Raymond James Financial Inc (RJF) — Q4 2025 Earnings Call Transcript

Good evening, and welcome to Raymond James Financial's Fiscal Fourth Quarter and Fiscal 2025 Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristina Waugh, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chief Executive Officer, Paul Shoukry; and Chief Financial Officer, Butch Oorlog. The presentation being reviewed today is available on our Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to Slide 2. Please note that certain statements made during this call may constitute forward-looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions and our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments, and general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs such as may, will, could, should and would as well as any other statements that necessarily depends on future events are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q and Forms 8-K, which are available on our website. Now I'm happy to turn the call over to CEO, Paul Shoukry. Paul?

Thank you, Kristina. Good evening. Thank you all for joining us. I'm very pleased to report record results for both the fiscal fourth quarter and fiscal year 2025 this evening. And while the financial results are critically important, it's more than just numbers to us. It's the deep personal relationships our advisers, bankers and associates have with their clients, which is a foundation to providing tailored financial advice. It's the long-standing values of the firm, always putting clients first, making decisions for the long term, having integrity and valuing independence, which guide all of the decisions that we make. These values, the personal relationships and differentiated financial advice across our diverse and complementary businesses contributed to our fifth consecutive year of record revenues and record net income in very different market environments. As we look ahead, many of our key business drivers also ended the year at record levels, including record client assets of $1.73 trillion, a record number of financial advisers of 8,943, record trailing 12 production for recruited financial advisers of $407 million and record net bank loans of $51.6 billion. We also have healthy pipelines for growth, including strong levels of adviser commitments to join over the coming year and strong investment banking pipelines. And importantly, we have the regulatory capital capacity and plenty of liquidity to support this growth. Throughout the fiscal year, we have continued to develop and maintain industry-leading technology for our financial advisers, once again making significant investments of approximately $1 billion in technology. These investments include strategic AI initiatives designed to improve adviser efficiency and support regulatory oversight with the emphasis on enhancing the adviser and client experience. We filled new technology positions of Chief AI Officer and Head of AI Strategy to lead our development and implementation, which includes bringing experienced talent and fresh perspectives. During the year, we earned the highest ranking for investor satisfaction among those working with a dedicated financial adviser or team of advisers. Importantly, we were also recognized as the most trusted company among advised investors in wealth management in the J.D. Power 2025 U.S. Investor Satisfaction Study. In response to growing demand for private investment product alternatives for ultra-high net worth clients, we further developed the firm's private capital-raising expertise and broadened bespoke private investment alternatives for such clients. I'm proud of our many accomplishments this year and believe we are well positioned to continue to invest in our business, our people and technology to drive growth across all our businesses. Turning to our financial results for the quarter. The firm's values-based, client-focused approach continues to generate steady performance. Quarterly net revenues of $3.7 billion grew 8% over the prior year quarter and 10% over the preceding quarter. Pretax income of $731 million declined 4% compared to the year-ago quarter and increased 30% from the preceding quarter. For fiscal 2025, we generated record net revenues of $14.1 billion, representing 10% growth and record pretax income of $2.71 billion, up 3% over fiscal 2024. These strong results were attributable to our diverse and complementary businesses anchored by the Private Client Group and augmented with the Capital Markets, Asset Management and Bank segments. Across our businesses, we continue to achieve success retaining and recruiting financial professionals who provide high-quality advice to their clients. In the Private Client Group, we ended the quarter with a record $1.6 trillion of client assets under administration, representing year-over-year growth of 11%. We had an outstanding year recruiting high-quality advisers onto our platform, a testament to our unique service-first culture, comprehensive capabilities and strong balance sheet. In fiscal year 2025, we had record recruiting results of financial advisers to our domestic independent contractor and employee channels, with recruiting trailing 12-month production at their previous firms totaling $407 million, reflecting a 21% increase over last year's previous record. These recruited advisers had approximately $58 billion of client assets at the previous firms, also surpassing last year's record. Including assets recruited into our RIA & Custody Services division, we recruited total client assets over the past 12 months of nearly $63 billion across all of our platforms. Quarterly domestic net new assets were nearly $18 billion this quarter, representing a 5% annualized growth rate. We ended the fiscal year with a record number of financial advisers, 2% higher than the prior year and a reflection of solid adviser retention as well as strong recruiting results. Based on our robust adviser recruiting pipeline and strong level of commitments to join in the coming quarters, we continue to be optimistic about our momentum and growth. Our best of both worlds value proposition, where we offer a unique combination of an adviser and client-focused culture, coupled with leading technology and solutions, continues to resonate with advisers across all of our affiliation options. Additionally, our strong balance sheet and commitment to independence is proving to be a differentiator for advisers evaluating alternatives. To continue retaining and attracting the best advisers, we continue to make investments in our platform and offerings. For example, our private wealth adviser program offers education, training and accreditation along with enhanced capabilities and product solutions. This enables advisers to meet the needs of their most sophisticated clients and create significant value for our advisers who progress through this rigorous program. We continue to make investments and implement solutions to automate and streamline processes, which in turn frees associates and advisers to do what they do best, which is to engage in deep personal relationships, add more value and importantly, have more capacity to grow their businesses by attracting new clients. The Capital Markets segment delivered strong results in the fourth quarter, achieving revenues that represented the third highest level on record, surpassed only by those observed during the pandemic period. This strength demonstrates the potential resulting from the strategic investments we have made in this segment over the past few years. The fourth quarter results were underpinned by solid performance throughout all of our capital markets businesses. Looking ahead, the investment banking pipeline remains strong. We are confident that we are well positioned with motivated buyers and sellers, along with deep expertise across the industries we cover. We remain committed to continuing to enhance the platform by broadening and deepening our capabilities, whether through strategic hiring or acquisitions. For example, over the past 2 years, we've hired a number of experienced public finance investment bankers, which provided us growth opportunities across a number of domestic markets. We began to realize the returns on some of those investments as evidenced by our fourth quarter results. As it pertains to acquisitions, we recently announced the acquisition of GreensLedge, a boutique investment bank recognized for its expertise in structured credit and securitizations, and we anticipate that this transaction should close later this fiscal year. Notably, GreensLedge differentiates itself with deep relationships and expertise while operating on a balance-sheet-light model. In the Asset Management segment, net inflows into managed fee-based programs in the Private Client Group were strong during the quarter, annualizing at over 7% and reflect the complementary impact of being able to offer high-quality investment alternatives to our financial advisers as well as growth resulting from our successful recruiting efforts. In the Bank segment, loans ended the quarter at a record $51.6 billion, primarily reflecting robust 22% annual growth in securities-based lending balances, yet another synergistic impact from our growing Private Client Group business, as we are able to deploy our strong balance sheet in support of clients. Importantly, the credit quality of the loan portfolio remains strong. Turning to capital deployment. Our long-standing priorities have remained unchanged, and that starts with investing in growth first organically and complemented with strategic acquisitions. We continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit and at valuations that would generate attractive returns for our shareholders. As we continue to pursue both organic and inorganic growth opportunities, we also maintained our share repurchase program to effectively manage capital levels. As outlined in recent quarters, our capital deployment strategy is to repurchase shares on a consistent basis at a level which, barring new developments, should keep our Tier 1 leverage ratio from growing beyond current levels. We continue to operate that guidance this quarter as we repurchased $350 million of common stock at an average share price of $166. We ended the quarter with a Tier 1 leverage ratio of 13.1%. In fiscal 2025, we returned capital of over $1.5 billion through common dividends and share repurchases. Now I'll turn the call over to Butch Oorlog to review our financial results in detail.

Thank you, Paul. I'll begin on Slide 6. The firm reported net revenues of $3.7 billion for the fiscal fourth quarter. Net income available to common shareholders was $603 million with earnings per diluted share of $2.95. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $635 million, resulting in adjusted earnings per diluted share of $3.11 and our adjusted pretax margin was 20.7%. We generated an annualized return on common equity of 19.6% and annualized adjusted return on tangible common equity of 23.9%, solid results for the quarter, particularly given our conservative capital base. Turning to Slide 7. Private Client Group generated pretax income of $416 million on record quarterly net revenues of $2.66 billion. Results were driven by higher PCG assets under administration compared to the previous year, the result of market appreciation, retention and the consistent addition of net new assets. Pretax income declined year-over-year, primarily due to interest rate reductions totaling 125 basis points since September of 2024. Our Capital Markets segment generated quarterly net revenues of $513 million and a pretax income of $90 million. Net revenues grew 6% year-over-year, driven primarily by higher debt underwriting, strong growth in affordable housing investments business revenues as well as solid improvements in both equity and fixed income brokerage revenues. Sequential results grew a robust 35%, largely due to higher M&A revenues, underwriting and affordable housing investment revenues. The Asset Management segment generated record pretax income of $132 million on net revenues of $314 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation over the 12-month period and strong net inflows into PCG fee-based accounts. We had strong net inflows of approximately $3.6 billion or 7.3% annualized growth rate into managed programs on our platform. The Asset Management segment generated record revenues and pretax income in the fiscal year. The Bank segment generated net revenues of $459 million and pretax income of $133 million. On a sequential basis, the Bank segment net interest income was up slightly, primarily driven by continued loan growth. The September 2025 rate cut had minimal effect on our fourth quarter. Turning to consolidated revenues on Slide 8. Fourth quarter net revenues grew 8% over the year-ago period and 10% sequentially. Asset management and related administrative fees of $1.88 billion grew 13% over the prior year and 8% over the preceding quarter. Record PCG fee-based assets equaled $1.01 trillion at quarter end, up 15% year-over-year and 7% over the preceding quarter. As we look ahead, we expect fiscal first quarter 2026 asset management and related administrative fees to be higher by approximately 6.5% over the fourth quarter level, driven by higher PCG assets and fee-based accounts at quarter end. Brokerage revenues of $616 million grew 8% year-over-year, mainly due to higher PCG revenues. Investment banking revenues of $316 million were nearly flat with the year-ago quarter and increased 49% sequentially. The sequential increase was driven by significant increases in M&A and advisory revenues, along with robust results in debt underwriting, which were in part from large private placement transactions where frequency and magnitude are unpredictable as well as an increase in public finance activity in the quarter. Affordable housing investment results reported in other revenues grew $25 million sequentially in what is typically a seasonally strong fiscal fourth quarter but also reflected a 19% increase in fiscal year revenues, demonstrating continued growth of the business.

Moving to Slide 9. Clients' domestic cash sweep and enhanced savings program balances ended the quarter at $56.4 billion, up 2% over the preceding quarter and representing 3.7% of domestic PCG client assets. Balances increased $2.2 billion or 4% in the month of September, growing nicely after fee billings had resulted in anticipated decreases earlier in the quarter. Based on October activity to date, domestic cash sweep and enhanced savings program balances have declined as anticipated given October's record quarterly fee billings of approximately $1.8 billion. Turning to Slide 10. Combined net interest income and RJBDP fees from third-party banks was $653 million, down slightly from the prior quarter. Net interest margin in the Bank segment decreased 3 basis points to 2.71% for the quarter. The average yield on RJBDP balances with third-party banks decreased 5 basis points to 2.91%, in part due to the impact of the September Fed interest rate cut. Based on current interest rates, including the full quarter impact of the September rate cut, in quarter-end balances net of the $1.8 billion fiscal first quarter fee billings, we would expect the aggregate of NII and RJBDP third-party fees in the first quarter to be approximately flat with the fourth quarter level. This is largely the result of the positive impact of a higher interest earning asset balance as of the September starting point offsetting the full quarter impact of the September Fed rate action. Keep in mind, there are many variables which could influence actual results, including any interest rate actions during the upcoming quarter and factors affecting our balance sheet, including changes in our loan and deposit balances. Turning to consolidated expenses on Slide 11. Compensation expense was $2.39 billion, and the total compensation ratio for the quarter was 64.2%. Excluding acquisition-related compensation expenses, the adjusted compensation ratio was 64.0%, better than the 65% target level we shared at our Investor Day. In fiscal year 2025, adjusted compensation expense included the amortization of transition assistance provided to recruited advisers and other retention awards to existing advisers in the aggregate amount of $355 million, representing an increase of approximately 11% compared to fiscal 2024. Non-compensation expenses of $602 million increased 11% over the year-ago quarter. A large portion of these costs support firm-wide growth initiatives, such as adviser recruiting, professional fees associated with investment banking activity and higher investment sub-advisory fee expense. For the fiscal year, consistent with our prior guidance, we achieved full-year non-compensation expenses of approximately $2.1 billion, excluding the bank loan provision for credit losses, unexpected legal and regulatory items, and non-GAAP adjustments presented in our non-GAAP financial measures, a strong result, given our continued investments in technology as well as the higher growth-related costs we incurred. We remain committed to investing to support growth across the business while maintaining discipline over controllable expenses.

On Slide 12, we provide key credit metrics for our Bank segment. We grew loans during the quarter by 3%, primarily in support of our clients with this loan growth continuing to be led by our securities-based loans, which grew 22% and residential mortgage loans, which grew 9% over the year. These 2 loan categories represent nearly 60% of our total loan book, reflecting 38% and 20% of the total. The credit quality of the loan portfolio remains strong. Criticized loans as a percentage of total loans held for investment were 1.28% at quarter end and nonperforming assets remained low at 29 basis points of Bank segment assets. The bank loan allowance for credit losses as a percentage of total loans held for investment ended the quarter at 88 basis points. The bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.88%. We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may affect our loan portfolios. Slide 13 represents the pretax margin trends for the past 5 quarters, highlighting the stability and strength of our diversified businesses in consistently achieving strong margins. During the fiscal fourth quarter, the adjusted pretax margin reached 20.7%. For the full fiscal year, we attained an adjusted pretax margin of 20%, successfully meeting our target margin objective. On Slide 14, at quarter end, our total assets were $88.2 billion, a 4% sequential increase resulting primarily from loan growth and higher corporate cash balances. We continue to have strong levels of liquidity and capital. During the quarter, to take advantage of a favorable market environment reflecting very tight credit spreads and attractive benchmark yields, the firm issued $1.5 billion of senior notes with a mix of 10-year and 30-year maturities as well as amending and extending the maturity of the revolving credit facility. These actions resulted in additional liquidity on hand for deployment in our growth and to meet client needs as well as providing additional capacity in our committed borrowing facility should the need arise over the next 5 years. RJF corporate cash at the parent ended the quarter at $3.7 billion, $2.5 billion over our target level of $1.2 billion, an increase over the prior quarter level resulting from the proceeds of the senior notes offering. Our capital levels provide significant flexibility to continue being opportunistic in our pursuit of strategic acquisitions and to invest in organic growth. With a Tier 1 leverage ratio of 13.1% and a total capital ratio of 24.1%, we remain well above regulatory requirements with approximately $2.6 billion of excess capital capacity to deploy before reaching our targeted Tier 1 capital ratio of 10%. The effective tax rate for the quarter was 17.4%, reflecting the favorable impact of nontaxable corporate-owned life insurance gains and the favorable resolution of certain historical tax matters in the quarter. Looking ahead, we estimate our effective tax rate for fiscal 2026 to be approximately 24% to 25%. Slide 15 provides a summary of our capital actions over the past 5 quarters. Through the combination of common dividends paid and share repurchases, we returned over $450 million of capital to shareholders during the quarter and more than $1.5 billion over the fiscal year. Additionally, in other debt capital actions, in August, we utilized nearly $100 million of liquidity to redeem our outstanding subordinated notes. We maintain our long-term commitment to operating our businesses at capital levels consistent with established targets. I'll now turn the call back to Paul for some final remarks. Thank you. As we enter fiscal 2026, we are more confident about our competitive positioning and path forward than we have ever been. While in some ways, there's more competition in our space, we are confident that our long-standing approach is becoming increasingly differentiated and unique. We are focused on the long term and providing a stable platform for advisers, bankers and associates, whereas so many of our competitors are increasingly looking for an exit in 3 to 5 years or even less. We attract and retain financial advisers with our unique culture, leading service and robust platform, whereas many of our competitors compete with the largest checks. We value independence to foster an environment where our advisers can provide objective advice to their clients, whereas many of our competitors change their comp plans every year to cross-sell more bank products. We are focused on sustainable growth and quality over quantity, whereas many of our competitors are focused on growth at all costs. We strive to maintain a strong balance sheet with strong levels of capital liquidity, whereas many of our competitors have significantly higher levels of leverage. As I said at the beginning of the call, this is way more than just numbers to us. We deeply value the personal relationships that we are so blessed to create in our business. We are confident our tried and tested approach will continue to endure in both good times and more challenging times and help us deliver on our vision of being the absolute best firm for financial professionals and their clients. So I want to end this call by thanking our advisers, bankers and associates for the great service and advice they provide to their clients and delivering on our firm's mission to help clients achieve their financial objectives. That concludes our prepared remarks. Operator, will you please open the line with questions?

I just wanted to start on recruiting. Paul, you noted that the net new asset growth was about 5%, and the quarter saw some nice acceleration from last quarter. Can you flesh out which segments, whether it's independent or employee, that's kind of seeing more uplift more recently? And ultimately, what do you think is resonating more with advisers today than, call it, 9 to 12 months ago? Or is it really just more advisers in motion across the industry that's ultimately benefiting?

Thank you, Michael. Our recruiting success has been widespread across all our affiliation options, including employees, independent contractors, and the RIA custody channels. As we approach 2026, we have seen a significant increase in recruited production advisers, reaching over $400 million, which reflects a 21% rise from last year's record. This indicates exceptional recruiting outcomes as we look toward fiscal 2026, and we are entering the fiscal year with unprecedented strength. What continues to resonate with advisers at Raymond James is our unique value proposition that combines a supportive adviser and client-focused culture with resources, technology, and a comprehensive range of products and services for their clients. This consistent long-term strategy stands out in a landscape filled with short-term players and M&A consolidation that introduces disruption. Advisers appreciate the stable platform provided by Raymond James, ensuring that their business, employees, and clients can depend on a solid foundation for the long term.

Great. If I could just switch gears to AI. Paul, you mentioned in your comments and in the release today some milestones throughout the fiscal year regarding AI and the establishment of a new Chief AI Officer as well as an AI Strategy. Can you elaborate on what you're aiming to achieve with Raymond James' AI initiatives? Looking ahead, how will the planned resource allocation toward these initiatives affect the $1 billion in technology spending you mentioned for the coming years?

Yes, I believe we view AI in three main areas. The first is to enhance our infrastructure, resiliency, and cybersecurity, using AI to build a more secure platform for our advisers, bankers, and clients. The second is to improve the efficiency and consistency of our services. This doesn't mean we expect to have fewer resources; rather, the resources we have and will add will achieve more with AI, resulting in higher quality and more consistent service. Finally, we aim to assist our financial advisers and bankers in delivering more personalized advice to a larger client base, therefore increasing efficiency and enhancing the quality of advice through data-driven insights. We are very enthusiastic about our AI investments and are committed to this direction. We’ve expanded our team and have budgeted for a significant increase in AI expenditures next year. We believe that over time, these efforts will set us apart from others. Smaller regional firms and many independent firms cannot afford these investments, and some private equity-backed companies may hesitate to make long-term technology commitments, especially given that payback periods can span multiple years. If the exit strategy is just two to three years away, investing in long-term technology for advisers and clients might not seem worthwhile. We're excited about this investment and confident in its potential to differentiate us in the market.

I want to start with one on loan growth; obviously, it's been a really nice story for you. A lot of it's been coming from securities-based loans recently, but you did see a little bit of residential mortgage growth and even C&I growth sequentially in the quarter. So as we start to see interest rates moving lower from here, just curious what you're expecting in terms of demand and opportunity there and whether you expect SBLs could actually maybe accelerate as rates come down? And then also kind of expectations for some of these other categories, could they become more interesting or just see more demand? Just really ultimately just trying to get a sense of the pace expected. Can you keep this up or even accelerate and then what the mix of growth might look like?

Yes. Our expectation continues to be in a lower rate environment and also with the growth of our Private Client Group business that the securities-based loan category will continue to be the highest growth category as it has been for the past several years now. It's over 60% of our loan balances between that and mortgages. So we will continue, I think, to shift more of the balance sheet to support the Private Client Group business, both through securities-based loans and through residential mortgages. And we think a lower rate environment will drive more demand and potentially accelerate demand there. It's up 22% year-over-year, and we think with lower rates that, that can actually accelerate.

Got it. Okay. That's great. And then just a follow-up here. I just want to hit on a couple of items from the model that were kind of standouts. So PCG brokerage strength, was that mostly trails that supported kind of that big growth? Or were there any gains in there? And then just on the debt underwriting strength, I heard the comment, some private placements in there, which can be kind of lumpy and then also strengthen public finance. I'm just curious if we can kind of parse that out a little bit and get a sense of how much the placements were. Is that a seasonal thing versus how much was public finance better? Just be helpful just given how much that was up relative to the prior quarter.

Yes, thank you. Regarding brokerage revenues in the PCG segment, we experienced a 7% increase compared to the same quarter last year and a 14% rise from the previous quarter in insurance and annuity products. This growth was primarily driven by clients looking to secure annuity pricing in anticipation of rate cuts. It was a notable performance for the PCG area. In terms of debt underwriting, we also had a strong quarter in both public and private debt underwriting. We highlighted that a few large transactions contributed to the increase in private debt underwriting. However, we are witnessing growth in our capacity to seize market opportunities in debt underwriting. While there were significant transactions, we are continuously expanding our ability to serve our clients in that sector, and this quarter reflects the additional capacity we have implemented to achieve that.

Over the last year, we've brought in 12 to 15 highly experienced public finance bankers from a large bank that left the industry. Along with the strong foundation and talent we already had, they've significantly enhanced our capacity and momentum in public finance. We're really optimistic about the future, especially considering the potential benefits from lower rates, which will enable us to invest across all our businesses. I'm particularly excited about the results we've achieved this fiscal year and this quarter, as every segment contributed to the outstanding, record-setting results we produced this year. The contributions were broad-based across all our business lines.

Paul, I wanted to follow up on the net new assets. Obviously, the number's stronger this quarter, but your commentary does sound rather similar to what we've heard for the last several quarters. So is some of this just timing of onboardings? Or do you see this kind of level of growth as kind of the new normal as we look ahead into fiscal '26?

Yes, the net new asset figures have risen over the last few quarters, reflecting our record recruitment results. However, it's important to note that not all assets come in immediately, so there is a delay between when we recruit advisers and when the assets onboard, although this process is happening fairly quickly. Additionally, the competitive landscape plays a role, as there are still lucrative offers from roll-ups and aggregators. Furthermore, we anticipate some asset loss due to bank mergers and acquisitions, with an estimated $2.7 billion in assets potentially affected next quarter. This illustrates the fluctuations in the competitive and M&A environment. Despite this, our retention remains strong, and our recruitment efforts have never been more vigorous. As we look ahead to fiscal '25 and into '26, our recruitment activity is extremely robust and shows no signs of slowing down. We're very optimistic as we approach fiscal '26.

That's helpful. Could you provide some insights on spending priorities for 2026 compared to 2025, particularly in terms of areas where you might be increasing or decreasing spending and how those priorities may differ?

Yes, thank you for the question. As we consider our spending, we are focused on investing in areas that will support our growth. This includes additional expenditures on recruiting and sub-advisory fees, the latter rising due to asset growth, and recruiting costs related to our hiring successes. We recognize that these costs will increase. Additionally, we remain dedicated to technology investments, which are a top priority. Our commitment to innovations like AI is strong, and we view it as a differentiator that will be a continued focus for us moving forward. We are carefully managing our controllable expenses while allowing growth-oriented investments to proceed as our business expands.

We have a unique opportunity to grow in all our businesses, and we prioritize growth. As Butch mentioned, we will continue to invest significantly in growth to capitalize on this opportunity, increase our market share, and provide more resources for financial professionals to offer customized advice to their clients across all areas. We will start detailing the upfront money amortization that impacts compensation expenses in the Private Client Group business next quarter. For instance, this year we brought in advisers with $400 million in production from their previous firms, which is akin to a medium-sized acquisition in our industry. We are achieving this one by one, focusing on retention benefits instead of traditional acquisitions where only a small part goes to retention. If we were to make an acquisition, we would use non-GAAP measures for that expense. However, our current method of recruiting one by one is much better for both retention and selecting the right fit for our platform. While we won't use non-GAAP for the amortization, we will provide a breakdown for everyone to understand that it is an important investment in our future.

Okay. Apologize for the hoarse voice due to the weather. Maybe just starting on the opportunity on the earning asset side. I was wondering if you could talk about how you might fund some of that growth. Would you look to maybe bring some of the third-party sweep deposits back on to the balance sheet, run off some of the investment securities portfolio? Or how to think about that interplay?

Yes, we have plenty of capacity with third-party banks, allowing us to bring that on-balance sheet to fund growth. We can also continue to a certain extent to reduce some of the securities portfolio. Moreover, we have a diverse funding mechanism to gather deposits. The Private Client Group, Raymond James Bank, and TriState Capital Bank all possess significant treasury management and deposit capabilities to diversify our funding sources. Therefore, we have ample funding capabilities and are prepared to support continued growth moving forward.

Okay. And then just as a follow-up. Just coming back to expenses for a moment. It seems like a big theme going into the new year. Can you help us maybe ring-fence this a little bit of any kind of guidepost for nonoperating expense? Or kind of targeted pretax margin as you look ahead, maybe pre-provision pretax margin?

The last guidance we put out in our Analyst Investor Day was that we want to generate pretax margins of over 20%, which we were able to do this fiscal year. We'll update that target as appropriate in the next Analyst Investor Day sometime in the May-June period. But in the meantime, that target stands. And being able to do that with the level of growth that we're experiencing is just truly phenomenal because not only are we growing, but what we're also doing is ensuring that we're providing extremely good service to our existing advisers, bankers and clients. And so doing that, we're also investing in technology, which is increasingly differentiating us from our competitors, particularly the smaller regional competitors who just can't afford to make the investments in the technology, in some of the independent competitors as well. We're really excited about being able to deliver over 20% margin with our growth profile.

You have clearly communicated your focus on discipline and making growth investments. It's encouraging to see you reach the $2.1 billion mark for non-comp expense in the recently completed fiscal year. How should we view that line moving forward? What portion of that balance can we expect to grow as we head into 2026 based on those growth investments?

We're still working on our budgets as we speak and will provide updates on the next earnings call. A lot of it will focus on growth, as Butch mentioned, so we'll examine line items directly related to growth, such as the FDIC insurance expense and the investment advisory expense that supports the fee-based assets. For now, I would highlight our margin targets, which I discussed with Bill in response to his question; our target remains to generate over 20% margin on an adjusted basis.

Okay, understood. The securities-based loans have been growing well, as you mentioned in your prepared remarks, Paul. I'm curious about whether you think this growth will be sustainable based on feedback from your advisers at RJF and the third-party companies that TriState collaborates with. Are you seeing an increase in demand as rates decrease? Given the current attractive high-risk appetite, could we potentially see this growth accelerate?

Yes, they're floating rate loans to your point. And so the lower short-term rates go, the more attractive those loans become all else being equal. So that certainly contributed to the 22% year-over-year growth that we experienced this fiscal year. And as we kind of start fiscal '26, the momentum and the growth there continues to be attractive. So we do see a lot of tailwinds right now in terms of those balances continuing to grow.

My question is on the strong recruiting pipeline. And I'm curious, how has the pipeline been impacted, not just from bank M&A where you highlighted an outflow but also from IBD mergers that are going on in the background and they may be driving elevated inflows?

Yes. I mean, M&A activity in the industry always creates opportunity. And so I think there's another transaction just announced a couple of days ago, for example, and that's a catalyst for people to look at, for advisers to say, okay, if I'm going to have to move to a new home one way or the other, I want to make sure that the new home fits the characteristics of what's best for me, my team and most importantly, their clients. And so it has created certainly opportunities for us to grow one by one with the advisers that we find mutual fit with. We're a great home for them, and we determine they're a great fit to affiliate with us.

And I'm not sure if you quantified the impact from the GreensLedge acquisition. But is there any accretion numbers behind that we should think about as the deal closes?

No, it will close later in the fiscal year and really based on its size, it's really not something that we have provided or dimensioned in terms of accretion dilution. It's really more of a long-term strategic play for us, so we're excited about the opportunity for it to contribute over the next several years. It's not something that we would provide 12- or 18-month accretion numbers on. But it is strategic and that creates an opportunity for us to provide our existing institutional clients, a securitization capability and advisory capability that we did not have prior as well as providing GreensLedge, their clients an M&A and capital markets capability that they didn't necessarily have prior. So it's a very synergistic opportunity that, over the long term, we think, will be very meaningful to our business.

This is Michael on for Alex. We just wanted to get some clarification around the somewhat slower pace of buybacks in the quarter. Specifically, was this related to the GreensLedge acquisition in the quarter? Or should we take it as a signal that maybe there's something bigger that's imminent?

Thank you for your question. We consistently purchased throughout the quarter, although there were a few pauses. One pause was due to the senior note offering, which was the main reason for the interruption in buybacks. Additionally, we used $98 million during the quarter to redeem subordinated notes as part of our debt capital actions. In terms of liquidity utilization, we combined share repurchases of $350 million with the almost $100 million in debt actions, totaling within our guidance of deploying between $450 million and $500 million each quarter.

And that target has not changed, so it doesn't necessarily mean we'll hit it exactly every single quarter. But $350 million of repurchases was still meaningful, and we're not changing our target to buy $400 million to $500 million a quarter going forward.

Yes. The criteria for pursuing larger deals align closely with those for smaller deals or even recruiting a team of financial advisers. Most importantly, there needs to be a good cultural fit with the organization. Since we are in the people business, our team members serve as representatives and ambassadors of the firm. A strong cultural fit is critical for long-term benefits, both qualitatively and quantitatively. If the cultural fit is right, we then consider the strategic fit, ensuring that the joining firm enhances our capabilities and we also improve theirs. We have a proven track record of retaining leadership from acquired firms. For instance, our current fixed income and public finance leadership stems from the Morgan Keegan team we acquired in 2012. This is true across all our acquisitions. Our consumer investment banking division is still led by the individual from the firm we bought in that area. Additionally, we maintain TriState as an independent firm with their leadership team intact. Our aim is to leverage the strengths of both firms to achieve synergies greater than the sum of their parts. Lastly, the financials need to be favorable for both us and the seller, which means the valuation must make sense for shareholders on both sides. These are the three key criteria we follow, and we remain disciplined in our approach. We have ample capital and liquidity and are actively seeking opportunities in all our business areas that fulfill these requirements.

First, just a question on digital assets. Curious what sort of appetite you're seeing from advisers and their clients. Maybe can you remind us on how they're able to access to what extent digital assets on the platform today? And how do you envision that access and product potentially expanding over time, whether it's ETFs, futures, derivatives, spot, et cetera?

Our advisers and clients are primarily focused on long-term financial planning, which sets us apart from day traders who use e-brokers for daily asset speculation. That said, digital assets are becoming a larger part of the conversation around long-term financial planning. The new administration is actively establishing the necessary regulations and infrastructure to better support digital assets. We have introduced Bitcoin ETFs for advisers and their clients on a limited basis. However, the level of interest here may not be as broad as what you might observe at day trading firms.

Got it. And then just a follow-up question, two parts. Maybe you could just elaborate on what limited basis means and to what extent that might evolve over time. And then the follow-up question I had was just around the investments you're making in the business from AI to recruiting. How would you just sort of characterize that level of investment spend right now? And as you think about into next year, do you think that, that level and pace and speed of that investment spend would accelerate? Does it remain stable or does it decelerate?

Yes, we are still in the early stages of our AI investment, and that spending is definitely increasing and gaining momentum as it becomes more integral to our operations. It's not that our overall IT spending is accelerating; rather, the AI component of our IT budget is expanding relative to the total. Regarding the digital asset restrictions, we can reconsider certain types of accounts or other aspects over time. As advisers and clients request changes, we will adapt, especially as the regulatory framework evolves. We prioritize our clients, constantly assessing their needs and what advisers are seeking. Advisers are the strongest advocates for clients in our industry, and we have always met and will continue to meet the demands of advisers and their clients as their preferences and the regulatory landscape develop.

We appreciate your time and interest in Raymond James. We are excited to have achieved our fifth consecutive year of record revenues and earnings. I want to express my gratitude to the advisers, bankers, and associates for their contributions to these outstanding results by building strong relationships with their clients and consistently providing excellent financial advice. Thank you, and I look forward to seeing all of you soon.