Good evening and welcome to Raymond James Financial's Fiscal 2024 Fourth Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristie Waugh, Senior Vice President of Investor Relations and thank you for joining us. With me on the call today are Chair and Chief Executive Officer, Paul Reilly; President 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 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 Chair and CEO Paul Reilly. Paul?

Thank you, Kristie. Good evening and thank you for joining us today. Before I discuss our fourth quarter and fiscal year earnings, I want to start by acknowledging the heartbreaking devastation our associates, advisors, friends and neighbors experienced over the last several weeks. With hurricanes Helene and Milton impacting communities throughout the Southeast including the St. Petersburg Tampa Bay area where Raymond James is headquartered as well as the Carolinas and Georgia, thousands across the region experienced unprecedented flooding, power outages, property damage and devastation. We enacted our business continuity plans and with our service workforce almost equally distributed across offices in St. Pete, Memphis and Southfield Michigan, colleagues outside impacted areas stepped in to ensure continuous service coverage. Even those affected associates and advisors continue to serve clients while facing storm and evacuations often working remotely from safe locations. The storm left a long recovery road ahead of us for all in their path. And while it's been difficult to bear witness to the pain and loss, I have also been humbled by the resilience of our associates, advisors and our community. Following the hurricane, the firm and leadership team have contributed almost $11 million to associate and community relief, including stipends to eligible associates and donations to the Friends of Raymond James, the American Red Cross, United Way Suncoast and other charitable organizations across impacted communities. In addition to granting associates the time needed to navigate recovery efforts, the firm continues to provide comprehensive resources and benefits, including information about financial support, immediate aid, relocation services and wellness benefits. Challenging times like these highlight the importance of always putting people first, which has always been the foundation of Raymond James. The preparation, perseverance and response to the storm reflect the long history of Raymond James service culture and I'm especially proud to represent our team today. Now moving to our quarterly performance. We achieved strong results once again, concluding another fiscal year with outstanding achievements. In fiscal 2024, we generated record net revenues and record net income showcasing the strength of our diverse and complementary businesses. We ended the year with record client assets, healthy pipelines for growth across our business and ample funding to support the balance sheet. We remain well-positioned to continue to invest in our business, our people and technology to help drive growth across all of our businesses. Beginning on Slide 4, the firm reported record fiscal fourth-quarter net revenues of $3.46 billion, net income available to common shareholders of $601 million, and earnings per diluted share of $2.86. Excluding expenses related to acquisitions, adjusted net income available to common shareholders was $621 million, or $2.95 per diluted share. We generated strong returns for the quarter, with an annualized return on common equity of 21.2% and an annualized adjusted return on tangible common equity of 25.8%, a great result, particularly given our strong capital base. During the fiscal quarter, we repurchased 2.6 million shares of common stock for $300 million, bringing our fiscal year total to 7.7 million shares for $900 million at an average price of $117 per share. In total, we returned nearly $1.3 billion of capital to shareholders through a combination of share repurchases and dividends in the fiscal year. Moving to Slide 5, client assets grew to record levels this quarter, driven by rising equity markets and solid advisor retention and recruiting in the Private Client Group. Total assets under administration increased 6% sequentially to $1.57 trillion. Private Client Group assets in fee-based accounts grew to $875 billion in financial assets under management to $245 billion. Domestic net new assets during the quarter were $13 billion, representing a 4% annualized growth rate on the beginning of the period domestic PCG assets. And for the fiscal year, domestic net new assets were $60.7 billion, representing a 5.5% growth rate on beginning of the period domestic Private Client Group assets. A key contributor to the net new asset growth is our continued recruiting results, which were really strong this quarter. To our domestic independent contractor and employee channels, we recruited financial advisors with approximately $100 million of trailing 12-month production and $17.5 billion of client assets at their previous firms. Including assets recruited into our growing RIA and Custody Services division, which we refer to as RCS, we recruited across all platforms, total client assets during the quarter of $22.3 billion, surpassing the previous best quarter which occurred in 2021 in terms of recruited assets. For the fiscal year, we recruited financial advisors with approximately $335 million of trailing 12-month production and $56.7 billion of client assets at their previous firms, recruiting in the year production and assets equal to that of a pretty good-sized firm. RCS asset growth is bolstered by both external joins as well as from internal transfers, and RCS finished the quarter with $181 billion of client assets under administration, up 36% over the prior year level. This quarter, we reported financial advisors of 8,787. Overall, these fantastic recruiting results reflect the continuous focus of the entire firm to ensure Raymond James remains a destination of choice for advisors. As we had mentioned in previous quarters, there are a couple of OSJ relationships in our independent contractor division who had decided to leave the platform. It takes time to effect these movements, but a portion of those assets left the firm in the fiscal fourth quarter, totaling roughly $3 billion of AUA. We anticipate approximately $5 billion of assets associated with these firms to complete their transfers off the platform in early fiscal 2025. Adjusting for these transferred assets, net new assets growth in the quarter would have been approximately 5%. Overall, we remain focused on serving advisors across our multiple affiliation options. Our robust technology capabilities and client-first values continue to enable us to retain and attract high-quality advisors. Total client domestic cash sweep and enhanced savings program balances ended the quarter at $57.9 billion, up 3% over June of 2024. Bank loans grew at 2% over the preceding quarter to a record $46 billion, primarily due to higher securities-based loans which grew 5% in the quarter as well as continued residential mortgage growth. Moving to slide 6. Private Client Group generated record quarterly net revenues of $2.48 billion and pre-tax income of $461 million. Year-over-year results were bolstered by higher PCG assets under administration due to a strong equity market and net new assets brought into the firm, reflecting positive results from our long-term focus and patience to hold the course in our capital markets businesses generated quarterly net revenues of $483 million and a pre-tax income of $95 million. Net revenues grew 42% year-over-year and 46% sequentially driven primarily by higher M&A revenues as the market environment became more supportive of transaction closings in the quarter. Market conditions seem to be improving and we are optimistic about our healthy pipeline and new business activity and M&A. The Asset Management segment generated record pre-tax income of $116 million on record net revenues of $275 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter, due to market appreciation and net inflows in PCG fee-based accounts, as well as modest net inflows into Raymond James Investment Management. The bank segment generated net revenues of $433 million and pre-tax income of $98 million. Bank segment net interest income increased 1% due in part to higher loan balances. The net interest margin for the segment of 2.62% declined two basis points compared to the preceding quarter. Looking at the fiscal year 2024 results on slide 7, we generated record net revenues of $12.82 billion and record net income available to common shareholders of $2.06 billion up 10% and 19% respectively over the record set in the prior year. Additionally, we generated strong returns on common equity of 18.9% and adjusted return on tangible common equity of 23.3% for the year. On slide 8, the record results in PCG and Asset Management segments for the fiscal year, primarily reflected a strong organic growth in PCG along with robust equity markets. Now, I'll turn the call over to our new CFO, Butch Oorlog to review our financial results in detail. Butch?

Thank you, Paul. Turning to slide 10. Consolidated net revenues were a record $3.46 billion in the fourth quarter, up 13% over the prior year, and up 7% sequentially. Asset management and related administrative fees grew to $1.66 billion, representing 15% growth over the prior year, and 3% over the preceding quarter. This quarter PCG domestic fee-based assets increased 7%, which will be an approximate 6% tailwind for asset management and related administrative fees in the fiscal first quarter. Brokerage revenues of $561 million grew 17% year-over-year, primarily due to higher brokerage revenues in PCG and fixed income capital markets. I'll discuss account and service fees and net interest income shortly. Investment Banking revenues of $315 million increased 56% year-over-year, and 72% sequentially. Fourth quarter results benefited from a significant increase in M&A revenues. Moving to slide 11. Client domestic cash sweep and enhanced savings program balances ended the quarter at $57.9 billion, up 3% compared to the preceding quarter and representing 4.2% of domestic PCG client assets. So far in the fiscal first quarter, domestic cash sweep balances have declined about $1.3 billion attributable to record quarterly fee billings. Turning to Slide 12. Combined net interest income and RJBDP fees from third-party banks was $678 million, up 1% over the preceding quarter. The bank segment net interest margin was down two basis points to 2.62% for the quarter, while the average yield on RJBDP balances with third-party banks decreased seven basis points to 3.34%, primarily due to the Fed rate cut. Based on current rates and balances, which reflects the September rate cut and the impact of quarterly fee billings, we would expect the aggregate of NII in RJBDP third-party fees to be down approximately 5% in the fiscal first quarter. Keep in mind, there are a lot of variables that could impact that estimate, including further rate actions which are not assumed. Turning to consolidated expenses on Slide 13. Compensation expense was $2.16 billion and the total compensation ratio for the quarter was 62.4%. Excluding acquisition-related compensation expenses the adjusted compensation ratio was 62.1%. Non-compensation expenses of $543 million increased 10% sequentially, largely due to the bank loan provision for credit losses, which was a benefit in the preceding quarter. For the fiscal year, non-compensation expenses, excluding the bank loan provision for credit losses, unexpected legal and regulatory items and non-GAAP adjustments presented in our non-GAAP financial measures came in just under our expectation of $1.9 billion. While we maintain discipline in controlling our expenses, we continue to invest to support growth across the business. Slide 14 shows the pretax margin trend over the past five quarters. This quarter, we generated a pretax margin of 22% and adjusted pretax margin of 22.7%, an increase over the prior quarter arising in part from the improved capital markets results. On Slide 15. At quarter end, our total assets were $83 billion, a 3% sequential increase, largely due to loan growth and higher cash balances primarily held in our bank segment. Liquidity and capital each remained very strong. RJF corporate cash at the parent ended the quarter at $2.2 billion well above our $1.2 billion target with a Tier 1 leverage ratio of 12.8% and total capital ratio of 24.1%, we remain well capitalized. Our capital levels provide significant flexibility to continue being opportunistic and invest in growth. The effective tax rate was 20.8% for the quarter, primarily reflecting the favorable impact of nontaxable valuation gains associated with the corporate-owned life insurance portfolio. Slide 16 provides a summary of our capital actions over the past five quarters. During the quarter, the firm repurchased 2.6 million shares of common stock for $300 million at an average price of $115 per share. For the fiscal year, we repurchased 7.7 million shares for $900 million. As Paul noted earlier, in total we returned capital to shareholders of approximately $1.3 billion during the fiscal year through dividends and share repurchases. As of October 19, approximately $645 million remained under the Board's approved common stock repurchase authorization. Going forward, we expect to continue to offset share-based compensation dilution and to be opportunistic with incremental share repurchases. Given our present capital and liquidity levels, we currently expect to keep a similar pace of buyback activity as we did during this quarter, or possibly more as we remain committed to maintaining capital levels in line with our stated targets. Lastly, on Slide 17, we provide key credit metrics for our bank segment, which includes Raymond James Bank and TriState Capital Bank. The credit quality of the loan portfolio remains solid. Non-performing assets remained low and relatively unchanged from the prior quarter level at 28 basis points of bank assets. Criticized loans as a percentage of total loans held for investment ended the quarter at 1.47%, up from 1.15% in the preceding quarter, primarily due to a small number of idiosyncratic loan downgrades. The bank allowance for credit losses as a percentage of total loans held for investment ended the quarter roughly unchanged from the prior quarter level at just under 1%. The allowance percentage has trended lower, largely due to a loan mix shift toward more securities-based loans and residential mortgages which carry lower allowance levels and now account for 35% and 20% of the total loan portfolio balances, respectively. The bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was largely unchanged from the preceding quarter at approximately 2% at quarter end. We believe this represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolios. Now I'll turn the call over to Paul Shoukry to discuss our outlook. Paul?

Thank you, Butch. You definitely covered the financials a lot better than I did when I was a CFO. Great job. Now on to our outlook. We are pleased with our record results this quarter and for the fiscal year. More importantly, we are well positioned entering fiscal 2025 with record client asset levels, healthy pipelines for growth across the business and ample capital and funding to support balance sheet growth. In the Private Client Group, next quarter's results will be positively impacted by the sequential increase of assets and fee-based accounts, which we expect will benefit asset management and related fees by approximately 6%. Our advisor recruiting activity remains robust, and we're encouraged by the number of large teams joining us and remaining in the pipeline. We are focused on being a destination of choice for current and prospective advisors, which we believe over the long-term should continue to drive industry-leading growth. In the Capital Markets segment, we were pleased to see significantly improved results this quarter as the market environment became more constructive for investment banking results and particularly M&A. Our M&A pipeline remains healthy, and we are optimistic that the consistent investments in our platform and people should continue to drive growth in fiscal 2025. And in the fixed income business, the market is still challenging, but we've begun to see some improvement in the depository sector of our business. With short-term rates decreasing and the yield curve steepening, depository clients are starting to be more engaged in managing their securities portfolio. Overall, despite the headwinds over the past two years, we believe our long-term patient approach along with opportunistic investments we've made have well positioned us for growth as the market and rate environment become more conducive for the Capital Markets segment. In the Asset Management segment, we remain confident that strong growth of assets and fee-based accounts in the Private Client Group will drive long-term growth of financial assets under management. In addition, we expect Raymond James Investment Management to help drive further growth over time. And while the entire industry has been challenged by high levels of redemption activity, the record levels of sales in fiscal 2024 are a testament to our strong portfolio management and sales teams. In the Bank segment, we remain focused on fortifying the balance sheet with diversified funding sources and prudently growing assets to support client demand. We have seen securities-based loan demand increase, as clients get comfortable with the current level of rates further supported by the recent Fed rate cut. Corporate loan growth has been muted as new origination activity in the credits we target remain low, but we will remain patient and we are confident that loan demand in this category will rebound as well. With ample client cash balances and capital, we are very well positioned to lend across the loan segments as activity increases within our conservative risk guidelines. In addition to driving organic growth across our businesses, we also remain focused on corporate development efforts. While we prefer to deploy capital to invest in growth we plan to maintain this past quarter's pace of buybacks or potentially increase it as we continue to look for opportunities that may meet our disciplined M&A parameters. I want to quickly touch on short-term rates because all too often lower interest rates are viewed as a negative for our business. I would just say that there are a lot of potential positive outcomes as well. Two potential examples are higher loan growth and better investment banking results across the industry, both which have been really low over the past couple of years. Again, this reinforces the value of having diversified and complementary businesses. In closing, we are well positioned entering fiscal 2025 with strong competitive positioning in all of our businesses and solid capital and liquidity to invest in future growth. I want to thank our advisors and associates for their continued dedication to providing excellent service to their clients. I also want to thank our fantastic leadership team, many who took on larger roles starting on October 1 as part of our long-term CEO succession process. I really look forward to partnering even more closely with all of our leaders and associates for many years to come. And of course, I want to thank Paul Reilly for developing the strong team over the past 15 years. What is reinforced in the most challenging of times including with the 200-year hurricanes that hit us in a two-week period is that we have something really special here at Raymond James. And my number one job when I take over as CEO is to do everything we possibly can to fiercely protect our culture and values. That concludes our prepared remarks. Operator, will you please open the line for questions?

Thank you. We will now begin the question-and-answer session. Your first question comes from Michael Cho with JPMorgan. Please go ahead.

Hi, good evening, team. Thank you for taking my question. I wanted to discuss the Capital Markets segment. I apologize for having two questions. It's great to see the positive momentum in the advisory segment. Could you share any insights on what you observed during the quarter or what specifically contributed to the quarterly results in advisory? Additionally, could you provide any updates on the pipeline as you look forward? Secondly, Paul, could you explain how your investments in people and platforms over the past few years relate to operating leverage going forward? Is there a way to estimate the incremental margins in relation to what you have achieved in previous periods of stronger capital markets activity?

The overall market has shown a positively changing M&A environment, influenced by interest rate expectations and significant capital that has been waiting on the sidelines. We experienced a considerable increase this quarter, and this trend appears to be continuing into the upcoming quarter. Many larger transactions are being finalized as those who have been inactive are now completing deals. In terms of activity, we can assess it through various metrics, but any speculation on growth rates would just be conjectural. While the last couple of years set a high benchmark that is hard to surpass due to their exceptional performance, I believe there is still potential for growth. I won't specify a number at this stage, but we certainly have ample productive capacity available.

As far as the margin goes, the margin portion of your question, for the year is 20.6%. And that's a pretty healthy margin, given the mix of businesses that we're in. Now capital markets really wasn't hitting on all cylinders until this past quarter's final quarter of the fiscal year. But we have puts and takes in our businesses. So I'd say over time, our goal has always been to grow revenues faster than expenses and therefore, grow earnings and margins beyond that. But in any one quarter, any one year, there could be a lot of puts and takes in our various businesses.

Okay. Wonderful. Thank you. And then just a quick follow-up on the balance sheet. I know you had a willingness or the willingness to ultimately grow the balance sheet and you've called out that corporate loan growth, particularly has been somewhat tepid. I'm just curious what you're hearing from clients and what ultimately drives more demand area, if it's really just simply lower rates or if you're hearing anything else in terms of that that piece of business? Thank you.

On the corporate side lower rates would certainly help, as companies take advantage of the debt that they could get at more attractive rates. But also going back to your last question to Paul, M&A activity historically has been a big driver of financing needs. And so as we start seeing M&A activity pick up, hopefully that will be a leading indicator for corporate loan demand over time.

Your next question comes from the line of Dan Fannon with Jefferies. Please go ahead.

Good evening. Thanks for taking my question. Curious on your outlook for next year with the non-comp expense you came in slightly below the 1.9 for fiscal 2024. Could talk about the areas of investment and maybe quantify growth in that non-comp, as you think about the next 12 months?

A lot of our non-comp items, as we've said in the past is really growth related, so investment, advisor, sub-advisory fees for example that grows with fee-based assets which have been growing really nicely, 7% sequentially as an example. And then the other expenses, we're going to continue to invest heavily in technology. If you look at it on a percentage basis, that's been our biggest grower consistently year in and year out and on an absolute dollar basis for that matter. And that's really to remain competitive and provide advisors the very best technology that we can, very competitive in the industry to help them find time and serve their clients more efficiently and effectively. And so technology will continue to be an area of focus. And then of course, as you grow as an organization and grow the businesses, you're going to need to grow the branch and office space and other aspects of non-comp to invest in the business.

Understood. And then the comments around the backlog for advisors sounded pretty similar to what we've heard from previous quarters. I was hoping to get a little more context maybe around numbers for retention in the period. And then I think the larger books of business coming on board maybe talk about the size today that you're recruiting, average size versus say a year ago?

I think that both of those are up is that the biggest change probably over the last few years is a fewer advisors in total but much, much bigger books. So not only was this year an onboarding of probably the largest books we ever have but also the same in the pipeline. So we've become a destination for very large teams. I think both because of our technology platform and our high net worth offerings over the last couple of years that we've developed have really taken off and made us a destination. So we're very comfortable not only do we have a very good recruiting year but we're very comfortable with the backlog that's in there too.

Your next question comes from the line of Devin Ryan with Citizens JMP. Please go ahead.

Thanks very much. Hi, Paul, Paul and welcome, Butch. First question just on – coming back to the balance sheet just lending capacity as demand picks up here. So you have obviously plenty of capital. You seem to be holding at least a couple of billion dollars of excess liquidity on the balance sheet. Then I think you have $18 billion of cash at third-party banks. So I appreciate, this isn't going to happen overnight and you're not going to force the lending, but how you would frame the amount of loan growth that could come from just remixing the current balance sheet? And then how much of that third-party cash you guys are comfortable moving on to the balance sheet over time with the assumption that deposits are stabilizing to maybe starting to grow a bit here?

Devin, you addressed the question by pointing out our significant cash and capital reserves. What's been constraining our growth is our consistent risk appetite, particularly maintaining a low risk profile on the commercial and industrial side, where the spreads and demand have not been sufficient. This situation has been further influenced by the lack of merger and acquisition activity, which has limited our lending opportunities at the spreads we prefer. However, we are ready to invest when those opportunities return. On the other hand, the small business loans saw a decline in demand as interest rates increased, but we have noticed an uptick in small business loans following a recent drop in rates. Clients seem to be adjusting to these rates and are becoming more active. We are now observing the commercial side to evaluate potential risk and reward regarding the spreads and risk levels that we are comfortable with. For small business loans and mortgages, the key factor is the clients' appetite. We are prepared and have ample cash available, so we are not trying to restrict the bank's growth. Historically, we've experienced quarters of significant growth followed by others with little to no growth, depending on our assessment of market risk appetite.

Thanks, Paul. I appreciate that. I guess where I was going was more that you have $18 billion of third-party cash you want to have some liquidity parameters there I'm sure for risk management purposes. So like are you comfortable moving $5 billion of that or $10 billion of that? Like what's the threshold that we should be looking at? I know there's been thresholds over time. So just curious how you guys think about that and where you're comfortable.

Well, I mean, the major thing that drives that is we offer clients FDIC insurance up to $3 million through the multi-suite program. And so we want to make sure that we avail our clients to those third-party banks to maximize their FDIC insurance. Not a lot of other firms do that anymore especially firms with affiliated banks. And so we think it's important to protect to give that client that type of protection. And so that would limit all $18 billion for example to being deployed in our own bank probably would limit half of that I would say something in that range from being deployed to our own bank to give the clients the FDIC insurance that they could get to the multi-suite program.

Got it. Okay. That’s great color. Thanks, Paul. And then a follow-up I'd love to ask about fixed income brokerage. I think performing reasonably in an environment that's been challenged. I think you guys highlighted starting to see some light at the end of the tunnel with depository clients. So just trying to think about where we could go from here. If there's a kind of a framing of whether it's historical levels of revenue? Or how we should think about like how maybe much that part of the business is under punching relative to its potential if liquidity builds in the system and banks are more active? Like just where that could go relative to where we currently are?

I would say the periods during COVID with very low rates were record levels for fixed income brokerage and created an ideal environment for that business. There was a lot of excess cash in the system, short-term rates were nearly zero, and there were advantages to taking on some duration. A reasonable expectation for a healthy level of performance over time would be somewhere between where we've been over the last couple of years during COVID. As we continue to grow the business, increase market share, and explore additional opportunities like Sumridge, which has been a great addition beyond the depository space, we are diversifying and strengthening our business further. We will keep looking to enhance our capabilities, and as our balance sheet expands, we will use it wisely to support that business. Overall, it remains a growth area for us moving forward. However, during the COVID period, the elements of the depository business were perfectly aligned.

Yes, got it. Okay, that’s helpful. Appreciate you taking all the questions.

Thank you. Your next question comes from the line of Brennan Hawken with UBS. Please go ahead.

Good afternoon. Thanks for taking my questions. So, I wanted to ask about advisory. So, it's one of the themes we've been noticing and has been sort of nagging has been that sponsors have been sort of slow to reengage. But I know your advisor business has a lot of leverage there and certainly encouraging to see that strength. So, hoping you could get maybe a little more color around what you're seeing. Is this a good sign that sponsors are beginning to reengage in the mid-market space? Or were there some lumpy results that benefited the revenues?

There seems to be a general reengagement across many sectors, which is a positive indicator. We've generally maintained a conservative outlook regarding our backlog, especially when the market conditions weren't favorable. However, we're now noticing increased engagement. This isn't just limited to existing inventory; we're also witnessing new discussions around potential mandates. While I can't predict an overnight boom, the current market appears more favorable, with heightened interest from both buyers and sellers. For the short term, we perceive a fairly robust and recovering market. However, it's important to note that a single quarter may not reflect a long-term trend, but for now, our backlog looks promising.

That’s fair. Thanks for that Paul. And then ESP given where the yields were on that product I would expect that in the recent Fed cut that had a very high beta. Should we just assume that that's a roughly 100 beta product as we see cuts? And have you noticed any change in behavior or engagement since yields have started to come down around that offering?

I would say ESP balances yield similarly to money market funds. This usually represents a product with a 100% deposit beta. We also have various balances and opportunities in the bank segment. Overall, about half of our total bank segment deposits and suite balances are higher-rate, higher deposit beta types. This provides us with significant protection against decreasing rates, as most of our assets are floating rate. What was the other part of the question?

Any changes in engagement with those higher yield products as we've seen rates come down?

Not really. I think a lot of the cash reinvestment activity we are slowing down and decelerating well before the rate decrease. And so we haven't seen sort of an acceleration or deceleration frankly that's notable following the decrease.

Okay, thank you. Your next question comes from the line of Steven Chubak with Wolfe Research. Please go ahead.

Hi good evening Paul. Good evening Butch. I wanted to start with a question just on the spread revenue guide for next quarter. Now, the growth in sweep deposits was encouraging even inclusive of the fee billings. Just wanted to drill down to some of the inputs that are underpinning that lower spread revenue guide? Maybe more specifically just what deposit pricing changes are embedded in the guide? And does it contemplate any favorable cash seasonality which we typically see around year-end?

Yes, I mean we've been accused of being conservative with our guidance in the past particularly on this guidance. So, hopefully that proves to be the case this time around because loan balances are continuing to grow. We're not really factoring in ongoing loan balance. This is more of a snapshot type view in terms of what the full run rate of rate changes would be to both the BDP fees and NII. And so, to your point, balances can increase throughout the quarter whether it’d be cash balances but hopefully more loan balances and that could offset some of the reduction in rate and the sensitivity around that. And I just gave you the breakout of the deposits that are higher yielding and higher deposit beta versus the ones that are lower yielding lower deposit beta. And so that's kind of what went into our math.

Understood. And for a follow-up just on, I wanted to drill down to some of the earlier comments you made on net new asset growth in the pipeline. For both you and industry peers, this past year we did see the moderation in industry flow trends. I understand you struck a positive tone in terms of the pipeline of new advisors but just trying to gauge what drove the slowdown in industry growth, whether we should interpret the comments on the pipeline as supportive of an acceleration in that flow rate? And which channels are seeing the fastest growth across the platform given the omnichannel offering?

It really depends on the perspective taken regarding our RIA segment. RCS has shown the highest percentage growth, aligning with industry trends and growing rapidly. Looking at the total figures, a few years ago, the independent channel was dominant, but this year, the employee channel has taken the lead. Previously, independents tended to grow faster in both up and down markets, but we no longer observe that trend. It's now about meeting teams that prefer an affiliation option, and the employee channel is currently leading. I believe we will see some improvement in the independent contractor model eventually because it is cyclical. The employee segment has a robust backlog, as does RCS, which is encouraging. However, it is a process to get people to commit and come on board, so while we can't predict the timing, we remain optimistic about even better results.

Your next question comes from the line of Alex Blostein with Goldman Sachs. Please go ahead.

Hey, guys. Good afternoon and Butch welcome to the call as well. I wanted to follow-up to Steve's question around cash trends. Is it possible to unpack sort of sources of growth you saw in the third quarter, your fiscal fourth quarter across the cash stack, and curious whether it is really kind of abating of the sorting? Or are you starting to see more cash coming on to the sidelines as net new assets coming in?

We continue to experience significant growth as a business. As we expand and onboard new advisors, they also bring in their clients along with their cash balances. This growth has been occurring over the past couple of years, but it has been somewhat obscured by a high level of reinvestment activity. As that reinvestment activity slows down, we expect to see clearer growth resulting from the addition of new advisors and their clients.

Yes. That makes sense. So your point is kind of like look from this point on like your cash balances are likely to grow and trend more in line with net new assets like we've seen in the past?

Well, you took my comments a couple of steps further but I'm not sure we're willing to declare a total end to the cash reinvestment but that's the dynamic that you've seen over the last, call it, four to six quarters as that dynamic has decelerated.

Thank you. And then a quick follow-up on the buyback. I just want to make sure I'm interpreting your comments correctly. So, $300 million share repurchases this quarter a nice step-up. Should we assume that to be kind of run rate quarterly pace of buybacks from here as well or absent, obviously, like M&A or anything like that? And if there are opportunities to do more, you're likely to do that as well? I'm just trying to understand what the criteria are from here for trajectory of share repurchases.

I mean to your point, we'd much rather use the capital to grow the business whether it's through organic growth acquisitions or balance sheet growth with loan growth. And we are optimistic on those fronts as well. But to the extent that we're not using the capital and we're generating pretty good earnings then we want to make sure that we limit further expansion of the capital ratio. And that's where we come up with the pace that we've been out here for the last quarter or maybe even a little bit more, depending on all those factors and price and other things that we want to show our commitment to limiting further capital ratio growth given how strong it is now and it is over our target of 10%.

Your next question comes from the line of Bill Katz with TD Cowen. Please go ahead.

Good evening. Just coming back to the margin discussion. Just wondering, if you could unpack a little bit from the top-down view of driving operating leverage to maybe the segment lines. So if I look at maybe the private client business and the capital markets business in particular, the margins there improved reasonably strongly particularly in capital markets. So how do we think about the marginal margin in those segments? And then coming back Paul to your comments, Paul Shoukry your comments of 22% margin is pretty fulsome at this point. So how do we think about the incremental margin at the segment level and then that translating into the overall margin outlook for holdco? Thank you.

How many more hours do you have tonight? Yeah, I mean I think listen to the extent that revenues grow in our segments then that should result in margin expansion for each one of our segments. So interest rates and spreads play a big role in that both at the private client group segment and the bank segment. And we just had a 50 basis point reduction. Now I think we can over time offset that impact by growing the balance sheet at the bank as loan demand comes back. So over time I think we can do that. And then to the extent capital markets margin improved this past quarter, but it hasn't been exactly great the first three quarters of the fiscal year. So the incremental margin when you're operating at a loss is pretty significant especially with the significant revenue increase we had in the segment this quarter. So I'm just saying over time what I caution the Street from doing is just assuming that the margin gets better in every segment because everything goes in the right direction and then that generates a substantially higher margin than we generated this year. I think that's maybe not factoring in the puts and takes that are natural and are diverse and complementary businesses.

Okay. That’s helpful. And then just one follow-up just coming back to client cash for a moment, sort of, seen this as some of your peers you've seen a big pickup in client cash into the end of the quarter and some have pointed to just some fixed income liquidity maturities coming in, some uncertainty around interest rate expectations given some of the moves by the Fed, and obviously election coming up in just a couple of weeks from now. So are you seeing a structural shift in the client cash? Or is this more of a timing element on asset allocation that is somewhat pumping up client cash all else being equal and could move back into more AUM type of levels and not so much on the NII side? Thank you.

I would say our asset mix has been remarkably consistent. Advisors have done an excellent job navigating different market and rate cycles, ensuring that clients' asset allocation remains aligned with their long-term investment goals. For instance, equities currently make up about 60% of our assets on an ex-rate basis, and this has remained stable within two or three percentage points over the last several years across various market conditions. The adjustment you've observed over the past five years has primarily occurred within the cash category; in a low-rate environment, there tends to be more transactional cash, while in a higher rate environment, there's a greater amount of investable cash. That’s the main shift we've seen over the long term. Recently, the difference over the last few quarters has been the slowdown in sorting activity, and now we are beginning to see growth from new advisors bringing in clients and existing advisors acquiring new clients.

Thank you. Your next question comes from the line of Kyle Voigt with KBW. Please go ahead.

Hi, good evening. Paul, you noted a continued focus on corporate development efforts and remaining disciplined there. Just curious if you can give us an update on the M&A environment. Are you seeing more or less opportunities today compared to earlier in 2024? Is the rate certainty helping to narrow bid-ask spreads for potential targets? And any areas of focus we should really be thinking about in terms of the Wealth segment? Or are there other areas you're considering for inorganic growth?

Yes, we look across all of our businesses for growth. We really believe we're positioned for the right opportunities to grow. And I'd say, our corporate development team has done a great job of bringing opportunities to us, right? So, we look at a lot of deals. Some, we just don't like the deals, the way they fit in our environment, some are not culturally there. And some we like, and we just can't get the terms on what we think is the long-term price. So, we're constantly looking, we take them very seriously. We're, as you know, a conservative buyer and that will be competitive, but we won't stretch way out to buy an asset. And so it really just depends when they click, and that's the hard thing on timing. Like a few years ago, people say, well, you guys aren't going to buy anything. You're hoarding all this capital and we closed four deals in the next few months. I mean, it just took a while, and they just all happened to hit around the same time. So, we're still in that mode, but we're not going to do a deal just to do a deal. It has to be something that fits and makes sense for the firm and shareholders.

Makes sense. And for my follow-up, maybe just a question on the balance sheet. On the AFS portfolio, I know that continued to run off in the quarter. I guess, with some more clarity on the rate environment in terms of the direction of travel with the Fed and still with significant excess capital. Is there any desire to change your stance on that and begin holding that steady or growing those balances in fiscal 2025? Or do you anticipate letting that portfolio continuing to run off?

Yes. We let that portfolio grow modestly just really to accommodate client cash balances when the banks during the COVID period didn't really want those balances. And so now all we're doing is getting back to sort of a normalized liquidity level at both banks and primarily at Raymond James Bank, where we were accommodating those balances. So once they get to that normal state, then we'll maintain the balance for the securities portfolio. Banks typically need to run at maybe around the 10% to 15% liquidity ratio between cash and securities. And so Raymond James Bank is still well above that. And so we'll let those securities run off, and then once they get to that type of range, then we'll maintain the balances. But the point is we're not taking bets on duration, we're not taking bets on where the Fed may or may not take rates. That got a lot of our peers in trouble. And so we want to just stay focused on serving clients and keeping the balance sheet as flexible as possible for anything that the market or the interest rate environment may bring us.

Thank you. Your next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.

Great. Thanks for taking the questions. I wanted to ask about the PCG business in Canada and the U.K. today? I know you've done some acquisitions there over the years. Just curious what you're seeing in terms of organic growth contribution over the past year versus, say, fiscal 2023? And then Canada and the U.K., maybe you could talk a little bit about some of the initiatives there to accelerate organic growth and improve scale and profitability?

It's a bit of a mixed situation for different reasons. The Private Client Group in Canada is experiencing significant growth in recruitment. When we acquired that business, it was primarily focused on capital markets, but now the small Private Client Group has become quite robust, similar to the U.S., with a substantial capital base continuing to attract recruits while maintaining healthy profit margins and good growth. We're using the same platforms here as in the U.S., such as AdvisorChoice, and they've performed exceptionally well, allowing us to grow from the smallest to the largest banks, which is quite rare in Canada. We consider ourselves a Canadian firm with a U.S. parent, and our operations are functioning very well. In contrast, the U.K. is still in the integration phase following a recent acquisition, resulting in flat growth. As we work to integrate people and systems, progress has been slow, but we expect growth to pick up once the integration is complete, although it will impact a smaller business, so the overall effect will be limited when consolidated.

Great. Thanks. And just on the RCS business, maybe you could help remind us just in terms of the economics there, how that compares to your traditional channel say for $1 billion of assets. Just maybe, you can walk us through the P&L impact across revenue?

Yes. What we've disclosed so far, so maybe it's something we covered at Analyst Day or something, we haven't really disclosed in detail, but we really get an asset fee there. So if you looked at pure RIA, the way they measure margins, they're higher margins. If you look at our net on basis points on assets, are lower. So, part of the service model is different too. You don't have all the supervision and compliance requirements that an RIA has those responsibilities or certain things that they do. They are clients of ours, their clients are their clients, they're not our clients. And outside of some AML responsibilities and just oversight to make sure they have a process. There's a lot less cost that goes into it, although, we're a higher service model. So it's not easy to give a quick answer, but it might be something that we can show in more detail at maybe the next Analyst Day.

Just any sense ballpark, directionally PBT margin, revenue ROCA, just how to think about that versus the firm or versus?

It's complicated. Again, as Paul said at Analyst and Investor Day, would be a good time to talk about the margin, on a P&L basis is actually higher, because the attachment revenue that you book is much lower whereas in our other businesses, we gross up the revenues pre-payout. And then the ROCA just varies dramatically depending on the asset mix that the RIA has and the pricing structure, because there's different pricing structures depending on the RIA as well. So, we can get probably more time than we have now to discuss, but Analyst and Investor Day is probably the right forum for that.

Great. Well, we appreciate everybody's attendance and we're very proud of the quarter, but we're already working on the next quarter because that's just what we do here. And Butch has done a great job, and we've had a great transition and we'll continue to do that over the next year. So appreciate you joining us and we'll talk to you next call.

Thank you. And this concludes today's conference call. Thank you all for participating. You may now disconnect.