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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: The week to make sense of these markets with us

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Speaker 2: now is Paul Riley. He is the CEO of Raymond James.

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Speaker 2: Paul is the third CEO in the firm's history, and

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Speaker 2: we'll be passing the rains here to Paul Schukri while

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Speaker 2: remaining on board as executive chair. And we're going to

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Speaker 2: talk about succession the future of Raymond James. But we

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Speaker 2: also want to get your thoughts on how clients are

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Speaker 2: reacting to the market environment and some of the big

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Speaker 2: ticket items that are happening here in.

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Speaker 1: The world of politics. It is incredible.

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Speaker 2: We have just reported a story on just how much

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Speaker 2: it would cost here to see the Trump tax cuts

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Speaker 2: be maintained, to see just how much it would cost

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Speaker 2: at the end of the day, and according to certain

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Speaker 2: experts that we're setting here, it would cost more than

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Speaker 2: almost all federal agencies. The text cuts expire at the

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Speaker 2: end of next year. Either president would have to really

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Speaker 2: grapple with this issue. What in your view would be

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Speaker 2: the most damaging to investors. What is your staff talking

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Speaker 2: about as they talk to clients.

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Speaker 3: Well, probably depends where you fall, you know, in the

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Speaker 3: in the snack brackets here. So probably the wealthiest investors

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Speaker 3: the proposed not just the expiration which doesn't affect them

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Speaker 3: that much, but some of the proposed tax increases on

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Speaker 3: net worth, on realized gains and stuff really has them concerned.

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Speaker 3: And so I know people are worried about it, but

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Speaker 3: it's way too early to call the election. It's you know,

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Speaker 3: way too early to know what would even pass. You know,

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Speaker 3: whether House or Senate will be divided or not, and

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Speaker 3: what does it take to pass the tax changes. So

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Speaker 3: there's a lot of speculation, but not much to realize,

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Speaker 3: you know, what's really going to go on yet.

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Speaker 2: Yeah, it's interesting because you see the two campaigns taking

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Speaker 2: two different strategies. Yes, at unrealized taxes on capital gains

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Speaker 2: here are something that many investors are concerned about.

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Speaker 1: But then you have a Kamma Harris floating.

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Speaker 2: That idea about really reducing kind of the tax burden

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Speaker 2: on small businesses. At the end of the day, would

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Speaker 2: you like to see large corporations tax more, small businesses

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Speaker 2: tax less? Where does kind of that tax burden have

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Speaker 2: to come from corporate America?

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Speaker 3: Yeah, that's that's kind of a hard one because no

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Speaker 3: matter who you picked. Someone's not going to be happy

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Speaker 3: in that. So, you know, corporate taxes, I think in general,

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Speaker 3: individual income taxes aren't at an excessive rate, So the

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Speaker 3: question is can they really go down? Well, you've got

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Speaker 3: to fund the deficit, which will continue to increase, So

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Speaker 3: the question is more where you're going to apply some

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Speaker 3: of those savings, and investors worry about different things. Certainly

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Speaker 3: the estate tax exemption going down. That's a near term

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Speaker 3: thing when people trying to you know, want to use

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Speaker 3: that up. So when will they get an indication the

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Speaker 3: highest rate you know, going down last time. I personally

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Speaker 3: think that wasn't needed, but there are probably a lot

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Speaker 3: of people that would disagree with me. So again it's

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Speaker 3: it's a matter of how do you raise the money

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Speaker 3: and who pays.

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Speaker 1: I mean, it's just not an obvious thing.

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Speaker 4: I think personally a lot about the state and local

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Speaker 4: tax deduction, right, which was capped. Trump capped that before

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Speaker 4: the election. I could write off my property taxes from

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Speaker 4: my federal Now I can't, And if I had that

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Speaker 4: extra money, I would spend it straight back into the.

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Speaker 1: Economy, every last cent.

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Speaker 4: So yes, it would cost more according to this accounting

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Speaker 4: in the future. But it might also boost GDP if

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Speaker 4: people like me put it right back into the economy.

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Speaker 5: Right Well, my question is, I mean Raymond James has

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Speaker 5: an extensive network of financial advisors. I mean, does that

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Speaker 5: dominate conversations with financial advisors right now? Basically those tax

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Speaker 5: questions that Matt is sitting on here.

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Speaker 3: I think people are more focused on what's going to

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Speaker 3: happen the near term economy their clients. They're talking about

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Speaker 3: what the tax implications can be, but I think again

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Speaker 3: it's too early to really focus on it too much,

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Speaker 3: so they're having conversations over cocktails or in a conversation

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Speaker 3: like we're having today. But I think they're more worried

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Speaker 3: about where's the economy going. You know, what's going to happen,

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Speaker 3: Will rates go down? And those types of things are

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Speaker 3: more dominating the conversation right now with advisors and their clients.

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Speaker 5: Yeah, unfortunately, no cocktails on this sense, it's a little early.

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Speaker 5: But shifting a bit away from politics here, I mean

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Speaker 5: when it comes to that financial advisor network, you said

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Speaker 5: recently you have about eighty eight hundred financial advisors as

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Speaker 5: of June thirtieth, that's up one percent from a year ago,

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Speaker 5: and I'm always curious about the role of financial advisors. Obviously,

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Speaker 5: younger investors are entering the market, millennials, gen Z. Is

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Speaker 5: the role of the financial advisor shifting? How do they

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Speaker 5: remain relevant?

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Speaker 3: Well, for the last decade there has been a big shift.

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Speaker 3: A lot of advisors what I call asset allocators, where

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Speaker 3: should I put my investment dollars? But that's really shifted

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Speaker 3: into being wealth planners, you know, advisors that are successful

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Speaker 3: or integrated so much into the f family. People don't

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Speaker 3: realize they're helping families make family decisions, allocations, setting plans,

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Speaker 3: and helping people achieve where they want to be. Not

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Speaker 3: just performance, it's what are my goals? Am I in

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Speaker 3: a good position to hit my goals? So they've really

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Speaker 3: become integrated into the family. And what everyone said, well,

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Speaker 3: X and Z they're going to pick their own we're

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Speaker 3: not seeing that. I take my own six kids from

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Speaker 3: you know, twenty seven to forty. You know, I remember

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Speaker 3: my forty year old said, why whatever invest dollar in

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Speaker 3: the stock market hadn't gone out? Well, she's invested. My

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Speaker 3: kids are invested. They have advisors, some have their own

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Speaker 3: advisors away from me, but they're all using financial advisors,

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Speaker 3: even though they were the people that were going to

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Speaker 3: make their own decisions. It's too complex and retail individuals

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Speaker 3: need that push to do things. It's right writing the

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Speaker 3: first will. People are afraid to sign a will because

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Speaker 3: they think they're signing their death certificate or something. You

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Speaker 3: know people are going to die eventually. It's it's the

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Speaker 3: financial planning. But just to get people to sign. It's

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Speaker 3: hard to get people stay in the market when it's

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Speaker 3: off as hard, right, And that's the role.

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Speaker 4: It's hugely important. And by the way, good for you

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Speaker 4: for tripling the replacement rate with six children, because demographics

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Speaker 4: are going the other way, right. I mean, we talked

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Speaker 4: to Sally Krawcheck on this program and she was talking

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Speaker 4: about the fact that, you know, the the boomers have

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Speaker 4: like seventy five trillion dollars I think your identity gave

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Speaker 4: me that figure. But seventy five trillion dollars in wealth

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Speaker 4: that they're going to eventually pass on. You have now

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Speaker 4: I think one and a half trillion dollars under management

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Speaker 4: at RAJA. Is that going to keep growing as they

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Speaker 4: pass it on?

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Speaker 1: Are they spending it?

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Speaker 4: I mean, how do you where do you see that going?

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Speaker 3: Yeah, I think that certainly, when you divide wealth and

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Speaker 3: to pieces, probably everyone spends, you get a little more spent,

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Speaker 3: you know, just because they have more and it gets

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Speaker 3: divided up. So but I think it'll continue growing. I mean,

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Speaker 3: do you believe the markets will grow over time? And

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Speaker 3: I believe they will. Doesn't mean we've been waiting for

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Speaker 3: this adjustment. We've had a fifteen year run. When's the

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Speaker 3: last time we've had a really fifteen year run in

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Speaker 3: the equity markets? But people have been talking about the

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Speaker 3: soft landing for three years right now we're into the

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Speaker 3: next year. There'll be a correction some point, but I

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Speaker 3: believe long term the markets will continue to grow. So

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Speaker 3: those invested their wealth should continue to grow. And if

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Speaker 3: our advisors are doing their job on succession, making sure

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Speaker 3: their kids are involved, bringing next gen advisors on their teams,

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Speaker 3: which all the good teams do, I think, you know,

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Speaker 3: will continue to keep our share of the wealth and

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Speaker 3: have the business growth.

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Speaker 2: Paul, It's been really interesting if you look at Raymond

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Speaker 2: James's stock over the last twenty years, for example, you've

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Speaker 2: only had three down years and that includes two thousand

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Speaker 2: and eight, so quite.

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Speaker 1: The run here.

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Speaker 2: If you look at the next twenty years of Raymond

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Speaker 2: James's growth.

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Speaker 1: Where does it come from.

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Speaker 2: Do you see an opportunity to buy assets, to increase

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Speaker 2: in wealth management, in M and A capacity.

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Speaker 1: Where are the biggest growth areas for you?

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Speaker 3: Well, so, first you know, we're long term growth oriented.

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Speaker 3: The number one growth success So the firm has been

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Speaker 3: retention less than one percent regretted attrition a year, so

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Speaker 3: it's easier to grow when you're not replacing people that

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Speaker 3: are leaving. Secondly, it's individual recruiting, our organic recruiting. You know,

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Speaker 3: assets are up fifty percent versus recruited these in the

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Speaker 3: last nine months versus the previous nine months. So we

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Speaker 3: continue to have success in the marketplace. And when we

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Speaker 3: find acquisition M and A opportunities, if they're a cultural fit,

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Speaker 3: and there probably aren't a lot of firms left that

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Speaker 3: we'd put in that category, you know, we'll execute on them.

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Speaker 3: So we're we don't force them. They happen when they happen,

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Speaker 3: but we believe that we can continue to grow attract advisors.

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Speaker 3: And remember Raymond James is primarily a you know, a

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Speaker 3: financial planning firm, So eighty percent of our revenue directly

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Speaker 3: and indirectly comes from that part of the business, So

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Speaker 3: that's where we're focused on growth as well as our

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Speaker 3: capital markets, businesses and others.

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Speaker 5: Okay, so open to organic m and A, but not

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Speaker 5: going to force it there you mentioned that. I mean,

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Speaker 5: if you expect that markets going to continue to grow,

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Speaker 5: then your assets under advisement will continue to grow as well.

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Speaker 5: I'm curious where you think that growth in markets is

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Speaker 5: going to come from, because it's been really interesting watching

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Speaker 5: the IPO market really kind of dry up, and we

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Speaker 5: know that private markets are very hot and only getting hotter.

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Speaker 5: How are you thinking about that dynamic, you know, companies

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Speaker 5: staying public or staying private rather for longer. I mean,

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Speaker 5: you have a lot of teenagers right now. When it

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Speaker 5: comes to the private.

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Speaker 3: Markets, Yeah, it's at some point generally those markets only

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Speaker 3: get so big. So the private markets, you see a

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Speaker 3: lot of trading amongst private equity firms, but at some

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Speaker 3: point they get to a size either there's no other exit,

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Speaker 3: you know. But the public markets today, so sure, there's

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Speaker 3: fewer firms going public because private's easier, you know, less regulation,

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Speaker 3: easier to grow the firm for a lot of reasons.

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Speaker 3: But at some point they've got to monetize, and that's

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Speaker 3: generally the public markets. So you look at Facebook, how

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Speaker 3: big it got before it went public, So I think

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Speaker 3: that's the ultimate exit. So I think public markets are

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Speaker 3: still going to be active. So you know, I think

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Speaker 3: there's a lot of opportunity right now. Private equity, because

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Speaker 3: of the amount of money it raised, has certainly been

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Speaker 3: a bigger factor, and it's been a long period of

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Speaker 3: time and has helped grow companies. But we'll have to see,

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Speaker 3: you know, sometimes they're buying a lot higher multiples and

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Speaker 3: the public markets are buying at but those can go

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Speaker 3: up and down. We'll see where they balance out over time.

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Speaker 4: Are you concerned about this election? I mean there are

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Speaker 4: I guess there are a lot of similarities in that

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Speaker 4: both of these parties want to continue to spend as

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Speaker 4: much money as they possibly can and blow up the

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Speaker 4: deficits to unbelievable levels. However, there are differences. Right Trump

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Speaker 4: wants to deport millions, you know, stop incoming at the border,

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Speaker 4: continue the tax cuts. I mean, a lot of seemingly

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Speaker 4: inflationary things, and we don't know a lot about Kamala

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Speaker 4: Harris's plans.

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Speaker 3: Yeah, so there are few things we can't control one

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Speaker 3: or markets. One are regulations and one are elections, So

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Speaker 3: you know, we have to work with whatever the result

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Speaker 3: is of all of those.

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Speaker 4: So certainly the Trump administration would reduce regulations. I mean

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Speaker 4: he wants to get the civil service.

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Speaker 3: Well it probably more likely, you know, his campaign has

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Speaker 3: been more likely to do that than the other. But

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Speaker 3: you know, you have to work within the parameters. And

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Speaker 3: who knows. It seems like everyone and every election that

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Speaker 3: I can remember, would speculate if this party got elected

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Speaker 3: it would be the destruction of you know, the markets,

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Speaker 3: and this one would go up. They seem to not matter,

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Speaker 3: you know, in the short term anyway, long term policy does.

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Speaker 3: And the one thing you don't hear anything is about

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Speaker 3: the deficit. I mean three campaigns ago it dominated and

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Speaker 3: now no one ever mentions it, you know, and I'm.

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Speaker 1: Not so sure about that.

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Speaker 3: It's a bigger and bigger factor that we have to

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Speaker 3: deal with at some point.

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Speaker 2: So then, at what point does it actually matter? Because

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Speaker 2: you have not seen the bond market react to it yet,

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Speaker 2: not in a significant way. How do you invest in

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Speaker 2: longer term treasuries if you're really worried about the deficit, Well, it's.

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Speaker 3: Still a relative. You know, the treasury can always print right,

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Speaker 3: and it's still the currency of the world, so it's

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Speaker 3: still the safe place to be, at least perceived whether

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Speaker 3: it is actually so. I think the treasury markets are

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Speaker 3: still safe. It's still in demand. You know. The question

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Speaker 3: is how long do you go before people lose confidence

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Speaker 3: and say, you know, this isn't a good bet, it's

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Speaker 3: too risky. And I don't know what that breaking point is.

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Speaker 3: Ten years ago or twenty years are ago. There's no

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Speaker 3: way all these countries could have this much debt, but

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Speaker 3: they do, and they seem to still be you know, thout,

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Speaker 3: you know, working with all that debt.

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Speaker 2: Paul, you mentioned something earlier about how politics is really

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Speaker 2: something that people are talking about in the course of

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Speaker 2: their everyday lives, but when it comes to the market,

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Speaker 2: they're more worried about the economy.

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Speaker 1: How worried, I.

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Speaker 3: Would say concerned. You can see that the confidence has

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Speaker 3: gone down slightly, but not materially. I think when they

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Speaker 3: see valuations, they hear, you know, the economy slowing and

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Speaker 3: the job growth may be slowing now, and they see

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Speaker 3: the first signs. They're concerned, but not enough to panic

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Speaker 3: or withdraw right. So when the market's clearly going up

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Speaker 3: and it's you know, going up quickly, then you don't

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Speaker 3: worry about it. But I think it's a reasonable expectation

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Speaker 3: to say, look it's slowing down. What does that mean?

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Speaker 3: What does that mean for my investments? But the truth

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Speaker 3: is where do you invest? So you've got to put

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Speaker 3: your money somewhere and you know, so again being diversified

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Speaker 3: isn't so bad because you you know, you head your bets.

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Speaker 4: All right, Paul, great having you in the studio. Thank

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Speaker 4: you so much for joining us on this new program.

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Speaker 1: Paul Riley.

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Speaker 4: There of Raymond Jamis