RJF - Earnings call transcript Q2 2018 | Raymond James Financial, Inc.

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Operator

Good morning, and welcome to the earnings call for Raymond James Financial's Fiscal Second Quarter of 2018. My name is Ashley and I'll be your conference facilitator today. This call is being recorded and will be available on the company's website.

Now, I will turn the call over to Shoukry, Treasurer and Head of Investor Relations at Raymond James Financial.

Paul Shoukry

Thank you, Ashley. you joining thank call. on and morning, all us for this Good appreciate in interest time James We and Raymond your Financial. Executive our After I'll I and Reilly, Financial turn disclosure, Jeff Chief Chairman the call our read over to Officer. the Chief Officer and following Julien, Paul

for may prepared line constitute they forward-looking open remarks, made statements their ask the statements. Certain Following to during operator will the questions. this call

ability financial developments to litigation, information include, recruit concerning limited future results, but acquisitions, business objectives, and economic statements financial our Forward-looking integrate to, prospects, successfully of and advisors, or are strategic results conditions. not anticipated general regulatory

results identify such In statements. forward-looking that most are statement that the words verbs consider necessarily Please differ be our as subject our plans as statements in forward-looking and actual there to as XX-K addition, are website. XX-Q available to We on or which that from in future events the urge statements. conditional no can will forward-looking believes, you to and subsequent expects, recent those future described expressed forms depend note other any not on risk well assurance intended Form are risks materially

also found pertinent in call, of the schedule of be use financial today's our provide measures non-GAAP to release. information non-GAAP these we'll During business performance. to GAAP comparable to may measures measures view management's reconciliation our certain ongoing A the press most accompanying

Reilly, Paul? over call Paul the Chairman James CEO turn I'll to that, with of and So, Raymond Financial.

Paul C. Reilly

welcome Tampa Lightning. home The Paul, and Bay here call welcome to Thanks, to the and Great. the of

not warmed but don't why It is country the folks Boston all the week. So, down. rest look the in coming week. all of I here want the welcome to next yet, quite are to the up forward know XXs I who is

start. me let So,

quarterly but net that prior with lot back in year pleased bit later typically quarter. of the the really factors results have the up billion, of quarter our $X.XX the $XXX.X and need a call. reflect over over first little on and which quarter, income about we'll We to prior the I where talk had that net we seasonal think overall a you of XX% impact I'm us, revenue XXX% up calendar quarter over year's million, preceding X% had record we record quarterly of of Overall, income you the First, X% and over new to the so had We quarter, going had up and adjusted versus item our quarter. we no in had over GAAP we're expense quarter, unusual GAAP over in preceding the preceding I'm some to have was our adjusted use net in from charge the remember we the Tax that non-GAAP quarter. tax prior adjustments preceding legal quarter XXX% XX% but net But the again the comparisons numbers Act income. versus an our then the year

percent have taxes factors starting may income bit, billings, couple paying drag that get those reset Jeff expenses, quarter, little really we a of and that the seasonal the our and had fewer start impacts So, that there's we so in And first, days days interest items. FICO fee starts this couple our fewer on FICO as into we quarter. a a

statements, have and of ran our expense our in mailing year-end advertising flight quarter. We this we a also

Bank. for record the the this biggest Raymond Group are revenues drivers, in Raymond rest Management, We the record expenses and two Bank quarters profit James net Private Group, Asset those for the usually over quarter, income quarterly for which our and pre-tax Private and had Client So, year. are Client James of elevated

our intangible on we intangible quarter, exclude to both significantly capital, return capital. A of our most tangible had impressively equity, raise a our return lot think and includes firms peers. compared XX.X% and on ROE which I the would for equity

if outperformed we've most So, that our of look I at competitors. that adjusted, find ROE you'd think you

common no all no have we so equity, also there's equity, adjustments to either. preferred We have the denominator

More records; record under assets drivers, we of assets under importantly, billion; financial at $XXX.X the a ended of maybe client billion. had we administration up management our quarter-end with key at $XXX.X

Our number X,XXX, and up down were XXX assets Client of year-over-year financial grew was X.X%. the S&P XX even though advisors, sequentially. Index

half last six $XXX of the $XXX.X So, and year, so if million billion record months, revenues up had net [XX%] of XX% (sic) last six months. look our versus year's fiscal first you [$X.XX far of over net year's for first the we year, billion], income or (sic) first XX%

employee, again, very, segments, the had quarter. all Group you We divisions, recruiting a levels, We've revenue had pre-tax. great so are and lot the retention very think extremely growth. recruiting little So, our really good division, a has institution our our but it's over recruiting, net recruiting focused is up And the Private Client trended on even give had our last been on which to has all RIA I'll of financial growth. channels key year's our recruiting we independent, a color record strong.

compared thing, lot target the the advisors bank But the who that's very any are trailing closed XX well. committed which transaction, to join it expansion. have groups. last which of in transaction have We XX% I we or those European to in areas kicked Northeast think, showing then, a the and for other XXs really months, and XX we the been is The Brown, West especially is client extremely joined is of since retained Alex. private have or in good

Raymond and James Scout had Group ultra-high-net-worth performing trend as of of investments, clients, our They've our had alternative We the Management, to of expanded masses. lending clients, a kind We've so So, well. bolster steady its Asset we've platform and able after and great successful those continues private start. over within In a not But our underwriting. equity revenues, great solutions, year great financial in, those despite ultra-high-net-worth had asset time well to net for also our our but had been focused to really integration products still record of we've conservative growth. robust of types grow the really management for of also helped under has They're off Client very settling a family S&P into traction and up this the billion, of very, and we fit growth on $XXX.X X% the Reams. assets very drop. a Private period, sequentially, done they've

in If assets added November. you remember $XX transaction, it billion that last had

the increased under is basis revenues Raymond ended and up last those so that in an go sheet not up on and at the we with didn't James really driven can over look Bank's probably largely asked you very, over XX growth underwater Bank Loans managed XX of impact had you we increased accounting accounts our even growth Bank NIM quickly. had Bank And funds up is if little and helped PCG of why, there's up X% financial adjusted disclosures, by a some growth billion, Our – loan pre-tax. securities though in charge, up last year-over-year up day, rate year, spread points look very balance rates. sheet you $XX.X And were our assets actually you at be that to interest balance Fed and over for at mix that bit anticipate see X.XX%, bps if and by the year, of in continuing. they rates be our categories. last a major over forced loans, and XX load the up this betas. they're would look liquidated. XXX%, by at management the both net sequentially driven we And if why look of short-term rate even increase fixed at deposit if Bank lot quarter to XX% utilization had the all earning, shows you loaded lower-than-expected in of year, sequentially, securities, LIBOR, a average if XX though and and the we've record has who've as

been any declines we felt a you to The a of loans. assets of big help loans certainly the look had Markets a Bank's metrics total Capital told both to in nonperforming M&A, percent we take and sheet. we as economic and in had we revenues, banking and in sequentially. pipelines credit importantly, good the balance is that's percent We a criticized challenged. Most were add slow area of the continue we year-over-year asset start total where as improve rebound long-term did decline but kind investment a we March had that the asset So, in as a

range, II In X fixed institutional maybe for as yield market and commissions. people of has XX% income certainly equities rate less more quiet you'll flattening a those industry-wide the as has than over-the-desk see low weaker volatility has think an and been probably commissions, curve but has a MiFID is the been percentage this lot and about impacted certainly challenge for the report impact However, trading market volumes. the already on XX%, where or in us non-bulge bracket had firms I

quarter. look income yield with you I fixed us during forward, maybe week, cautious. curve, That if the in but So, maybe think both at commissions, still movement help we're flat last and they're going the down institutional the equities

good quarter and shape. our the look I'm given second pleased So drivers very with that, results for in key our

more some in So, it line turn color items. to for the Jeff with that, Jeff? I'll over

Jeffrey P. Julien

Paul. Thanks,

a As I only from the consensus this bit about of relatively model, there the talk few. would although usual, say, I'll little were some variations quarter,

revenues both. pretty of we most reflected, much your came As notes on earnings to in and very close consensus already

I the bigger commissions does commissions, also, consensus. the fee-based of billings securities be were already starting side. X% quarter, and the commissions fees, and miss as Paul was weak, the quarter. was on equity continue up the to PCG, a fixed but you some which the the fee institutional But to factor extent. little mentioned beginning short income think On a transactional know, fees, both the it the impact weak the versus assets

you where item, up of release, the line fee-based assets end can PCG that they at versus were are the quarter. as on forward Looking the in press see preceding PCG, X%

that of we again, surge little of in lot saved March the So, releases for bit headwinds a drop-off billings, quarter, a late I we in toward but investment a the got know the The once in statistics M&A the in S&P revenues. on quarter guiding tailwind total were banking operating the we terms despite banking of our quarter. investment line, got, throughout a the

the on particular roughly offset on beat the and So, the that securities commissions line shortfall fees.

banking we're For $XXX for the last the we've revenue million we quarter, match hopeful little type stronger although the that has on forward the which investment can been mentioned line, year, historically little as to got a year, the we line, last us. looking year's quarter, has historically a we're for work I'm of in second which do half – But been sorry, second bit that perhaps Scout optimistic still still advisory are is of prorated can we it by revenues. and on little the The expected. terms are the we same as in by level quarter Reams fees. the course Paul days hurt days. assets shorter achieve a of bill year. things We performing Even a basis, the got here. investment though mentioned quarterly of that some over

had and advance, asset. arrears, impact that which XX% billed individual PCG-related line generally But in assets over the item of billed all accounts. accounts, item average XX% that the fee-based in based of advisory about the fee quarter investment on institutional an institutional assets, other the XX% in is, that – institutional are particular the the our of mind in course bear fee-based revenues, all are particularly for billed The are are the type

December, have the volatility actually if of obviously had assets March at on And billings a so, of end basis, at been could end an the average per then the assets. the versus account looking impact March down you're so on in the

gives in Couple as administration for clean change total under assets components interest under the as quite release, or net margin. press at first X.XX%, page assets we Bank's that a $XXX interest in factors. to net wasn't XX, a it surpassed NIM a management. So, We details which of that, the put the of The the now income the in mentioned quarter. million combination line, time page Bank the was Paul just

partly the Paul asset. driven increase sheet, You cash can on has rate priced the was off mentioned funds, somewhat is a funds three balance are having see it low-earning one the less on that page off some and versus LIBOR And some that Fed which on month, deposit loans that off generally Bank's faster the the of than the the up LIBOR, side. month, by moved Fed

there that. guidance now. the that's good factors. I We've higher it think a looking enjoyed a the of from benefit because end we're trending like probably those forward bit been still for think that's So range a we range, giving at I the little toward of X.XX% moment still you X.XX% of of that good probably although looks a range, But range to

interest The the competitive impact be full other rate the general our reflected in we tough think is as need this at look is December answer. part as We of overall of XXXX which to week increase. to Deposit groups. income the peer we beta with staying detail. of results corporate a We're all the every one

of March for this the the relative million tune unless we've rate will that competition through deposit in we million to that to where June so. And further time. again increase to very passed in be quarter still far, earnings it actually the future, near we beta the of So example, clients, increase, move dictates $XX XX% rate $XX to low or of March would assist higher the at thought is but

So, on low. beta. it's It's a historically hard deposit call

One cash steady to and don't yields. alternative money decline who funds factors wouldn't that's what put buying related been fairly of press I a on things decline. for decline, little now it other products release as a you there call here, CDs client we rapid the sweep market cash purchasing and in cash, have that better but are it's a balances as some see they're or permanently would that's in can total the we more allocated cash steady and to we clients a

financing something keep we on of an for the it's Bank's is cash growth. primary balance, course, that eye source is our So,

the the comp info averaged mainly despite comp give $XX quarter our side, with almost a projects to that as fees comp think variable for preceding XX%, was target, little associated the of in Communication we've the line of coming guidance and and have our to from is the which it. noted, reset in But and On which spreads processing the ratio we at XX% consulting below interest million. and could a came I is benefits XX.X% which things. $XX FICO credit with of that online to of big timing higher very everyone incurred jump being year-to-date million kind high-XXs some quarter predominantly

summary million shareholder all XXXXs of of the probably This our cash the management seasonal $X All is Paul quarter, which XXth of statement annual as their all mentioned, accounts million then to for meeting. activity to our those of capital and a to get $X factors was impacted obviously tune account. we summarizing mailing by access, our of related statement the for the year mailings had our

factor. all somewhere $X things million and that March cost this of in so those is was million So, $X quarter, a seasonal hit that between

with rest forward, for type our Going the think quarter still line, million I comfortable to high fiscal million we're $XX year. for of $XX that a this guidance

a be That's The to going hit. lumpy took was a that jump little other little conferences development. business line when

December We of sort that trips and the in between quarter. nothing have conferences virtually

look increase, like we other looks big but it in quarters. you have the conferences each sequentially, when of a So,

you that Those often. of thing on other the flights Golf noticed see I tournaments to run the watched did The commercials. who we Channel, may most was them which some happen have where is golf them of

good for We that of $XX running million the still I is this at think, fiscal So, our probably the of commercials of a for be quarter least. line, guidance every year roughly was quarter. flights rest won't

the particularly And there, press upward that given but get quote loan the to the Bank we light of three a aside downgrades, think when don't we does in little do payoffs, general provision in to the and quarter. might rapid, upward was activity growth mentioned hike upgrades, a quarter add we XX $XXX the you still all for one did reserves line and an environment sales, five-year is than you was with item. a release, I add and basis So, in loan maybe that December as point rate of trending, quarter to million about related think the some just net other rapidly as the from we're things every expect, and up line quarter, higher the loss loans. interest trending particularly variety during also it

factors that on close. service rate impact it rate debt so the particularly environment. their increases some don't XX%; come was credits equity good opposite corporate-owned X environment plus a that market of still year, of XX% reasonably release, the have factors. certain the assuming you to rising in and whatever a a for our requirements the our range Couple will those market, rate we is a we a we are our rate, still directions. that And I variety reserves be are than it for still the So, In metrics; rate page the where we in COLI. XX.X% in has sensitive that kind with works of if of concern, the that of life remember, some of on margin XX.X% segments quarter other added answers But up on to to lower that environment, There's ended declining and Tax has tax PCG, are probably borrowers versus interpretations insurance that increase can equity press for for the cetera. of we rising have that. our which on for don't lower that about in XX% the related will et arms totally December. or rest minus of, But and tax did around that impact think

flat that as in counts of segments. the challenged and just had Markets firm the set you is contributed all income, profits benefit well had underwriting of of may they're majority slower And yield in margin really what resulted partially the also that may do financial in other quarter. that of are particular various division. in has seen may trading that's be and slightly Paul year. divisions environment segment terms we've not mentioned we in growth a have segment as less commissions may in That increase little would side. that target for that a XX% of little lot advisors and Capital our weaker the the remains below tax of or remind the resultant capital a overall credit business to we rate an fuel administration the repriced but and increases. to been process curve talked as and be Equity that above rest XX% pipeline about in the this the continues particular target, a FA weak X%, three which our tax continue in the assets for under to less to They this weaker commissions interest nicely bit a the drive still they us volume, are both from reasons. equivalent revenue Fixed rebuilding valuable. their funds, the still in as to credits So, be lucrative the only markets,

their direct them March by That were much I a sync. couple and between nice the correlation revenues but AUM RJ NIM, We about S&P of late see mandates time and measurement. so gave it's draw didn't XXX just Those the Bank, loan really the about was pre-tax. record in remember revenues assets, but that's won to decline talked for Management have somewhat despite the talked point largely revenues can't market a may to in that a volatility, there. revenues. contribute quarter quarter, And growth we big Asset the in impacted up you

look in comparisons, when the performing of from segment growth So, well, revenues year-over-year the particularly three three of four pre-tax basis, see very four you at a double-digit on both nice the you and segments.

this is basis that we as and targets new of and for XX% our overall a get budget is coming the XX.X% surpassing year. of nicely an the XX.X% And hold target here into year-to-date which year-to-date And also for well comments, corporate typically coming again, for as the we'll adjusted quarter Just the margin XX% for last current sort where the XX.X% quarter, adjusted season likewise, couple other goal environment. unveil pre-tax Analyst reset had the for for we above type the our set the we year. Day, targets quarter ROE

all lastly, the we fact in climbed ratios the that our quarter, really net of during I'll say capital little and a total very is nice the which growth. boost sheet because we balance income equity way So, had boosted had

change the during assets didn't the quarter. risk-weighted and and total So, things assets particularly really all

of So, as capital strengthened a ratios a bit our result, little all even further.

color. item-by-line So, item better line that's a basis on some

Now, I comments forward. Paul's think looking some got

Paul C. Reilly

Thanks, Jeff.

we've based few, a Just and far key good a factors so lot quarter business call, covered think an the on continue. awful really in our should our but I momentum

rate levels of March, We to continue all have as in Jeff hike near-record our business drivers. on help. most interest should about, The talked

There So, changes on good position. front. regulatory we're the is overall in

whole growth the As Circuit is till vacated best is X a as disappear, comments likely areas ruling meantime, go rule. the And you does taking seems fairly a also, Brown again, distance is over looks introduced balanced we're a may release, it, change it's the and our regulatory Labor getting of really have never Alex. could in talked recruiting, only pages it, Court. fiduciary Private you traction. more know. other think about of SEC the that's that rule and It a but by and positive like work most from the knows Group, Department know, investors. the but We that everything It's rule SEC period, X,XXX Client challenges balanced, interest in there we groups, all appeal over who and And we to In is will more as the short. a then, happening to for we by it. divisions. but great little so will so flexible certainly but more be was May the who think will The really we trending it Supreme in we over its has standard DOL but unlikely, through with workable. but we once comment trend think other love The standard. year the last overturned rule not First go, it be

hopefully strong our got focused X, retention long spreads. is great good and one. little accounts, benefit financial income up more of really that starting assets the volatility, advisors have markets, although we've be We've and M&A with with looks Capital good, fee-based and that getting as still a moving a institutional that little equity about get they're the firm some In So, help. seen. higher a look up the and and are real the tax and to group finance outlook. recovering from and commissions business looks really I as got headwinds more should do recruiting, is think Quarter a challenged we Markets, maybe Underwriting XX-year fixed should like hit in and credits we'll a X% cash but public this in the the and action, remains really Jeff we

assets benefiting Asset starting also from Management the their for quarter.

helpful. be the well. to should perform Bank it So, And continues

close but really the one I before want So, feeling markets. going don't in deployment. make certainly this next into starting is going to what's know part comment good on the capital happen quarter, I to

has our changed. First, strategy not

long-term We to and utilizing our deploying on have focus business. grow a capital our

the focused term, thing, return we're long we're on focused equity, to tied so do the on on but Our to not very is the comp right partially short that term. retained

our to grow and most investments to business first. at return positive shareholders. culture, want niche in through also to be acquisition importantly continuing do fit our a strategic, we We to look have any and recruiting. acquisitions first So, But has grow

And Alex. very do XMacs, can then we we saying disciplined. close years which and lot a So, do been Scout we successful, announced and very acquisitions, pretty but good of so when couple pressure and Reams, of far them. Brown, had a very them three we have are together: we're the ago, where and

end. it's that board, the meeting XX% really will earnings the strategy hasn't changed, is with its and next to I'm and increase, policy in changed. at looking changes but morphed sure, the hasn't meetings, lower dividend Our XX%, be that to certainly tax or But

I return well not even that think XX.X% having really also as long is in capital, really just using management. total intangible focus capital to for capital which with shareholders, term capital, on the providing our we levels a we're our good talk the returns about and capital

good quarter. So,

a in in I the markets. think And industry we're with in it to turn and questions. good position the I'll over that,

Ashley, open the line don't why So, you up?

Operator

from Yes, sir. first Jim your question Mitchell Buckingham with Research. And comes

James Mitchell

Hey, guys. morning, good

Paul C. Reilly

Jim. Hey,

James Mitchell

opportunities Hey. the on Coast. do there developed. as Maybe jump-start the not sort help could gotten Northeast, update sort quite and Brown-type an you on sort but the just us maybe game Alex. West Coast Can update just like ahead penetration is PCG, the recruiting of And a in seems that going? question a you're you on West the of there? see of or of bit on It West you've better how Coast penetration the little

Paul C. Reilly

Yeah.

recruit country growing be of towards is those average Northeast time. for get we we'll room, which the rest share a first, the to have And we anywhere certainly in in the states, of the West. and both lot So, in a news, can the market long, if long two good

really So, it's New so Alex. have our a the York focus key made recruit. kick-starter still. in We've the Alex. significant we didn't with progress good big statement areas. in in Baltimore, of Boston, presence Brown a West, and but made Brown the

for of San and Seattle. be whether Coast, the we opportunity LA, that found type So, Fran, that West haven't

We're doing it we're organically. recruiting up So, our resources. beefing

are We and we but there, of recruiting growing lot room. certainly have a

a do not do we're going something. culture our something do good that found would to but fit, and we if just So, was we it, to fit something

the on So, forward near it organic for we're looks short to opportunity. West the to recruiting like out at and look term, least focused

of to lot I we've grow. opportunity got think a

James Mitchell

is certainly. like Do No, improving? momentum you there feel

Paul C. Reilly

yeah, we've improving, of lot still. It's got opportunities but a

small, still commits but both added in Brown are growing also. channels, employee, we're in California So, all and Alex. independent certainly and recruits has our and, again,

on it. So, we're focused

divisions two really could making we we with Just could had we're want I recruiting hit don't and force them, years, been a meeting again, But I focus only that sure challenge and those on so for a mean, but quality a progress. it's numbers of numbers. give number and run good Scott out I'm for business. and a them they West, advisors Tash

out we're lot a we're a of deliberate focus, recruiting and but taking energy have long-term certainly we So, around West.

James Mitchell

No, question. maybe And one for absolutely. Jeff,

cash, the right still down billion. and levels? is but In did these What of at of you bank, did forward reinvest cash? still $X level Do the NIM from as see opportunities levels the terms you cash it it that come help reinvestment going it's above

Jeffrey P. Julien

how Yeah, much to just for they position need and machination we've generally the any et that with can got to having sweeps cash they're we day, between needed hand liquid so million the billion, keep to us $X loans cetera, at bank. be on in It's $XXX borrow of to without or or any fund anything having else. do kind a some targets

sweep usual our December some So, bank heavier it growth. was in anticipation out we to as of their of other in the banks bank the assets quarter, were reallocating just than over of

stay So, ahead little of bit. it we to try a

they probably at where running be. been average, on they've that more level the in need for the is to think I quarter, March So, realistic

James Mitchell

the is So, safe that range assumption? of probably a end upper

Jeffrey P. Julien

probably. Yeah,

to try of growth, we As their stay ahead correct. that's

James Mitchell

Okay. Great. Thanks.

Operator

comes from question Instinet. with Nomura next Your Steven Chubak

Julian Craitar

Steven. guys. actually Craitar Good is This filling in Julian morning, for

Paul C. Reilly

Okay.

Julian Craitar

Hi.

capital. a question on just So,

potential capital significant having capital has needs. exceed pace up fulsome securities, earnings quarter's capital a and weighed of earnings And this challenge any your appreciate your the on reluctance load would but end, I clear approach? more expect When should your the where and dampened build strong the strategy in deployment build earnings reinforced at we update on the we to change multiple. not of growth organic despite a to your So, and your continues argue commentary this

Paul C. Reilly

update make will we Well, you as we changes.

nature. They our rata. risk been things consistent. issues. Acquisitions approach tend earnings So, can short-term bolster lumpy pro do at of to has be are of to a economic not by We longer-term lot the

So, a them, strategy our we a sometimes long-term acquisition capital we don't. get It's quarterly in don't fill program and to sometimes needs. we have

anticipate ago quarter to say the for other muni Tax business, the just Act at the doesn't us our the lot of business, at and at lot effective a tax look impact because one running of of things. to the we're will So, again, the Tax Act we try just public really of year, a end business, mean came in people credit looking knee-jerk finance of that going our without our –

do So, by we is we people's could take XXXst why we're our do consecutive profitability. we more that's approach heavy could had capital it even and here still, always anticipate superior or most measured quarter longer And I standards, we things. think of with a generating term, what

longer-term of law yeah, do good make We could that we the impact for and mix, do for tax we don't do profits. things the profits. both And short-term the So, analyze firm. things the decisions again long-term for business here, will we changes,

deployment and clear So, on our we're have topic one Certainly, quarter regime. healthy board the in try understand our new but to capital to of on meeting we tax capital capital we pretty will very ratios. it a be we that May allocation, be

Jeffrey P. Julien

would now. grow of wouldn't capital to taking only that pickup really getting I very use kind thirdly, instruments not all to have curve. significantly and takes capital the you'd mean because the a Julian, it's respect much of it, support which do portfolio very much get lot $X of of to we're any to it the that, bank, first opposed we paid portfolio securities. billion to to yield risk, you're right buying, securities $XX And million of could We're at I a yield duration to growing with flat add do

So, aren't thing in client cash on aggressive get growing. to this that and in it top of balances time, doesn't overly do that, point the at to just seem logical

which... so, And

Paul C. Reilly

– rising environment, interest rates so. And too

Jeffrey P. Julien

would again, why of – an and you – we want of duration rate rising excessive a risk not amount duration would the I And to risk. environment, take face in

Julian Craitar

What Understood. plan? color, an That guys. of terms the Appreciate helpful. in like about annual buyback was

Paul C. Reilly

We tax in plan We've the did kind And people our Again, knee-jerk again it view when reactions had one chunk. dilutive in on basis. of which board plan the at this a law buy a previously announced. the we read took was capital May. lot announced will I was said, to a of back

meeting. business, board we're analyze it see going wanted of relook and to our haven't, impact We the we at the May because at and it to

Julian Craitar

you. Got

to Okay. that but you one actions challenges planning any of take from cited, on your me, And trading the your such Markets. then some given you've Are to last within Capital one guys switching regulatory businesses, IB gears just MiFID like as business? trading

Paul C. Reilly

really right already I for for trend and and costs, research a is think the a MiFID's decade. been probably now, The we And model accelerated have has that have taken trimmed challenged certainly it actions and industry started. others. across

rational. being we're So,

have plans the exit We no business. to

has markets grow number the focus the markets to Our private is business increasingly for years of become public been because have M&A, that. M&A reflecting a and

one costs I or and taking, business no call, approaches the that watching reasonable think we the plans part what So, continue anything will side, to are exit on think to grow. we I But growing drastic. and

Julian Craitar

it That's guys. from Thank it. Got me, you.

Operator

comes Chris Wells with Fargo. question from Your next Harris

Christopher Harris

Hey, Thanks. guys.

Paul C. Reilly

Chris. Hey,

Christopher Harris

you of sounds maybe Hey, Alex. there? guys momentum. so about like has what's little it bit lot Brown Can a a resonating comment

Paul C. Reilly

has great and I that's that things choice, that's advisors didn't that these been think channel, been all want the it's all to affiliate. of Raymond brand I platforms inherited too, that has which James we momentum create, the that Raymond right? ultra-high-net-worth area, And for the growing. positions, lot really ultra-high-net-worth but the I Alex. focused we independent employee our it side, on us, they can is divisions clients have on are but relative, whether advisors other one the a of choose each that of have how James is focused for that space, certainly Well, probably think Brown, also; have more momentum a which it's So, the

movement a move with been retention. It the advantage to or helps it's independent the have independent, whatever employee RIA, to is real options. to as people to employee from RIA those So, that we certainly

So, great. Alex. is doing Brown

divisions. every good news us affiliation expect to of our for single we continue Right as well have the It options, certainly which well we it is to it We other now in momentum hope one does. do do bodes continues. positive it for if And us.

Christopher Harris

does lot people maybe I as thought if But changes being bad. to guys actually be the to that side that's the might on really it, about regulatory that you helping think that happened with not Do all A universally it's tend of you a financial do Or didn't all think advisor other know the on side. of have kind mentioned? have the you things anything recruiting been factor? that you

Paul C. Reilly

No, – has. that it I tougher. balanced. has for say just I where I don't will – has it's it's elections, been the everyone I since gotten mean the regulatory think, environment, that's think more

there them, our coming was it so think I a to out now keep up so worry with ago quickly, isn't. were year many and rules was hard

I seeing think balanced at both they're are existing people new rules of sure flood not and making a and rules. they're looking

been the trust department, institutions else the clients just where regulatory feel own at What's And our their different to advisors. competing – that our divisions. for side. it's positive have our a with we with great have our advisors anything doesn't they're trying and bank, recruiting or that advisors compete the model really that's many driven on many respect So, we is in whether they're

want. time advisors they here any they and book own So, their tell they we can the leave

could always So, always protocol for issue could. they because us leave and even an wasn't

they our bank, allow on trust of the don't go invitation the we call advisor. the have to department to a client, at Second,

anything with economic our solicit sometimes we don't advisor, our maybe cards. stuffings doesn't long-term mailing mortgages put in. think We detriment, credit to our compete bank Our We certainly or benefit. to but don't do to

the So, versus has a need, to joining what them. like with I and and many are supporting think we're scale that they platform offer offer us feel right advisors competing we they them because technology just

that's to think recruiting. the the I been secret So,

Christopher Harris

Makes sense. Thanks.

Operator

Fitzgerald Your Sachs. next question comes from Conor Goldman with

Conor Fitzgerald

morning. Hi. Good

helpful. That's new on disclosure for Just the first, thanks your cash breakdown.

decline, your your clients being and $XXX but really side, a rotating the on is decline driven hoping sounds that alternatives comments, little like quarter-over-quarter Just based equities in the it by cash digging you the elaborate million was bit. just into buying on not could

Jeffrey P. Julien

a allocated permanently do. money or growth able but positions have X%, methodology, permanent alternatives by there true firm. the taken those are than offering cash are question who our We that's have and purchasing that's or there's of That's one-year short-term there, fund or T-bill. get We asset to who we statement. can T-bill better Those X% allocations the over the happening track vehicles are is that allocations of then program, But whatever that that cash. little all don't cash continue X% of a the one some is of through yield two-year really are lot market temporary by better And in CDs, to market middle to an to out – have or a these purchased a sweep or to people purchasing harder get which a track who other a allocations want we Yeah. in got, a instruments. for benefit have funds money to able investing which sweep no to are of we've insured, the use a they FDIC yield

Paul C. Reilly

But of was that into not all cash. movement

that's of related, market there's fair I chunk So, a mean too.

certainly $XXX well. fair and that cash moving alternatives. into that's of some a market So, that million then But there's has cash did move as out chunk from to

Conor Fitzgerald

your breaks fees? on account other markets And that That's Got fees understanding give and on on service how third-party just helpful. you us your and down money an it. updated between can then fees, deposits,

Jeffrey P. Julien

Yeah. that XX-Q. put to We right? Q, breakdown

Paul C. Reilly

We're looking the for this moment. at (XX:XX)

Jeffrey P. Julien

For for the quarter – million quarter? the is it $XXX

Paul Shoukry

with Conor, that. I it up mean on will can I be... Yeah. I said follow you like

Conor Fitzgerald

I Yeah, know. yeah,

Paul Shoukry

(XX:XX).

Jeffrey P. Julien

minute would quarter's got last probably from Q is to We take breakdown. it changed percentages the percentage but or you of a the the anything it in dramatically do give some breakdown quarter, breakdown, hadn't a else. to math each But

Conor Fitzgerald

be opportunity policy? opportunities would you my I on M&A kind capital. question would appreciate you it. the go return sporadic need helpful. reconsider nature. how But can finding before then, Got long is, your That's right And of in And know without comments Paul, capital your to

Paul C. Reilly

Yeah.

constantly. it examine we first, So

inside We have group capital board. present and certainly planning we a the to

other I investor. I every return a and tied on We're getting not our ROE. So as concerned we're our are hoard to to open. cash. of comp about just think, is not the always shareholders where them locked mean trying both and capital are half – deferred tied RSUs, We it's certainly,

we So, to instantly very calling We and look it increase wanted being dividends resisted what it. the to at instantly or about was. I know measure point we always change the it. rule don't changed thoughtful because we're when do capital

that the tax we capital again, use made want the is this just has our part And can't grew it, and quarter changes. because to it. we much commitment say I of going we so, and of to the policy And return on been that it we're know very same

have think use our will I keep So, it we're but dramatically. is to over-accumulated the we is The that be and think to change shareholders. strategy return on long-term in it, to we're can't benefit would points mean board to it our we'll to for what that looking motivated at and, I don't case, capital it at question I do we it talk any same. think the reason. we not

Conor Fitzgerald

Thanks for taking questions. my

Operator

And your question comes Ryan Securities. with from Devin next JMP

Devin P. Ryan

Hey, great. Thanks. Good morning, everyone.

Paul C. Reilly

Hey, Devin.

Devin P. Ryan

Hey.

race impact you just bit help I talk the making. here? adding the arms to on to on now because it the related So, investments seems how of and it's back-office there flow advisors and about like Can of lot think also some just functions kind trying digitizing that's about seems and of become should of and then now, here the I that to the over productive. you're making investments guess next occurring mean could inflationary capabilities we into right maybe trend years, it some a technology you're a more add question around first the innovation there's few that about right an like system and just one of from then how spending that think capabilities

Paul C. Reilly

Yeah.

money is client making spend onboarding that for where initiative in is lot probably of been really things. certainly one technology help externally, we field the to exact our to have platforms the be amount data, this, the uses our which we've automated two spent. there's we'll of recognize, lot a certainly our multiple of painful data from when last focused And source and through of data. move a is industry, – source One of little or we a collect platforms we've we is think What it. going to to the that through, the we true advisors And whole able with clients and data up get first our years. really people has one five with don't which internally having across a that sure for all of haven't as I

to (XX:XX) apps, extremely competitive say we're So, we the on rolled clients. our was now. that that advisors you client make won that for apps those is our but with, there advisor do the best, can we our to on to from money on first, to sure those spending the all make out spent and that robo-like iPhones are mobile interface on the iPads advisor those tell sure And – an never up-to-date. started or on secondarily awards our now we're are money. that of technology prudent But so being We first We of had a board communication. platforms. want we're they our integrated And the extremely I mobility I wanted lot were to apps, we've competitive.

at the now. So, a are And the entry. and systems we compliance right of into we other them world-class the spend really we going great right instead those that is a what supervisory lot I compete have apps part make that feel to client-facing the want call of that compliance with is supervisory actually And of also and through just rewrite. help decisions advisors point

from updating areas. those and and been both outside. kind supervision new head in recruited a chief we've up of capabilities really We've we've beefed those new systems our compliance so, added of officer And

of spend those we've years, going and So, that's through back the done been the cash big right we've in few speed back-office office kind movements things things last And other from to through the now. up.

also division. advisor dollar I focused PCG Private of division really on systems, through loan in we've a the systems. kind and can spend So, we've client-facing spends have systems. our our business, by and bank Client And monitoring biggest Group of the But go although invested been lot

Devin P. Ryan

here industry kind of then Paul. Thanks, maybe Okay. And Great. just regulation. a on follow-up

comment of allow away. which on activity, So, business outside of I Raymond period of things. rule custodians. proposal kind affect for requirements approaching activity end advisor some the James a oversight could the We're know couple doesn't FINRA's for outside

and And to on Raymond just RIAs James, And licensing that similar the have so, of thing. on actually I'm If rule. and thoughts that's also good implication of thought broadly. a if or there's if then kind any proposal more any of industry theme, just greater that maybe education requirements, you the could continuing have require kind on curious SEC's kind

Paul C. Reilly

Yeah.

We of any about paid think I that don't other first get we they're of those on worried at assets all, don't firms. have away. issues held So,

had level, cons more questions And are mean. if what changes we couldn't held than rule clarify we in lot is away have assets of them all. what the requirements so suitability, They does we clear So, would would on see should supervisory responsibilities. other rule be our that an a then and issues have commissioned-based the high pros monitoring because would a assets RIA like certainly little or client that concentration, is – things

and about it. So, I that. do overly and board and of listening to There to think really much and you the cons discussions are are we advisor, it, how Robert an pros Cook treasurer we like there issues, become supervise that rule. I worried a your I join board, about need things church FINRA, charitable activities certain not of mean outside in business like independent that think you they to you're kind We're with if are

the those think, voluntary, little policy, proposed how but The The have you you supervise required ones you are if don't of to. rule you're is, not a is are we to tricky own So, assets. can kind do choose your good. supervisory areas, see so

you a on open competition and we've So, it. about the good with discussion ask had FINRA implications, and all

So, been month think tell it. up too feedback know go, but I last it I tell. But on can't I've much, I you it's where we worrying will the I have although it think don't that rule, to early provided about

Devin P. Ryan

been and benefit has to Got maybe I being of looking it. continuing SEC greater for And one for requirements around an education, kind know which the RIA. around RIAs then licensing just commentary

or curious, momentum So, that requirements, something would there I'm et that. cetera. I'm change you or just is about bar change to higher that the oversight just trying potentially think

Paul C. Reilly

the of to first, at to the should day where the has protect be and supervision view to But here you invest. we're the clients and channels. similar in been any that Our both no matter requirements think advisors end get because practice, we of the supportive them we're

rule any and helping is spend business our is that a of both advisors their sure the good. lot and of licensing kind So, on and advisors be education money that too, then do education qualified, our own advisor that would makes and whether any any continuing a which testing, in that's ongoing we or

is that and rule a in rule It'd which had it way good that simplify you think one rules a is of think and you the allows, have for in but rather good. so the full which lives and make standard I think, it know, best this clients, to field, spend to interest is level first, We're apply I been, clients call of And we've it's client thought advisor the is presented, the an trend general, So, things a of disclosure move But with pushes who think of kind a We'd like is advocates. the but in we've an a anyway. always I that. think we in should flexibility, advisor again, going SEC everybody. playing see I certainly as set in understand can direction. lot a I the advisor, positive And details. weird I forward the why little step bit time, devils or rule and our

best see parts there would Congress up I tweak, We've think the it's it. DOL good largest has think and move comment Although are really advocates during SEC the firm parts standard sure, opposed out. of stepped has testify different period been are to any we every I'm little But like one, and – a we against we're but the in we'll right to publicly comes what rule that's, the the rule propose I direction a the testified good, firm view. interest to and and

Devin P. Ryan

Paul. lot. Yeah. Great, okay. a it, Thanks Appreciate

Operator

questions are no there And further this time. at

Paul C. Reilly

we great, like all and call believe to joining So, quarter. for I'd had thank a good I just the you

over Our that and quarter. be hopefully have in advisors good next the show will positioning momentum assets markets conducive we and the

and joining talk Ashley. we'll for to you, soon. thanks Thank So, you

Operator

you Thank welcome. concludes You're That for your conference. participation. today's

may You now disconnect.

Raymond James Financial (RJF) 26 Apr 182018 Q2 Earnings call transcript