00:00So Raymond James, you have thousands of financial advisors. I'd love to get a little bit more of an
00:05update on where you are looking at the recruiting process right now, what the pipeline looks like,
00:11because you sounded pretty confident on the call there. Yeah, Katie, we had a record recruiting
00:17year last year. We recruited $401 million of production with advisors from their prior firms.
00:23This year, we're starting off the first half of our fiscal year with a stronger start than we had
00:28last year. We had 7% annualized net new asset number for the first half of the fiscal year,
00:34which is amongst the highest in the industry. And that's because two things. One,
00:38we retain our existing advisors. The retention of our existing advisors, despite the highly
00:43competitive environment, remains very high. And also, we're a destination of choice for
00:50advisors from other firms, experienced advisors who are looking for both culture and capabilities
00:55to best serve their clients. And I wonder, you know, a little bit about the impact of AI. And
01:01this is something we've discussed before. But, you know, you think about the muscle memory that's
01:06being developed. A lot of people just go to some of these LLMs, ask them questions. And, you know,
01:11there's rumblings that, you know, a lot of people are doing that for financial and wealth management
01:16advice at this point. So, I mean, how do you turn that sort of existential threat and harness AI to
01:22turn it into a tailwind for Raymond James? No, you're absolutely right. I mean, technology has
01:27changed our business over the last two decades with the internet and with online trading. And
01:31with AI, we think it'll continue to change the business. But the one thing that you see, we had
01:36three client events in the last quarter across the country. The one thing you see with those advisors
01:41and clients at these events is that these relationships are deeply personal. It's not an advisor-client
01:48relationship. It's not about a transaction. It's not just about a portfolio return. In a lot of cases,
01:54these are very good friends that they're, and they understand their financial priorities. One of the
01:59things I said on the earnings call last night was, it helps me sleep better knowing that my financial
02:05advisor, if God forbid something were to happen to me, could take care of my wife and my family and
02:09understands what our financial objectives are, has a deep relationship with my wife, knows my kid's
02:14situation. That's not something I'm going to trust to a bot or an AI agent, no matter how good the
02:19algorithm is. So what we're focused on is using AI to enable the advisor to develop even more deeply
02:26personal relationships with their clients through technology. I understand that, certainly for
02:30existing clients. But I mean, how do you future-proof this for a generation that may not be old enough
02:35to be your client now, but a generation that is sort of growing up in this environment where they are
02:40used to just talking to a computer or their phone or whatever the hardware will be. Are those folks
02:46also going to sort of end up in the human wealth channel or are they going to end up talking
02:51to bots?
02:52Yeah. We have a lot of conviction that they will eventually seek out human financial advisors. We saw
02:57a little bit of this with robo-advisory right before COVID. A lot of younger folks using robo-advisors,
03:03COVID hit, incredible amount of stress and complexity, and they weren't, it wasn't sufficient for them to
03:08just get an email from a robo-advisor saying, we'll call you back in 48 hours. We're kind of
03:14jammed up right now. And we actually, as a financial advisory industry during COVID, saw record net new
03:20assets from existing advisors bringing on new clients because they said the direct channel in
03:25this period of stress isn't sufficient for me. So what we're doing is focusing on technologies,
03:30products, and AI to help advisors provide more holistic advice because that's what clients are going to
03:36expect from their advisors, more holistic advice, but also more tailored advice for their financial
03:42needs.
03:42I am curious that particularly in the moment, what type of advice clients are asking of the
03:47advisors? Is it more complex now given the geopolitical uncertainty and also just the big
03:53structural changes going on in our society from AI to industrial revolution, all these other things
03:58that are just changing the complexion of maybe what the economy is and what should you be investing in?
04:03Yeah. The most important piece of advice that financial advisors have provided to their clients
04:10over the last five to seven years is don't overreact to headlines. Don't overreact to social media posts
04:17because the one thing that clients have learned over the last five to seven years is when you do that,
04:22you're going to overreact and miss the opportunity. And so what advisors do is help their clients in those
04:27periods of emotion, high emotion, high stress say actually they rebalance their portfolios and buy
04:33into dips. So we saw that with liberation day concerns last year where the stock market kind of
04:39crashed in a week. And what we saw was high levels of rebalancing. So advisors were helping their clients
04:45buy into the dip versus to sell in the dip. And that's the most important piece of advice is just
04:49come up with a 10 year financial plan, 15 year financial plan, and stay aligned with it. And don't let
04:55headlines and emotion derail you from that financial plan. What are you hearing about how cash factors
05:01into that? Because I mean, we've been talking about for years, just this consistent buildup when it comes
05:06to money market funds. And you think about your own cash lead business. I wonder, you know, how you're
05:11thinking through what seems to be just a lot of thirst still for these cash like instruments.
05:18Yeah, we, I mean, we, as an industry, since interest rates started rising, cash balances
05:23are down 40 to 50% across the industry. And that's a good thing. That means financial advisors
05:28have helped their clients reinvest those cash sweep balances, which weren't earning much in
05:32interest rates into higher yielding alternatives. And at Raymond James, we have a very open platform
05:37of higher yielding alternatives, whether it be purchase money market funds, where we let all of
05:42our clients avail themselves to the institutional share class with the highest rates available,
05:46or our enhanced savings program at our Raymond James bank, which offers up to $50 million of
05:52FDIC insurance at a high rate. And so clients have been reinvesting in their cash into higher
05:57yielding alternatives, which is appropriate given the rate environment.
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