-year. Our growth remains focused on quality over quantity, strong retention and continued recruiting momentum again demonstrated that Raymond James remains a destination of choice for financial advisers across our affiliation options. Domestic net new assets were $21.7 billion in the fiscal third quarter, representing a 5.5% annualized growth rate.
During the quarter, we recruited financial advisers to our domestic independent contractor and employee channels with trailing 12-month production totaling $156 million and nearly $23 billion of client assets at their previous firms. Through the first 9 months of the fiscal year, we recruited advisers with trailing 12-month production totaling $393 million and more than $56 billion of client assets at their previous firms, putting us on a clear path to exceed the record results set in fiscal 2025.
The source of this year's recruiting success as well as our current pipeline remains diverse across our affiliation options. This strength in retaining and attracting high-quality advisers reflects our differentiated value proposition, advisers do not have to choose between culture and capabilities. We offer a unique combination of an adviser and client-focused culture along with a leading technology, products and solutions advisers need to serve clients at a high level. together with our strong balance sheet, long-term focus and commitment to independence, that combination continues to set Raymond James apart for advisers evaluating alternatives. Our ability to scale and sustain this compelling value proposition is seen in our near record levels of adviser satisfaction.
At the same time, advisers' expectations are high and clients' needs are becoming more complex. This is why we are investing to equip advisers and associates with private wealth tools and resources to deliver deeper, more tailored advice while keeping personal relationships at the center. To support that, we'll continue investing in automation, process improvement and AI as part of our more than $1.1 billion annual technology spend. These investments are designed to create efficiencies, give advisers more time to deepen client relationships and further enhance the client experience.
For example, this quarter, we completed the enterprise rollout of Raymond, our proprietary AI assistant following a thoughtful pilot program and phase deployment. Raymond gives our people a secure plain language way to access institutional knowledge, ask follow-up questions and receive more actionable answers. We are very encouraged by the strong initial feedback from the pilot and full rollout. In Capital Markets, revenues grew this quarter supported primarily by stronger investment banking results, though activity levels remain below what we would have considered a normalized environment, especially in the middle market and sponsor-driven client segments.
We entered the fourth quarter with an encouraging pipeline, reflecting the opportunities created by the strategic investments we have made in this segment over the past few years. While the timing of transaction activity remains difficult to predict, we are optimistic about our positioning as motivated buyers and sellers continue to engage us for the deep expertise across the industries we cover. In the Asset Management segment, net inflows into managed fee-based programs in the Private Client Group were strong during the quarter. This reflected the complementary benefits of offering high-quality investment alternatives to financial advisers and their clients as well as growth from our successful recruiting efforts.
We also completed our acquisition of Clark Capital during the quarter adding its wealth-focused solutions in approximately $47 billion in combined assets under management and nondiscretionary assets to Raymond James platform. We are excited to welcome Clark Capital to the Raymond James family. In the Bank segment, loans ended the quarter at a record $56.2 billion, driven primarily by continued strong growth in securities-based lending balances. These balances increased more than $6 billion or 34% from the year ago period and 8% sequentially. This growth continues to reflect the synergy with our expanding Private Client Group business as we deploy our strong balance sheet and support of clients.
Importantly, credit quality across the loan portfolio remains strong. Our capital deployment strategy remains disciplined and long-term focused. -- with priorities that include organic growth, technology and platform investments, strategic acquisitions and returning capital to shareholders. Over the 12 months, we deployed capital through our share repurchase program to help manage capital levels, repurchasing approximately $1.6 billion of common stock, including $400 million during the quarter. We ended the quarter with a Tier 1 leverage ratio of 11.7%. Now I'll turn the call over to Butch Oorlog to review our financial results in detail. Butch?
Thank you, Paul. I'll begin on Slide 6. The firm reported record net revenues of $3.93 billion for the fiscal third quarter. Net income available to common shareholders was $595 million, with record earnings per diluted share of $3.01. Adjusted net income available to common shareholders, which excludes acquisition-related expenses, equaled $620 million resulting in record adjusted earnings per diluted share of $3.14. Our pretax margin for the quarter was 19.1% and adjusted pretax margin was 19.9%. We generated annualized return on common equity of 18.8% and annualized adjusted return on tangible common equity of 23.5%, strong results for the quarter, particularly given our conservative capital base.
Turning to Slide 7. the Private Client Group generated pretax income of $423 million on record quarterly net revenues of $2.84 billion. Revenues grew by 14% year-over-year, primarily driven by higher PCG assets under administration, resulting from market appreciation, strong retention and the continued addition of net new assets. Pretax income grew 3% over the year ago quarter as the revenue growth was partially offset by the impact of lower interest rates and investments in leading growth, including record recruiting results. The Capital Markets segment generated quarterly net revenues of $477 million and pretax income of $48 million.
Segment net revenues increased year-over-year and sequentially, largely due to higher M&A and advisory revenues and higher debt underwriting revenues. The Asset Management segment generated pretax income of $143 million on record net revenues of $362 million. Results were largely driven by higher financial assets under management compared with the prior year quarter, reflecting market appreciation over the past 12 months and strong net inflows into PCG fee-based accounts. Results also included a partial quarter contribution from Clark Capital, which we acquired on April 30. The Bank segment generated net revenues of $488 million and record pretax income of $206 million.
Segment net revenues increased 7% year-over-year, largely due to net loan growth over the period. Results also benefited from a loan loss reserve release during the quarter, driven by a strengthening in credit quality as the loan portfolio continues to shift toward lower risk securities-based and residential mortgage loans.
Turning to consolidated revenues on Slide 8. Asset management and related administrative fees were $2.08 billion, up 20% over the prior year and 3% over the preceding quarter. Record quarter end PCG fee-based assets were $1.15 trillion, up 22% year-over-year and 11% over the preceding quarter. Looking ahead, we expect fiscal fourth quarter 2026 asset management and related administrative fees to increase approximately 11% from the third quarter level, driven primarily by higher PCG assets and fee-based accounts at quarter end.
Moving to Slide 9. Clients' domestic cash sweep and enhanced savings program balances ended the quarter at $58.8 billion, up 2% from the preceding quarter and 7% over the prior year level representing 3.4% of domestic PCG client assets at quarter end. Cash sweep balances grew 4% year-over-year and reflect the impact of organic and recruited growth over the period. We continue to diversify funding during the quarter with strong growth in enhanced savings program balances up $2.4 billion or 19% over the prior quarter level.
This on-balance sheet increase in bank deposits enabled us to shift a portion of our cash suite program balances from our banks to third-party banks. This dynamic highlights the strength of our deposit gathering capabilities and the flexibility inherent in our funding model to move cash sweep balances on or off balance sheet, enabling us to better serve client needs.
Turning to Slide 10. Combined net interest income and RJBDP fees from third-party banks were $658 million, up $8 million or 1% from the prior quarter. Fee revenues earned on RJBDP balances with third-party banks increased $5 million as a result of both an increase in the yield of 5 basis points to 2.75% as well as an increase in average balances swept to third-party banks in the quarter. Bank segment net interest income was flat sequentially as incremental interest from loan growth was offset by higher interest expense primarily from the growth in the enhanced savings program balances that I previously discussed.
Looking ahead, based on static interest rates and assuming unchanged quarter end balances, net of the fiscal fourth quarter fee billing collection of $2.1 billion, we would expect aggregate NII and RJBDP fees from third-party banks in the fourth quarter to be approximately flat with the third quarter level. Keep in mind, actual results could be influenced by several variables including interest rate actions during the upcoming quarter and changes in loan and deposit balances.
Turning to consolidated expenses on Slide 11. Compensation expense was $2.58 billion, and the total compensation ratio for the quarter was 65.7%. The adjusted compensation ratio which excludes acquisition-related compensation expenses was 65.5%. This result is in line with our target of approximately 65% provided at our Analyst and Investor Day and is down 20 basis points sequentially. In a quarter with better M&A and advisory revenues, we would expect this ratio to improve. Noncompensation expenses were $599 million, down 5% from the year ago quarter. Recall that the prior year quarter included a reserve increase associated with the settlement of a legal matter which did not recur this quarter.
Sequentially, non-compensation expenses increased 3%, driven by higher professional fees and business development expenses, partially offset by a benefit for bank loan credit losses. Professional fees during the quarter reflect elevated legal expenses with the vast majority being defense costs incurred during the quarter associated with the previously disclosed putative class action lawsuit related to our cash sweep programs. We believe we have strong defenses to the claims asserted, and we are vigorously defending the action. However, such defense is triggering an increase in our cost.
Additionally, there were legal costs incurred this quarter related to our acquisitions of Clark Capital and GreensLedge. Business development expenses were higher as the fiscal third quarter typically reflects seasonal cost as we host many of our largest annual conferences and invest more heavily in advertising during this time of the year. Certain noncompensation expenses are tied directly to our growth and many of those expenses, particularly those associated with successful recruiting benefit future periods. For the fiscal year, we remain on track with our target level of noncompensation expenses of approximately $2.3 billion, even with the additional costs associated with our 2 recent acquisitions which were not contemplated at the time the target was set.
This measure excludes the bank loan loss provision for credit losses, unexpected legal and regulatory items and the non-GAAP adjustments presented in our non-GAAP financial measures. Slide 12 presents the pretax margin trends for the past 5 quarters. This quarter, we achieved adjusted pretax margin of 19.9%, in line with our guidance of approximately 20%. Our long-term trend continues to highlight the stability and strength of our diversified businesses to consistently generate strong margins throughout various market cycles.
On Slide 13, at quarter end, our total assets were $94.2 billion, up 3% from the preceding quarter, primarily due to the growth of the loan portfolio. Record bank loans of $56.2 billion grew 13% over the year ago quarter and 3% sequentially with that loan growth largely in support of our clients. Securities-based loans and residential mortgages represent 64% of our total loans held for investment, reflecting approximately 44% and 20% of the total, respectively. We continue to have strong levels of liquidity and capital to support the continued pursuit of our capital deployment priorities of investing in organic growth, growth through strategic acquisitions, providing sustainable and increasing dividends to our shareholders and when appropriate, managing regulatory capital levels through share repurchases.
RJF corporate cash at the parent ended the quarter at $2.5 billion, providing excess liquidity of $1.3 billion above our $1.2 billion target. Corporate cash declined in the quarter primarily due to our deployment of liquidity and capital in completing the acquisition of Clark Capital with a Tier 1 leverage ratio of 11.7% and a total capital ratio of 22.5%, we remain well above regulatory requirements with approximately $1.5 billion of excess capital capacity to deploy before reaching our conservative Tier 1 leverage ratio target of 10%.
The effective tax rate for the quarter was 20.7%, which includes the favorable impact of nontaxable gains on corporate-owned life insurance portfolio in the quarter. We estimate our effective tax rate for the fiscal year will approximate 24%. Slide 14 provides a summary of our capital actions over the past 5 quarters. Through the combination of common dividends paid and share repurchases, we returned $506 million of capital to shareholders during the quarter. In the quarter, we repurchased $400 million of common shares at an average price of $152 per share. Over the past 12 months, we repurchased 9.8 million common shares for approximately $1.6 billion. Including dividends, over that period, we returned nearly $2 billion to common shareholders representing 86% of earnings.
Through successful execution on our capital deployment priorities over the past year, with strategic balance sheet growth, completion of 2 acquisitions and capital return to shareholders, our Tier 1 leverage ratio has declined 140 basis points over that period to its still strong 11.7% level. We remain committed to operating our businesses over the long run at capital levels consistent with our established targets. I'll now turn the call back to Paul for his final remarks. Paul?
Thank you, Butch. I am pleased with our strong performance this quarter as we continue to focus on driving long-term growth across all of our businesses. Our steadfast commitment to prioritizing the client in every aspect of our business has resulted in record revenues, record pretax income and record earnings per share in the first 9 months of the fiscal year. As we enter the fiscal fourth quarter, we do so with significant momentum, supported by historically strong business drivers, robust financial adviser recruiting and strong investment banking pipelines, along with ample capital and liquidity to support continued growth. Our consistent performance reflects our long-term approach, the resiliency of our diversified business model and the commitment of our people to serving clients with integrity. .
Before we conclude, I want to thank our financial professionals and associates across the firm for everything they do each day to serve clients. The real value in this business has always been and always will be true personal relationships. Client expectations are changing, innovation is accelerating and differentiation matters now more than ever. But what sets Raymond James apart is the same thing that has always set us apart, our culture and the way our financial professionals and advisers serve clients through trusted relationships. That can't be replicated by AI or technology, but it will be helped by AI and technology.
So we'll continue to invest in the people, platforms and capabilities that help our financial professionals deliver more holistic and personalized advice while staying true to the culture and long-term approach that is always differentiated Raymond James. Thank you for your interest in Raymond James. That concludes our prepared remarks. Operator, will you please open the line with questions?
[Operator Instructions] Your first question comes from the line of Dan Fannon with Jefferies.
2. Question Answer
Paul, I was hoping to just expand upon your comments around the robust recruiting backlog. Obviously, a lot of momentum in that business. Curious if this gives you confidence around maintaining that -- these levels of organic growth you put up so far year-to-date? .
Thanks, Dan. We remain -- we've been consistently best-in-class recruiter of financial advisers in the industry year in and year out. And while recruiting gets a lot of the limelight, I just want to remind everyone the most important thing we can do to grow the firm is have high retention of our existing advisers and making sure that our advisers are satisfied with the firm as a partner to growing their business and developing deeper relationships with their clients. And so we look at their satisfaction very closely. There's lots of ways we do that. I spend 70% of my time with advisers getting to know them and understand what we could do better to help them grow their businesses. And we have 97% adviser satisfaction rate, 97% adviser satisfaction rate with our surveys, which is the best I know of in the industry when I speak to other CEOs and other firms. And so that retention is the foundation for the growth. And these advisers know each other in the communities and they talk to each other, and that's helped us have that consistent growth. And we have the largest addressable market in the industry because we have all the affiliation options that an adviser could possibly want. And we have adviser choice where we're agnostic into how you affiliate with Raymond James.
We want you to fall in love with our culture, values and the platform and capabilities and how you affiliate with us, we're indifferent too. And so that combination of factors is increasingly unique in the industry and we're -- there's very few firms in the industry that treat advisers like clients anymore. And so we're one of those firms, and we couple that with the capabilities and that's what's really driven our strong recruiting results and the pipeline remains strong. This is not a pipeline that is driven by 1 firm or 1 catalyst in the market or 1 affiliation option. It's a broad-based pipeline from many different advisers from many different firms and many different communities across the country interested in all of our -- the variety of our affiliation options.
So we feel very good about the pipeline. We don't think it's idiosyncratic. But certainly, when you look at the net new asset growth for the fiscal year, so far in the fiscal year, it's up 119% of $75 billion of net new assets for the fiscal year is up 119% from last year, which was a record. So it's truly phenomenal growth that we are driving. But again, it starts with a keeping our existing advisers satisfied and having high retention of our existing advisers.
Understood. And then just wanted to follow up on the Investment Banking commentary. That seems to be very consistent with what you've been saying in the last few quarters. I guess, what do you think it takes to get you to that more normalized level you've been aspiring to?
I mean there's a lot of pent-up energy, I would say, amongst financial sponsors to get deals done. But there's pretty well documented in terms of the portfolio companies that are well beyond their original hold dates as well as the dry powder that financial sponsors and buyers have out there that they want to deploy. And so there's been sort of idiosyncratic concerns impacting different industries, like AI with software and fintech and that sort of thing. So I think as we get through those type of idiosyncratic concerns and some level of discovery and closing the gaps and valuations between what sellers expect and what buyers are willing to pay based on our sort of activity levels and dialogues and engagement letters that we're signing, we think that there's going to be significant room for upside in investment banking. But yes, those factors need to all kind of align for that to happen.
Your next question comes from -- your next question comes from the line of Michael Cho with JPMorgan.
I'm going to just start with the recruiting one of all, Paul. I mean you just talked through the NNA and the success that you've had year-to-date, and you also kind of talk through the robust pipeline. I was just hoping you can test a little bit more on that pipeline, maybe pipeline today relative to maybe where 2026 started and I recognize it's broad-based pipeline, but anything to kind of provide any color on the employee versus independent channel.
Yes. I mean the pipeline is still strong and robust across the different affiliation options. There's a team yesterday with $5 million of production that came and they're actually interested in understanding the various options and the various affiliation options, which those are the best conversations to have, which like we don't necessarily know exactly how we want to affiliate with Raymond James and how we want to run our business going forward, but we know that Raymond James is the right partner for us and for our clients and our teams. And so we once -- now that we figure that out, we want to do the homework on which is the right affiliation option and what are the pros and cons of the affiliation options. So I would just say it's broad-based strength. The momentum is strong and it's really across our affiliation options.
Great. Understood. And if I could just follow up just on AI. Paul, you referenced in your prepared remarks around the enterprise rollout of of Raymond. And so I guess, how do you envision the adoption of Raymond. And I believe you're partnering for models and some of the other capabilities out there. I mean can you just talk through the cost of these initiatives and the potential for pricing model changes and again, just the adoption of how you envision across the firm.
Yes, the adoption has been fantastic. We just did the full rollout of Raymond. We had in pilot phase, but we did the full rollout in June 15. So just a little over a month ago, and we already have 6,500 unique users. And the satisfaction rate is 99.5%, which is phenomenal. This is a sort of large language model that can answer many questions related to customer and client accounts. And so -- the feedback has been overwhelmingly positive and the utilization has increased substantially, and there's still a lot of advisers and sales assistants that are learning about Raymond that haven't even used it yet. .
We also rolled out an AI Academy. I think the first in the industry that I've heard of that's done this to educate advisers and their teams and associates on AI capabilities and how they can use it on a day-to-day basis. And in a very short period of time since our rollout, I think we have close to 20,000 folks who have completed the 4 course module. And so we'll continue to build upon that to help educate people on how they could use AI to improve their efficiency and effectiveness of the various functions in serving clients with all of this is to help people spend more time on what we believe is the most valuable aspect of our business, which is developing relationships. And that could be internally but also externally financial advisers, more time, we could save their advisers and their teams on the administrative aspects of what they do on the sort of back and middle office aspects of what they do, then the more time they can spend developing personal relationships with their clients and prospects, which is going to win the day.
We say to our advisers, AI will not replace advisers. Advisers who use AI will replace advisers who do not use AI. And so that's what -- our goal is to ensure that all of our advisers have access and expertise in using AI to help them better serve their clients. Of course, there's a cost to that, but we believe the long-term ROI and we're managing that cost very closely, and we the token costs and those type of things. But we believe the investments that we're focused on are investments that we have high conviction levels that the long-term ROI will exceed the cost of utilizing AI.
Your next question comes from the line of Devin Ryan with Citizens Bank.
I want to follow up on the AI theme. And obviously, great to hear about the adoption. I'm curious, is it way too early to map out some of the productivity uplift that you could see? Like do you have a sense of how much more productive people can be with even the tools that you've launched today. And then on the expense side, just as you guys get smarter around the capabilities, how meaningful do you see kind of opportunities to drive expenses either down or just kind of flatten the curve with AI, particularly just in areas like back office, where I know there's a lot of infrastructure and people where it would seem like automating tasks could drive a lot of savings. So any sense on both productivity and efficiency?
Yes. I mean those are the 2 critical questions, not only for Raymond James, but for the AI boom in general. So you're asking the absolute right questions. I think speaking not only here within Raymond James, but to other CEOs across multiple industries. I think the answer to that at this juncture is we know it's going to be significant, but it's just too early to dimension it. And so -- our goal now is to make sure that we're not falling behind and that where our associates and advisers are staying well informed and educated on the capabilities and we're investing in the tools and the resources and the infrastructure to provide those capabilities. But at this juncture, we're not prepared to sort of put a percentage increase in productivity, which obviously would impact the second part of your question as well. It's just too early to know.
Okay. Fair enough. We'll obviously come back on that one. And then just as a follow-up on just the NIM outlook, as we look at just kind of the mix of the balance sheet, obviously, seeing still a tremendous growth in securities-based loans. The yields there are slightly above kind of the blended asset yields. So how should we think about the NIM trajectory here kind of all else equal on interest rates? Like should we expect modest uplift? Or are there other remixing considerations that we should be modeling as well?
Yes. Thanks, Dan. Thanks for the question. Just a couple of things to point out. The yield on our bank segment interest-earning assets would was flat. We maintained the same yield on interest-earning assets over the quarter. as we think about the impact on our NIM, the nature of the deposits how much the constitution of our deposits, whether on balance sheet or off balance sheet has a direct impact on our NIM. So in this quarter, as an example, we grew the deposits, those are on balance sheet, enabling us to use other capacity in the sweep program with third-party banks and we get fee revenues from that. But -- and so from time to time, the cost -- the impact on our NIM could be negative as we have higher cost deposits on balance sheet, but overall, we managed to the aggregate of the BDP revenues and the NII in aggregate. We have to look at them in aggregate.
So we think over the long run, we continue to see steady -- in a steady rate environment. We've demonstrated a basically consistent NIM performance. So we just say that when you think about our NIM, you really have to keep in mind that dynamic between our deposits that are on balance sheet and off balance sheet.
I mean the goal really is to grow interest earnings and BDP fees over time. And we're confident that we'll be able to do that. But points out that the geography of the cash will impact the NIM versus the third-party fees. But -- the most critical thing is that we have various funding sources, both at the bank and at the wealth business, et cetera, that we test from time to time, and we want to see how successful those sources can be in this quarter, we were able to be very successful in raising ESP balances, which allowed us to put more off-balance sheet to third-party banks. So it's working in the apparatus and the diversified funding sources is working.
Your next question comes from the line of Ben Budish with Barclays. .
Maybe first, just on the margin. Bush, I heard you talk about how when advisory fees pick up, that's going to maybe drive the comp ratio back down. Curious if you could just talk a bit about what you saw this quarter it looks like in both capital markets and I think Asset Management, your revenues were up sequentially, but your margin was down. Can you just unpack that a little bit, particularly curious on the asset management side, where your non-comp expenses steps up a little bit. I presume some of that's related to Clark, but any more color on what's going on there would be helpful.
Yes. Yes. So in terms of the -- as you mentioned, the long-term opportunities that we have to improve that adjusted comp ratio is with growing our M&A revenues where the comp ratio in our Capital Markets segment is relatively lower relative to the firm life comp ratio. What we saw was pretty steady comp performance in the Capital Markets segment, the pretax margin impact was really related to an increase in and certain deal-related expenses that non-compensation expenses that impacted the performance. In the Asset Management segment, keep in mind that we included 2 months of Clark Capital. We've been pleased to close that acquisition. And so on a segment basis, there are there are additional costs, both on the noncomp aspect impacting that segment that weren't there prior to the Clark acquisition. .
And so we really need to get a full quarter run rate in place to see the impact on the Asset Management segment on a comparative basis. with Clark in those periods. But basically, the slight degradation that you noticed is due to the inclusion of Clark and certain of the acquisition-related expenses that get reported as a segment of Clark.
Yes. The segment results include acquisition-related expenses, which for the consolidated results we backed out on a non-GAAP basis. So that sometimes creates some noise and as Butch pointed out, we don't look at operating leverage on a quarter-to-quarter basis just because there's noise in various line items. But certainly, year-to-date, for example, in the Capital Markets segment, revenues were up 5%, and pretax income was up in -- now there was a one-off legal expense last year that -- but it still would reflect operating leverage year-to-year even if you excluded that in the Capital Markets segment. With that being said, the current margin is not where we wanted in capital markets. And so we hope -- we are optimistic that when M&A revenues get back to a good level for us that we can get back to that 15% target. So we understand and fully appreciate the question around that margin in that segment.
Okay. Just as a follow-up. Similarly on the asset management side, as we look at -- or sorry, in the PCG segment, as we look at asset management revenues relative to assets. It looks like the yield in the quarter stepped down a bit sequentially and relative to maybe the last few years. I'm curious if there's anything in particular to call out? Or I imagine there's some funky timing with the kind of the market movements month-to-month. But anything to note there? And how should we maybe be thinking about that run rate going into the next fiscal quarter and next year?
Yes. I wouldn't say that anything fundamentally has changed in the way you should think about that. I think adjusting for the timing of that of those balances and understanding the nature of the fee revenues are being determined on a quarter lag basis. We're coming off a quarter where those asset balances didn't increase as much as they did this quarter at quarter end would explain that dynamic.
Your next question comes from the line of Brennan Hawken with BMO Capital Markets. .
I'd like to follow up on Dan's question on sponsors and the pipeline. Number one, it sounds like what you're saying is some of the issues that need to be resolved are probably going to take a little bit of time, and so we're a ways away. It should, of course, your point on pent-up demand and there's a need to transaction all that. That's absolutely true. But it's been true for a few years. And so getting to a catalyst here might take a little time to resolve because these are some rivalry issues as you lay out that need to be worked out. I want to make sure that I'm reading that correctly. And two, you did define the pipeline as encouraging as opposed to robust. Is that an actual change or a difference? Or am I just reading too much into it?
No, no difference intended there in the different words. But to your point, there are -- I would say the answer to your first question is really industry-specific. It really like the AI concern really impacted the technology team, which is one of our biggest, if not our biggest business year in and year out with fintech and software being uniquely -- relatively uniquely impacted by the AI concern. So I don't know how long that takes to resolve itself and to get back to a place where buyers and sellers can converge. We're -- for example, there's other sectors that last year, for example, the tariff concerns really hit our consumer business pretty hard. That has subsided and consumers actually had a very strong year this year.
So it really is sector-specific. And I'm not sure I would say that definitively that it's going to take a long time for these issues to resolve. I would just say the pipelines and activity levels are good. We don't know when that would actually converts to revenue.
Fair enough. And then just a quick one on asset sensitivity. We now have seen the forward curve shift from -- shift to a more hawkish stance. Could you remind us of your level of asset sensitivity and what factors would come into play? You've spoken a couple of times to greater balances moving into ESP. So does success you've had with the ESP sort of blunt some of the asset sensitivity and the other side of that would be loan growth. Do you find that, that growth is sensitive to rates moving higher? Or is it less so just given we're probably looking at 1 or 2 hikes?
Yes. I'll let Butch get into the specifics, Brennan, but higher interest rates, which is amazing that we're talking about that because I think a year ago, we were talking about maybe 5 or 6 cuts or something like this. But the world changes quickly as we are consistently reminded if rates do increase, that would be a nice tailwind for our business, all else being equal. There's always puts and takes in our various businesses. But as far as the floating rate assets that we have on the balance sheet, to your point, securities-based loans, so the corporate loans, the vast majority of those, et cetera, floating rate. So we have a relatively floating rate balance sheet. We've always strived to keep it that way. So we're not effectively taking interest rate risk. Some firms who did that saw the downside of that in 2023. So all else being equal, when rates go down, we see a negative impact on those balances. And when rates go up, we see a pretty nice benefit to those balances. But Butch, I don't know if you wanted to provide in more detail than that.
Yes. No, I think that covers it. Thank you.
Your next question comes from the line of Alex Blostein with Goldman Sachs.
I was hoping to follow up on the margin discussion. A little noisy this quarter. Obviously, you guys had the reserve release that helped, but then you also had the legal cost that sort of hurt the margin. So one, could you quantify the legal piece, but more importantly, I think when you normalize for both of these, you're kind of like high 19s pretax margin, almost 20%, kind of almost at your target. Can you talk about the ability to drive positive operating loans from here if the banking backdrop does not really improve because we've obviously been in this sort of waiting for Gedeon and advisory for some time and look maybe gets better, maybe it doesn't. But talk about improving operating leverage over time ex banking.
I would just say, yes, 20% is the target we talked about a month ago or maybe 2 months ago. And to your point, we're right there at the 20%. So things that can help our operating margin going forward. We just talked about one of those things, short-term rates, if they increase. I think that would be a tailwind. We talked about M&A. That's another thing that could be a tailwind. But again, we're investing heavily in growth. I mean, so that is to get a 20% margin in our business with the type of NNA production over 6% fiscal year-to-date, which very few firms have been able to show, net new assets up 119% year-to-date over last year's record. So the growth, that's a good long-term ROI, but to be able to generate a 20% margin, while investing in that growth without capital markets hitting on all cylinders, is a fantastic result, and that's why we gave you that target out a couple of months ago. But there's certainly catalysts that could drive it higher. There's also catalysts that could drive it lower.
Hopefully, the market stays where they are, and rates don't hurt us going forward, but we feel really good about the margin and also the return on equity. We had 19% return on equity this quarter. adjusted return on tangible common equity of 23.5% annualized. So the return profile -- and that's on a pretty high level of capital that we've been managing more deliberately, but still very nice cushion of capital to be able to generate a 23.5% adjusted return on tangible common equity while making the growth investments that we're making being a leading grower in the industry, we're feeling pretty good about that result.
And just a cleanup on the legal reserve, how much was that this quarter?
Yes. We're not disclosing the specific number, but it was a vast majority of the increase in professional fees in the other segments. So it was a meaningful number. And your analysis essentially was on target.
Yes. And the only thing I'll add to that is that on an ongoing basis, we would -- we do continue to expect to incur some level of additional expense in the near-term quarters, but not at the level that we experienced this quarter.
And again, it's not a unique situation to Raymond James. I think there's at least 13 or 14 other companies in our industry that are all dealing with the same type of litigation.
Your next question comes from the line of Steven Chubak with Wolfe Research.
So I wanted to follow up with -- of course, I want to follow up with 1 fall on recruiting. M&A trends across the firm remain robust. You noted Rate remains a destination of choice for many advisers. Admittedly, some of your peers, which have seen a slowdown in recruitment have cited deteriorating returns on adviser or asset recruitment, just given elevated TA rates I was hoping you could speak to the range of EBITDA multiples or return hurdles that you're underwriting that supports a more proactive recruiting stance? And across which channels are you seeing more or less rational behavior?
I'm not going to speak on peers and what they're saying quarter in and quarter out. What I would say is we've been consistent. We -- first, we don't lead with the highest check we want to have competitive economics. Certainly, we have to have competitive economics, but we lead with culture and capabilities. And so we have a true differentiated value proposition. In the absence of a true differentiated value proposition, the highest check is all you have. And so the economics are going to deteriorate relative to really being able to offer advisers a differentiated value proposition.
So we we've remained disciplined. We've -- have been disciplined on those transactions -- transition assistance and economics to advisers. And so we see it as attractive. And again, as I said in prior calls, we -- recruiting is not something you could turn on and off quarter-to-quarter. You can't -- you have to be consistent in that value proposition that I described and retaining your existing advisers, recruiting new advisers, having the team focused on finding advisers like good cultural fits with the firm across our affiliation options. And so we want to remain consistent. Consistency is a critical sort of concept for us, not only in recruiting but across the results that we generate.
We came into this year with 5 consecutive years of record results in 9 months into the year, you can't annualize it, but we have record results so far this fiscal year as well. I mean there's not a lot of other firms in the different market environments that we've seen over the last 5 years or so, that can say they have record results over all of those areas. And so consistency is important, discipline, making decisions over the next 5 to 10 years, not over the next 5 to 10 weeks. That's really been the foundation of our long-term success.
I think this is 153 consecutive quarters of profitability. I should know that exactly number. But I think it's 153 consecutive quarters of profitability, again, through the financial crisis. So that consistency is super important for Raymond James' long-term success.
That's well said. And for my follow-up, Paul, it's one that you're admittedly uniquely positioned to opine on is adviser affiliation preferences in an AI world, Historically, you've always talked about that you've -- or at least alluded to the fact that you're agnostic to how advisers affiliate. But given that omnichannel approach, why to gauge how you see AI adoption impacting adviser affiliation preferences, whether that's the ability to maybe replace regulatory compliance oversight, some of the additional bells and whistles and resources offered to the employee channel. Just trying to gauge how you see that value prop evolving as AI adoption increases?
That's a really interesting question. I haven't thought in terms of the different affiliation options, and it's too early to tell. What I do know is -- what I do have a belief in is that AI will differentiate firms amongst each other as technology has, which is why we invest $1.1 billion in technology, a lot of the smaller firms out there just simply can't keep up with that level of investment and that platform, the capabilities associated with that. And AI will be an extension of that in terms of differentiating your platform with those type of tools to help increase productivity for each adviser and their teams. But yes, within the affiliation options, there's such big differences in terms of how advisers spend their time day-to-day between the various affiliation options.
Some want to dedicate as close to possible as 100% of their time building their books of business, serving their clients, dealing with the financial planning, the holistic financial planning that you provide. And that's more aligned with the employee affiliation option and some want to run a business on -- in addition to those responsibilities of building up the client books and serving their holistic financial needs running a business. And that building a team, paying for their benefits, dealing with the real estate, dealing with utilities and all aspects of running a business, the legal aspects, et cetera, and so your question is, could AI create convergence among those things, potentially, It'd be interesting to see how that kind of evolves over time.
Your final question comes from the line of Mike Brown with UBS.
Great. Paul, I wanted to ask on Clark Capital. So now that it's on the platform, it does bring a number of differentiated capabilities across models, investment solutions and planning support. Historically, Raymond James has taken more of an adviser-centric approach rather than pursuing more of a cross-sell strategy here. So still early, but are you seeing any indications of kind of adviser interest or adoption thus far? And then more broadly, how do you think about that opportunity to really drive more utilization of those capabilities across the existing adviser base and maybe what would constitute success over the next few years there?
Yes. Clark Capital. First and most importantly, a great cultural fit with the firm, very aligned with how we approach the business, putting clients and advisers first, making decisions for the long term and being just good people. So we're thrilled to have them join the Raymond James family. Frankly, a year or so -- for the first year or so after you join the family, you really focus on stabilizing your client base, stabilizing our team and getting everyone comfortable with the new family. And so we are letting them sort of run independently and obviously, with the appropriate monitoring and everything else. But they run a very tight ship and their NNA even through the transition has continued to be very strong, again, because they have such strong relationships with the advisers that they serve. And over time, as -- once you get beyond that stage of stabilizing things, again, we're making decisions for the next 5 to 10 years. then you can look at the opportunities to cross pollinate.
So maybe a year from now on a call, we'll be able to talk more specifically around the revenue synergy opportunities and we're already talking about this now, our team just met with their team in Philadelphia, I think, this week or last week on that -- on those ideas. But again, first and foremost, you have to -- it goes back to how we think about adviser retention. You have to retain before you recruit when a family joins your family, you have to make sure that they're retaining their people, their clients before you start adding on to it, and that's what their focus is on now, and they've been extremely successful in doing that in these early innings.
Okay. Great. So still early days there and look forward to hearing more. Maybe just another follow-up on the AI front to kind of wrap things up. One thing that certainly gets a lot of discussion and focus, it's the impact of AI on the industry economics, whether it's on the sweep cash or is the adviser going to be disrupted those debates are still lively. I guess, against that backdrop, that increased uncertainty around the long-term model, has that changed the way Romanes has approached recruitment in terms of economics, capital allocation or even kind of payback expectations?
And then maybe if I flip that and said, if AI begins to improve adviser productivity, which you are seeing already reduces the administrative burdens, does that actually make you even more confident in your ability to earn attractive returns and continue to compete effectively as you aim to recruit more adviser talent here?
Absolutely. And it also makes us more confident that a lot of our smaller competitors aren't going to be able to keep up with the level of investment that will be required to provide these tools to their advisers and their teams. So the moat in our industry will increase because I think the cost of making those investments will increase. So we could not be more optimistic about the future. I mean we're entering this fourth quarter here already with record results for the first 3 quarters of the fiscal year, entering the fourth quarter with fee-based assets up 11% sequentially and which is the highest number I remember in quite some time. So we have a significant tailwind going into the fourth quarter.
Banking pipeline -- recruiting pipelines remain strong. The banking pipelines remains strong as well. And I'm confident those deals will eventually get done. I don't know exactly when they'll get done, but there's a lot of pent-up energy there. And we just have really great people, I'm biased, but I say the best people in the industry, we really have people that put their clients first day in and day out. I spent a lot of time with advisers here over the last quarter, and I just get so energized by spending time with advisers across the country, across our affiliation options because it just really great people that are passionate about helping their clients achieve their financial objectives or long-term financial objectives.
And that is what Raymond James is all about is ultimately helping clients achieve their financial objectives. And AI will only help us. We are the first -- well amongst the first in the industry to say AI will help us, not hinder us. And we're still -- we're more -- we have more conviction around that now than we did months ago. So with that, I want to thank all of you for your time, your interest in Raymond James. We do not take that for granted and wish all of you a great evening.
Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Raymond James Financial — Q3 2026 Earnings Call
Raymond James Financial — Analyst/Investor Day - Raymond James Financial, Inc.
1. Management Discussion
Good afternoon, everyone. I'm Christy Wa, 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 Ewen 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 Zilper will discuss the overview of our technology. We will also follow up those sessions with another Q&A session.
Finally, Butch Orlog 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 Orlg. 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.
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 playoff. So it will be exciting to see. But welcome.
We don't take -- as Christy 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 as, 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 there 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. Tas 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 Busch 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 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 Zoper 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 Zoper 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, Tosh 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 -- 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 the 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 well-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 in 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 and 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 business is 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 -- 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, 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 they are cards face up. They said 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, and 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 looked 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, the 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 cost. It's not sustainable it is 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 1 cross-selling goal in the entire firm. Management does 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 wanted to be a mandate.
We never wanted to be a forced push. One such example of a successful collaboration that we've had across the firm is what we call -- it's where investment banking in 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 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 1 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, to focus on increasing productivity.
I can 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, as the back office, the middle office and the front office, it's easiest way to simplify it. In the back office, AI is racing to create more efficiencies for us. We launched Raymond with AI in the middle instead of a way.
Raymond 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 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 Raymond, 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 meet those 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 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 could 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 spent $82 million a year just on cybersecurity technology to protect clients' data, clients information. And when you add the infrastructure to it totals almost $120 million a year.
Well, the way 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 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 are 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 the -- 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 where in 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 base 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 a 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, I'm -- 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 Tosh as the next speaker. Tash Alwin is the President of our Private Client Group business. And then I am going to do Q&A with Butch 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.
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 is Paul Shoukry noted that 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 1 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 templated 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 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 the 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 to 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, a 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 independents.
And independents 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 1 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, we're 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.
We're at 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 1 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 is unattainable as that may be.
But obviously, the high price 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 excitingly, 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 '20.
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 1 of the leading recruiters in the industry. You see that play out as well through not only adviser head count, 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 one 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 a 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 in the economy cycle.
And then also extending the differentiator of book ownership of treating the adviser is 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. Christi?
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, Christie. 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 Albi. 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. Card 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 $282 million, hopefully, all of you realize that's $282 billion. So that should be a B, not A. I can't not 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 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, they're 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 Randy'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, 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 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 been trusted 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. Kristi?
I just remind you to wait for a microphone.
We can either wait or Brendan -- I'll just repeat your question when you ask it. Go ahead. You can go .
Sure, I got you. .
2. Question Answer
Thanks, Scott, for the offering to Perrot. 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 scaling 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. You zoom out and think about financial advisers over decades. They've always been pretty resilient group, and have had to 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. 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 Suruli 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.
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 agent, bus 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 1 of those and then remind me which 1 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 1 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 clients are disadvantaging advisers. So that's an effort that we have underway right now. Then the other 1 you were asking me about the portfolio manager.
Well, so just the benchmark, you said 2% of total client assets, lots are to go higher. If you look at your peers in the industry, what are some of the benchmarks that you would compare yourself to to say that could go to 50, like what's kind of the goal post.
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 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 don't want the only a handful of strategies out there, but just kind of curious what you're thinking longer term as you think about business, the active ETF business and where your head's at in terms of [indiscernible].
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 1 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 1 of the mutual funds over to an ETF is the first 1 that we're doing, and we'll have other subsequent ETFs coming. That's where the growth is.
Great. Mike Cypress, 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 [indiscernible].
Sure. Yes. So Michael, thank you for the question. So on the separately managed accounts platform today, we have well over 1 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 1 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, Mike. Just 1 for Tash. Just on 1 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 to 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 1 event. And it's not just any 1 firm or any 1 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 grown 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 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, Brendan, I can repeat it rather than wait.
Brendan Halcon. You hear a lot about recruiting test competition. And I was thinking about and reflecting as you guys were maintenance about some of the things that we heard from Paul to open up your approach over time, watching folks make mistakes, not string 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, question yes. You got all that, Scott. I'll start over.
I was going to Brent and Alan B. 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, Brendan, 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, do 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 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 hair 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 1 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.
All right. No further questions. So thank you both for your time. this morning. That does actually take us to our break for the day. So we are right at about 2:30, so we'll take a 15-minute break and reconvene at 2.45. Thank you. .
[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-cap 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 them 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 part of our longrange plan for the Board.
I've defined a goal to grow our $1 billion of revenues to $3 billion. That's 1 goal. And with a higher level goal, people hear me talk about them a big believer [indiscernible] big carry 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. Pulsar, you talk 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% 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, sounds 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 go out and find your own deals, but you probably get 1 extra deal opportunity a year that comes your way because of that relationship with the private loan 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 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% and 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 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 slide the 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 is 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 and 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 conferences, 1 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 Horse 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, a 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 people total, 8 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 numbers and productivity, but it has some additional sensitivities that factor into the activity levels in 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 had 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 unique, which this group distributes as our banks, our fixed income sales force, they're the 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 business where none is 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 that 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 1 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 apply to affordable housing into the renewable energy market, and that's a key growth engine of that business.
Revenues have been -- it's -- I love to -- I'm quite envious I want to hear, Tosh, for example, talk about percentage of recurring revenue in his business. We don't have any of that recurring revenue. I'd love to have someone figured out how to get some, but we kind of started 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, and 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 refine 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 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.
Bunch of Warner ran and everything sort of runs to a halt, and that stuff kills us. We need some stability and 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 offer are evaluating them in parallel, growing our capabilities across the fixed income business, the Greens ledge acquisition is appropriate example of that.
We had a world-class structured products trading business, trading and tap 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.
Greens edge. 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 the CLOs by marrying those 2, we think we bring an end-to-end capability and both businesses can grow and even be more successful.
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 Greens Edge 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 Greens ledge team working with our investment bankers.
Equities is all about leveraging the 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 league 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 greens ledges as I was talking about.
To drill a little bit deeper into that. On the investment banking front, we have 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 -- 1 of those sectors might look like 3 or 4 managing directors cover in 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. 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.
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 million. 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 managed 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 connectors 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 Greens edge.
That's been the profit example of that of expanding that business electronic trading, some -- that applies to both businesses. The Sunridge 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 1 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. With that, I think I'm going to bring up -- do you get to ask your question?
I'd love to answer your question, Devin, but I'll wait for it. .
Thank you, Jim. Really appreciate it. We are going to hold off on questions and do another we'll rejoin us at that point.
Next up, I want to introduce Steve Rainey. 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 Rainey.
Thank you, Christie. Great to see everybody. See 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 Tosh 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 and Raymond James reside inside of the 2 banks.
And -- and of that, almost $70 billion, about $55 billion of that is loans at the 2 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 Tri-State 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 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 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. It'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 a few years ago, we were very reliant on and almost exclusively funded with client cash balances, sleeps 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 Tri-State team in a more traditional way ahead 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 that we do business through and with their clients ultimately.
And tremendous respect for those independent financial advisers. Even the employee advisers are very independent around ran. And we have tremendous respect for how we interact with them and 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 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 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 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 Tri-State 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 Tri-State 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 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 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 Greens 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 1 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 we're on our way to increase that percentage even further. And now I'll turn it back over to Christy.
Okay. we will continue on. So 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, Christy, 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 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 make 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, surely in their recent broker-dealer marketplace study, he 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 -- 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 write click and send a note from trading, rebalancing or adviser mobile to RGC. 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 or all of that is making sure that our core platforms, our enterprise platforms are modern up-to-date or 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 in the 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 Palantier, 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 genic 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 2 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 lier 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 Ray J, 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 [indiscernible] 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 stablecoins 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 2 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 2 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 2 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 [indiscernible]. 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 4 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, 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].
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 0. 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 noncompensation, 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 2 base versus growth categories are growing at very different growth rates over the past 2 fiscal years. You can see that when just considering base expenses, our revenue growth over the past 2 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 2 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 noncompensation-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 noncomp expenses grew 10%, adjusting those noncomp expenses for the growth-related expenses incurred in each comparable period, the noncomp 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 3 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 2 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 2 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 2 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 2 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 2 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 2 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 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 3 or 4 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.
Raymond James Financial — Analyst/Investor Day - Raymond James Financial, Inc.
Raymond James Financial — Q2 2026 Earnings Call
1. Management Discussion
Good evening, and welcome to Raymond James Financial's Fiscal Second Quarter 2026 Earnings Call. This call is being recorded and will be available for replay for 30 days on the company's Investor Relations website. I'm Kristie Waugh, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shoukry; and Chief Financial Officer, Butch Oorlog.
The presentation being reviewed today is available on Raymond James' Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Call 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, anticipated results of litigation and regulatory developments and general economic conditions.
In addition, words such as believes, 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.
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 and Forms 8-K, which are available on our website.
Now I'm happy to turn the call over to CEO, Paul Shoukry. Paul?
Thank you, Kristie. Good evening. Thank you for joining us. Raymond James delivered strong results this quarter despite a challenging and volatile market environment. Our steady, consistent performance reflects our disciplined execution against our objective of being the absolute best firm for financial professionals and their clients.
In an industry built on relationships and trust, we believe in the power of personal, our commitment to building and maintaining deeply personal relationships with advisers, bankers, associates and clients. Turning to the quarter. Continued focus on our long-term strategy drove record quarterly revenues of $3.86 billion, representing growth of 13% over the prior year quarter and 3% above the preceding quarter.
Pretax income of $735 million increased 10% compared to the year ago quarter and 1% over the preceding quarter. By supporting our advisers and financial professionals across the firm with a personal approach, we consistently retain and recruit high-quality professionals who deliver excellent service and advice to their clients.
In the Private Client Group, we ended the quarter with $1.7 trillion of client assets under administration down slightly compared to the preceding quarter, but representing year-over-year growth of 15%. Our client-first culture, together with our robust technology and product platforms and strong balance sheet, continues to differentiate Raymond James as a destination of choice for financial advisers across our affiliation options, As reflected again this quarter in our strong retention and continued recruiting momentum.
In the fiscal second quarter, quarterly domestic net new assets were $23 billion, representing a 5.8% annualized growth rate. We recruited financial advisers to our domestic independent contractor and employee channels, with trailing 12-month production totaling $141 million, nearly $21 billion of client assets at their previous firms. The second highest quarterly result in our history in terms of both recruited production and assets.
Our optimism about future growth is fueled by our commitment to our existing advisers which is reflected in high retention, along with a robust adviser recruiting pipeline and a strong number of financial advisers who have made commitments to join in the coming quarters.
Our value proposition is becoming increasingly differentiated. At Raymond James, advisers do not have to choose between culture and capabilities. We offer a unique combination of an adviser and client-focused culture together with leading technologies, products and solutions advisers need to serve clients at a high level. Combined with our strong balance sheet, long-term thinking and commitment to independence, that continues to set Raymond James apart for advisers evaluating alternatives.
But we won't rest on our laurels. We will continue investing in automation, process improvement and AI as part of our more than $1.1 billion annual technology spend to create efficiencies, give advisers more time to deepen client relationships and further enhance the client experience.
For example, our proprietary AI operations agent provides curated natural language answers and guidance to operational questions while intelligently evolving based on user activities and preferences. This agent has been rolled out to a few hundred advisers and their team so far in addition to service focus groups at the home office.
We are very encouraged by the strong initial feedback, and we'll continue to expand adviser and associate access over time. Capital Markets results improved this quarter, primarily driven by stronger investment banking revenues with a particularly strong performance in the month of March. We entered this third quarter with a robust pipeline that continues to reflect the opportunities that come from the strategic investments we have made in this segment over the past few years.
We are confident we are well positioned to continue building upon this quarter's momentum with motivated buyers and sellers engaging us for our deep expertise across the industries we cover. We remain committed to opportunistically enhancing the platform by broadening and deepening our capabilities through strategic hiring or acquisitions such as GreensLedge, which closed towards the end of the quarter.
In the Asset Management segment, net inflows into managed fee-based programs in the Private Client Group was strong in the quarter, reflecting the complementary impact of offering high-quality investment alternatives to financial advisers and their clients as well as growth resulting from our successful recruiting efforts.
Additionally, our Raymond James Investment Management business brought in positive net inflows in the quarter. In the bank segment, loans ended the quarter at a record $54.8 billion, primarily driven by continued outstanding growth in securities-based lending balances, which have increased more than $5 billion or 31% over the year-ago period and 6% sequentially. This growth continues to reflect a synergistic impact from our growing Private Client Group business as we are able to deploy our strong balance sheet in support of clients.
Importantly, the credit quality of the loan portfolio continues to be strong. Our capital deployment strategies remain disciplined and focused on the long term, as demonstrated by our strong organic growth ongoing technology and platform investments and our recent acquisitions of GreensLedge and Clark Capital. Clark Capital is expected to close this quarter. We also maintain our share repurchase program to effectively manage capital levels. This quarter, we repurchased $400 million of common stock at an average share price of $155. We ended the quarter with a Tier 1 leverage ratio of 12.4%.
Now I'll turn the call over to Butch Oorlog to review our financial results in detail. Butch?
Thank you, Paul. I'll begin on Slide 6. The firm reported record net revenues of $3.86 billion for the fiscal second quarter. Net income available to common shareholders was $542 million with earnings per diluted share of $2.72. Adjusted net income available to common shareholders which excludes acquisition-related expenses, equaled $564 million, resulting in adjusted earnings per diluted share of $2.83.
Our pretax margin for the quarter was 19% and the adjusted pretax margin was 19.7%. We generated annualized return on common equity of 17.3% and annualized adjusted return on tangible common equity of 20.9%. Solid results for the quarter particularly given our conservative capital base.
Turning to Slide 7. Private Client Group generated pretax income of $416 million on record quarterly net revenues of $2.81 billion. This performance was driven by higher PCG assets under administration compared to the previous year, resulting from the impacts of market appreciation, retention and the consistent addition of net new assets.
Pretax income declined 3% year-over-year primarily due to the impact on the segment of interest rate reductions over the past year, which reduced our non compensable revenues. Our Capital Markets segment generated quarterly net revenues of $464 million and a pretax income of $51 million. Segment net revenues grew year-over-year and sequentially due to higher debt and equity underwriting revenues as well as higher M&A and advisory revenues.
The Asset Management segment generated pretax income of $137 million on record net revenues of $327 million. 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 PCG fee-based accounts.
The bank segment generated net revenues of $486 million and pretax income of $166 million. Sequentially, the bank segment's net interest income increased marginally. Despite robust loan growth driven by securities-based lending, incremental interest revenues were nearly offset by the impact of 2 fewer interest earning days during the quarter and a full quarter impact of interest rate cuts during the prior quarter.
Turning to consolidated revenues on Slide 8. Asset management and related administrative fees of $2.02 billion grew 17% over the prior year and 1% over the preceding quarter. Record PCG fee-based assets equaled $1.04 trillion at quarter end, up 20% year-over-year and up slightly over the preceding quarter.
As we look ahead, we expect fiscal third quarter 2026 asset management and related administrative fees, to be higher by approximately 1% over the second quarter level, driven by the impact of 1 additional billing day in our third quarter, along with the slightly higher PCG assets and fee-based accounts balance at quarter end.
Moving to Slide 9. Clients' domestic cash sweep and enhanced savings program balances ended the quarter at $57.8 billion, down 1% compared to the preceding quarter and representing 3.7% of domestic PCG client assets. Based on April activity to date, domestic cash sweep and enhanced savings program balances have declined due to the collection of record quarterly fee billings of approximately $1.9 billion along with further declines largely driven by the seasonal impact of client tax activity.
Turning to Slide 10. Combined net interest income and RJBDP fees from third-party banks declined 3% from the prior quarter to $650 million. Net interest margin in the bank segment remained stable at 2.81% for the quarter driven by the factors I previously mentioned. The average yield on RJBDP balances with third-party banks decreased 6 basis points to 2.7%.
Primarily due to the full quarter impact of the Fed interest rate cuts in the December quarter. Based on static interest rates and assuming unchanged quarter end balances, net of the fiscal third quarter fee billing collection of $1.9 billion we would expect the aggregate of NII in RJBDP third-party fees in the third quarter to be up approximately 1% from the second quarter level.
The increase is largely due to 1 additional interest-earning day in the fiscal third quarter. Keep in mind, there are many variables which could 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.
Turning to consolidated expenses on Slide 11. Compensation expense was $2.54 billion, and the total compensation ratio for the quarter was 65.8%. The adjusted compensation ratio would exclude acquisition-related compensation expenses was 65.7%. The Compensation expenses were impacted by the seasonally higher expenses relating to resetting payroll taxes as of the beginning of the calendar year.
Non-compensation expenses of $583 million increased 10% over the year-ago quarter and 5% sequentially. For the fiscal year, we remain on track with our target level of noncompensation expenses of approximately $2.3 billion. This measure excludes the bank loan loss provision for credit losses unexpected legal and regulatory items and non-GAAP adjustments presented in our non-GAAP financial measures.
As demonstrated this quarter, we will continue to invest to support growth across our businesses. while maintaining discipline over controllable expenses. Slide 12 presents the pretax margin trends for the past 5 quarters. This quarter, we achieved adjusted pretax margin of 19.7%, a good result given the headwinds of lower interest-related revenues which we faced this quarter.
Our long-term trend continues to highlight the stability and strength of our diversified businesses to consistently generate strong margins throughout various market cycles.
On Slide 13, at quarter end, our total assets were $91.9 billion, up 3% from the preceding quarter primarily due to loan growth and higher cash balances in our bank segment. Record bank loans of $54.8 billion grew 14% over the year ago quarter and 3% sequentially with that loan growth largely in support of our clients.
Securities-based loans and residential mortgages represent 62% of our total loans held for investment, reflecting approximately 42% and 20% of the total, respectively. We continue to have strong levels of liquidity and capital. RJF corporate cash at the parent ended the quarter at $3 billion providing excess liquidity of $1.8 billion above our $1.2 billion target.
Our capital levels provide significant flexibility to continue being opportunistic in our pursuit of strategic acquisitions and to invest in organic growth with a Tier 1 leverage ratio of 12.4% and a total capital ratio of 24%, we remain well above regulatory requirements with approximately $2.1 billion of excess capital capacity to deploy before reaching our conservative Tier 1 leverage ratio target of 10%.
The effective tax rate for the quarter was 26%, which includes the unfavorable impact of nondeductible losses on the corporate-owned life insurance portfolio in the quarter. Looking ahead, we continue to estimate our effective tax rate for fiscal 2026 to be approximately 24% to 25%. Slide 14 provides a summary of our capital actions over the past 5 quarters. Through the combination of common dividends paid and share repurchases and we returned $507 million of capital to shareholders during the quarter.
Additionally, in January, the firm opportunistically redeemed all of the outstanding shares of its Series B preferred stock for an aggregate value of $81 million. In the quarter, we repurchased $400 million of common shares at an average price of $155 per share.
Over the past 12 months, we have repurchased $1.6 billion of common shares and including dividends paid, we've returned over $2 billion of capital to common shareholders reflecting a combined return of 94% of our earnings. We maintain our long-term commitment to operating our businesses at capital levels consistent with established targets.
Over the past year, the Tier 1 leverage ratio has declined 90 basis points as we have focused on strategic balance sheet growth and disciplined capital actions while maintaining a conservative approach to capital management. I'll now turn the call back to Paul for his final remarks. Paul?
Thank you, Butch. I am pleased with our record performance during the first half of the fiscal year. Despite challenging and unpredictable market conditions, our steadfast commitment to prioritizing the client in every aspect of our business has resulted in record revenues and record pretax income during the first half of the fiscal year.
We remain well positioned to generate long-term sustainable growth. We started the third quarter with record PCG fee-based assets under administration, record bank loans and strong competitive positioning across all of our businesses with ample headroom for continued growth. Importantly, as evidenced this quarter, financial adviser recruiting activity remains robust and the investment banking pipeline is strong.
Before we conclude, I want to thank our financial professionals and associates across the firm for what they do every day for clients. As we look ahead, our focus remains the same. To be the absolute best firm for financial professionals and their clients. In a world being shaped by AI, technology and constant change we believe personal relationships will matter more, not less.
Our strategy is to keep investing in the people, platforms and capabilities that help our financial professionals deliver more holistic more personalized advice to clients while staying true to the culture and long-term approach that have always differentiated Raymond James. Thank you for your interest in Raymond James.
That concludes our prepared remarks. Operator, will you please open the line with questions?
[Operator Instructions] Our first questions comes from Ben Budish with Barclays. .
2. Question Answer
Maybe first, just on -- can you talk a little bit about the competitive environment there? It sounds like you're quite confident on the recruiting pipeline. I think there's definitely a presumption that there's been some sort of M&A-driven advisers in motion over the last few quarters. I'm not sure if you could comment on whether that's continuing up, but just any other color around your confidence, what competitive intensity looks like in that business would be helpful.
Thanks for the question, Ben. Yes, our confidence is just really driven by the volume of home office visits that we're conducting with prospective advisers the volume of new commits prospective advisers across our affiliation options, we're actually seeing an uptick of commits in our employee affiliation option as well.
It was consistently strong, but we're seeing an uptick there as well. And so while there have been catalysts really, there seems to be catalysts every 12 to 18 months over the 16 years that I've been with the firm, there's different types of catalysts, but what remains consistent is our focus on being the absolute best destination and firm for financial advisers and their clients and matching that culture with the capabilities that are very hard to find in the marketplace.
Private equity has certainly been competitive over the last 5 years as well as some of the strategic firms. And I think this is going to be an interesting year for private equity. I've heard that there's at least 1 or 2 firms that have tried to raise capital in the last 3 to 6 months that weren't able to do so.
And so I think the valuation -- there'll be close eyes on the valuation in that space to see what the ongoing commitment and value prices that they'll be willing to pay will be going forward. And that certainly could be another catalyst potentially down the road if that doesn't work out the way some people expect.
So again, our focus is just to remain the absolute best destination for financial advisers and their clients across all of our affiliation options. We call it adviser choice -- and that's really what's driven the 7% annualized net new assets for the first half of our fiscal year, which is leading the industry and at least a leader in the industry as far as net new assets go, and that's both from recruiting but also retention, strong retention despite the very competitive environment.
Okay. I appreciate all that. Maybe just a follow-up, sticking with PCG. The pretax yield there has been coming down a bit sequentially. I know you talked a little bit about the company-wide comp ratios, some seasonal factors, but anything decline down for that segment in particular?
Yes. I mean, year-over-year, short-term rates are down. And so that obviously is a headwind to margins in the Private Client Group business because there's a spread dynamic there. which I think everyone sort of anticipates both on the way up with rates and on the way down with rates.
We've also ramped up recruiting substantially year-over-year. So we've actually broken out the cost of recruiting and retention because if we were to do an acquisition, which our annual recruiting now is a medium-sized acquisition, a lot of firms break that out.
And so we wanted to make sure that you had that transparency to see exactly how much we're paying to recruit and to grow the firm. Again, very good returns when we make those recruiting when we recruit financial advisers and most importantly, those advisers are big cultural fit.
So we prefer to recruit 1 by 1 versus doing acquisitions because we know -- first, 100% of the transition assistance is going to retention of the adviser. And secondly, we can ensure that the advisers we're bringing over a really good cultural fits for the firm.
Your next question comes from the line of Devin Ryan with Citizens Bank.
Paul. I want to start with an AI question. I appreciate some of the current initiatives that you already launched and you talked about, Paul, it sounds like you think AI will be a net positive for the business versus an overall risk. So would love to hear a little bit more about why.
And then if you can just weigh in on how you're thinking about implications of this potential agent cash sweep optimization, which I think some people think in theory could pressure transactional cash balances and whether you would consider kind of evolving the monetization with like a platform fee or something else? Just wanted to get some thoughts on both.
Devin, maybe on your second question first around the genic AI cash optimization tool, which I think is conceptual. I haven't seen it yet, but I think when you step back, it's really the dynamic that the industry has been seeing since rates started rising.
And we were talking about before, as you recall, Devin, before rates started rising, which is as rates rise, advisers will help clients invest in higher-yielding alternatives. At Raymond James, we've been offering one of the most open platforms of higher-yielding alternatives, whether it's the enhanced savings program, which offers a very competitive rate with up to $50 million -- $50 million of FDIC insurance as well as the purchase money market funds, which we let all clients avail themselves to the institutional share class to get higher rates and a whole host of other higher-yielding alternatives for their cash.
And because of that, you've seen in our industry cash transactional or sweep cash balances go down 40% to 50%. And now in fee-based accounts, the average cash balance per account is less than $10,000. So without AI, you've seen that trend happen and I don't think it requires AI for that cash to be invested in higher-yielding alternatives. I think AI is kind of being sort of used to describe the phenomenon that we already anticipated would happen.
And so I don't see much more of an incremental threat maybe to the e-brokers where there's not a financial adviser involved that's been helping clients reinvest those cash balances, perhaps, I'm not sure. We're not an e-broker so I'm not an expert in that space.
But I don't see it really impacting our space much more incrementally but again, I haven't seen the AI and genetic solution neither that everyone is talking about. So I'm not sure to tell you the truth. But we feel like the sweep balances have stabilized -- over the last several quarters, we have the quarterly fee billings.
We have the tax dynamic every year that we talked about. But outside of that, there's not a whole lot of cash in movement right now given where rates are at. It's been pretty stable across the industry overall. As far as AI goes and your question around AI, I think it's already been helpful in our industry.
And so we've had 3 client events in the last quarter with advisers and clients, 1 in Memphis, 1 in Atlanta, 1 in Miami, and I would tell you, when you see the adviser relationship with clients, there's no doubt that the deeply personal relationships that advisers have with clients trump any kind of technology or AI bot that may exist in the future.
I mean these are deeply personal relationships. I know just with my financial adviser at Raymond James, one of the things that help me sleep better at night, my wife sleep better at night as my financial adviser got forbid, if something will ever happen to be shorter intermediate term.
My financial adviser knows my wife knows my family and knows what our financial objectives are and can help my wife navigate that situation. And if that were to exist. And that's not something I would trust to an AI bot no matter how good the algorithm is. And so those are the type of things you hear stories where clients with tears in their eyes talk about what their loved ones funerals, who was there was the religious leader, their family, their best friends and their financial adviser.
So when we talk about AI we need to understand the value of those personal relationships advisers have with these families. It's not about transactions. It's not just about portfolio returns it's about really deeply understanding the family's financial objectives, and that's something that AI should help down the road because it will help advisers come up with more bespoke tailored insights that advice safe there, save them time on administrative tasks and allow them to spend more time developing those deeply personal relationships with their clients.
Your next question comes from the line of Michael Cho with JPMorgan.
I'm just going to follow along to the same line of the question just more operationally. Paul, you talked about, I think, $1.1 billion in tax spend this year. Can you just unpack kind of where the priorities are in terms of the growth of that spend. And if we look at the various AI initiatives that Raymond James has instituted internally, and I think you called out to get operational chatbot as well. How are you gauging success of some of these initiatives? And really, how do you think the next step evolves as you roll out these capabilities?
I mean the $1.1 billion in technology spend, the vast majority of it is being focused on the Private Client Group business. And that's one of the things that make us unique for the size of our platform, well, there are some bigger firms out there that have higher technology spend, they have to focus on credit cards, payments, treasury banking a lot -- a whole host of other priorities, whereas most of our technology spend is really focused on supporting the financial advisers and their clients and the [ Viva ] Client Group business.
And so -- and that's been a key differentiator for us. when advisers come in to the home office visits and they look at our technology, they're blown away by our capabilities relative to what they have even at the largest firms in the industry because of our focus on that wealth management technology.
And the way we test whether or not it's working, I mean, first of all, all the development of the technology is guided and directed by our Technology Advisory Council, which is made up of our financial advisers. And so they tell us what they're looking for. They give us real-time feedback. They've become representatives for the other financial advisers that they have a network with to tell us what they need, what's working, what's not working.
And that's what's given us. I mean, we've won awards in our technology, and we'll continue to deliver for financial advisers and their clients there.
Great. I appreciate all that color. If I could just switch gears just for my follow-up, just on the capital market pipeline. I was hoping you could unpack some of your comments there as well, you called out the strong pipeline. I think you also called out March was pretty strong as well. So I was hoping you can provide any incremental color there and how you'd characterize the pipeline as it sits today, maybe relative to maybe the start of calendar '26.
Yes. I mean we feel really good about the investment banking pipeline. The month of March was a strong month for us, frankly, stronger than we expected. And so there's been a lot of volatility to contend with geopolitical issues with oil prices and other things.
And so there's a lot to -- and AI concerns on certain sectors like technology and software, fintech, et cetera. But notwithstanding all those things, we have a very strong platform with great bankers across various verticals. In the pipeline, the activity levels, engagement letters being signed are all very promising.
So we feel great about the pipeline. There's certainly certain volatility and other things that need to be navigated through over the course of the year, but we don't know when those pipelines will convert to revenues.
But most of our pipeline is driven by financial sponsors on the buy side and/or on the sell side, and they're motivated buyers and sellers. They have -- the buyers have capital and dry powder and the sellers have investments that are, in many cases, beyond their original holding period.
So we feel like these will get done. We feel great about the pipeline. And most importantly, we feel very good about the professionals that we have in investment banking and their expertise and relationships.
Your next question comes from the line of Alex Blostein with Goldman Sachs.
I wanted to ask you a question around longer-term profitability and maybe some -- that's something you will talk to on the Investor Day coming up in a few weeks. But was hoping you could help us think through the benefits of AI and other related initiatives that could have on the business longer term? You guys have been sort of hovering around the 20-ish percent margin, which is great, considering I guess, that capital markets obviously hasn't been contributing to its full extent.
But as you think about a more normal backdrop with the benefits of AI and any other efficiencies, what do you think the margins could go to over time?
No, it's a fantastic question and one that we talk about a lot because really a lot of the focus on AI across corporate America right now. And for us, it included, has been around the large language models and some of the sort of benefits of an efficiency and increased productivity that large language models can provide by synthesizing a lot of data and we rolled it out.
We have a solution called [ Ray ] that we rolled out and that advisers and sales assistants can use to find -- to sit through a lot of information, self-service and very quickly find the answers the complicated questions. And so we're piloting it with a few hundred advisers in the early feedback has been extremely positive.
But what we're all wondering is the next phase of AI really is around Agentic AI and what can Agentic AI do to improve processes and streamline processes and ultimately the cost curve across not only our industry, but all industries. And we're still -- I think Raymond James and all of corporate America is still early in that journey, frankly.
And so we think that there will be significant opportunities. The compute power being invested is substantial and significant. We're using AI in a lot of areas already, whether it be in our cybersecurity area, although that's continuing to evolve as we saw with a new release a couple of weeks ago and some of the notifications from Washington around that.
So we're using AI, and we're seeing a lot of benefits from AI, but it's hard to dimension the actual margin impact at this juncture. I think anyone who's talking about cost reductions or margin benefits from AI today at least I would be arbitrary and too preliminary in providing that type of specificity.
No, fair enough, too early. Follow-up for you guys related to something, Paul, you mentioned earlier around private equity having perhaps a little bit more of a challenging backdrop in terms of deploying and raising capital. you guys continue obviously just had a significant amount of excess capital you've been putting in to work via more recurring buybacks, which is definitely welcome. .
As you think about the probability of a larger deal and perhaps absence of sort of the private equity competition, which has been weighing on your ability to pull something off that's a little larger. Where are the odds of that today? So you sort of think about your pipeline of corporate M&A, particularly in the wealth space. What are the chances that you think you guys might be able to do something more meaningful in the next, I don't know, 12, 18 months?
Yes. I mean the biggest obstacle and challenge is there's -- we have a lot of great competitors strong cultures and strong franchises. The biggest challenge is they haven't necessarily been for sale. And so we continue to stay close to those friendly competitors and exchange notes with them and compete with them on a friendly basis. But ultimately, it's hard to know what the catalyst might be to want to join forces and ultimately, make 1 plus 1 equals something greater than 2.
We don't really do takeovers. We invite other firms to the Raymond James family and we keep the best of both worlds. We've done that over and over again, starting with Morgan Keegan back in 2012. If you look at our fixed income leadership team, it's still led by legacy Morgan Keegan leaders. We've actually grown headcount in our fixed income area in Memphis, for example, over that period of time. So we're not a traditional acquirer in the sense that we take over [indiscernible] burn costs, and we want to keep the franchise intact. We want to keep the culture intact and keep the best of both worlds. And so that makes us unique relative to other potential acquirers out there. We're in it for the long term. We're not looking for a 5-year holding period.
We're looking for a much longer holding period. And so we're -- we believe that there are great partners out there. We're confident that they will happen that the families will join that to alter at some point. But in the meantime, we'll be patient and continue to develop those relationships.
Your next question comes from the line of Brennan Hawken with BMO Capital Markets.
I got one on the FA comp ratio in PCG. So it's great that you're breaking out the cost of recruiting and certainly, see that it's rising. But if we look at like the revenues for the segment, even the baseline compensation is growing slower than the revenues.
And so even though we've got kind of like low double digit or even one revenue growth, we're seeing the comp ratio continue to grind up. So can you explain maybe what's going on there and why we're seeing operating leverage negative despite pretty decent revenue growth?
Yes. I would just say in PCG in particular, with the compensation and payouts to independent advisers versus employee advisers, of course, the independent payouts are higher because they cover their overhead costs, their real estate, their health insurance, et cetera, as you know, and so over the last year, in particular, much more of our recruiting has come from the independent side of the business versus the employee side of the business.
So there's just a mix shift there to some extent that you're looking at over the last year or so. And as production increases, we are on the -- even on the employee side, we have tiered payout systems. And so as production increases, you kind of get higher up on the payout grid as well.
Your next question comes from the line of Steven Chubak with Wolfe Research.
Paul, Butch, hope you're well. Yes. So maybe just to double-click on Brennan's line of questioning with regards to the PCG margin dynamics. So certainly appreciate the mix shift and the impact that has was hoping you could speak to where the recruiting pipelines are across the different affiliation options.
Just trying to gauge whether we should expect this mix shift headwind to persist for a little bit given the wires appear to be doing a little bit of a better job in terms of retention and just given the expectation that the momentum may be more concentrated within the independent channel, that we could continue to see some modest pressure even as the M&A momentum accelerates.
Yes. No, we're actually seeing pretty good uptick in the employee affiliation option as well. And the mix shift is really what I was referring to more about the comp ratio than the margin because the payout difference in the independent channel versus the employee channel.
But no, we're seeing really good momentum across all affiliation options and the pipeline is strong. There has been some catalysts on the independent side, as you all are aware, but I don't want it to totally overshadow the success we're having on the employee side, which has been significant and actually it's been -- continues to tick up.
And just for my follow-up, I did one digging into some of the comments you made around AgenticAI, specifically, as it relates to the impact that, that could have on cash levels.
And Paul, you made compelling points about easy access to cash alternatives, you cited lower sweep cash per account. But it's also pretty clear that the market is ascribing a lower terminal value to cash derived profits just given the risk from whether it's agent, tokenization, pick your poison here. Just trying to gauge in a scenario where competitors in the event that they pivot to more of a fee-based model or approach to reduce the reliance on cash economics -- is that something that you're amenable to? And are there barriers to introducing things like platform fees given the fact that you service multiple affiliation options with your omnichannel approach?
I mean, ultimately, we want to have a profitable and competitive and fair pricing structure. Fair for most importantly for the clients, also the financial professionals and the firm.
And so if that evolves in the industry based on competitive pressures and competitive dynamics and client preferences, most importantly, then of course, we would be flexible and open to evolving with where clients and advisers in the industry is evolving to. I mean we look at that on an ongoing basis for all of our pricing fees and payout.
Your next question comes from the line of Mike Cyprys with Morgan Stanley. .
I was hoping you could maybe talk a little bit about the steps that you're taking at Raymond James to help and expand deepened relationships with advisers in the coming years. How might your offerings evolve? What additional services or value what you'd be able to provide advisers? Is there navigating a very quickly evolving world?
Yes. It starts with bringing advisers like clients, which already makes us very unique in the industry and really understanding what their needs are, what their demands are. Having ultimate accessibility in terms of advisers feeling not only that they're allowed to, but they're welcome to invited to reach out to me if they have any concerns or questions or any way that we can possibly help them out.
That culture should not be underestimated or underrated in terms of how unique that is in our industry, both on the independent side and employee side across the board. And that's where we spend the most time making sure we try to get right and we reinforce because that's what's made us successful since our founding in 1962.
But you also have to have competitive technology -- that's why we spent $1.1 billion on technology and AI and all the components of technologies from the adviser tools to the client tools. You have to have good competitive products not just investment products from the plain vanilla investment products to alternative products, but also managing both sides of the balance sheet with -- we have a bank that helps clients with their lending needs as well on the SBL and mortgage side and then off-balance sheet protection insurance and having competitive insurance offering.
So I can go on and on, but it's all of the above. Advisers have been expected and will continue to be expected to provide more holistic and bespoke financial advice to their clients over time. And so that's going to require the firm to provide technology. Again, that's where AI can actually help. When we look at these AI releases, some of which have negative impacts on our stocks in our industry.
I look at it as these are releases that could be extremely helpful to us and to our advisers to help provide more bespoke advice to a larger number of clients. And so that's really what we are here to do is help advisers better help their clients.
And just a follow-up, I was curious if you could comment on how you see adviser behavior evolving -- and when you look at the new advisers that are joining Raymond James, any notable differences in behavior from those versus, say, legacy users? Is there anything notable to speak to on maybe banking adoption or all adoptions amongst new versus existing advisers?
No, not really. I mean it just depends on where we're recruiting from and what affiliation option. So it varies. There's nothing noticeably different. I would say the advisers that were newer to the firm. Sometimes, I think they are more -- actually appreciate our technology capabilities even more because they're coming from a firm where they saw what the alternatives are.
And so counterintuitively, a lot of the newer advisers in terms of appreciation of the culture and the technology are even more blown away than some of the advisers have been with us for 25 to 30 years. We still love Raymond James and still appreciate the technology, but they don't realize what the alternatives look like.
We have time for one more question, and that question comes from Jim Mitchell with Seaport Global.
Maybe, Paul, you've had pretty significant growth in SBLs and continue to accelerate. When you think about your different distribution channels there, can you discuss how much is being driven by [ TriState's ] platform versus your own private client business? And if you see further opportunities to kind of continue this growth trajectory and further penetrate penetration rate PCG?
No, it's a great question, Jim, and it's remarkable. Over the last year, it's been almost identical between the 2 at the 30-ish percent rate year-over-year growth, which, again, 30-ish percent growth rate, 31% year-over-year is just truly phenomenal and certainly a reflection of the capabilities that we have there. But it's been pretty consistent. And the opportunity to continue growing on both platforms continues to be significant.
And maybe a follow-up just on [ TriState. ] If you don't talk about it a lot, but it looks like the deposit growth there has been pretty substantial since you acquired it, maybe over 50% and has picked up over the last year.
So how is that helping what are the spreads on those deposits? And do you see it as a big contributor to profitable growth in the lending channel?
Yes, absolutely. The reason that we had [ TriState ] joined the Raymond James family is because, one, their FBL capability, their blending capability more broadly and also it diversifies the funding sources through its various deposit products.
So you're absolutely right. It's been a contributor on all fronts, very successful. The leadership team, again, going back to culture and joining a family is still in place. They're still independent branded independently, still separately chartered banks. And so just been a really great addition to the Raymond James family.
We have no further questions at this time. I'd now like to turn the conference over to Paul Shoukry for closing comments.
Great. Appreciate everyone's time and attention to Raymond James, and we don't take your trust for granted. So if there's any other questions, we're at your disposal, feel free to reach out to us at any time.
Ladies and gentlemen, this does conclude today's conference call. Thank you all for your participation, and you may now disconnect.
Raymond James Financial — Q2 2026 Earnings Call
Raymond James Financial — 47th Annual Raymond James Institutional Investor Conference
1. Management Discussion
Welcome. Good morning. First, I want to welcome all of you to our Institutional Conference. Thank you for your participation and taking time, have your busy schedules to attend the conference. We're always excited to host investors and corporates from around the country, Canada and the U.K. as well. So thanks for your attendance. And of course, it's always good to have a home crowd when I'm presenting about Raymond James. So for those Raymond James Associates, thanks for carving out the time to attend this presentation as well.
I want to start off the presentation well, with the forward-looking statements, of course. But also going to our values where we always start the values of the organization that was started by Bob James in 1962 and certainly reinforced by Tom James and then Paul Reilly, through their tenures. And certainly, the focus that I have as CEO and that the leadership team, we spent a good portion of all of our leadership team meetings talking about the values of the organization. This is what really makes us different in a highly competitive industry. It is so important for us to reinforce these with tangible, measurable behaviors each and every day.
It starts with being client first. And every firm says that their client first, if you go on the website, every firm says, "Hey, we are client first." But I always say the proof is in the pudding. And so if you look at the financial crisis or if you look at the mini banking crisis in 2023, what put those firms under? It was nothing to do with clients. There were bets that the firm were taking on their own behalf. In 2009, it was using wholesale funding to buy what they thought were double and AAA securities that were securitized that ended up essentially becoming a liquid and the wholesale funding ran dry. 2023 was duration bets that they're taking on the balance sheet that a lot of these firms went under. The leadership team said they had no idea they were taking. The CEO and CFO were doing it on the side had nothing to do with clients. We didn't do either one of those things. And the reason wasn't because we knew that rates were going to go up to 550 basis points in a very short period of time. We were getting a lot of pressure from analysts and investors for years to make those type of bets. And the reason we didn't do it wasn't because we were brilliant is because we said our value start with being client first. What to buying long-dated securities have to do with clients? Absolutely nothing.
We don't try to time the market. We don't try to make bets for the firm's on behalf. We're in the business of serving clients and making decisions for the long term. We don't care what happens over the next quarter or 2. We're making decisions for the next 5 to 10 years and beyond. That's why when we announced acquisitions, we're not big on 12- to 18-month synergy or accretion targets because that gets you so shortsighted, you lose focus on what's most important, which is preserving the culture of the organization that's joining the Raymond James family and looking at the 5- to 10-year strategic benefits. We're not worried about what happens over the next quarter or two. Integrity. Integrity, particularly in the financial services business is so important. A lot of people say integrity is what you do when no one is looking. I think that's a decent test. But really in financial services and a public company perspective, integrity is what you do when everyone is encouraging you to do something that's inconsistent with your values and rooting you on. Right now in this marketplace, you're getting rooted on if you're taking a lot of risk.
Most of the firms with the highest leverage are doing -- are getting applauded because we're 16 years into a bull market. And so we have to stay consistent with our values, even though we would get applauded for taking on more risk in a 16-year bull market, at least up until recently, it's not consistent with the values of the organization, and that's what we mean by integrity. And then independence is critical. We want all of our advisers, bankers, associates to all feel like they really have a sense of ownership with the businesses that they run with the functions that they support. All of our businesses work together. Private Client Group is our biggest business, accounts for about 70% of the revenues but the private client group at Raymond James would not be what it is today without our capital markets business, without our asset manager, without the bank. All of these businesses support one another to provide a full service capability to our clients in the wealth management business and also our institutional clients. And so that -- sometimes again, 16 years into a bull market, we get questions, why don't you focus on being more of a pure play?
Interestingly, pure plays have higher multiples in a bull market, right? Because in their multiples typically have a much higher range or standard deviation because when things go bad, their multiples go down even more. And for us, having a diversified and complementary business where the multiple and the valuations are much more consistent over time, and our earnings profile is much more consistent over time. Just last year, we recorded our fifth consecutive year of revenues and earnings, in very different rate cycles and very different capital market cycles, in very different market environments over those 5-year period. We couldn't find one other financial services firm that have 5 consecutive years of records in that -- in those different environments starting with COVID. And the reason for that is because of our diverse and complementary businesses really focused on serving clients with holistic financial advice. And you see in our long-term performance as well, 152 consecutive quarters of profitability.
In fact, the only quarter that we weren't profitable since going public in 1983 was Black Monday in 1987, and the only reason we lost money in that quarter was because that day when everyone else closed their trading desk, Tom James said, this is when clients need us the most client focused. And so we kept the trading desk open that day because of the volatility of prices that day, we lost money. But beyond that, we've been profitable every single quarter since going public. We didn't need TARP money during the government shutdown nor did we take TARP money during the recession. And we've always strive to keep enough capital and liquidity on our balance sheet to stand on our own 2 feet. As we look forward, we've just unveiled a new value proposition in our annual report. It's called the power of personal. And this applies to all of our businesses, the wealth management business, the capital markets business, the bank and the asset manager. We, as a leadership team, have a lot of conviction that the one thing people need more now than ever before in this world of AI and technology. And we spend over $1 billion a year in technology. I'll talk about that more later. In the world of social media, and I can tell you, I call it antisocial media because my kids use social media and it's not helping them become any more social, I assure you than I was without social media what people need more than ever is a deeply personal relationship.
And counterintuitively, even though people need a deeply personal relationship now more than ever and value a deeply personal relationship now more than ever, it's harder to find a firm in our industry focus on providing deeply personal relationships than it was when Bob James founded the firm in 1962. Fewer firms are focused on investing in personal relationships. It takes a long time. How could a private equity firm focus on developing a personal relationship model when their exit is 3 to 5 years? Deeply personal relationships, by definition, take longer than that to create, right? So in a world that's focused on quick returns, quick IRRs, quick ROIs, we're focused on the long term, developing those deeply personal relationship which is becoming increasingly differentiated in our industry. And again, that's true with our investment banking clients, our sales and trading clients, and also our wealth management clients. We really want to be differentiated in the industry by doubling and tripling down on what we've always done, which is developing deeply personal relationships with our clients.
And our value -- our vision is very straightforward as we want to be the absolute best firm for financial professionals and their clients and that their clients is very important, not our clients as a firm, but really, again, going back to the value of independents. We want every financial professional to feel like they own their clients. Actually, in our wealth business, we put in writing in the adviser bill of rights. You own your book of business, if you leave on good standing, we'll help you move to your new firm. No other firm says out across all of their affiliation options. And even on the independent side of the business, those firms are making it harder for their advisers to have mobility.
So again, the focus on independence is so critical, their clients and us treating financial professionals, whether it's our financial advisers, our bankers, our traders or salespeople like our clients. So they -- even though they have that portability, they know they're treated like free agents. They want to stay at Raymond James because we have a unique value, unique culture and a robust platform that we're investing in. So why would they want to go anywhere else? You look at our strategy over the next 5 years, which we presented to our Board and our offsite a couple of years ago, a couple of weeks ago at our annual off-site, and it really remains consistent. It's to continue gaining market share in each one of our businesses. And we're uniquely positioned in each one of our businesses where we have critical mass to be competitive. Again, $1 billion technology investments, some firms have a fraction of that technology investment that we're competing against. And there's just no way for them to keep up with the demands of AI and technology in our industry, and those become consolidation targets over time.
But coupled with that critical mass, we're uniquely positioned, and we also have headroom to continue growing doing what we're doing. We don't have to reinvent who we are to find growth opportunities in each one of our businesses, we have significant room to expand just by taking market share, both throughout the U.S., the U.K., Canada, just continuing to do what we're doing and not trying to reinvent who we are or do something totally new. We're also focused on increasing collaboration. I talked about the diverse and complementary businesses and it's not about cross-selling. I don't like that term cross-selling. It's about bringing all of the products and services that we can to clients to broaden and deepen the relationship, and to enhance the relationship to serve clients and to meet them where they are.
Of course, that requires investing in tools and resources across the organization, products, alternative investments, private wealth program and the wealth management space. We just announced additional capabilities over the weekend that we closed with an acquisition of a firm called GreensLedge, which enhances our securitization capability and our advisory capability there. Those are all investments that we're making to, again, broaden and deepen the platform for clients.
Enhancing the infrastructure under the hood, cybersecurity matters more than ever. It's more complicated than ever. We spend over $80 million a year just in cybersecurity technology, $80 million. That's more than a lot of our competitors' entire technology budget and the infrastructure resiliency so critical as well and more complicated than ever because so many -- we're dependent on so many different vendors in the value chain and technology with cloud-based services and solutions and other vendors. So the whole ecosystem has gotten more complicated in terms of making sure that the entire system's resilience. You've seen it with cell phone providers and other cybersecurity providers externally, cloud providers. When one goes out, it has a knock-on effect across a variety of industries. All of this requires most importantly, we're in a people business. We have to hire, develop and retain the very best people. So the focus on people is first and foremost in everything that we do and talk about at Raymond James.
And then, of course, the investment in technology. We announced the rollout still in pilot of our AI solution called Rai. And what Rai is a large language model, generative AI, where we've taken transcripts from service calls and created essentially an agent where people can self-serve advisers and their teams can self-serve as client related questions that actually provide more consistent, higher-quality results and it's much quicker in terms of being able to give you client-related questions at your fingertips. And so this is early stages. Eventually, we're going to expand this to all of our businesses to ask questions about not just the client-related business but also ask associate related questions. And so these are the type of investments we're making. We're doing both internally developed AI solutions, but also looking to partner with vendors that provide specialty AI solutions.
And so I know there's a couple of weeks ago, a lot of concern around these AI solutions coming out in the industry and what does that mean for Raymond James and wealth managers. I would tell you that the wealth management industry needs these AI-driven solutions to help advisers better serve their clients, to help advisers get both more scale in their business, to serve more clients and more assets. At the same time, provide more bespoke and customized advice and more holistic advice than they have ever provided before. So these AI solutions actually help the wealth management business evolve and providing more sophisticated holistic advice while at the same time, doing it for a larger number of clients. And that is required in the wealth management industry. McKinsey came out with a report a year ago that said, without these technology solutions, there's going to be a massive shortage of financial advisers in the industry.
If you look at the demographics of existing advisers versus new advisers getting into the business, coupled with rising demand for human financial advice. And so to solve that shortage, we need the AI solutions, which is why we're investing over $1 billion in technology and looking at all of these solutions going forward. So we're really excited about the opportunities that AI will have for the industry, not just in wealth management, but across all of our businesses going forward. So now I'll hand it over to our CFO, Butch Oorlog, who will kind of give you a financial review, and then we'll open it up for Q&A. Butch?
Thanks, Paul. Anchored by those values that Paul just described, pleased to be able to provide the update that we had in our most recent fiscal year, we were able to achieve our fifth consecutive year of record levels of net revenues and record levels of pretax profit both on a GAAP and a non-GAAP basis. And that consistent performance is really anchored in those values that we've talked about. I'm going to take a moment and talk about -- highlight 3 aspects of our characteristics anchoring that performance. And the first is our track record of increasing operating leverage. We've been able to increase operating leverage consistently, and we're going to talk about how we're focused and how we think about doing that. We're going to talk about our strong balance sheet, the characteristics of our strong balance sheet. And we're going to talk about our consistent capital priorities that are focused on growth.
Specifically, the way we think about generating operating leverage, we strive to grow revenues at a higher rate than we increase expenses. And simply put, and we do that across our diverse and complementary businesses. As you can see on this slide, we have been able to do that over the last 5 years with a compound annual growth rate growth of 12%, growth in revenues. In terms of our expenses, our expenses are variable. A very significant portion of our expenses are variable, and therefore, flex with the revenues. So over that, that provides us a lot of flexibility to be able to adjust in different market environments. And as you see on this slide, we've been able to achieve a 21% increase in pretax income over that same 5-year period that we had the 12% increase in growth. So solid performance in our ability to generate positive operating leverage. And as we look forward, we mentioned the $1 billion of technology investment that we're going to spend, that we budgeted, have spent and continue to spend.
We believe that we're going to continue to gain efficiencies through those investments that enable both our top line growth as well as give us efficiencies and economies of scale. Scale does matter in this business. And we believe that we have further opportunities to continue to leverage our scale as we continue to grow. In terms of financial strength for our most recent December 31, '25 reporting period, our total capital ratio is in excess of 24%. That is more than 2x the regulatory minimum level to be considered well capitalized. In terms of dollar value, that represents $2.4 billion of excess Tier 1 capital which we have available to us to deploy in our growth, in our business. It takes both capital and liquidity to put that into action. And in terms of liquidity, we have $2.1 billion of excess liquidity at December 31. That's excess over our $1.2 billion target level of liquidity. So we have capital and liquidity on hand and ready to invest in terms of -- as opportunities and invest in our growth strategies going forward.
We also have a relatively low level of of debt on our balance sheet, coupled with investment-grade credit ratings from each of the 3 credit rating agencies. So we're well positioned to access the debt markets to the extent that, that becomes opportunistic to fuel our growth. In terms of our capital deployment priorities, our first strategic priority in deploying capital in terms of fueling our organic growth. Organic growth for us in the terms of our PCG business can take the form of TA loans to financial advisers to grow our adviser practice and our capital markets business, it can take the form of bringing on additional teams and talent to expand our service capabilities to our institutional clients. As well as in our banks, it can take the form of funding loan growth as opportunities arise, which in the most recent fiscal year, our loan balances increased 12% as evidence of our deployment of our balance sheet organically to support our bank loan growth.
Our second pillar of capital priorities is our acquisitions. In terms of acquisitions, our criteria is long-standing. The first criteria is it has to be a cultural fit. Secondly, a target has to improve, has to be improved, both us and that target. So the way we think about it is 1 plus 1 needs to equal more than 2. And the way that, that happens is that target has to make us better, and we have to make them better. And then our third element in our strategic acquisition deployment is in terms of value. So if and only if, and when and only when, a target checks those first 2 boxes, then we're going to evaluate the economics to make sure that we can make that investment consistent with the long-term goals and returns for our shareholders. Our next level of capital deployment priorities in terms of common stock dividends. We have a target dividend payout ratio of 20% to 30%. We operate within that target. And as an example, in the most recent quarter, we increased our common stock dividend 8%, which was consistent with our growth in earnings.
And finally, the last pillar is share repurchases. We're committed to repurchase shares to offset compensation-related dilution, and then to be opportunistic with share repurchases in order to keep Tier 1 capital from growing in excess of those levels that I cited earlier. On this slide, you'll just see our demonstration of how we have performed by putting the acquisition of strategy to work over the past since 1999. A couple of takeaways on this slide, including the fact that we've been able to leverage the people from many of the acquisitions that are reflected on this slide in terms of talent development, and it evidences that cultural fit that we hold ourselves accountable to that results in us being able to bring those leaders on and have those leaders make us better and remain with us going forward.
This slide depicts the last pillar of the capital deployment. And you can see that over the past 5 years, we've deployed nearly $4.7 billion in aggregate and returns of capital to our shareholders between dividends and share repurchases. So based on our pillars of values, we've been able to achieve those results over the long run. With that, we'll open it up for questions.
Thanks, Butch. Any questions from the group? One in the back there. I'm not sure if we have a microphone or I'll just repeat it for you.
2. Question Answer
Do you have any concerns that people might have over private credit and how have -- how might any fall out in private credit world impact Raymond James?
Yes. So the question around private credit and some of the rumors, I would say, so far, the issues that we've seen in private credit were actually much less credit related and much more isolated to fraud events in particular companies or that sort of thing. And so I know there's some concerns in certain industries that private credit lends to. And I would say, thus far, those concerns are haven't materialized into real credit issues as far as we could see them in the private credit space.
So at Raymond James, we've always been very conservative around offering those type of products. We do offer them on a limited basis to firms that we do operational and financial due diligence on but we've always been more cautious around offering, whether it's private credit or more broadly speaking, alternatives because, especially where we are in the cycle, the world is -- does go up and down, the economy and the markets go up and down. And so we want to make sure that we're balanced in offering the various type of products that Private Client Group advisers and clients want access to. So we've always been conservative about that. We're monitoring private credit very carefully. I think the biggest risk for private credit near term is much less of a credit risk and much more of a funding dynamic in terms of redemptions or ability to raise more funding.
And again, we haven't seen any statistics on that yet, but certainly, if the headlines keep coming out around potential cracks and concerns around private credit, that could in itself create concerns and risk, and funding issues for the space. So that's something that we'll monitor very closely going forward. Any other questions?
Distinguish between collaboration and cross-sell?
So the question was distinguished between collaboration and cross-selling. So one very explicit difference is cross-selling usually comes with requirements, where we tell advisers or branch managers or regional managers or leadership in the businesses that in order to get a certain level of compensation, you have to sell a certain number of products or refer a certain number of products. And we've seen that certainly cause a lot of explicit tangible issues in the industry and a lot of intangible issues in the industry.
We have 0 cross-selling requirements. There's not one financial adviser that will tell you that they're -- out of our 9,000 or so advisers that will tell you that they have a cross-selling requirement to hit a deferred comp program goal. We're very unique. That sounds like common sense, that's actually pretty unique in the wealth management space. Same with regional management. Same with the leadership team. While I encourage Jim Bunn sitting there, he's the President of our Capital Markets group. While he's very motivated and encouraged about using all the resources in the firm to provide the very best service and product and advice to the institutional clients, his compensation is not impacted at all by a certain number of products being sold from the other divisions. That's not a part of the formula.
In fact, we make it almost more difficult for our asset management products, as an example, to be sold internally to our own wealth management clients. Because we take that separation very seriously. We want to make sure that we're focused on quality versus cross-selling. So when I say all these things, we take it for granted at Raymond James and it sounds like common sense, but it's very unique in the industry for all of those facts that I just described to be true. And that's really the difference between cross-selling and collaboration. Collaboration is about, hey, what can we do to broaden and deepen the relationship with clients that adds value to clients and not what's the quota that we need to hit to get to our financial goals for a firm. It's a very different construct and mindset.
Maybe time for one more, if there's another question out there? All right. Well, if not, then again, I want to end where I started, which is by thanking all of you for your participation and time at this conference. Always great to see everybody. Enjoy the rest of the week.
Raymond James Financial — Bank of America Financial Services Conference 2026
1. Question Answer
Everyone, welcome to the 34th Annual Financial Services Conference at the Bank of America. This is Craig Siegenthaler. I run the North American diversified financials vertical, and I'm pleased to introduce Raymond James CEO, Paul Shoukry. Paul has been with the firm for over 15 years in a variety of roles, including President and CFO. Paul, thank you for joining us.
Sure. It's my pleasure.
So Raymond James competes really in three main businesses: wealth management, capital markets and asset management. It's a leading private client business and manages about $1.7 trillion in client assets, and it finished the year on a very strong note with over $30 billion in net new assets. So Paul, first, congrats on the strong finish.
Thank you.
So let's get started with a big picture question. On the macro front, we've entered year 4 of the bull market. IPOs and M&A are expected to accelerate, I hope. The Fed is cutting rates. So how do you frame this current macro environment? And what is really the impact on Raymond James?
Well, great to be here, and I want to welcome everyone to my home state of Florida. The Chamber of Commerce is doing its job with the great weather here. And you said 4 years into a bull market. Some people say we're basically 16 years into a bull market. Obviously, there was a blip during COVID, but fortunately, with all the support that was provided, the markets really responded and were extremely resilient during COVID. So I am optimistic on the macro for all the reasons that you stated. Unemployment is still near historical lows. Inflation seems to be relatively under control. Consumer sentiment is strong. And so a lot of the key components to what creates a healthy economy exists. There's always uncertainty. There's always things that are potential challenges and concerns. But overall, when you look at the economy, the market, the labor market, the consumer sentiment, the corporate earnings growth, I mean, our CIO, Larry Adam at Raymond James, I think he's expecting 12% earnings growth this year, and he's on the low end of the consensus. I think 15% is where consensus is at. So earnings growth is very strong as well for the S&P 500. So I'm pretty optimistic long term with where we are in the U.S. economy.
So as you put your strategy hat on and you think about your strategic priorities, what are the 1, 2 or 3 things you really want to do this year?
Well, the most important thing we do at Raymond James have consistently done and are consistently focused on is just continuing to reinforce the values and the culture that was set out by Bob James in 1962, which is to always put clients first to make decisions for the long term, to have integrity in different market environments. Some people say integrity is what you do when no one is looking. I actually say integrity is what you do when everyone is asking you and rewarding you for doing something that's inconsistent with your values.
And then respecting independence, independence that we still put in writing, it's called the adviser Bill of Rights that advisers own their book of business across all of the affiliation options. And if they want to leave in good standing, we'll help them move to their new firm. And so growing larger while preserving and reinforcing and strengthening those values is so critical to our long-term success. What we really want to do at Raymond James is be the absolute best platform for financial professionals and their clients, not our clients, but their clients. And that's true across all of our affiliation options. And to do that, you have to have that strong culture I just described, driven by the values of the organization, which have not changed since our founding. But you also have to invest significantly in technologies and products and solutions to help financial professionals provide better advice and more holistic advice to their clients, which I know we'll talk about throughout this discussion, all of those areas.
And so we're doing that with a newly unveiled value proposition that we came out with our annual report, which was released several weeks ago, and it's called the Power of Personal. So in this world of technology and AI and transactions and returns, what people need more than ever now is human relationships, personal relationships. And we're doubling down on that. What -- why our advisers have such sticky relationships with their clients is because the clients deeply trust their advisers. Raymond James was ranked the #1 most trusted firm in the financial advice industry by clients. And that's really what wins the day is the personal relationships, we call it the Power of Personal. And it's also the personal relationships we have with our financial professionals.
I just came in from a complex event in Charleston last night with 150 of our financial advisers. That's so important for me to understand what we can do to be better partners for advisers. So those are really our priorities, a consistent year-to-year because we have a 5- to 10-year horizon. So we don't really change our strategic initiatives or strategic focus or priorities year-to-year. It's continuing to invest in the platform, but really focused on reinforcing the culture and the values of the organization.
So Paul, we've been in a multiyear bull market here. You've had private equity money enter the space. And I'm talking about the Private Client Group. You've also had OSJs, yet through all that, you just put up a record or near record net new asset number in the fourth quarter. So my question is, what does the competitive landscape look like in the private client business?
Well, Craig, as you know, you've been following it, and you've been a big advocate for releasing the net new asset number for years now. And we have consistently been a leading recruiter in our business for years now. Last year was a record recruiting year despite how competitive it was, and it was extremely competitive. It was a record recruiting year for us. We recruited advisers with over $400 million of production at their prior firm, which was up 21% from the prior year record, 21% increase from the prior year record to what we recruited last year. And it's because of all of those things that I just described around our culture and the platform. We don't aspire to be the highest upfront check.
We have a very different strategy than many of the other firms, some of the private equity-backed firms. We want to compete on the culture and the platform. And we don't want advisers to join us just for the highest upfront check. We want advisers to join us because they're convinced that over a long period of time, they'll be able to grow their business more, develop better relationships with their clients and make more money over the long term at Raymond James. And the longer they stay at Raymond James, the more money they'll make for their clients and for themselves and for the firm. And by pursuing that strategy, we are self-selecting advisers who are less likely to leave every 7 or 8 years to recapitalize for the highest check.
And so it's a very different long-term strategy, but it's because we have a long-term approach and view to the world, whereas some of the competitors that you mentioned have maybe 3- to 5-year exit time horizons, right? And so their strategies are different, not that one strategy is better than the other. It's just for us, what makes sense is what makes sense for the next 5 to 10 years and beyond, not what makes sense for the next 5 to 10 quarters.
Well, I want to hit on guidance. At the last Investor Day, you provided several targets. Adjusted operating margin above 20%, comp ratio 65% or lower. Given recent KPIs, how do you feel about these targets today?
Well, we update our targets once a year at the Annual Investor Day, which we'll have again in May or June of this year in person. And we try not to deviate much from that intra-year just because there's so many different things that change across our businesses, whether it's Private Client Group, Capital Markets, the Bank, et cetera. And so rates have -- short-term rates have come down, which a lot of people rightly view as a headwind in that the spreads we earn on cash balances decline as rates -- short-term rates come down. But there's a lot of offsetting tailwinds to that as well. So you saw that, for example, in the last quarter with record securities-based lending growth. As short-term rates come down, borrowers, our clients are more comfortable borrowing on those floating rate loans against their securities portfolios. And that's certainly a tailwind that helps us grow earning assets.
As rates come down, we saw this during COVID as well. M&A activity picked up because financing was more readily available at cheaper rates, which was able to stimulate M&A activity. And so we always have puts and takes in our business. We're not prepared to change our metrics one way or our targets one way or the other right now, but just -- but we're still feel like with our -- with an improvement in M&A, in particular, last quarter due to timing, largely due to timing, M&A was softer for us than many of our other competitors, but we still feel very good about our pipelines in M&A. We still have a lot of motivated buyers and sellers, and we feel good about the pipeline for the rest of the year. And so that should certainly help the margins and the comp ratio as M&A hopefully rebounds from what was a weak fiscal first quarter for us.
So Paul, I want to come back to the Private Client Group recruiting backdrop. And I want to talk about transition assistance, but I know you can't comment on numbers, but maybe some high-level commentary on how TA packages have trended across the industry over the last couple of years.
Well, certainly, over the last couple of decades, too. I mean, transition assistance has continued to increase across all of the affiliation options. The market has continued to get more competitive. And that really puts a focus on two things. One, scale. You have to have scale in our business. The size really does matter in terms of being able to generate efficiencies in the business and the support areas and the product areas and then the technology that is required to be competitive. We spend over $1 billion a year in technology. And we're fortunate to have the size now to be able to invest over $1 billion a year because I can't imagine being competitive in this highly competitive space if we had a fraction of that technology budget. So that creates a moat for us relative to these new entrants coming in and the smaller players in the space.
And it also puts a focus on that value proposition, the culture, treating advisers like clients, respecting the book ownership because that's highly differentiated in the space as well. Again, we don't want to be the highest upfront check on the street. We want to be the best long-term destination and the best long-term partner on the street. And so while we still have to be competitive on the upfront check to be competitive, we want to be competitive on the full package and convince advisers that you'll make a lot more money here over the long term if you stay with us at Raymond James because we'll help you grow your business and we'll help you support your clients.
So when you look across segment, more on the RIA side, smaller IBD side, kind of maybe core or you look across geographies, you look across kind of asset mix, maybe advisory versus brokerage. Is there a type of adviser that you're really focused on recruiting now? And alternatively, is there a type that maybe you're not that interested in recruiting at this moment?
We have the largest addressable market in the industry because we service all of the affiliation options from W-2 employee to independent contractor to financial institution divisions where we provide brokerage platforms to banks and credit unions to RIAs. And so -- and we've been in those businesses for a long time, and we have critical masses in all of those businesses. So we have a very large addressable market. And our approach, which is relatively unique is we just want advisers who are focused on serving their clients to put their clients first who are good cultural fits with Raymond James, who would be good representatives across the country.
The #1 most energizing thing about my role and CEO over the last year, it's been almost exactly a year, is traveling the country and seeing how consistent the advisers are in terms of representing Raymond James, putting their clients first, being good stewards in their communities. That's energizing. And that's -- and we have to remind ourselves not to take it for granted because that doesn't exist everywhere else. And so I'm extremely proud of that, and that's who we're focused on. We don't try to hire one type of adviser or force all of the advisers to use one type of investment approach or try to marginalize their business or force them to serve one type of client.
Again, one of our four values is independence. We want them to be entrepreneurs, run their business the way they feel that is best suited for their communities and for their clients. Every community is different. We have a great group of advisers here on Brickell that do a great job for their clients. That's a very different market than where I was yesterday in Charleston and lots of advisers from the surrounding area all the way up from Columbia, South Carolina. And so we want advisers to meet their clients where they're at in the communities that they're in and not try to require them to shift one way or the other based on what's best for the firm.
So Paul, do you have any specific initiatives in place today to help accelerate organic growth or productivity per adviser? So not on the recruiting side, but on the same-store sales side, the existing adviser base?
Absolutely. We have dozens of initiatives that are focused on helping advisers better serve their clients, increasing the wallet share of their clients. And it ranges from providing education, training, development to the advisers. Coaches, we have coaches that help coach the advisers in running their business and running their practices and developing their teams. We have a lot of training that's not only targeted to the advisers, but education for their sales assistants and their teams as well because a lot of the organic growth, this is a team effort. It's not just focused on the advisers, it's focused on the entire team.
And then also related to organic growth is it's not just investable assets and investments. It's also lending solutions, whether it's mortgages or securities-based loans, it's insurance solutions, it's donor-advised funds out of our trust company. So having a full-service platform to be able to offer more holistic and deep advice to their clients is really helping them gain wallet share, again, not just of the investable assets, but both sides of the balance sheet and insurance and trust planning and estate planning as well.
Great. Let's flip in and talk about the bank for a moment. And in my intro, I didn't actually include the bank as a fourth division because I kind of look at it as helping some of the other divisions. But client cash sweep and ESP balances grew to $58 billion or kind of 3% last quarter. This represents, I think, about 3.7% of clients' assets at this moment. How do you see client cash behavior evolving across the Raymond James Bank, third-party banks and the ESP as the Fed continues to cut rates, even though we maybe only have two this year.
I would say the -- as we saw across the industry since rates started rising up to a peak of 5.5% for Fed's fund targets, clients have really, with the help of their advisers, invested the cash in higher-yielding alternatives, whether it's purchased money market funds, which have grown significantly over the last few years, the enhanced savings program balances, which we offer up to $50 million of FDIC insurance at a very attractive rate and a lot of other higher-yielding alternatives to cash. So cash has come down across the industry in terms of what's in the cash sweep program. I think for us now, it's around 3% of assets or something like this, 2.8% of assets, which historically is a low for us and for the entire industry.
As -- that has stabilized as rates have come down. So the further around making sure you're earning the absolute highest rate on every last dollar of cash balance, I think between rates coming down and clients have invested most of their cash or almost all of the cash that's sensitive to price in those higher-yielding alternatives, the cash balances certainly have seemed to stabilize across the industry and for Raymond James as well. Now the flip side of that is the enhanced savings program balances have seen declines. And the reason for that is because clients -- the flip side of clients being less sensitive around placing every last dollar of cash is that it's higher -- harder -- more difficult to track cash balances and higher-yielding alternatives because they're just not as sensitive to it. And a lot of the cash when rates come down, get reinvested into the markets, especially given consumer sentiment and confidence in the markets right now. So we're seeing a lot of reinvestment into the market and more -- it's a more difficult environment between lower rates and strong markets to raise cash in higher-yielding savings products.
So loan growth, I think, was 13% in the fourth quarter. So where do you see the strongest opportunities across SBL, securities-based lending, C&I, residential mortgage, maybe I'm missing one. But as you think of that loan portfolio continue to grow, where do you expect to be the leader?
Yes. And last quarter's growth was really driven by securities-based loans to Private Client Group clients, and that will -- was where we expect continued growth. I mean these are very -- these are well collateralized with marketable securities that reprice daily. So we like the credit risk associated with these. We like the risk-adjusted returns associated with securities-based loans. They help advisers establish stronger, more holistic relationships with their clients. And to your point, our bank is really a utility bank to serve clients. We use our balance sheet to help deepen client relationships and to solve client demand -- solve for client demand. So we're -- we would expect the securities-based loans and eventually residential mortgages to continue to take more of the balance sheet at the expense of corporate loans going forward.
So credit quality has remained very good across the banking industry. And U.S. economy grew at 4.3% last quarter. So this might not be a big topic. But what are you seeing on the credit quality front? Are there any early signs of stress in any parts of your portfolio?
No, we feel really good around the credit quality. We're not seeing kind of thematic early signs of stress. And again, our securities-based loan, which is the fastest-growing part of the portfolio is very well collateralized. And so we feel very good about the balance sheet and the credit quality.
Great. Now no wealth manager is immune to what happens with -- on the rate front and the Fed is cutting here, although the 10-year has been a little more range bound with long duration. But what is the outlook for NIM as the Fed likely continues to cut rates a little bit?
Well, all else being equal, as NIM comes down, even though we have a large portion of our deposits that have about 100% deposit beta, so the enhanced savings program balances, even some of the balances in the sweep have 100% deposit beta. So that protects us, provides a cushion to a lower rate environment. But all else being equal, in the lower -- as rates come down, you would expect some level of compression on the NIM across the industry. But the flip side of that is as rates come down, you should be able to also grow earning assets at a faster rate. And so your NII, I always say I focus on NII, not NIM because NII is real dollars to earnings. So we should -- we're optimistic about our net interest income and the fees from third-party banks over a long period of time as we continue growing the balance sheet and growing -- earning assets. And we think that, that's the trade-off you have with lower NIM is the ability to grow earning assets faster.
Paul, you've built a multi-manager, multi-boutique model in your asset management business. But what I'm curious of what is the strategic benefit to the rest of the firm by having that business? What's the linkage like?
Well, the asset manager, the majority of the assets are still sold externally to other wealth management platforms and other institutional investors, but there is -- a lot of those assets are also sold internally to our own wealth channel, particularly a lot of the fixed income assets that -- with shorter duration, medium-term duration. And so there's certainly a benefit to the wealth business of having the asset manager provide bespoke product that the wealth managers can -- and attractive products that the wealth manager can take advantage of. But we also are very clear that the asset manager does not get preferential treatment. It's actually, in some ways, more difficult to sell asset management product internally than it is to sell externally. So we want our asset manager through the multi-boutique strategy to be competitive on its own two feet to build its own distribution force, to generate good returns on its products, to be competitive externally with outside wealth platforms and outside institutional investors.
If you look at the broader asset manager ecosystem, you got a variety of asset classes, active equity, passive equity, fixed income, private markets. Where do you see kind of money going? And how is the Ray J asset management business positioned for that? And kind of a follow-up is, if the Fed is cutting, at some point, some of that cash becomes even lazier and some of that risky cash may move out into areas like fixed income.
Yes. I spoke earlier about our value proposition of power of personal. And you see that in our asset management business as well. So where the flows are going certainly are driven by the macro and different types of products and different types of wrappers. But what we see more than anything is where the flows are going across the industry are where the asset managers have the deepest relationships with their clients. And they're not product providers or solution solvers. They create solutions, they become extensions or partners with their investors and their clients. And that's what we're really focused on with our boutique asset management strategy.
Clark Capital is a perfect example of an acquisition that we just announced with about $40 billion of assets under management is that they really have deep personal relationships with the financial advisers that they serve. And they do pitches with prospects and clients alongside the financial advisers they serve. And so the reason their flows have been so good isn't just because of their products and the performance, but it's because they're really focused on developing deep personal relationships and becoming an extension of the team to the financial advisers. And so that's what we're focused on. Our strategy in asset management is the foundation is the power of personal, where can we create differentiated relationships with clients, product performance and product wrapper, all of those things are going to be critical. But how can we make more investments in developing deep value-added relationships and creating solutions for clients in the investment management space, and that's really what our focus is. And that's similar to our focus in our capital markets business, our bank and our Private Client Group, of course.
So we got to cover capital markets. I haven't covered that one yet. You have a pretty broad offering there, M&A advisory, equity and fixed income underwriting, equity and fixed income brokerage. How would you characterize the current recovery in capital markets activity that we saw last year?
Yes. Well, the majority of our M&A business is really focused on financial sponsors where private equity is the seller and/or the buyer, in a lot of cases, both. And so we have a lot of motivated sellers. We have seller -- private equity firms that have held investments portfolio companies a lot longer than they originally expected. And so they're motivated to sell those companies and return some capital back to their LPs. And on the other side of the -- with the buyers, there's a lot of dry powder still in the system and capital to be deployed. And so they're looking to make acquisitions. And so we -- the pipeline has been building and growing. It obviously was disrupted as rates rose from near 0 to 5.5% for the Fed funds target. That created a lot of disruption. And we were pretty optimistic beginning of last year, but then we had some disruption with Liberation Day. But as we had -- as the markets and the economy got more confident around that situation, M&A really picked up in the second half of the fiscal year. So a lot of market participants were surprised with the soft first fiscal quarter that we had last quarter in M&A because we are optimistic about the pipeline. And again, a lot of that is just timing. You can't time -- this is not a recurring revenue business. You can't time closings. We're still optimistic about the pipeline and the pull-through going forward for the rest of the fiscal year.
So within capital markets, what product gaps or coverage areas would you be looking to fill over the next 12 months?
Well, we have really good coverage across our industry verticals, but almost within every industry vertical, there are sort of sub-verticals where we can continue to broaden and strengthen and continue to gain market share. So we have a very good depositories business, but there's a couple of other players out there that are bigger -- much bigger than us in depositories. So that's an example of an area where we can continue to -- we have plenty of headroom to continue to grow. We see these as great opportunities for us. Biotech, another great opportunity for us. Industrials. We have a great business, but we don't have the market share that we can get in that sector either. So really across all the verticals, we have a lot of opportunity to continue expanding and getting stronger, which is why we're so optimistic about the growth opportunity in investment banking over the next several years.
One of the really nice positive points in the story was you've really accelerated the buyback here. We've seen capital ratios kind of stabilize, and they look very high relative to other firms. That's good. I think you have $2.1 billion of excess liquidity, too. So my question is, as you look over the next year, how do you prioritize all this organic investments, M&A, dividend increase and also buybacks, which have a lot of near-term EPS leverage.
So our capital prioritization framework is very consistent. First and foremost, we're focused on organic growth. We talked about recruiting financial advisers is a big use of capital for us. And that -- we believe organic growth will generate the best long-term returns for shareholders and the best -- and that's the best opportunity for us across all of our businesses. Following organic growth is acquisitions, M&A. We announced two acquisitions in the last several months, both GreensLedge in the capital markets space, and I just mentioned Clark Capital. We continue to look for acquisitions across all of our businesses. But the acquisitions have to be good cultural fits. We don't even proceed from there unless it's a good cultural fit, unless we feel like the leadership team and the people.
We are in a people business. So if they're not focused and aligned with our values in terms of putting clients first and making decisions for the long term, that we're not interested in pursuing that acquisition. But it also has to be a good strategic fit. And when we say good strategic fit, we mean that they make Raymond James better, but we also make them better. So it's a true win-win-win for us, the firm that we're partnering with and the underlying clients. And that's the way we extract long-term value for the clients and ultimately to the shareholders. And then if it's a good cultural fit and strategic fit, then we look at the valuation. The valuation obviously has to makes sense for both Raymond James and the partner that's selling to us.
And then the third area of priority for capital deployment is ongoing dividend. We have a long-term target of 20% to 30% of earnings for the long-term dividend. And if we can't use the capital to check those boxes, then we would look at repurchases as the fourth and final priority in the capital prioritization framework. We've been fortunate in a very fortunate position where we have one of the leading capital ratios in the industry, and we've been generating a lot of capital through what was our fourth consecutive year of record earnings last year, last fiscal year. And so because of that and because of the excess capital generation, we've been accelerating and increasing the buybacks to about $400 million a quarter.
Great. We're running low on time, but I wanted to look at the audience and see if anyone has any questions. And if you do, please raise your hand and wait we'll get you a microphone. We have a question from the gentleman in the front row.
My question is on operating leverage and the margin. You've articulated that you invest because of your scale, allowed you to invest $1 billion in technology every year, which is very sizable. So I wanted to ask on, I guess, when you look at your business, across which areas do you see have the greatest opportunity for further margin expansion beyond the 20% that you've articulated at your Investor Day?
Yes. We look at our margins, each of our businesses work together to generate that margin. There's so many interdependencies between the business that it's hard to isolate one segment's margin and its target relative to the others. So when we look at that 20% target overall, we think -- and we've been very consistent historically of growing revenues faster than expenses and driving the bottom line and improving margins over time. But with that being said, we're a growth business. And our margins would be a lot higher if we only invested $600 million in technology versus $1 billion.
And -- but the reason we invest $1 billion instead of $600 million is because we're continuing to invest in growth. We're continuing to invest in being the absolute best partners for our financial professionals and their clients. And we're doing that across technology, the product areas. We're record recruiting. All of those things require investment, but that generates better long-term returns for our shareholders over the long term. So we're not going -- we're going to continue to focus on that balance between investing in the business to drive growth, to drive top line growth, while at the same time, that long-term aspiration of growing revenues faster than expenses, which we have a consistent track record of being able to do.
Great. Thanks for the question. And with that, we are out of time. So Paul, on behalf of all of us at Bank of America, thank you very much for joining us.
Thank you.
Raymond James Financial — Q1 2026 Earnings Call
1. Management Discussion
Good evening, and welcome to Raymond James Financial's Fiscal First Quarter 2026 Earnings Call. This call is being recorded and will be available for replay for 30 days on the company's Investor Relations website. I'm Christy Wa, Senior Vice President of Investor Relations. Thank you for joining us.
With me on the call today are Chief Executive Officer, Paul Shoukry; and Chief Financial Officer, Jonathan Oorlog. The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. 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, anticipated results of litigation and regulatory developments and general economic conditions. In addition, words such as believes, 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 statements 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 and Forms 8-K, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shoukry. Paul?
Thank you, Christy. Good evening, and thank you for joining us. Before we begin, we recognize that difficult weather conditions are impacting many of you and communities across the U.S. Our thoughts are with everyone affected, and we appreciate the dedication of our teams as they continue to clients during this time. Our focus on being the absolute best firm for financial professionals and their clients has contributed to strong results this quarter. The strength and consistency of our client-first culture alongside a robust technology and products platform, coupled with our strong balance sheet, continues to appeal to financial advisers. This is reflected in our solid recruiting momentum and net asset annualized growth of 8% this quarter.
We continue to deploy capital with a focus on the long term as demonstrated by our robust organic growth, continued investments in our technology and platform, our consistent deployment through dividends, our recently announced acquisitions as well as share repurchases. In the fiscal first quarter, we recruited financial advisers to our domestic independent contractor and employee channels, with trailing 12-month production totaling $96 million and approximately $13 billion of client assets at their previous firms, a strong result for a quarter that typically experiences a seasonal slowdown.
Over the past 12 months, we recruited financial advisers with trailing 12-month production totaling nearly $460 million and over $63 billion of client assets -- including assets recruited into our RIA and custody service division, we recruited total client assets over the past 12 months of more than $69 billion across all of our platforms. Our optimism about future growth is fueled by our robust adviser recruiting pipeline and strong levels of commitments to join in the coming quarters. We offer a unique combination of an adviser and client-focused culture, coupled with leading technology and solutions. This value proposition, coupled with our strong balance sheet and commitment to independence is proving to be a differentiator for advisers evaluating alternatives.
In order to continue retaining and attracting the best advisers, we continue making investments in our platform and offerings. For example, our private wealth adviser program and expanded alternative investments platform supports advisers and focus on high net worth clients. We continue to make investments and implement solutions to automate and streamline processes that provide advisers with incremental time to invest in their client relationships. Highlighting this is our newly launched proprietary digital AI operations agent named RA, which builds on our service-focused long-term AI strategy.
The firm's suite of AI-based tools and technologies is focused on empowering financial advisers and professionals across the firm by applying artificial intelligence to enhance service models in secure, scalable applications. Capital Markets results declined this quarter, primarily driven by lower M&A and advisory revenues and also lower debt underwriting and affordable housing investment revenues on a sequential basis. Given the very strong M&A results in both the year ago and sequential periods, this quarter faced tough comparables. Even so, we entered the second quarter with a robust pipeline that continues to reflect the potential resulting from the strategic investments we have made in this segment over the past few years.
We are confident we are well positioned with motivated buyers and sellers, along with deep expertise across the industries we cover. We remain committed to opportunistically enhancing the platform by broadening and deepening its capabilities, whether through strategic hiring or acquisitions as evidenced by the announced acquisition of the boutique Investment Bank Greens Labs during the quarter, which we anticipate closing later in the year. In the Asset Management segment, net inflows into managed fee-based programs in the Private Client Group were strong during the quarter, annualizing at nearly 10% and reflects the complementary impact of being able to offer high-quality investment alternatives to our financial advisers as well as growth resulting from our successful recruiting efforts. In the Bank segment, loans ended the quarter at a record $53.4 billion, primarily reflecting outstanding 28% annual growth in securities-based lending balances and 10% growth in this quarter alone, yet another synergistic impact from our growing private client business as we are able to deploy our strong balance sheet in support of clients. Importantly, the credit quality of the loan portfolio remains strong. Turning to capital deployment.
We continue to deploy capital with a focus on the long term as evidenced by our robust organic growth, continued investments in our technology and platform and recently announced acquisitions. In January, we announced the acquisition of Clark Capital Management, a leading asset management firm specializing in wealth-focused solutions to financial advisers and their clients with expertise across the growing segment of model portfolios and SMA and UMA wrappers. With over $46 billion in combined discretionary assets under management and nondiscretionary assets, Clark Capital is recognized as a high-growth firm in the industry and has a track record of strong inflows.
We are excited to welcome Clark Capital into the Raymond James family where it will maintain its independence in brands going forward. We believe their services and capabilities further strengthen Raymond James Investment Management's existing investment and wealth planning offerings. This announced acquisition, along with that of Green'sledge, demonstrates our steadfast pursuit of acquisitions that are a strong cultural fit, a good strategic fit and valuations that generate attractive returns for our shareholders.
As we continue to pursue both organic and inorganic growth opportunities, we also maintain our share repurchase program to effectively manage capital levels. This quarter, we repurchased $400 million of common stock at an average share price of $162. We ended the quarter with a Tier 1 leverage ratio of 12.7%. Now I'll turn the call over to Butch Orlog to review our financial results in detail. But? Thank you, Paul.
I'll begin on Slide 6. The firm reported record net revenues of $3.7 billion for the fiscal first quarter. Net income available to common shareholders was $562 million with earnings per diluted share of $2.79. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $577 million, resulting in adjusted earnings per diluted share of $2.86. Our pretax margin for the quarter was 19.5% and adjusted pretax margin was 20%. We generated annualized return on common equity of 18% and annualized adjusted return on tangible common equity of 21.4%. Solid results for the quarter, particularly given our conservative capital base.
Turning to Slide 7. Private Client Group generated pretax income of $439 million on record quarterly net revenues of $2.77 billion. Results were driven by higher PCG assets under administration compared to the previous year, resulting from the impact of market appreciation, retention and the consistent addition of net new assets. Pretax income declined 5% year-over-year, primarily due to the impact on the segment of interest rate reductions, which reduced our noncompensable revenues.
Interest rates have declined 125 basis points since early November 2024. Our Capital Markets segment generated quarterly net revenues of $380 million and a pretax income of $9 million. Segment net revenues declined year-over-year and sequentially due to the factors Paul already mentioned. The Asset Management segment generated record pretax income of $143 million on record net revenues of $326 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to the market appreciation over the 12-month period and strong net inflows in the PCG fee-based accounts. The bank segment generated net revenues of $487 and record pretax income of $173 million.
On a sequential basis, the bank segment net interest income grew 6%, primarily driven by strong loan growth fueled by securities-based loans and lower funding costs, driven by the decline in short-term rates and a favorable mix shift in deposits.
Turning to consolidated revenues on Slide 8. Asset management and related administrative fees of nearly $2 billion grew 15% over prior year and 6% over the preceding quarter. Record PCG fee-based assets equaled $1.04 trillion at quarter end, up 19% year-over-year and 3% over the preceding quarter. As we look ahead, we expect fiscal second quarter 2026 asset management and related administrative fees to be higher by approximately 1% over the first quarter level, driven by the impact of 2 fewer billing days in our second quarter, which partially offsets the impact of the 3% increase in PCG assets and fee-based accounts at quarter end.
Moving to Slide 9. Clients' domestic cash sweep and enhanced savings program balances ended the quarter at $58. 1 billion, up 3% over the preceding quarter and representing 3.7% of domestic PCG client assets. Based on January activity to date, domestic cash sweep and enhanced savings program balances have declined as a result of the collection of record quarterly fee billing of $1.8 billion and with further decline due to client reinvestment activity.
Turning to Slide 10. Combined net interest income and RJBDP fees from third-party bank grew 2% over the prior quarter to $667 million. Net interest margin in the bank segment increased 10 basis points to 2.81% for the quarter, driven by the factors I previously mentioned. The average yield on RJBDP balances with third-party banks decreased 15 basis points to 2.76% primarily due to the impact of the Fed interest rate cuts since mid-September 2025.
Based on current interest rates, including the full impact of the October and December rate cuts and assuming unchanged quarter-end balances, net of the $1.8 billion fiscal second quarter fee billing collections, we would expect the aggregate of NII and RJBDP [Audio Gap] the second quarter to be down from the first quarter level. The decline due to 2 fewer interest earning days in the second quarter impact of the recent Fed rate cuts are partially set by the higher interest-earning asset balances as of the beginning of the quarter.
Keep in mind, there are many variables which could 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.
Turning to consolidated expense on Slide 11. Compensation expense was $2.45 billion and the total compensation ratio for the quarter was 65.6%, excluding acquisition-related compensation expenses, the adjusted compensation ratio was 65.4%. Commencing this quarter, we presented recruiting and retention-related compensation expense in the PCG segment for each reporting period to aid the understanding of the impact of such costs on our business. These costs have increased as a direct result of our strong recruiting successes and reflect a component of the execution of our highest capital deployment priority of investing in organic growth.
Non-compensation expenses of $557 million increased 8% over the year-ago quarter, but decreased 7% sequentially. For the fiscal year, we expect noncompensation expenses, excluding the bank loan loss provision for credit losses, unexpected legal and regulatory items and non-GAAP adjustments presented on the non-GAAP financial measures to be approximately $2.3 billion, representing about 8% growth over the same adjusted non compensation metric for the prior year.
Importantly, we will continue to invest to support growth across our businesses while maintaining discipline over controllable expenses. The majority of the projected increase reflects our continued investment in leading technology supporting our financial advisers as well as our expectations for overall growth in our businesses. This projection, therefore, includes, for example, incremental recruiting-related and transition support costs, which are driven by continued successful recruiting, higher subadvise fees which grow as fee-based client assets increase and FDIC insurance premium, which grows as the bank's segment balance sheet increases.
Slide 12 presents the pretax margin trends for the past 5 quarters. The achievement of our 20% adjusted pretax margin target this quarter despite the headwinds we experienced a lower interest-related and investment banking revenues, highlights stability and strength of our diversified businesses to consistently generate strong margins.
On Slide 13, at quarter end, our total assets were $88.8 billion, a 1% sequential increase, resulting primarily from loan growth, partially offset by lower corporate cash balances, which declined primarily due to corporate share actions as well as seasonal funding obligations, record bank loans of $53.4 billion grew 13% over the year-ago quarter and 4% sequentially with that loan growth largely in support of our clients.
Securities-based loans and residential mortgages represent 60% of our total loan book, reflecting approximately 40% and 20% of the total, respectively. We continue to have strong levels of liquidity and capital. Our day of corporate cash at the parent ended the quarter at approximately $3.3 billion, providing liquidity of $2.1 billion, well above our $1.2 billion target. Our capital levels provide significant flexibility to continue being opportunistic in our pursuit of strategic acquisitions and to invest in organic growth.
With a Tier 1 leverage ratio of 12.7% and and a total capital ratio of 24.3%, we remain well above regulatory requirements with approximately $2.4 billion of excess capital capacity to deploy before reaching our targeted Tier 1 capital ratio of 10%. The effective tax rate for the quarter was 22.7%, reflecting a seasonal tax benefit arising from share-based compensation that settled during the quarter.
Looking ahead, we continue to estimate our tax rates for fiscal 2026 to be approximately 24% to 25%. Slide 14 provides a summary of our capital actions over the past 5 quarters through the combination of common dividends paid and share repurchases, we returned $511 million of capital to shareholders during the quarter. In January, the firm opportunistically redeemed all of [indiscernible] shares of Series B preferred stock for an aggregate redemption value of $81 million. which reduces Tier 1 capital in the fiscal second quarter.
Taking this capital action into consideration, we expect to target approximately $400 million of common share repurchases again in the fiscal second quarter. Over the past 12 months, we have repurchased $1.45 billion of common shares and including dividends paid, we have returned nearly $1.87 billion of capital to common shareholders, reflecting a combined return of 89% of our earnings. We maintain our long-term commitment to operating our businesses at capital levels consistent with established targets.
I'll now turn the call back to Paul for his final remarks.
Thank you, Butch. In summary, we are off to a strong start in fiscal 2026, and I believe we are very well positioned entering the second quarter with record client assets and strong competitive positioning across all of our businesses. Financial adviser recruiting activity remains strong, and the investment banking pipeline is robust.
Near term, there are headwinds with lower interest rates and seasonal impacts typical in the second fiscal quarter with fewer billing days in the quarter and payroll taxes resetting at the beginning of the calendar year. However, that doesn't distract us from our focus on generating long-term sustainable growth. While in some ways, there's more competition in our space. We are confident that our established approach and focus on the power of personal is setting us apart in our industry more than ever.
We are focused on the long term and providing a tail platform for advisers, bankers and associates with a foundation of deeply personal relationships. We attract and retain financial advisers with our unique culture leading service and robust platform. We value independents to foster an environment where our advisers can provide objective advice to their clients. We are focused on sustainable growth and quality over quantity. We strive to maintain a strong balance sheet with strong levels of capital and liquidity and a conservative amount of leverage.
We are confident our long-standing approach will continue to endure in both good times and more challenging times and help us deliver on our vision of being the absolute best firm for financial professionals and their clients. So I want to thank our advisers, bankers and associates for the great service and advice they provide to their clients and delivering our firm's mission to help clients achieve their financial objectives.
That concludes our prepared remarks. Operator, will you please open the line with the questions.
[Operator Instructions] We'll go first to Michael Cho from JPMorgan.
2. Question Answer
I just want to start on net new assets. It's been seen a pretty nice acceleration over the last several quarters at 8% this quarter. I mean, are there areas that saw any particular strength this quarter. And if you look back maybe over the last 4 quarters, what segment or tweaks in Raymond James' approach? Do you think it's been supporting that acceleration and how would you frame that pipeline today relative to the past couple of quarters?
Thanks, Michael. Yes, $31 billion of net new assets in the quarter would be our second best quarter ever, just to put that in perspective. So as I've been messaging last few quarters here, the recruiting activity is robust. It's broad-based across our affiliation options, maybe more heavily tilted in the last 6 months on the independent contractor side of the business. But really what's resonating now is what's really always resonated. We've kind of consistently been a leading destination for financial advisers in the industry. And more importantly, the retention of our existing advisers remains very strong. Yes, there are more competitive pressures now with private equity backed roll-ups and that sort of thing.
But really retention of our existing advisers, the adviser satisfaction is the highest it's been since I think 2014 and really having a platform where advisers feel like there's a culture that really respects the independents and their book ownership, the book ownership they have of their clients. And coupling that with the platform, the technology, we've been investing close to $1.1 billion this year. the AI to support that, to help them save time, to help them make better decisions, to help them be more efficient in their operations with their clients and then the products.
And so having the culture and the products as a platform and the technology is really differentiating us more than ever. And the power personal, the value proposition that we released with our annual report of several weeks ago, is increasingly differentiating as well. Other firms are talking about IRRs and exit periods in 3 to 5 years or funnels and all sorts of impersonal things. And what we're doing in that world -- of what I'd call noisy competition is really doubling and tripling down on what we've always done, which is really focusing on the personal relationships with financial advisers and giving them tools and resources to strengthen the personal relationships that they have with their clients.
And that's really resonating with advisers, both our existing advisers and prospective advisers, which is driving our consistently leading recruiting activity.
Great. Paul. If I could just quickly follow up on a modeling question, just on expenses. Sorry if I missed it -- was there anything to call out in terms of comp expense or comp ratio during the quarter. And now I know it's typically builds seasonally from here. I think Paul, you mentioned the payroll taxes. But how should we think about kind of modeling in terms of comp ratio, whether in the fiscal second quarter or even fiscal '26?
I mean the comp ratio target that we laid out on the last analyst Investor Day was 65% or better. And really, this quarter, it was impacted by revenue mix. So Private Client Group business with the independent channel, which has a higher payout. Some firms break that out of compensation. We included in compensation drives a higher mix of compensation relative to the capital markets business, which, for us, largely due to timing of the investment banking pipeline, we still feel very good about.
But this quarter, it was a weaker quarter. And so due to the revenue mix, also with lower interest on short-term rates, When you look at those mixes of revenue, it ended up being slightly above 65%, but really at 65.4% for the quarter, with lower rates in a very tough quarter for capital markets, again, due to timing. We're really pleased with that results.
The next question will come from Ben Budish from Barclays.
Maybe just following up on Michael's first question there on NNAs -- really solid quarter, but it does seem like from what we're hearing from competitors from a lot of the kind of media, the media coverage that the competitive intensity is picking up quite a bit, whether it's manifesting in more incentives, more aggressive retaining of existing advisers. Just curious, is that something you're seeing? How are you thinking about responding? Is it the sort of environment where this quarter -- was there anything unusual? Or do you think that kind of growth is sustainable over the next at least coming quarters? Just would be great to get your thoughts there.
Thanks, Ben, and welcome to being 1 of our covering analysts [indiscernible] just starting this morning. So yes, I mean the environment though is competitive, I think in the last 5 years, the biggest change has been -- the entry of these private equity roll-ups. And we've talked a lot, as you know, in the past around that dynamic. I think this is going to be a really important year for those type of firms. A lot of them have thought liquidity events and haven't been able to achieve them at the multiples that I think they were targeting. And so -- and a lot more will come out, I think, in the next year or 2. And that will dictate whether or not they can still afford to pay what they have been paying, which has actually been increasing over the last couple of years.
But I call that short-term noise, short-term impact. We obviously had to deal with that from a competitive perspective. But the advisers we're recruiting are not looking for a 3- to 5-year destination. They're looking for a much longer -- 3- to 5-year destination with another liquidity event that's going to cause other sorts of disruption for them and their clients. We are kind of a long-term stable play for advisers and their clients. We're looking for advisers who are really looking for a platform in a home for them, their teams and their clients where they're not going to have to have another disruption in 3 to 5 years. They want -- they're looking at our balance sheet to see how much tangible equity we have, how much leverage we have, how much cash flow we have in capital because they want a platform in a home that can remain independent. And we're absolutely committed to remaining independent because, again, they don't want to have to make a change again in 3 to 5 years.
So while the competition has increased in the industry -- for us, our differentiation, we feel like we have, in some ways, less competition than ever because we're focused on the long term. We're focused on the power of personal, the personal relationships, and we're able to invest $1 billion in technology. A lot of our competitors who also are focused on personal relationships and that have similar cultures, their technology investment, for example, is a fraction of ours. And that's hard to remain competitive when you can't invest in AI and the tools that you need to help advisers develop more efficiency in their businesses with their clients.
All very helpful. Maybe for my follow-up, just curious if you could unpack a little bit more the near-term outlook on the capital market side -- sounds like you're still confident on the pipeline. Obviously, the revenues can swing quite a bit from quarter-to-quarter. So anything you can share from a modeling perspective how we should think about the very near term, we're about 1/3 of the way through Q1. Anything you can share would be helpful.
The pipeline remains very strong. There are a lot of pent-up demand in terms of buyers and sellers, buyers with capital, dry powder to deploy and sellers. Again, the majority of our M&A activities driven by financial sponsors, either on the buy and/or on the sell side. And there's a lot of holdings and funds that are well beyond their original holding period.
And so there's a lot of pent-up demand. There's a lot of -- we're signing a lot of engagement letters and we feel good about the demand. But you can never predict timing. And so -- we don't try to guess on when they will close or if they will close if the market conditions have to be conducive and there have to be buyers and sellers that meet on price and terms.
Next up is Craig Siegenthaler from Bank of America.
Good evening, Paul. just a big congrats on the 8%. But there actually has been a wide range to recent quarters. We saw 2% a couple of quarters ago. 8% this past quarter. So I was wondering if you can comment on the sustainability of the 8%? And in your view as maybe the midpoint, something like 5% to 6% a better go-forward run rate to model.
Yes. I mean 8% did benefit from not only the really strong retention results, recruiting results, but also there's year-end -- calendar year-end dynamics, which help all firms in the industry with dividends and interest payments and those sorts of -- but with that being said, we're confident that based on our pipelines now and our retention that I spoke about earlier, that we can continue to be a leading grower in wealth management, which we have been on a pretty consistent basis.
And doing it in a way that we feel sustainable. We're really focused on quality over quantity. And so we've been really growing assets by bringing on higher quality teams that are focused on higher net worth clients. And so that will -- and that enables us to keep a high touch service model and really reinforce the value proposition of Power personal.
And then given the stronger recurring that we've seen and we're seeing the results today, but also elevated competition. Could we see the PCG comp ratio creep up in 2026? Or does the 5- to 10-year smoothing really protect the operating margins if recruiting NNAs remain robust.
Yes. I mean there's a lot of investment that goes into recruiting. The reason we broke out the retention and transition assistance related expense for the first time this quarter because in the last 12 months, we recruited advisers who had $460 at their prior firm. That's equivalent to a pretty decent sized acquisition in our space, especially when you look at what is remaining out there. And we'd much rather recurit 1 by 1 where we know the advisers are a good cultural fit and 100% of what we pay in transition assistance is going to retention versus the seller.
And if we did do with acquisitions, that type of expense would typically be non-GAAP. So we wanted to at least break it out for you to see because that is a part of the expense. But so as we pay recruiters and we have to pay for account transfer fees and other things that support that growth. But again, organic growth is the #1 capital priority in terms of capital deployment. So we'll continue to invest in that organic growth. We are confident that generates the best long-term returns for our shareholders and then growing the top line gives more opportunities for everyone and allows us to reinvest in the platform overall.
Brennan Hawken from BMO Capital Markets has the next question.
Curious -- totally hear you on how robust the capital markets pipelines are the need for the sponsors to engage and absolutely hear you there. So it sounds like you guys are setting up for solid revenue growth as we come into the coming year. Is that fair? Or do you think that it's going to take a little bit longer to come to market, the sort of revenue translation there has been -- a bit long in the tooth, so to speak. And then when you eventually do get some revenue, how should we be thinking about operating leverage on revenue growth. Is there a [indiscernible] an algorithm we can and just think about when we're confirming that we're teeing up our forecast correctly.
Yes. No, I mean we had a really strong quarter in investment banking just last quarter. So if you look at Capital Markets last quarter, it was over $500 million in revenues, and we certainly don't think that's a ceiling, but you saw how that impacted the operating leverage relative to this quarter. I think the pretax margin last quarter was around 17.5% in that segment. So there's a lot of operating leverage with higher levels of revenue in capital markets. We are optimistic about the pipeline.
And we would be disappointed for the rest of the year if the revenue in the Capital Markets segment doesn't improve meaningfully above the $380 million level that it's achieved this quarter.
Okay. Got it. And then a lot of questions around the outlook for crude and whatnot. The certainly a robust net new asset growth this quarter sort of following up on Craig's question around -- because it has been volatile, it moves around. And also in the marketplace, there's a couple of deals out there that have been very much in focus, which could cause some maybe movement to be a bit more elevated. Did you see that -- did that impact you guys were you guys able capitalize on some of that movement? And how long do you expect such disruption could create opportunity for you?
Yes. I mean I hate to speak on any specific M&A or transactions. We have a lot of friendly competitors, and they're doing good jobs keeping the advisers through those transactions. So what I would speak to is just the broad-based strength. It's not 1 firm that we're seeing success from. There's a lot of different firms. Advisers are coming from wires, regionals, other independents.
And again, that value proposition -- we have the largest addressable market across our affiliation options, from employees, independent contractors to the RIA custody, and we have critical mass and decades of experience in all of them. It's not a new venture for us -- it's not something that we're testing out or trying out or seeing how it will work.
And so that value proposition, the cultural fit, the platform that I talked about, the multiple affiliation options, it's appealing to advisers from a lot of different firms.
Next, we'll hear from Bill Kat from TD Cowen.
Just coming back to the M&A, I hear you on organic growth, and it seems like the pipeline there is quite good. Just wondering if you could unpack maybe the Clark transaction a little bit, how to think about the accretion to that -- and then how should we be thinking about where you might be interested in terms of incremental inorganic opportunities given such a strong balance sheet and maybe trying to understand the path back to a 10% Tier 1 leverage ratio.
Thanks, Bill. Yes, Clark Capital is really a perfect representation of our M&A priorities. And that's first and foremost firm that has a good cultural fit. The Card family, who started the firm and the team, the entire team there -- our client-focused long-term focus and exactly approach the business in a very similar way that we approach it with our values and our culture.
And then as a strategic fit in terms of their focus on treating advisers like clients. We're going to maintain the independence that Clark has both in terms of brand and the way they interface with their clients, not our clients, but clients. And so the cultural fit, the strategic fit and then the financials have to make sense for both us and for the sellers. And so that was the case here as well. And so we are very excited, their high organic growth, differentiated product, but really, really deep personal relationships with their clients, which is what was so appealing about hard capital.
And those are the type of deals we're going to look at across all of our businesses. It's firms that have good cultural fit, strategic fit and makes financial sense for us and for the sellers. And so -- we're very active. We have an active corporate development apparatus. We have a lot of capital, and we're confident with our ability to integrate. And so we're going to continue to look for deals that make sense. So we're not going to force deals just to do deals. They have to make sense for our shareholders over the long term.
Okay. And just as a follow-up, maybe just a 2 part, so I apologize for squeezing it in. Can you talk a little bit about the path to support the interest-earning asset growth from here? And how you sort of see the interplay of the sort of liquidity on the third party versus maybe cash coming in to doing net new assets. And then if you could just review what you said in terms of the January numbers, the way it was phrased. I wasn't quite quick clear. If you were down 1.8% for the quarter or down something less than that inclusive of billings and activity. If you could just clarify, that would be helpful.
Yes. So Bill, in terms of the stand currently in January, our total combined program we sweep and ESP balances are down $2.6 billion, which includes the $1.8 billion fee billing, which have already come out of the account as we indicated. And what we're seeing for that difference is a strong client reinvestment of their balance for the rest of it. The breakdown between suite program and ESP balance of that $2.6 billion is we've seen $2.1 billion of that in the suite program and about $500 million of that in the ESP program since the quarter end balance.
So yes, we're continuing to see, like others that have reported a shift of the mix of bigger percentage declines in the enhanced saving program balances as rates come down, clients are -- those high-yield savings rates are less appealing, especially relative to the market. So we're seeing more investment in the market versus higher-yielding alternatives at least over the last couple of quarters as rates started really coming down, which lowers the weighted average mix or the weighted average cost of deposit between suites and enhanced savings.
To answer your question about ongoing long-term growth, I mean, you saw securities-based loans grow close to $2 billion this quarter alone. And so the growth is attractive. That's the flip side of the lower rates that floating rate loans become more attractive, and you saw that this past quarter as well. And we'll fund it with the diversified funding sources that we have, both the sweep cash, we have third party cash that we can redeploy. But also, we have diversified deposit gathering apparatus, particularly at TriState Capital Bank. And so we'll look at all of those levers to fund future growth going forward.
The next question is from Steven Chubak from Wolfe Research.
So I wanted to drill down into the M&A results and the outlook recognizing that pipeline strength you cited also acknowledge 1 quarter does not a trend make. But if I compare for the calendar year, full year '25 versus '24 advisory results. The gap between you and peers was quite substantial. I think you guys were down 20%. Peers big and small, were both up about 20. And I was hoping you could just speak to any do factors that might have weighed disproportionately on your results, whether it's a function of client or sector mix. And just bigger picture, in the past, you talked about this $1 billion target in M&A fees based on your current scale? Do you still view that as a credible target? And what actions are you taking to help narrow that gap?
Yes. I mean we're adding a lot of MDs and have added have been adding a lot of MDs and high-quality MDs in investment banking across various sectors over the last several years. So in terms of comparisons, really it's hard to compare apples-to-apples. Like you mentioned the bigger firms. Last year was a better year for public company M&A [indiscernible] bracket M&A. And that's, as you know, not a space that we really compete or play in. So when you compare mid-market growth-oriented firms to the public company firms for the year overall last year, a public company M&A, the bolts-bracket M&A definitely led the way in the recovery. And that's not atypical if you look at history, where both on the way up and on the way down, it seems like public company M&A sort of leads the way.
And in every firm, even on the regional side or the growth of oriented size has different strengths in sectors, the depository sector, some firms have long-standing, deep businesses and depositories, for example, which has really seen a pickup in the new administration proving deals. And you kind of have to go sector by sector. But we feel very confident with our expertise -- with the sectors that we are very good in in our pipelines.
And so I hate to compare things quarter-to-quarter. There's some quarters we do a lot better, and we tell you, don't overindex that because it's timing. And I would tell you in this type of quarter we're doing worse than, I would say, don't overindex that either. Investment banking is not a recurring revenue business, as you know, as like the Private Client Group businesses. So you really do have to look at long-term trends. And if you look at our long-term trend and growth of investment banking over the last 5 to 7 years, which we'll highlight again at our Analyst Investor Day, it's been very strong and attractive relative to our peers.
And Paul, you just squeeze into, let's call them, more tite modeling questions. Noncomps have grown double digit the last 3 years, 8% guide is encouraging, reflects the moderation in growth. Just given the commitment to investing, do you feel like you can continue to hold the line and then the cost curve on non comps. And I'll just mention the other 1 now. The M&A growth is impressive. The AUM growth admittedly lagged our expectations given strong organic flows and market appreciation. I was hoping you could speak to why that better NNA flow rate didn't necessarily translate into a strong AUM conversion, which I know can happen from time to time.
Yes. Let me take the last part of the question first, and then I'll have Butch touch on your first part of the question on the cost curve. But it is a good question around AUA because I was comparing our overall AUA and flows to some of the others that have reported. And I think really where you see that relationship makes sense is if you look at our fee-based assets. And the fee-based assets were up 19%, which if you compare it to the other firms that are reported and their net new assets, you would see the relationship that you're expecting.
So I would kind of look at that as a proxy fee-based assets versus overall firm-wide AUA. And I'll have Butch talk about the noncomp trajectory?
Yes. So with respect to noncomp expenses, technology and our continued investments and our leading technology and support of financial advisers just continues to be an area of emphasis. So as we continue to manage those noncomp expense levels, we're going to continue to invest in that technology. it sort of makes us -- it's part of our unique culture and our unique value proposition at Raymond James.
And so we have to balance continued growth in that expense against continuing to achieve that key objective. So the majority of that increase year-over-year is for technology. And as a growth company, we still have other expense elements that vary directly with our successful growth, both in terms of NNA. We mentioned the recruiting expenses and the incremental expenses that come with successful NNA.
But we also -- as we grow our balance sheet, and we also have a growth expenses that come with growth in the balance sheet. So as we think about the objective, we remain committed to creating -- increasing and improving our operating leverage over time. We believe we have -- continue to have the scale do that. And so we're focused on our operating margin and continuing to pursue opportunities to grow that operating margin over the long term.
Great color and thanks for accommodating the additional questions.
We will take the next question today from Alex Blostein from Goldman Sachs.
This is Michael on for Alex. Maybe back to the non-comp growth that you guys are laying out for '26. So you mentioned this year will include further investments in tech and support of recruiting efforts as well. Can you maybe elaborate on what specifically is going into that growth this year? And I'll stop there.
I mean, if you look just at our investment in cybersecurity, the growth of AI investments and the development that we're doing with applications across all of our businesses, the infrastructure investment, there's a lot that goes into it. And that's why I was saying earlier, just harder and harder for smaller firms to remain independent and competitive without being able to invest $1 billion a year in technology.
We recruited advisers from another great firm culturally and they came over -- 6 months later, they said, "We didn't realize it until we made the move over, but we were basically on a prompt at our prior firm. And they're just not able to necessarily keep up with the technology -- and it's nothing inherently wrong with the other fund, but just you have to have scale and critical mass to make those investments. And so as Butch said, we're going to continue focusing on technology. I do think long term, especially with AI, we will find more efficiencies in the cost structure as we deploy AI and automation. We're not going to dimension that or even put a time table on that now because it's still early innings.
But we're starting to see some great benefits already. I mean we just launched Ray. We had a press release that came out Ray AI sort for kind of Raymond James a play on that. But it's natural language, sort of Q&A model, if you will, that uses generative AI that -- to answer questions for advisers and their sales systems and their teams -- that way, they don't even have to call in. And that's going to create efficiencies for them. That's going to allow our service people to spend their time on higher-value problems and solutions and opportunities.
So again, we're not even in the first innings of those opportunities going forward. But it's important that we have the critical mass and the expertise to make the investments to take advantage of those opportunities over the medium term and long term.
That's helpful. Maybe 1 modeling question. On when you guys originally increased the kind of cadence of the share repurchases, I think the original range was $400 million to $500 million a quarter. It seems the past couple of quarters has been closer to like $350 to $400 million range, including the target for the fiscal second. Can you kind of walk through the rationale? Is that because you guys are allocating capital to other things. Is the target going to remain [ 4% to 5%]? Or is 400 a better run rate for the rest of the year?
Yes. So as you noted, we did repurchase $400 million this most recent quarter, which was within the guidelines, the guidance that we had provided. And we have indicated an expectation that we'll repurchase at $400 million levels, what we're targeting for this current quarter. And keep in mind that we just had another capital deployment action this quarter where we redeemed $80 million of preferred equity, that has the same effect on Tier 1 capital as the share repurchase doesn't have the same EPS effect as a share repurchase.
So I would say we're deployed in capital actions this quarter, targeting $480 million of activity. And going forward, we remain committed to that 400 to 500 quarterly level going forward as we continue to monitor our Tier 1 leverage ratio until such time that we've deployed it in our other priorities.
The next question will come from Jim Mitchell, Seaport Global Securities.
Just on the deposit mix, you had ESP balances down $1 billion quarter-over-quarter, another $500 million so far. Is that just demand driven? Or are you actively looking to shrink those deposits and just trying to think through the trajectory of those balances and the mix going forward.
No, Jim, it really on demand driven because it's kind of just had a 100% deposit beta. So we haven't been accelerating that to change the demand. I think the -- and if you look at the outflows, outflows have been pretty consistent. It's really the inflows that have decelerated as rates have started coming in, and I think more clients are funds are getting invested into the markets. So I think that's consistent with what you've seen with other firms and their higher-yielding savings products. It's just that rates are coming in, as you would expect, the demand for placing cash there is declining.
Right. Okay. That's fair. And so when we kind of put it all together with kind of the thoughts on mix from here -- deposit mix from here, the forward curve and your pretty significant loan growth that's picking up at lower rates. So how do you think about the combination of NII and RJBDP fees as we go forward for the rest of the year.
Yes. I mean, I would say it really kind of depends on the rate trajectory from here. So any were the market's pricing in anywhere from 0 to 2 rate cuts, the lower the rates. I mean, we have good deposit beta on the balances that we have, which provides resiliency on both the NIM and the B2P yield. But in terms of the balances in ESP, I still think clients are price sensitive to what they're earning on their cash balances even if rates were to be cut a couple more times. It's just a real difficult question to answer is to what extent does that sensitivity decrease as rates go down. And we really don't know the answer to that, but we would be guessing, but that's what we would have to monitor going forward.
Our next question comes from Michael Siperco Morgan Stanley.
I just wanted to ask about the all platform that you've been investing across. I was hoping you could elaborate on -- how you've been expanding that platform where that stands today relative to where you'd like that to be? And what steps can we expect from Raymond James over the next 12 to 24 months with respect to the old platform?
I mean, with our platform, we -- we have a very similar approach that I described with growing the number of advisers that we have and it's an approach of quality over quantity. We don't want to have every product under the sun just because it might make a headline or a new story, then there might be some interest that comes in. We've got to make sure, one, there's critical mass of interest and demand but most importantly, that the product is well diligent from both an operational and an investment perspective and well supported on an ongoing basis, which requires ongoing servicing. And that really to do it well, we really want to make sure that there's critical mass in the products that we do offer.
So we're being deliberate on it. We invest a lot in education. We're not -- we've seen other firms in the industry use alternative investments as sort of a tool to make it harder for advisers to leave from 1 firm to the other because they kind of create friction when advisers want to move and/or as a profit driver. That's not how we look at any product.
First of all, all advisers are free agents and they want to leave on good standing, we'll help them move to another firm. And we don't want to try to sell any products to them that makes that harder for them and their clients. And secondly, I think it's problematic long term when you start looking at products and profit drivers versus what's most importantly, good clients long term.
And so we invest a lot in education and making sure advisers help their clients understand the impact of investing in private equity? And what portion -- what is the appropriate amount of allocation of private equity, given the individual clients' liquidity needs. So which is different amongst every client, which is why it's so important for the adviser to understand their clients' risk tolerance or liquidity needs, where they are in their investment process.
And so we have a balanced approach when it comes to offering any product, but particularly private equity because it is on a relative basis, less liquid than the more traditional investments. And it becomes even less liquid when you need the cash typically if you look at history. So we just want to have a balanced approach and a long-term approach there.
Great. And then just a follow-up question on AI. You spoke about automating processes, the launching AI operations agent Ray. I was hoping you could speak to your aspirations there. How you see this ramping in terms of usage and adoption compared to where adoption is today for Ray, what sort of ROI do you anticipate? And then just more broadly, where is there scope to launch additional agents and how you're thinking about potential for an agented workforce at Raymond James.
It's a great question. I mean I spent a lot of time with our technology leadership asking the same thing. Really, we don't know yet. It's early. It's first inning of opportunities here and deployment. We already have over 10,000 associates that are using AI on a regular basis in 1 way, shape or form.
So the penetration has been pretty significant. I think we've -- over 3 million lines of code are written a month using AI with oversight from the technologist in the group. So we are using AI to a pretty significant extent already, but I still think it's early innings. And the opportunities to expand that as these tools get smarter and more efficient is significant.
The next question comes from Devin Ryan from Citizens Bank.
Thanks, everyone. I think we're probably covered everything here. Just 1 maybe to dig in on the securities-based loan growth. I mean it's just been really off the chart. And so I'm just curious, as we think about kind of the next year here, I get the piece around rates are coming down and that's helpful. But it seems like there's probably a lot of education going on there. And so I'd love to just get a sense of kind of some of the other drivers -- and then just capacity because that's a really nice area for you guys, and we seem like kind of the remixing element of that is quite positive.
So I just want to get a sense of like how much more room there is to go in terms of penetration of your customers.
Yes. No. As you said, it's been -- the growth has been phenomenal. Lower rates have certainly helped that growth. But as you point out, education technology, the tools to tap into the securities-based lending product has been significant as well. And also recruiting has driven growth. A lot of the advisers were recruited coming with substantial SBL balances to their clients.
So it's really all of the above approach, and we're optimistic long term about SBL continuing to used by clients because it's a great product for clients relative to other borrowing solutions out there that's much more flexible, for example, than in a home equity loan. And so there's other substitutes out there that are much more mature that people have much higher awareness of. And as they learn about security-based loans, there's a lot of clients that are interested in it.
Our final question today comes from Dan Fannon from Jefferies.
Paul, I was just hoping to get some context around the industry and how you're thinking about adviser movement here in 2026 and how that might differ from, say, last year.
I think it's going to be -- based on our pipelines, we're optimistic about lease movement to Raymond James, I can't speak to movement to other firms, but we're pretty optimistic about the adviser movement to Raymond James. We're still viewed as a destination of choice. We're still viewed as a leading grower in the wealth space. So we're optimistic about it. And it's still early in the calendar year.
So we'll see what happens. I think it depends on some of these roll-ups. What happens with them, if anything, over the next year, that will be a potential catalyst as well. So we don't try to time things, whether we recruit an adviser this year, next year or 5 years from now, We're making decisions over the next 5 to 10 years.
So we just want to make sure that we reinforce the unique culture that we have, the power personal, the personal relationships we're building and the client first, long-term culture and values that we have as an organization and invest in the platform to make sure that we're competitive along all dimensions, technology and product and support and making sure that adviser satisfaction and client satisfaction are very high -- we won the J.D. Power award for the most trusted in our industry. Trust is critical in our space as well.
And so -- and then we know that if we preserve that special combination of facets that make Raymond James so attractive, then we will continue to recruit advisers and retain our existing advisers with a high level of satisfaction that they have. And frankly, I could care less whether that happens this year or next year or 5 years from now. It's a marathon, not a sprint, and we -- that's why when I hear other firms talk about , we think next quarter, we're going to lean into recruiting and put a little bit more money into it. It's like that's not sustainable long-term recruiting. It's a long-term process that requires a lot of investments. And if you dial up recruiting quarter-by-quarter or dial down quarter-by-quarter, then you're not going to get the quality advisers that you want. You're going to get the advisers out of moving or not moving for the highest check, and that's not who we're targeting. We have to have a competitive check.
But we want the advisers who want to be here over the long term to make more money and be satisfied here over the rest of their careers,
I think we answered all your questions, trying to interrupt, but I think we answered all your questions. I really appreciate your time on behalf of the Raymond James leadership ship team. We do not take your time or interest in Raymond James for granted and stay warm over the next several days here and look forward to seeing and talking to all of you soon.
Once again, everyone, that does conclude today's conference. We would like to thank you for participation. You may now disconnect.
Raymond James Financial — Q1 2026 Earnings Call
Raymond James Financial — Wolfe Wealth Symposium 2026
1. Question Answer
So good morning to those of you in the room and those of you joining us on the webcast. My name is Steve Chubak. I cover diversified financials here at Wolfe Research.
Really pleased to introduce our next speaker, Paul Shoukry, CEO of Raymond James.
Raymond James has seen really outsized growth over the past decade plus within the wealth channel. I think one of the really unique attributes is their omnichannel offering. It's something that's really differentiated in the marketplace. It clearly has driven better organic flow outcomes. So we're going to spend a lot of time digging into the organic flow outlook, the outlook for the wealth business more broadly, but we'll also touch on expenses, capital markets, just to keep Paul on his toes.
So maybe to start, Paul, you've been CEO now for 9 months, might be helpful just to outline your strategic priorities and how your approach may or may not differ relative to your predecessor?
Great. Well, Steve, it's great to be here. We're just talking, I think I've been to every one of these conferences since Steve joined the firm. So it's great to -- always great to be here and see the conference get bigger and bigger every year.
Yes, in terms of the priorities of the firm, it's really remained unchanged, and that's -- we want to be the absolute best firm for financial professionals and their clients. And so the way we do that, I've been spending about 80% of my time on the road meeting with financial advisers, bankers, clients and really getting their feedback on what are we doing well and what can we do to be even better partners for you, your team and your clients. And that's informed our strategy going forward.
And then, some of the things that we're working on, technology, we spend about $1 billion a year on technology. AI is certainly an area of significant focus. We're using AI to not only create and gain efficiencies in the back and middle office, we say we want to be able to do more with the same number of people, we're still budgeted to grow headcount next year, but we are getting more efficiencies with the help of AI, automation and technology, but also in the front office to help advisers save time with documenting meetings and prepping for meetings and those sorts of things. So -- and also at the end of the day, creating client-driven insights so they can provide more tailored and bespoke advice to a larger number of clients.
So we're still in the early innings of AI, but one of the very first things I did as CEO was announce a new Chief AI Officer. He has now hired a Head of AI Strategy from one of the large firms, and we're really dedicated, investing a lot of money, looking at third-party vendors, internal solutions that we need to build ourselves. And again, the focus with AI is not to disintermediate our advisers and go direct to clients like a lot of our other competitors, but really, it's to enable our advisers to provide better and more personalized and more tailored service to their clients.
Another initiative that came through with the feedback from advisers and financial professionals is just broadening the -- continuing to broaden the products that we offer, that they can offer their clients. And so alternative investments is one. I see that before and after this presentation, you're speaking to alternative investment firms. So those are all great partners for us in terms of just helping advisers, especially for the higher-net-worth clients, provide alternative solutions.
Now, alternatives are not for everyone. We don't have some aspirational allocation target that we want to hit with alternatives because really, alternatives are unique to each individual investor, and they are more illiquid than public securities. And so we need to make sure that alternatives to the extent that we sell them that those clients are comfortable with the amount of liquidity that they would have in their portfolio by adding alternatives. And they tend to become less liquid when you need the cash the most.
And so when things are going well, liquidity is usually more abundant than it is when things aren't going well and you need that cash. So we're cautious. We're growing, expanding the platform, expanding the education, but we're not going to try to set a firm-wide allocation target, but we are investing heavily in that platform as well as investing in our asset management platform with fee-based managed accounts, tax-harvesting products, et cetera. So really just continuing to do what we've always done, which is put advisers and financial professionals who treat them like clients, respect the relationship that they have with their clients and also just continuing to invest in the platform.
And it's working. You look at -- you see it in our recruiting results. Last year, we recruited advisers with $421 million of production at their prior firm, $421 million. That's bigger than a lot of midsized firms in our industry that we recruited in 1 year. That was a record that was up 21% from the record we achieved the prior year. And I know we'll talk more about recruiting, I'm sure.
Retention continues to be good. It's a very competitive environment out there. So there are challenges with the larger deals out there from private equity-backed roll-ups. But retention -- notwithstanding that, the retention remains very good. And just last week, we received the results from our Adviser Insights survey. We have 98% adviser satisfaction right now, 98% adviser satisfaction, which is the highest since 2014. So the morale of our existing advisers, most importantly, is very good, the interest from prospective advisers is at record levels. Our pipelines are strong heading into our fiscal 2026. And so we continue to be a destination of choice again, as Steve said, across all of our affiliation options.
Well, I will say this is the fifth time you've been here, this is definitely the most enthusiastic you've sounded about the prospects for the firm. And as we think about the macro, with rates down, but equity markets up, IB appears to be normalizing. So some improvement in the capital markets trends. Speak to what you're hearing from the financial advisers in terms of like their sentiment, their client sentiment? What it means for activity levels across both the private client side and even capital markets, if you can touch on that, too?
Yes. Just as recently as 2 nights ago, we had a dinner downtown here in New York with about 250 of our advisers. And I asked all of them about what are they hearing from their clients, and the equity markets are at or near record levels depending on which benchmarks you track. And so while there's all these headlines around tariffs and government shutdown and other things, really, the clients are very pleased with the service that they're getting with their advisers, with their portfolios, with the financial plans that they have in place. 97% of clients, by the way, in the same survey are pleased with the service that they're getting from their financial advisers. So very strong satisfaction, and they're mostly optimistic about the markets, as are we.
As a firm, our CIO, Larry Adam, I mean, as we look at 2026, we think with the benefit of lower rates and also tax cuts, that the economy, we're expecting 2% GDP growth next year. And so we're expecting a relatively strong economy. That doesn't mean that there won't be cycles and there won't be disruption in the markets at some point. We all know they come. We can't ever time them. But in terms of the fundamentals of the U.S. economy, we're pretty optimistic.
That's great. And maybe if we think about some of the context that you offered around organic growth. And specifically, like if I look over the last few years, you saw a little bit of a moderation in the past, too, although obviously, revenue production has certainly been steadily improving, as you noted. This year, you've definitely seen some re-acceleration. So, Paul, as we think about where you used to deliver high single digits, law of large numbers, that's moderated to mid-single, still better than the industry. What do you think is an achievable target over the long term, even as your business continues to scale?
I mean, most importantly, we have been leading growers in the industry consistently for many, many years. And that starts with retention of our existing advisers. We focus a lot on making sure that our existing advisers are satisfied with Raymond James. And on that foundation, recruiting to our multiple affiliation options, the employee -- traditional employee channel, the independent contractor channel, financial institutions division and the RIA custody business as well.
And so the entire industry, some of the net flow percentages have come down. Frankly, a lot of it is just due to equity market appreciation. You have a bigger base. And so percentages go down even if the absolute dollars are the same. And then, during COVID, there was a lot of net new sales in terms of organic growth of existing clients who are bringing more, they're getting leave money or they're not able to spend their money on vacation and ski trips. So they were investing more with their financial advisers and really bringing in a lot of cash from other places to Raymond James. So we launched the enhanced savings program during the California banking crisis, and we grew that to $14 billion in a very short period of time because people were bringing in their cash from other places to get up to $50 million -- 5-0 million of FDIC insurance at an attractive rate.
So we're -- we've continued to gain wallet share. We're continuing to recruit very well across our affiliation options. As I said, our pipeline is very strong after a record year last year, and the retention continues to be good. Really, the only headwind we have in NNA is some of the PE-backed roll-up money that's in the space now. It's been -- they target some of the larger firms and offer checks that we can't justify. And so we have had some of those issues, and also, some of the super-OSJs that where it's not a good fit for us and for them anymore. And so they go off to other platforms, which net-net is good for both them and for Raymond James.
And they're not usually the most profitable firms anyway on the platform by the time they make that transition. So there's some offsets to the NNA percentages, but the quality of growth that we have relative to what we're losing is very strong. And so we're optimistic about the quality of the growth we have going forward. And we're also optimistic that some of this disruption in the roll-up space at some point will be a huge opportunity for a stable firm like Raymond James.
So just in the last 18 months, what we're hearing more than ever from advisers, that are observing all this noise around them from all these firms, which, by the way, by definition, their holding periods of, what, 3 to 5 years. So there's going to be another period of disruption. Even if everything goes perfectly well, they're most likely going to have to transition and repaper and make some type of change. What we're hearing from advisers in the last 18 months is, "You know what, I want to go to a firm that's permanent capital, that's long term, that's stable. I'll make one more change for my team and for my clients, but I don't want to have to make another change 3 years later".
And so being a beacon of stability in the industry and having the multiple affiliation options, but being a source of stability and strength, we get questions on our balance sheet all the time. The strong balance sheet, increasingly a differentiator, because, again, they know that a cycle will eventually come. They want to make sure that the firm that they're affiliating with and that they're entrusting their client assets with will be able to withstand those cycles. So having the strong capital position becoming increasingly important as we get longer into this bull market. And so our value proposition just continuing to resonate more and more to advisers across the industry.
It's really encouraging to hear. And I guess, like the attrition you're seeing, I suppose, is less regrettable attrition is from what I can gather. And as we think about the momentum that you're seeing across the 3 different channels, is there any one particular channel where you're seeing like outsized inbound interest or more meaningful expansion relative across RIA, IBD and employee?
I mean it's really broad-based. I do a lot of meetings and dinners with prospective advisers. And just last night, we're dealing with -- I was having dinner with an extremely large team from one of the wirehouses that's interested in the employee channel. Now, the other interesting thing about Raymond James that's unique is they might be interested in the independent channel 7, 10 years from now. And -- but those advisers that are looking to move to an employee channel with the option of potentially moving independent 7 to 10 years from now, they're really intrigued by Raymond James because they can do that all on the same platform.
We have an adviser choice value proposition. So the number of advisers that come and say, "You know, I don't know if I want to be independent or not, but I like the idea of joining Raymond James. You have the culture, the capabilities that are very attractive to us as a firm and to our clients". And in 7 to 10 years, if I want to move to independents, if we have retirements and succession on the team and the new generation wants to move to independents, we can do that at Raymond James. And that's a very unique value proposition in the industry right now. So that's also another appealing part of the platform.
And, Paul, you've always been known to have a really unique and differentiated culture, which has enabled you to track a lot of advisers without necessarily having to pay up or engage in some of the irrational behavior that we've seen. You noted that private equity was bidding pretty aggressively for some of these teams or properties. Are you seeing more rational behavior today? And are you feeling compelled to adjust your compensation for advisers? Or are you sticking to the status quo?
So we ultimately have to be competitive, right? That doesn't mean we have to be the highest check near term. But between the upfront money and the long-term growth potential as we help them grow their business and be a source of stability, they need to see the economic upside of affiliating with Raymond James. So when the market becomes more competitive, we obviously have to lean in as well.
We don't want to attract the advisers who are just looking for the highest upfront check. That's very clear, like in our value proposition. We want the advisers who want to be at the firm long term and earn, sort of optimize their economics over a long period of time by growing their businesses, by getting the payout over a long period of time and all the benefits that are offered at Raymond James. Because if you aggressively go after the advisers that are looking for the -- just the biggest upfront check and they don't care about the cultural aspects and the capabilities and the ability to help them grow their business, then in 5 to 7 years when that check runs off or gets close to running off, they're going to leave to another firm for the next biggest check, right? And we don't -- that's not good for us. We don't want that, the adviser teams are looking for that type of churn.
Now, if your holding period is only 3 to 5 years in a particular investment, that's fine for you. That might be perfectly aligned with your strategy, right? Because 7 years is -- you'll be gone. You'll be at the next -- on the next platform by 7 years' time. We're looking at this as a 10- to 20-year partnership and beyond. We tell advisers -- the advisers I had dinner with last night, I said the same thing to them that I say to every adviser, please don't join Raymond James if you can't envision yourself being here for the rest of your careers. That means there's something that you -- some doubt that you have with the firm that is not ultimately the best destination for you.
We look at it as a marriage. So we've got to be the absolute best partner for you, your team and your clients, and you've got to be able to envision yourselves being with us for the rest of your careers. And if you can't convince yourself of those 2 things, please don't join Raymond James or force us to prove that we're the best partner for you and your clients.
They're not hearing that from a lot of other firms, right, particularly the roll-ups, right? Because that's a very high bar to set, but that's what we hold ourselves accountable to, and we need to prove that to our -- to the prospective advisers that want to affiliate with us. And it's true for prospective investment bankers, too, prospective traders, prospective salespeople. We want this to be the last move that they make in their career, and we want them to look back.
The thing that is most energizing to me when I travel the country is when advisers say to me or bankers say to me, "The best professional decision I ever made was affiliating with Raymond James 5 years ago. And the biggest regret I have is I didn't do it 3 to 5 years earlier". And I hear that every place that I go. Again, I travel 80% of my time. I hear that on trips. I hear that multiple times on the same trip.
And that -- and when the Board asks how are we going to measure success 5, 10, 15 years from now, of course, we'll have financial metrics. And, of course, those metrics will be impacted by externalities that we can't control. But the real litmus test should be in 10 years or 15 years when we're going around the country visiting with our financial professionals, are they still saying the best professional decision, often with tears in their eyes, they're so emotional about it, that they ever made was joining Raymond James and the biggest regret that they have is not joining 3 to 5 years earlier.
And hopefully, what you're picking up on that's differentiated with Raymond James and really a big part of our strategy going forward is we're going to call it the power of personal. The personal relationships really matter to us in terms of the personal relationships we have with our financial professionals and the relationships they have with their clients.
And in this world of all this fast money coming into our industry, all this increased competition, in some ways, while it's become more competitive in a lot of ways for the way we compete at Raymond James, we have fewer competitors than we ever had in terms of competing with those personal relationships, competing with that long-term vision of being the last home that you'll ever need to affiliate with for you and your clients. That value proposition was frankly more competitive 10 or 20 years ago than it is today because so much of the focus today is on the transaction, on the flip, and that's not what we're about. And so that we're -- in some ways, while things have become more competitive, it's for us, the way we compete has become less competitive in a lot of ways.
It's interesting how you frame that, Paul, because as I think about like your long-term orientation, your unique culture, we have an adviser on the move tracker, and we look at the types of teams you're attracting. It's a lot of wirehouse teams that want to make that jump to independence, and you're their destination of choice.
There was a recent M&A transaction that had some high-quality adviser teams, and you've been clearly the destination of choice for a lot of those advisers, too. As we think about the PE consolidators and the roll-ups, those teams are typically ones that you haven't recruited as proactively. So do you still view like Raymond James as a destination of choice for some of the teams that exist at those firms as well? Are you trying to broaden the net? Or are you still focused on that quality bias?
It's always quality over quantity for us. And again, those -- I think a lot of those roll-ups will become opportunities for us once they realize that it's not permanent capital and that there's going to be a lot of disruption in that space as well. But some of the most energizing recruiting meetings I have, I was in South Carolina a week or 2 ago, was with a senior adviser and his successor, who is younger in the business, but growing rapidly. And the senior adviser was really excited about Raymond James because he wanted a better home for his successor long term.
He said, "You know, I want my successor to join a firm that was like the firm I joined when I was his age 30 years ago". And that's music to our ears because they understand the value of being partners with a firm that's going to liberate them and enable them to grow their business and focus on their clients. So that's really the difference. And they hear that difference. I mean, the folks I was at dinner with just last night, a couple of blocks away, they said, what we're saying is totally different than what they're hearing at their other dinners. That doesn't appeal to everybody. But again, we don't want to appeal to the group of advisers who are just looking for the biggest upfront check and they're okay with whatever happens in the next 3 to 4 years. That's not who we're focused on.
So maybe pivoting just a discussion around cash, which is certainly garnering a fair amount of focus given the expectation for deeper Fed rate cuts. As we think about the past year, where sweep cash has started to stabilize a little bit with Fed funds around this low 4 handle, are we now at the point, Paul, in your mind that where we should start to see cash balances grow in line with M&A, that yield-seeking behavior is starting to abate just given how profitable some of these NII streams are? It's certainly something where we'd appreciate your perspective.
Yes. It certainly feels that way across the industry when you look at that sorting activity that now we're sort of getting to the point, especially with lower rates, where all the cash that was investable cash that the vast majority of cash that was investable cash has been deployed into higher-yielding alternatives. And as we grow assets going forward, hopefully, those cash balances will continue to grow with those assets.
So -- I always like to point to 3 or 4 or 5 quarters of performance before guaranteeing anything or calling it a trend. And so we haven't seen that trend yet across the industry. It's still -- we've seen the trend change from declining balances to more stable balances. But across the industry, we haven't -- we still haven't seen the balances grow in full transparency. So that's what we need to see next. But I think the sort of the logic and the rate trajectory would certainly support that hypothesis that that's what would happen going forward.
And so as we think about the NII trajectory and all the different inputs, so on the last call, you were constructive on loan growth, certainly with lower rates or some expectation at SBL growth, which you certainly have exposure to, that could accelerate. We could see cash balances inflect. And you do have some room to flex deposits. I know you guided to flattish NII. But even in the face of incremental rate cuts, is there a credible path to actually growing NII next year given some of those positive volume drivers?
Yes. I mean our goal is to grow -- certainly to grow NII over time, given all those factors that you just described, whether it would happen in a year or so, I'm not sure. We don't try to -- a year in the grand scheme of things is a very short period of time for us. So with rates depending on how much it drops versus how much balances grow and how much lending balances grow, I can't -- it's hard to know. There's a lot of different variables in terms of what happens in the next year. But beyond that, we are absolutely confident that we'll be able to continue to grow NII.
And the securities-based lending, for example, which are fully collateralized with securities that reprice daily, they've grown 21% year-over-year in our fiscal '25 year, 21%. And that was just with the early cuts in the rates, and our pipelines for those are still very strong. So we are optimistic that those balances will continue to grow.
Our mortgage balances continue to grow as well because, again, our mortgages -- our clients are not the same clients that traditional banks are dealing with. They're, on average, higher net worth clients that are going to be a little less sensitive to every basis point in rate when they make home purchasing decisions or second home purchasing decisions. So we're optimistic that the bank will continue to grow its assets supporting -- driven by the support for our private client group clients going forward, especially in a more attractive rate environment.
Paul, lots of great tailwinds for the wealth management business. We're also seeing an inflection in capital markets activity. I know that that's an area where some pockets have been under earning. Maybe just speak to how you're thinking about normalizing margins and normalizing revenues in a more constructive capital markets backdrop?
Yes. Our capital markets business, the investment banking pipelines are very strong. About 60% to 65% of our M&A activity is financial sponsor-driven, either on the buy side and/or on the sell side. And if you look on the sell side, because there weren't a lot of deals done in the last 2.5 years, there are a lot of companies that are being held beyond their original target kind of holding period. And so there's motivated sellers that now want to harvest those assets.
And then on the buy side, they're still raising -- there's still private equity firms out there raising a lot of capital. And so there's a lot of dry powder to deploy. And so there's motivated buyers and sellers. I think a lower rate environment will make that even more attractive for buyers to be able to finance at more attractive rates and maybe get the pricing to where sellers want the pricing so that continue to close that gap. And so our pipelines are strong in investment banking, and we're optimistic, notwithstanding some externality that we're not anticipating now with M&A and investment banking activity for fiscal 2026.
And the M&A in that business, in particular, really is a big driver of margins in both directions. I think the very peak margin in capital markets was during COVID, when both the equity side and the fixed income side of the business were at record levels and no one could travel. So business development, there weren't golf tournaments or golf outings and no one was traveling. And so the margin was -- I think, 27% was the peak quarter in the capital markets business. And that was very unique in that both equities and fixed income are at record levels at the same time because they're kind of countercyclical business.
And certainly, our bankers are traveling again, which is a good thing because it is a relationship business. But yes, we think that, that business can certainly be in the teens and mid-teens, but -- and even higher, like last quarter, I think it was 17% with really strong capital markets revenues across our various businesses. So again, harder to manage to a particular percentage point, but certainly, as M&A revenues pick up, that will drive margins.
And, Paul, it's certainly encouraging, too, that you reaffirmed the north of 20% pretax margin target even in the face of some rate cuts. I think that speaks to the improvement on the capital markets backdrop, certainly some of the volume tailwinds and accelerating NNA. You also talked about AI potentially driving greater efficiencies. Given you continue to scale, given -- while it does require upfront investment that should drive greater efficiency over time, is there a higher margin that you aspire to? And is there -- like over the next 5 years, do you expect that to be -- that target to potentially get raised over time, not even a commitment, but just philosophically?
Yes. We update our margins basically once a year at Analyst and Investor Day in May. So all we said was we're not changing anything in light of what happens. There's so much that happens in between our Analyst and Investor Days with the capital markets, equity markets, interest rates. If we were changing margins every time, one of the variables changed, we'd be changing margins every week. And again, we're focused on the next -- investing in the next 5 to 10 years. So we don't even love putting out margin targets for the next year, although I think we are certainly expected to from the Street, but you are.
So we -- there's a lot of puts and takes in the business. Lower rates obviously hurts spread income, which has a pretty direct impact on margins and the bottom line, but it also helps lending growth. It also can help M&A. Steeper yield curve can also help fixed income. So -- we just finished our fifth consecutive year of record revenues and record earnings in very different market environments. We're not sure -- I'm not sure if you are aware of any other financial services firms that you cover that have 5 consecutive years of record revenues and earnings. I'm not putting you on the spot, so you don't have to answer it.
In the last 5 years, in different interest rate environments from 0 all the way up to 5.5%, in different capital markets environments, where we had record M&A, record fixed income brokerage to very weak M&A across the industry, different equity markets. And it just shows you the power of our diverse and complementary businesses anchored by the Private Client Group business, but being able to generate 5 consecutive record results -- 5 consecutive years of record results in very different market environments, and again, I'm not aware of any other firms that have done it, maybe there are in our industry, is really kind of a testament to just keeping clients and advisers and bankers front and center in what we do and having that long-term approach where we make decisions, investment decisions.
We don't try to time the markets. We always get asked about taking duration in the securities portfolio on the balance sheet. So, guys, that's nothing to do with clients. That's a sad thing about some of the firms in California that went under is they went under it because they take duration bets, it had nothing to do with clients, to try to optimize short-term earnings. That's not Raymond James.
We keep clients first. We don't try to time the markets. We make decisions for the next 5 to 10 years, and that has served us very well since our inception. By the way, last quarter was also our 151st consecutive quarter of profitability. We didn't ask or take TARP money. We stood on our own 2 feet during the financial crisis. We didn't have to be converted on a Sunday afternoon to a bank holding company to survive. And we take a lot of pride in that because in a 16-year bull market, not all of those things are fully valued, right? But they are valued.
We always joke, no one cares about balance sheet until everyone cares about balance sheet. And no one cares about FDIC insurance until everyone cares about FDIC insurance. And so the liberating and the great thing about our long-term approach and not trying to time the markets is that we feel like we're well positioned to thrive on a relative basis anyway in any type of market environment. And that's not fully valued in a 16-year bull market sometimes, but it certainly is when things get a little tougher.
That's well said, and also, really glad I skipped over the balance sheet strategy and duration question. I did want to press you, Paul, just on your outlook for M&A and your appetite to actually pursue more transformative M&A. You've done a couple of tuck-in deals. I think the last one you had done was Greensledge. At the same time, we have this great scatter plot that shows capital ratios across different measures, Tier 1 leverage, Tier 1 capital, risk-based capital. You're always the clear positive outlier up into the right quadrant. So I wanted to gauge, like as you think about managing that excess capital, your appetite to pursue transformative deals, and across which businesses does that make the most sense?
Yes. We have a very strong capital position. And even our targets almost make us the strongest, I think, in the scatter plot. We're $2.5 billion of excess capital over our targets. And so -- and we have plenty of financing capacity to do transactions larger than that. So we are focused on M&A. We are focused on looking for opportunities that are a good cultural fit, good strategic fit. And the financials have to make sense for both us and the sellers and our respective shareholders. And so -- but we are leaning into opportunities.
I'm spending a lot of my time personally meeting with potential opportunities. But again, it has to meet the 3 criteria. And we're not going to do a deal just to do a deal. We're going to be patient. And the best opportunities for us are ones where the sellers see the long-term opportunity, just like the recruiting story I told you, where the sellers see the best opportunity for their teams and their clients to be with Raymond James, and they could see this being their home forever. And those are the best opportunities for us.
So some of the flip transactions that you see that -- where they're not focused on the long-term home for their advisers or their clients, those aren't -- and they're -- all they're looking for is the biggest upfront check, that's not the best fit for us. So it's -- our acquisition strategy is almost exactly the same as our organic growth strategy. And so -- and then we want to be the longest-term home -- the best long-term home for the firms that we're looking to acquire, where they make us better, and we make them better.
Our Morgan Keegan acquisition in 2012, our fixed income business is still run by the Morgan Keegan leadership team. The CEO of Morgan Keegan, John Carson, just retired last year. He was -- he retired 3 years or 2 years ago, retired as our President of the company. And so when we do acquisitions, we don't slash and burn. We keep the leadership team. We try to keep the leadership team. We try to keep the people. We try to keep the clients. And that's a very unique approach in our industry right now, increasingly unique in our industry right now.
Paul, maybe in the last minute here, just given your focus on long-term opportunities and orientation, and that also informs your investment approach. As you look out over the next 5 years, what does success look like for you? What are you hoping to achieve?
I hope that 5 years from now, when I'm visiting the country, advisers and bankers across the country, they're still saying the best decision they ever made was joining Raymond James and the biggest regret they have is they didn't join 5 years earlier. So if I hear that 5 years from now, as I'm hearing today, then I know our leadership team and our associates have been successful.
With the NNA to match.
Yes.
Paul, thanks so much for being here.
All right. Thanks so much.
Raymond James Financial — Q4 2025 Earnings Call
1. Management Discussion
Good evening, and welcome to Raymond James Financial's Fiscal Fourth Quarter and Fiscal 2025 Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristi Waugh, Senior Vice President of Investor Relations. Thank you for joining us.
With me on the call today are Chief Executive Officer, Paul Shoukry; and Chief Financial Officer, Butch Oorlog. The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions.
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, anticipated results of litigation and regulatory developments and general economic conditions.
In addition, words such as believes, 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 statements 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 and Forms 8-K, which are available on our website.
Now I'm happy to turn the call over to CEO, Paul Shoukry. Paul?
Thank you, Kristi. Good evening. Thank you all for joining us. I'm very pleased to report record results for both the fiscal fourth quarter and fiscal year 2025 this evening. And while the financial results are critically important, it's more than just numbers to us. It's a deep personal relationships our advisers, bankers and associates have with their clients, which is a foundation to providing tailored financial advice. It's a long-standing values of the firm, always putting clients first, making decisions for the long term, having integrity and valuing independence, which guide all of the decisions that we make.
These values, the personal relationships and the differentiated financial advice across our diverse and complementary businesses contributed to our fifth consecutive year of record revenues and record net income in very different market environments.
As we look ahead, many of our key business drivers also ended the year at record levels, including record client assets of $1.73 trillion, a record number of financial advisers of 8,943, record trailing 12 production for recruited financial advisers of $407 million and record net bank loans of $51.6 billion.
We also have healthy pipelines for growth, including strong levels of adviser commitments to join over the coming year and strong investment banking pipelines. And importantly, we have the regulatory capital capacity and plenty of liquidity to support this growth.
Throughout the fiscal year, we have continued to develop and maintain industry-leading technology for our financial advisers, once again making significant investments of approximately $1 billion in technology. These investments include strategic AI initiatives designed to improve adviser efficiency and support regulatory oversight with the emphasis on enhancing the adviser and client experience.
We filled new technology positions of Chief AI Officer and Head of AI Strategy to lead our development and implementation, which includes bringing experienced talent and fresh perspectives.
During the year, we earned the highest ranking for investor satisfaction among those working with a dedicated financial adviser or team of advisers. Importantly, we were also recognized as the most trusted company among advised investors in wealth management in the J.D. Power 2025 U.S. Investor Satisfaction Study.
In response to growing demand for private investment product alternatives for ultra-high net worth clients, we further developed the firm's private capital-raising expertise and broaden bespoke private investment alternatives for such clients.
I'm proud of our many accomplishments this year and believe we are well positioned to continue to invest in our business, our people and technology to drive growth across all our businesses.
Turning to our financial results for the quarter. The firm's values-based client-focused approach continues to generate steady performance. Quarterly net revenues of $3.7 billion grew 8% over the prior year quarter and 10% over the preceding quarter.
Pretax income of $731 million declined 4% compared to the year ago quarter and increased 30% from the preceding quarter. For fiscal 2025, we generated record net revenues of $14.1 billion, representing 10% growth and record pretax income of $2.71 billion, up 3% over fiscal 2024.
These strong results were attributable to our diverse and complementary businesses anchored by the Private Client Group and augmented with the capital markets, asset management and bank segments.
Across our businesses, we continue to achieve success retaining and recruiting financial professionals who provide high-quality advice to their clients. In the Private Client Group, we ended the quarter with a record $1.6 trillion of client assets under administration, representing year-over-year growth of 11%.
We had an outstanding year recruiting high-quality advisers onto our platform, a testament to our unique service first culture, comprehensive capabilities and strong balance sheet.
In fiscal year 2025, we had record recruiting results of financial advisers to our domestic independent contractor and employee channels. With recruiting trailing 12-month production at their previous firms totaling $407 million, reflecting a 21% increase over last year's previous record. These recruited advisers had approximately $58 billion of client assets at the previous firms, also surpassing last year's record.
Including assets recruited into our RIA and custody services division, we recruited total client assets over the past 12 months of nearly $63 billion across all of our platforms. Quarterly domestic net new assets were nearly $18 billion this quarter, representing a 5% annualized growth rate.
We ended the fiscal year with a record number of financial advisers, 2% higher than the prior year and a reflection of solid adviser retention as well as strong recruiting results.
Based on our robust adviser recruiting pipeline and strong level of commitments to join in the coming quarters, we continue to be optimistic about our momentum and growth. Our best of both world's value proposition, where we offer a unique combination of an adviser and client-focused culture, coupled with leading technology and solutions, continues to resonate with advisers across all of our affiliation options. Additionally, our strong balance sheet and commitment to independence is proving to be a differentiator for advisers evaluating alternatives.
To continue retaining and attracting the best advisers, we continue to make investments in our platform and offerings. For example, our private wealth adviser program offers education, training and accreditation along with enhanced capabilities and product solutions. This enables advisers to meet the needs of their most sophisticated clients and create significant value for our advisers who progress through this rigorous program.
We continue to make investments and implement solutions to automate and streamline processes, which in turn frees associates and advisers to do what they do best, which is to engage in human-to-human and deepened personal relationships, add more value and importantly, have more capacity to grow their businesses by attracting new clients.
The Capital Markets segment delivered strong results in the fourth quarter, achieving revenues that represented the third highest level on record, surpassed only by those observed during the pandemic period. This strength demonstrates the potential resulting from the strategic investments we have made in this segment over the past few years. The fourth quarter results were underpinned by solid performance throughout all of our capital markets businesses.
Looking ahead, the investment banking pipeline remains strong. We are confident that we are well positioned with motivated buyers and sellers, along with deep expertise across the industries we cover.
We remain committed to continuing to enhance the platform by broadening and deepening our capabilities, whether through strategic hiring or acquisitions. For example, over the past 2 years, we've hired a number of experienced public finance investment bankers, which provided us growth opportunities across a number of domestic markets. We began to realize the returns on some of those investments as evidenced by our fourth quarter results.
As it pertains to acquisitions, we recently announced the acquisition of GreensLedge, a boutique investment bank recognized for its expertise in structured credit and securitizations and the transaction we anticipate should close later this fiscal year. Notably, GreensLedge differentiates itself with deep relationships and expertise while operating on a balance sheet light model.
In the Asset Management segment, net inflows into managed fee-based programs in the Private Client Group was strong during the quarter, annualizing at over 7% and reflect the complementary impact of being able to offer high-quality investment alternatives to our financial advisers as well as growth resulting from our successful recruiting efforts.
In the bank segment, loans ended the quarter at a record $51.6 billion, primarily reflecting robust 22% annual growth in 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 the clients. Importantly, the credit quality of the loan portfolio remains strong.
Turning to capital deployment. Our long-standing priorities have remained unchanged, and that starts with investing in growth first organically and complemented with strategic acquisitions.
We continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit and at valuations that would generate attractive returns for our shareholders.
As we continue to pursue both organic and inorganic growth opportunities, we also maintained our share repurchase program to effectively manage capital levels. As outlined in recent quarters, our capital deployment strategy is to repurchase shares on a consistent basis at a level which barring new development should keep our Tier 1 leverage ratio from growing beyond current levels.
We continue to operate that guidance this quarter as we repurchased $350 million of common stock at an average share price of $166. We ended the quarter with a Tier 1 leverage ratio of 13.1%. In fiscal 2025, we returned capital of over $1.5 billion through common dividends and share repurchases.
Now I'll turn the call over to Butch Oorlog to review our financial results in detail. Butch?
Thank you, Paul. I'll begin on Slide 6. The firm reported net revenues of $3.7 billion for the fiscal fourth quarter. Net income available to common shareholders was $603 million with earnings per diluted share of $2.95. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $635 million, resulting in adjusted earnings per diluted share of $3.11 and our adjusted pretax margin was 20.7%. We generated annualized return on common equity of 19.6% and annualized adjusted return on tangible common equity of 23.9%. Solid results for the quarter, particularly given our conservative capital base.
Turning to Slide 7. Private Client Group generated pretax income of $416 million on record quarterly net revenues of $2.66 billion. Results were driven by higher PCG assets under administration compared to the previous year, the result of market appreciation, retention and the consistent addition of net new assets.
Pretax income declined year-over-year, primarily due to interest rate reductions totaling 125 basis points since September of 2024.
Our Capital Markets segment generated quarterly net revenues of $513 million and a pretax income of $90 million. Net revenues grew 6% year-over-year, driven primarily by higher debt underwriting, strong growth in affordable housing investments business revenues as well as solid improvements in both equity and fixed income brokerage revenues.
Sequential results grew a robust 35% largely due to higher M&A revenues, underwriting and affordable housing investments revenues. The Asset Management segment generated record pretax income of $132 million on net revenues of $314 million.
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 PCG fee-based accounts. We had strong net inflows of approximately $3.6 billion or 7.3% annualized growth rate into managed programs on our platform.
The Asset Management segment generated record revenues and pretax income in the fiscal year. The Bank segment generated net revenues of $459 million and pretax income of $133 million. On a sequential basis, the bank segment net interest income was up slightly, primarily driven by continued loan growth. The September 2025 rate cut had minimal effect on our fourth quarter.
Turning to consolidated revenues on Slide 8. Fourth quarter net revenues grew 8% over the year ago period and 10% sequentially. Asset management and related administrative fees of $1.88 billion grew 13% over the prior year and 8% over the preceding quarter. Record PCG fee-based assets equaled $1.01 trillion at quarter end, up 15% year-over-year and 7% over the preceding quarter.
As we look ahead, we expect fiscal first quarter 2026 asset management and related administrative fees to be higher by approximately 6.5% over the fourth quarter level, driven by higher PCG assets and fee-based accounts at quarter end.
Brokerage revenues of $616 million grew 8% year-over-year, mainly due to higher PCG revenues. Investment Banking revenues of $316 million were nearly flat with the year ago quarter and increased 49% sequentially. The sequential increase was driven by significant increases in M&A and advisory revenues, along with robust results in debt underwriting, which were in part from large private placement transactions where frequency and magnitude are unpredictable as well as an increase in public finance activity in the quarter.
Affordable housing investment results reported in other revenues, grew $25 million sequentially in what is typically a seasonally strong fiscal fourth quarter, but also reflected a 19% increase in fiscal year revenues, demonstrating continued growth of the business.
Moving to Slide 9. Clients' domestic cash sweep and enhanced savings program balances ended the quarter at $56.4 billion, up 2% over the preceding quarter and representing 3.7% of domestic PCG client assets. Balances increased $2.2 billion or 4% in the month of September, growing nicely after fee billings had resulted in anticipated decreases earlier in the quarter.
Based on October activity to date, domestic cash sweep and enhanced savings program balances have declined as anticipated, given October's record quarterly fee billings of approximately $1.8 billion.
Turning to Slide 10. Combined net interest income and RJBDP fees from third-party banks was $653 million, down slightly from the prior quarter. Net interest margin in the bank segment decreased 3 basis points to 2.71% for the quarter.
The average yield on RJBDP balances with third-party banks decreased 5 basis points to 2.91% in part due to the impact of the September Fed interest rate cut. Based on current interest rates, including the full quarter impact of the September rate cut, in quarter end balances net of the $1.8 billion fiscal first quarter fee billings, we would expect the aggregate of NII and RJBDP third-party fees in the first quarter to be approximately flat with the fourth quarter level. This is largely the result of the positive impact of a higher interest earning asset balance as of the September starting point offsetting the full quarter impact of the September Fed rate action.
Keep in mind, there are many variables which could 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.
Turning to consolidated expenses on Slide 11. Compensation expense was $2.39 billion, and the total compensation ratio for the quarter was 64.2%. Excluding acquisition-related compensation expenses, the adjusted compensation ratio was 64.0%, better than the 65% target level we shared at our Investor Day.
In fiscal year 2025, adjusted compensation expense included the amortization of transition assistance provided to recruited advisers and other retention awards to existing advisers in the aggregate amount of $355 million, representing an increase of approximately 11% compared to fiscal 2024.
Non-compensation expenses of $602 million increased 11% over the year ago quarter. A large portion of these costs support firm-wide growth initiatives, such as adviser recruiting, professional fees associated with investment banking activity and higher investment sub-advisory fee expense.
For the fiscal year, consistent with our prior guidance, we achieved full year non-compensation expenses of approximately $2.1 billion, excluding the bank loan provision for credit losses, unexpected legal and regulatory items and non-GAAP adjustments presented in our non-GAAP financial measures.
A strong result, given our continued investments in technology, as well as the higher growth-related costs we incurred. We remain committed to investing to support growth across the business while maintaining discipline over controllable expenses.
On Slide 12, we provide key credit metrics for our bank segment. We grew loans during the quarter by 3%, primarily in support of our clients with this loan growth continuing to be led by our securities-based loans, which grew 22% and residential mortgage loans, which grew 9% over the year. These 2 loan categories represent nearly 60% of our total loan book, reflecting 38% and 20% of the total.
The credit quality of the loan portfolio remains strong. Criticized loans as a percentage of total loans held for investment were 1.28% at quarter end and nonperforming assets remained low at 29 basis points of bank segment assets. The bank loan allowance for credit losses as a percentage of total loans held for investment ended the quarter at 88 basis points. The bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.88%. We believe the total allowance represents an appropriate reserve but we continue to closely monitor economic factors that may affect our loan portfolios.
Slide 13 represents the pretax margin trends for the past 5 quarters, highlighting the stability and strength of our diversified businesses and consistently achieving strong margins. During the fiscal fourth quarter, the adjusted pretax margin reached 20.7%. For the full fiscal year, we attained an adjusted pretax margin of 20%, successfully meeting our target margin objective.
On Slide 14, at quarter end, our total assets were $88.2 billion, a 4% sequential increase, resulting primarily from loan growth and higher corporate cash balances.
We continue to have strong levels of liquidity and capital. During the quarter, to take advantage of a favorable market environment, reflecting very tight credit spreads and attractive benchmark yields, the firm issued $1.5 billion of senior notes with the mix of 10-year and 30-year maturities as well as amending and extending the maturity of the revolving credit facility. These actions resulted in additional liquidity on hand for deployment in our growth and to meet client needs as well as providing additional capacity in our committed borrowing facility should the need arise over the next 5 years.
RJF corporate cash at the parent ended the quarter at $3.7 billion, $2.5 billion over our target level of $1.2 billion, an increase over the prior quarter level, resulting from the proceeds of the senior notes offering.
Our capital levels provide significant flexibility to continue being opportunistic in our pursuit of strategic acquisitions and to invest in organic growth. With a Tier 1 leverage ratio of 13.1% and a total capital ratio of 24.1%, we remain well above regulatory requirements with approximately $2.6 billion of excess capital capacity to deploy before reaching our targeted Tier 1 capital ratio of 10%.
The effective tax rate for the quarter was 17.4%, reflecting the favorable impact of nontaxable corporate-owned life insurance gains and the favorable resolution of certain historical tax matters in the quarter. Looking ahead, we estimate our effective tax rate for fiscal 2026 to be approximately 24% to 25%.
Slide 15 provides a summary of our capital actions over the past 5 quarters. Through the combination of common dividends paid and share repurchases, we returned over $450 million of capital to shareholders during the quarter and more than $1.5 billion over the fiscal year. Additionally, and other debt capital actions, in August, we utilized nearly $100 million of liquidity to redeem our outstanding subordinated notes. We maintain our long-term commitment to operating our businesses at capital levels consistent with established targets.
I'll now turn the call back to Paul for some final remarks.
Thank you. As we enter fiscal 2026, we are more confident about our competitive positioning and path forward than we have ever been. While in some ways, there's more competition in our space, we are confident that our long-standing approach is becoming increasingly differentiated and unique.
We are focused on the long term in providing a stable platform for our advisers, bankers and associates, where so many of our competitors are increasingly looking for an exit in 3 to 5 years or even less.
We attract and retain financial advisers with our unique culture, leading service and robust platform, whereas many of our competitors compete with the largest check.
We value independence to foster an environment where our advisers can provide objective advice to their clients, whereas many of our competitors change their comp plans every year to cross-sell more bank products.
We are focused on sustainable growth and quality over quantity, whereas many of our competitors are focused on growth at all costs. We strive to maintain a strong balance sheet with strong levels of capital liquidity, whereas many of our competitors have significantly higher levels of leverage.
As I said at the beginning of the call, this is way more than just numbers to us. We deeply value the personal relationships that we are so blessed to create in our business. We are confident our tried and tested approach will continue to endure in both good times and more challenging times and help us deliver on our vision of being the absolute best firm for financial professionals and their clients.
So I want to end this call by thanking our advisers, bankers and associates for the great service and advice they provide to their clients and delivering on our firm's mission to help clients achieve their financial objectives.
That concludes our prepared remarks. Operator, will you please open the line with questions?
[Operator Instructions] Your first question comes from the line of Michael Cho with JPMorgan.
2. Question Answer
I just wanted to start on recruiting. Paul, you noted that the net new asset growth was about 5%. And the quarter saw some nice acceleration from last quarter. Can you flush out which segments, whether it's independent or employee that's kind of seeing more uplift more recently? And ultimately, what do you think is more -- is resonating more with advisers today than, call it, 9 to 12 months ago? Or is it really just more advisers in motion across the industry that's ultimately benefiting?
Thanks, Michael. The recruiting success that we've been having has really been broad-based across all of our affiliation options, the employee, independent contractor and the RIA custody channels. And we're entering 2026, I mean as we said. In fiscal '25, we recruited production advisers with prior production of over $400 million, which was up 21% over last year's record. So really phenomenal recruiting results in the pipeline as we look at fiscal 2026, extremely strong, probably the strongest it's ever been entering the fiscal year.
And so what's resonating with advisers is what has always resonated here at Raymond James, which is our best of both world's value proposition, where we have the culture, the adviser and client-focused culture that we have, the values long-term oriented putting -- always putting clients first in everything that we do and coupling that with the resources and the platform and the technology and the products and services that we offer that they can offer to their clients.
And so that consistent long-term approach in a world where there's so much noise from short-term players, levered back players is really -- and there's M&A consolidation in the industry, which is causing disruption too. So having a stable platform like Raymond James, where they have confidence that their business, their employees, their team and their -- most importantly, their clients will have a stable platform for the long term is really what resonates the most.
Great. If I could just switch gears on AI. Paul, you called out in your comments and in the release today, you talked to some milestones throughout the fiscal year around AI and new Chief AI Officer as well as AI strategy. Can you flesh out a little bit ultimately what you're trying to achieve with Raymond James' AI initiatives?
And I guess, looking ahead, I mean, how does the prospective resource allocation into these initiatives, ultimately, impact the $1 billion of tech spend you called out in the future years?
Yes, I think the way we think about AI is really in 3 buckets. The first is to support our infrastructure, the resiliency, the cyber security apparatus and help using AI to essentially create a more resilient and secure platform for our advisers, bankers and clients. Secondly, increasing efficiency and consistency of service which from your resourcing question, it's not that we expect to need less resources to support the business, but that the resources we have and that we will continue to add, we'll be able to do more with AI and what they do in terms of the service they deliver will be actually higher quality and more consistent with the help of technology.
And then finally is to help our financial advisers and bankers provide more bespoke and tailored advice to a larger number of clients. So creating, again, efficiency and higher quality advice to their clients through the use of data-driven insights. So we're really excited about the AI investments. We're very focused on it. We've built out the team. We're budgeting for a significant increase in the AI expense next year. And we think that over time, this will continue to differentiate us. I mean these are investments that the smaller regional firms and a lot of the independent firms can't afford to make. Some of the PE backed firms are willing to make that long-term investment because, again, these are payback periods of multiple years.
So if your exit period is 2 to 3 years from now, it may or may not make sense to make a long-term technology investment for your advisers and clients. And so we're really excited about the investment. We think the upside is significant. And this will continue -- we're confident that we'll continue to differentiate us in the marketplace.
Your next question comes from the line of Devin Ryan with Citizens Bank.
I want to start with one on loan growth, obviously, been a really nice story for you. A lot of it's been coming from securities-based loans recently, but you did see a little bit of residential mortgage growth and C&I growth sequentially in the quarter. So as we start to see interest rates moving lower from here, just curious what you're expecting in terms of demand and opportunity there. And whether you expect SBLs could actually maybe accelerate as rates come down? And then also kind of expectations for some of these other categories, could they become more interesting or just see more demand really ultimately just trying to get a sense of the pace expected? Can you keep this up or even accelerate? And then what the mix of growth might look like?
Yes. Our expectation continues to be in a lower rate environment and also with the growth of our Private Client Group business that the securities-based loan category will continue to be the highest growth category as it has been for the past several years now. It's over 60% of our loan balances between that and mortgages. So we will continue, I think, to shift more of the balance sheet to support the Private Client Group business, both through securities-based loans and through residential mortgages. And we think a lower rate environment will drive more demand and potentially accelerate demand there. It's up 22% year-over-year, and we think with lower rates that, that can actually accelerate.
Got it. Okay. That's great. And then just a follow-up here. just want to hit on a couple of items from the model that were kind of stand out. So PCG brokerage strength, was that mostly trails that support kind of that big growth? Or were there any gains in there?
And then just on the debt underwriting strength, I heard the comment, some private placements in there, which can be kind of lumpy and then also strengthen public finance. I'm just curious if we can kind of parse that out a little bit and get a sense of how much the placements were. Is that a seasonal thing versus how much was public finance better, to just be helpful just given how much that was up relative to the prior quarter.
Yes. Thanks. So as it relates to the brokerage revenues in the PCG side, you'll notice that there was an acceleration, 7% growth over the prior year quarter and 14% growth over the preceding quarter in insurance and annuity products. We saw a spike in those, driven primarily by by clients in anticipation of rate cuts and rate-cutting environment, trying to lock in some annuity pricing. So I would say that, that was outsized in the PCG area.
And then as it relates to -- on the debt underwriting side, yes, we had a significant quarter in debt underwriting, both in public and in private debt underwriting. And we did mention that on the private debt underwriting side, we had a couple of large transactions that drove some of that increase. But what we're seeing in is growth in those our capacity and to capture the market, market opportunities that exist on debt underwriting. So we did have some -- a couple of large transactions, but we do continue to grow our capacity to service our clients in that area. And this quarter kind of reflects the capacity that we brought on to be able to do that.
Over the last year or so, we've added over 12 to 15 very senior, very experienced public finance bankers from a large bank who exited the business. And in addition to the great foundation and bankers that we already had, they've really helped us increase our capacity and momentum in public finance. So we're really going to get excited about -- as we look forward there, especially if again, that's another potential tailwind from lower rates, so making investments across all of our businesses.
And one thing I'm most excited about with the results that we generated this fiscal year and this quarter is that every business really contributed to the fantastic, the record results that we generated this year. So it really was a broad-based contribution across all of our business.
Your next question comes from the line of Dan Fannon with Jefferies.
Paul, I wanted to follow up on the net new assets. Obviously, the number is stronger this quarter, but your commentary does sound rather similar to what we've heard for the last several quarters. So is some of this just timing of onboarding? Or do you see this kind of level of growth as kind of the new normal as we look ahead into fiscal '26?
Yes, the net new asset numbers have increased over the past few quarters as well. So it is a reflection of the record recruiting results. And to your point, not all the assets come immediately. So there is a lag impact in terms of when we recruit the advisers and when the assets are on board, although it's happening fairly quickly, actually. So I think the other factor there that is just the competitive environment. And so there's still very rich deals out there from the roll-ups and aggregators. And so -- and then from time to time, with bank M&A, next quarter, for example, there will be a platform that we'll lose just through bank M&A. I think it's a $2.7 billion of assets. So there's movement out there that is a reflection of the competitive environment and the M&A environment. But when we look at the retention still very solid, and then the recruiting has never been stronger. So the recruiting activity both in the fiscal '25 and as we enter into '26 is extremely robust and showing no real signs of slowing down. So we're really excited as we enter fiscal '26.
Great. That's helpful. And then -- but just a follow-up on spending priorities as you think about 2026 and how that compares to 2025 and maybe areas where you're spending a little bit more or less are the priorities and how they may be different?
Yes, I appreciate that question. So we haven't -- as we think about our spending, we continue to to invest in growth in our spending where we're growing the business. So we have some additional incremental spend occurring in areas such as recruiting and investments, sub-advisory fee expense, the latter being associated just with growth in assets and the recruiting is a cost associated with the successful recruiting efforts. So we're going to have incremental costs.
And then, of course, we're always committed to continue to invest in technology, and that continues to be a very high priority of areas. As we mentioned -- we already mentioned our commitment level, including AI, and that will continue -- has been a priority of ours, but we believe it's a differentiator, and it will continue to be a priority for us as we move forward.
So we're very focused and disciplined on managing the controllable expenses and then the growth-oriented investments will just -- will occur as we continue to grow.
We have such a unique opportunity to continue growing in each one of our businesses, and we are a growth firm. So what you heard Butch say is that we're going to continue to invest heavily in growth to take advantage of this unique opportunity to continue gaining market share and providing more resources for financial professionals to provide differentiated, tailored advice to their clients across all of our businesses. So some of the recruiting, for example, we're going to start breaking out next quarter. The upfront money amortization that hits the compensation expense in the Private Client Group business because just this year, for example, we recruited advisers that had $400 million of production at their prior firms. I mean that's a size of -- that's about a medium-size acquisition in our industry, and we're doing it one by one and all of the consideration is going to a retentive benefit versus doing an acquisition where only a relatively small portion goes to retention, and most of it goes to a seller.
And so what we want to do, if we did an acquisition, we would non-GAAP that expense. Of course, we're doing it one by one, which is much superior in terms of the retention and the recruiting one by one, making sure they really fit on the platform. So while we won't non-GAAP that amortization, we will break it out for all of you to see because it is an investment in the future that is worth calling out.
Your next question comes from the line of Bill Katz with TD Cohen.
Okay. I apologize for hoarse voice weather. Maybe just starting on the opportunity on the earning asset side. I was wondering if you could talk about how you might fund some of that growth. Would you look to maybe bring some of the third-party sweep deposits back on to balance sheet, run off some of the investment securities portfolio? Or how to think about that into play?
Yes, all of the above, Bill. We have plenty of capacity with third-party banks, so we'll be able to bring that on balance sheet to fund growth. We also can continue to a certain extent, running down some of the securities portfolio. And then we have a very diversified funding apparatus where we can gather deposits both that to the Private Client Group, Raymond James Bank and TriState Capital Bank have very substantial treasury management capabilities and depository capabilities to diversify our funding sources. So we have ample funding capabilities and are staying ready to support continued growth going forward.
Okay. And then just as a follow-up. Just coming back to expenses for a moment, it seems like a big theme going into new year. Can you help us maybe ring-fence us a little bit of any kind of guidepost for nonoperating expense? Or kind of targeted pretax margin as you look ahead, maybe pre-provision pretax margin?
The last guidance, we put out in our Analyst Investor Day was that we want to generate pretax margins of over 20%, which we were able to do this fiscal year. We'll update that target as appropriate in the next Analyst Investor Day sometime in the May, June period. But in the meantime, that target stands. And being able to do that with the level of growth that we're experiencing is just truly phenomenal because not only are we growing, but what we're also doing and we're also focused on is ensuring that we're providing extremely good service to our existing advisers, bankers and clients.
And so doing that, we're also investing in technology, which is increasingly differentiating us from our competitors, particularly the smaller regional competitors who just can't afford to make the investments in the technology in some of the independent competitors as well. We're really excited about being able to deliver over 20% margin with our growth profile.
Your next question comes from the line of Brennan Hawken with Bank of Montreal.
Would like to -- so you guys have clearly delivered the message you focused on discipline, making growth investments. Encouraging to see you hit the $2.1 billion non-comp rents line for last -- for the just finished the fiscal year. How should we be thinking about that line? And how much of that balance is going to grow when we move into 2026 on the back of some of those growth investments?
We're still -- we'll provide that on the next earnings call. We're still working on our budgets as we speak. A lot of it will be growth focused as Butch said. So we'll look at the some of the line items that are directly correlated to growth like the FDIC insurance expense, the investment advisory expense that support the fee-based assets, et cetera. So what I would point to now is more of just the margin targets that I just shared with Bill in response to his question that for now, our target is still to generate over 20% margin on an adjusted basis.
Understood. Understood. And the securities-based loans, they've been growing really well, flagged those in some of your prepared remarks, Paul. And so just kind of curious about whether or not you think this -- based on what you hear from both the advisers that you have within RJF, but also the third-party companies that TriState works with, is pace sustainable? Are you actually seeing maybe a little bit more demand as we see rates come down and this really sort of attractive high-risk appetite backdrop, can we even see it accelerate?
Yes, they're floating rate loans to your point. And so the lower short-term rates go, the more attractive those loans become all else being equal. So that certainly contributed to the 22% year-over-year growth that we experienced this fiscal year. And as we kind of start fiscal '26, the momentum and the growth there continues to be attractive. So we do see a lot of tailwinds right now in terms of those balances continuing to grow.
Your next question comes from the line of Craig Siegenthaler with Bank of America.
My question is on the strong recruiting pipeline. And I'm curious, how has the pipeline been impacted, not just from bank M&A you highlighted an outflow, but also from IBD mergers that are going on in the background, and they may be driving elevated inputs?
Yes. I mean M&A activity in the industry always creates opportunity. And so I think there's another transaction just announced a couple of days ago, for example, and that's a catalyst for people to look at for advisers to say, okay, if I'm going to have to move to a new home one way or the other, I want to make sure that the new home fits the characteristics of what's best for me, my team and most importantly, their clients. And so it has created certainly opportunities for us to grow one by one with the advisers that we find mutual fit with. We're a great home for them, and we determine their a great fit to affiliate with us.
And I'm not sure if you quantified the impact from the GreensLedge acquisition. But is there any accretion numbers behind that we should think about as the deal closes?
No, it will close later in the fiscal year and really based on its size, it's really not something that we have provided or dimensioned in terms of accretion dilution. It's really more of a long-term strategic play for us, so we're excited about the opportunity for it to contribute over the next several years. It's not something that we would provide 12- or 18-month accretion numbers on. But it is strategic and that creates an opportunity for us to provide our existing institutional clients, a securitization capability and advisory capability that we did not have prior as well as providing GreensLedge their clients an M&A and capital markets capability that they didn't necessarily have prior. So it's a very synergistic opportunity that over the long term, we think, will be very meaningful to our business.
Your next question comes from the line of Alex Blostein with Goldman Sachs.
This is Michael on for Alex. We just wanted to get some clarification around the somewhat slower pace of buybacks in the quarter. Specifically, was this related to GreensLedge acquisition in the quarter? Or should we take it as a signal that maybe there's something bigger that's imminent?
So I appreciate that question. There were -- we did purchase pretty consistently throughout the quarter. There were a couple of pauses, a couple of periods during the quarter, but that we paused the buybacks. One was related to the senior note offering, and that was really the item that caused us to pause during the quarter.
We would also point out that, in terms of use of liquidity for capital actions, we utilized $98 million during the quarter to redeem subordinated notes as a debt capital action. So the way we were thinking about the use of liquidity is the addition of the share repurchases of $350 million plus the nearly $100 million of debt capital actions that we took, landed us within that guidance of deployment of that liquidity by between 450 -- between the $400 million and $500 million a quarter.
And that target has not changed. So it doesn't necessarily mean we'll hit it exactly every single quarter, but $350 million of repurchases were still meaningful and we're not changing our target to buy $400 million to $500 million a quarter going forward.
Got it. That's helpful. And then just based on some of the earlier remarks, it does sound like you guys are gearing to do additional M&A still. Maybe can you expand on some of the financial parameters, the criteria that you guys would look for for a larger-sized deal and then specifically timing of accretion or anything else you're willing to share?
Yes. The criteria for a larger-sized deal is actually very consistent with the criteria for a small deal or even recruiting a team of financial advisers. And that is it has to be, most importantly, a good cultural fit with the organization. We're in the people business and the people that we have are representatives and ambassadors of the firm in one way, shape or form. And so having a good cultural fit is so critical to it being accretive over the long term, both qualitatively and quantitatively.
And then if it's a good cultural fit and only if it's a good cultural fit, when we look at the strategic fit and where we really want one plus one to give us something greater than 2. In other words, we want to make the firm joining the family better, and -- but we also want the firm joining our family to make us better. And we have a track record of keeping leadership. If you look at our fixed income and public finance leadership today, it's operated by the Morgan Keegan leadership, which we acquired back in 2012, as an example. And that's consistent and true with all of our acquisitions.
If you look at our consumer investment banking operation, it's run by the person who ran the firm that we acquired in that space still all these years later. And TriState, we keep it as an independent firm with their leadership team still fully intact. And so again, keeping the best of both firms to make both of us better. That's what we really mean by one plus one equaling something more than 2 and being a good strategic fit.
And then finally, the financials have to make sense for us and for the seller. And so the valuation, of course, has to make sense for shareholders on both sides. And so those are the 3 criteria we look for. And we continue to remain disciplined. We have lots of capital, lots of liquidity. We are buyers. So we are looking for opportunities in all of our business -- across all of our businesses and that meet those criteria.
Your final question comes from the line of Michael Cyprus with Morgan Stanley.
First, just a question on digital assets. Curious what sort of appetite you're seeing from advisers and their clients? Maybe you can remind us on how they're able to access to what extent digital assets on the platform today? And how do you envision that access and product potentially expanding over time, whether it's ETFs, futures, derivatives, spot, et cetera?
Our advisers and clients are really focused on long-term financial planning. So we're different than the day traders using the e-brokers to kind of speculate in assets on a daily basis. Now with that being said, digital assets is increasingly becoming a part of the conversation even as long-term financial planning in terms of long-term financial planning because the new administration is certainly creating the guardrails and the infrastructure still in process, but certainly headed in the right direction in terms of creating the guardrails and the infrastructure to support digital assets in a more robust manner. And so we have opened up on a limited basis, the ETFs, the Bitcoin ETFs for advisers and their clients. And so that's the extent of it. But again, it's not the interest level is not maybe as widespread here as you would see at one of the day trading firms.
Got it. And then just a follow-up question, two-parts. Maybe you could just elaborate on what limited basis means and to what extent that might evolve over time? And then the follow-up question I had was just around the investments you're making in the business from AI to recruiting. How would you just sort of characterize that level of investment spend right now? And as you think about into next year, do you think that, that level and pace and speed of that investment spend would accelerate? Does it remain stable or does it decel?
Yes. Well, we're still in early innings in terms of investing in AI. So that investment spend is definitely increasing and accelerating substantially as a part and becomes essentially a bigger part. It's not that our total IT spend accelerates, it's that the AI portion of the IT spend grows as a proportion of the total IT spend.
So -- and then in terms of the digital asset restrictions, certain types of accounts, certain types of a -- certain portion of the total investable assets, and what we could certainly revisit that over time as advisers and clients demand change, we can change. And that's the regulatory kind of infrastructure becomes more mature. So we'll continue to evaluate that.
We always -- we're a client-first organization. So we constantly evaluating what the client needs are, what advisers are asking for. Advisers are the absolute best advocates for clients in the industry. And we will -- we have always and will always continue to to meet the demands of advisers and their clients as those preferences and the regulatory environment matures.
That concludes our question-and-answer session. I will now turn the call back over to CEO, Paul Shoukry, for closing remarks.
Well, great. We certainly don't take anyone's time or interest in Raymond James for granted. So thank you for your time this evening. We're just again just ecstatic that we were able to deliver our fifth consecutive year of record revenues and record earnings. And I would just want to thank the -- again, the advisers, the bankers and the associates contributing to those fantastic results by developing deep personal relationships with their clients and continuing to deliver really great financial advice to their clients. So thanks for your time, and I look forward to seeing you all of you soon.
Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Raymond James Financial — Q4 2025 Earnings Call
Financial data from Raymond James Financial
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 16,990 16,990 |
8%
8%
100%
|
|
| - Direct Costs | 2,160 2,160 |
6%
6%
13%
|
|
| Gross Profit | 14,830 14,830 |
10%
10%
87%
|
|
| - Selling and Administrative Expenses | 11,388 11,388 |
13%
13%
67%
|
|
| - Research and Development Expense | - - |
-
-
|
|
| EBITDA | 3,062 3,062 |
8%
8%
18%
|
|
| - Depreciation and Amortization | 44 44 |
5%
5%
0%
|
|
| EBIT (Operating Income) EBIT | 3,018 3,018 |
8%
8%
18%
|
|
| Net Profit | 2,299 2,299 |
8%
8%
14%
|
|
In millions USD.
Don't miss a Thing! We will send you all news about Raymond James Financial directly to your mailbox free of charge.
If you wish, we will send you an e-mail every morning with news on stocks of your portfolios.
Raymond James Financial Stock News
Company Profile
Raymond James Financial, Inc. is a holding company. The firm engages in the provision of financial and investment services. It operates through the following segments: Private Client Group, Capital Markets, Asset Management, RJ Bank, and Other. The Private Client Group segment deals with financial planning and securities transaction services. The Capital Markets segment pertains to institutional sales, securities trading, equity research, and investment banking activities. The Asset Management segment offers investment advisory to individual and institutional portfolios. The RJ Bank segment includes corporate loans, mortgages, and loan syndications. The Other segment consists of principal capital and private equity operations. The company was founded by Robert A. James in 1962 and is headquartered in St. Petersburg, FL.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Shoukry |
| Employees | 19,500 |
| Founded | 1962 |
| Website | www.raymondjames.com |


