Transcript

Let's bring in Raymond James CEO, Paul Shoukri. It's great to have you, Paul. Welcome. Yeah, great to be here at NYSC. Yeah, so how are you feeling about the overall market these days? We're waiting for the end of the shutdown, waiting to see about the AI trade after last week was a little bit bumpy. Where do you think things stand? Yeah, I mean, there's always uncertainty. And so, you know, the markets, the Dow finished at a record high yesterday. And so we're optimistic about the economy long term. As we look into next year, we think lower rates and tax cuts will be a tailwind. So we're looking at 2 percent GDP growth. And we're very optimistic about the economy and the markets going forward. I mean, this is sort of your sector. We were just talking about some of these bank CEOs going to Washington to dine with the president. What do you think the message from Wall Street should be? Yeah, it's not too late to invite me. I could still fly to D.C. after this. But I'm not sure what the message is. Someone's watching. Yeah. Not sure what the message is going to be, frankly, but I know we're all waiting for more on deregulation and more balanced regulation. Is it happening yet, the deregulation? There's a lot of guidance coming out and a lot of speculation around it, but in terms of real rule changes, we haven't seen anything just yet, but it's still early, you know, in the grand scheme of things. What do you want to see? Well, you know, some of the regulations post the recession that impacted banks for the asset thresholds, for example. They haven't even been indexed to inflation. So some of those rules that can be indexed to inflation, we're at $80 billion at Raymond James of assets. There's a whole new set of rules that happen at $100 billion. That $100 billion threshold was established over a decade ago. And so having some adjustments for that just to be indexed for inflation would be a great relief for us, for example. So, I mean, overall, the market, the client, the environment, the operating environment, what's been happening to assets? The stock has done very well over the last few years. Yeah, well, we released earnings for our fiscal year two weeks ago. We finished with record client assets of $1.7 trillion. Revenues were up 10 percent from last year's record to just over $14 billion for the fiscal year. Consumer sentiment is very strong. Exposure to the equity markets is near all-time high. Now, we don't have the volatility that the e -brokers have. We're a financial planning organization, so it's been relatively stable. But the engagement in the equity markets is strong, and client sentiment and client satisfaction with their financial advisors is near all -time high. Are you on the lookout for spreads to start acting a little bit weird? Yeah, I wouldn't be surprised if we see more spread volatility. I mean, we're almost near a multi-decade tight spread environment now. And that's pretty unusual. We were just meeting with our corporate bond trading team actually downtown last night that joined the Raymond James family three or four years ago. And it's a tough environment given how tight spreads have been and how low volatility has been. So going into the next year, it would be normal, I would say more normal to have a bit wider spreads and more spread volatility than we've had over the past I mean, I'm just trying to think, what kinds of catalysts would you imagine might widen that? Just natural volatility around, you know, we had some rumors come out, some issues come out in the loan markets, fraud-related a few weeks ago. We weren't, Raymond James wasn't involved in those particular loans, but that created some near-term spread volatility. So, you know, the credit environment has been near record good credit levels over the last 15 years. and it's not going to be a surprise to me over the next 5 to 10 years if we see more credit issues, which banks reserve for. I mean, we expect that we price it out. Yeah, we keep asking, where's the cycle? Yeah, yeah. So, you know, we don't try to time it. We make decisions over the next 5 to 10 years, and so we're not trying to time the cycle, but cycles will come. We all know that, and we just don't know when it will come. What's the level of bullishness from your clients? I think you said they were very happy and engaged in the market, But how does it look relative to some of the other periods where the market was near the highs? We had a great financial advisor dinner last night with 200 advisors. And I've asked all of them, what are you hearing from your clients? I spend about 80 percent of my time traveling and asking advisors, what are you hearing from your clients? And overall, it's very positive. You know, despite the headlines around tariffs and government shutdown, clients are looking through that. They have a long-term financial plan in place. A lot of it is fee-based assets that are being rebalanced. As the equity markets shoot up, they trim a little bit into fixed income. Within fixed income, there is some duration that is being taken now with the anticipation of lower short-term rates. So people are trying to fix some portion of their fixed -income portfolios. But overall, the sentiment is positive. Are there interesting demographic evolutions right now regarding the younger cohort or maybe that versus there's a nice piece in The Economist today about people over 70 and how much risk they're taking because they've done so well sitting on assets for decades now? Yeah, what we really see across the industry, because at Raymond James, we're really focused on higher net worth individuals, which on average are a little bit older. But when you look at the e -brokers, there is higher risk taking and even maybe higher level of return expectation that some of the younger generation has. I was with an advisor last night at dinner. He said he played golf with his friend and his son. And the friend's son, who was around 25 to 30 years old, he said, you know, the power of compounding can really work to your favor at your age. If you can earn 8% to 10 % a year over the next several decades, he goes, 8% to 10% a year? I earn 8% to 10% a week. And so those expectations need to be calibrated over time. And so, again, we don't see it in our system because we're not dealing with a lot of younger. I mean, some of these e-brokers have clients with $3,000 average account size, and they're investing in option contracts. Yeah, single day. And sports betting contracts, whatever they're calling them now, but it's sports betting. And that's not what we engage in in Raymond James. But over time, we're hoping that those clients have more aligned expectations with what return performance really looks like over a long period of time. So you said $1.8 billion in assets, according to the latest? $1.7 trillion of clients. Trillion. So what is the growth plan? Because we've seen a lot of sort of consolidation in the broker-dealer business and recruiting advisor teams. Is that how you will continue to grow? Yeah, all of the above. We're a growth-oriented firm. Last year, we had record recruiting results, recruiting advisors that had $421 million at their prior firms, which is up 21% from the prior year record. And the retention of advisors continues to be good. But we also are looking for acquisitions. We have over $2.5 billion of excess capital and cash. And so we are looking for acquisitions in the space that are first a good cultural fit, but also a good strategic fit. And it obviously has to make financial sense for both us and the sellers. Can I ask the requisite technology, AI efficiency effect on headcount in the years going forward? Yeah, our philosophy is we want to use AI and technology to do more with the same number of people. We're still planning and budgeting to grow our headcount next year. But we are using AI across the back office, middle office, and front office to gain more efficiency. So we are able to generate more productivity and efficiency with the use of technology. Why do you need a human financial advisor? Why can't an AI agent do the job? Yeah, our belief is that AI will actually improve and increase human and personal relationships. And so as you have complexity in your lives, We saw it during the COVID pandemic. A lot of people were doing things on their own. And then when you have a global health pandemic, you say, you know what, I need to speak to a professional who can actually help me navigate these decisions, help me not make emotional knee-**** decisions. I mean, one of the things I'm most proud of as I look back at the last year is after Liberation Day, when a lot of people were doing it on their own, they were selling out. We were actually, our advisors were helping their clients rebalance and actually invest more into equity. So instead of locking in their losses, they actually were able to participate in the upside after liberation. Yeah, it's different saying you've got to get in when a chatbot says it versus a human being, right? Yeah, or getting an email from a robo-advisor saying, do not panic. We will call you back as soon as our lines open up. So they want to speak to a human financial advisor that really knows them deeply, has personal relationships with them, knows their family, knows their children, knows what their long-term objectives are to help them navigate things during challenging times. All right, Paul. Thank you for joining us. It's really good to hear from you. Paul Shukri, the CEO of Raymond James. Appreciate it.