WEBVTT - Raymond James Chairman/CEO Paul Reilly Talks Tax Policies

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>The week to make sense of these markets with us

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<v Speaker 2>now is Paul Riley. He is the CEO of Raymond James.

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<v Speaker 2>Paul is the third CEO in the firm's history, and

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<v Speaker 2>we'll be passing the rains here to Paul Schukri while

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<v Speaker 2>remaining on board as executive chair. And we're going to

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<v Speaker 2>talk about succession the future of Raymond James. But we

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<v Speaker 2>also want to get your thoughts on how clients are

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<v Speaker 2>reacting to the market environment and some of the big

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<v Speaker 2>ticket items that are happening here in.

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<v Speaker 1>The world of politics. It is incredible.

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<v Speaker 2>We have just reported a story on just how much

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<v Speaker 2>it would cost here to see the Trump tax cuts

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<v Speaker 2>be maintained, to see just how much it would cost

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<v Speaker 2>at the end of the day, and according to certain

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<v Speaker 2>experts that we're setting here, it would cost more than

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<v Speaker 2>almost all federal agencies. The text cuts expire at the

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<v Speaker 2>end of next year. Either president would have to really

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<v Speaker 2>grapple with this issue. What in your view would be

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<v Speaker 2>the most damaging to investors. What is your staff talking

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<v Speaker 2>about as they talk to clients.

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<v Speaker 3>Well, probably depends where you fall, you know, in the

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<v Speaker 3>in the snack brackets here. So probably the wealthiest investors

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<v Speaker 3>the proposed not just the expiration which doesn't affect them

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<v Speaker 3>that much, but some of the proposed tax increases on

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<v Speaker 3>net worth, on realized gains and stuff really has them concerned.

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<v Speaker 3>And so I know people are worried about it, but

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

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<v Speaker 3>way too early to know what would even pass. You know,

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<v Speaker 3>whether House or Senate will be divided or not, and

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<v Speaker 3>what does it take to pass the tax changes. So

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<v Speaker 3>there's a lot of speculation, but not much to realize,

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<v Speaker 3>you know, what's really going to go on yet.

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<v Speaker 2>Yeah, it's interesting because you see the two campaigns taking

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<v Speaker 2>two different strategies. Yes, at unrealized taxes on capital gains

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<v Speaker 2>here are something that many investors are concerned about.

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<v Speaker 1>But then you have a Kamma Harris floating.

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<v Speaker 2>That idea about really reducing kind of the tax burden

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<v Speaker 2>on small businesses. At the end of the day, would

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<v Speaker 2>you like to see large corporations tax more, small businesses

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<v Speaker 2>tax less? Where does kind of that tax burden have

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<v Speaker 2>to come from corporate America?

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<v Speaker 3>Yeah, that's that's kind of a hard one because no

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<v Speaker 3>matter who you picked. Someone's not going to be happy

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<v Speaker 3>in that. So, you know, corporate taxes, I think in general,

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<v Speaker 3>individual income taxes aren't at an excessive rate, So the

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

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<v Speaker 3>to fund the deficit, which will continue to increase, So

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<v Speaker 3>the question is more where you're going to apply some

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<v Speaker 3>of those savings, and investors worry about different things. Certainly

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<v Speaker 3>the estate tax exemption going down. That's a near term

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<v Speaker 3>thing when people trying to you know, want to use

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<v Speaker 3>that up. So when will they get an indication the

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<v Speaker 3>highest rate you know, going down last time. I personally

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<v Speaker 3>think that wasn't needed, but there are probably a lot

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<v Speaker 3>of people that would disagree with me. So again it's

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<v Speaker 3>it's a matter of how do you raise the money

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<v Speaker 3>and who pays.

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<v Speaker 1>I mean, it's just not an obvious thing.

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<v Speaker 4>I think personally a lot about the state and local

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<v Speaker 4>tax deduction, right, which was capped. Trump capped that before

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<v Speaker 4>the election. I could write off my property taxes from

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<v Speaker 4>my federal Now I can't, And if I had that

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<v Speaker 4>extra money, I would spend it straight back into the.

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<v Speaker 1>Economy, every last cent.

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<v Speaker 4>So yes, it would cost more according to this accounting

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<v Speaker 4>in the future. But it might also boost GDP if

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<v Speaker 4>people like me put it right back into the economy.

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<v Speaker 5>Right Well, my question is, I mean Raymond James has

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<v Speaker 5>an extensive network of financial advisors. I mean, does that

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<v Speaker 5>dominate conversations with financial advisors right now? Basically those tax

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<v Speaker 5>questions that Matt is sitting on here.

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<v Speaker 3>I think people are more focused on what's going to

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<v Speaker 3>happen the near term economy their clients. They're talking about

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<v Speaker 3>what the tax implications can be, but I think again

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<v Speaker 3>it's too early to really focus on it too much,

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<v Speaker 3>so they're having conversations over cocktails or in a conversation

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<v Speaker 3>like we're having today. But I think they're more worried

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

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<v Speaker 3>Will rates go down? And those types of things are

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<v Speaker 3>more dominating the conversation right now with advisors and their clients.

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

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<v Speaker 5>But shifting a bit away from politics here, I mean

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<v Speaker 5>when it comes to that financial advisor network, you said

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<v Speaker 5>recently you have about eighty eight hundred financial advisors as

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

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

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<v Speaker 5>younger investors are entering the market, millennials, gen Z. Is

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<v Speaker 5>the role of the financial advisor shifting? How do they

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<v Speaker 5>remain relevant?

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<v Speaker 3>Well, for the last decade there has been a big shift.

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<v Speaker 3>A lot of advisors what I call asset allocators, where

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<v Speaker 3>should I put my investment dollars? But that's really shifted

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<v Speaker 3>into being wealth planners, you know, advisors that are successful

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<v Speaker 3>or integrated so much into the f family. People don't

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<v Speaker 3>realize they're helping families make family decisions, allocations, setting plans,

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<v Speaker 3>and helping people achieve where they want to be. Not

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

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<v Speaker 3>a good position to hit my goals? So they've really

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<v Speaker 3>become integrated into the family. And what everyone said, well,

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<v Speaker 3>X and Z they're going to pick their own we're

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<v Speaker 3>not seeing that. I take my own six kids from

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<v Speaker 3>you know, twenty seven to forty. You know, I remember

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<v Speaker 3>my forty year old said, why whatever invest dollar in

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

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<v Speaker 3>kids are invested. They have advisors, some have their own

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<v Speaker 3>advisors away from me, but they're all using financial advisors,

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<v Speaker 3>even though they were the people that were going to

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<v Speaker 3>make their own decisions. It's too complex and retail individuals

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<v Speaker 3>need that push to do things. It's right writing the

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<v Speaker 3>first will. People are afraid to sign a will because

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<v Speaker 3>they think they're signing their death certificate or something. You

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<v Speaker 3>know people are going to die eventually. It's it's the

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<v Speaker 3>financial planning. But just to get people to sign. It's

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<v Speaker 3>hard to get people stay in the market when it's

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<v Speaker 3>off as hard, right, And that's the role.

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

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<v Speaker 4>for tripling the replacement rate with six children, because demographics

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<v Speaker 4>are going the other way, right. I mean, we talked

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<v Speaker 4>to Sally Krawcheck on this program and she was talking

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<v Speaker 4>about the fact that, you know, the the boomers have

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<v Speaker 4>like seventy five trillion dollars I think your identity gave

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<v Speaker 4>me that figure. But seventy five trillion dollars in wealth

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<v Speaker 4>that they're going to eventually pass on. You have now

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<v Speaker 4>I think one and a half trillion dollars under management

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<v Speaker 4>at RAJA. Is that going to keep growing as they

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<v Speaker 4>pass it on?

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<v Speaker 1>Are they spending it?

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<v Speaker 4>I mean, how do you where do you see that going?

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<v Speaker 3>Yeah, I think that certainly, when you divide wealth and

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<v Speaker 3>to pieces, probably everyone spends, you get a little more spent,

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<v Speaker 3>you know, just because they have more and it gets

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

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<v Speaker 3>do you believe the markets will grow over time? And

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

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

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<v Speaker 3>last time we've had a really fifteen year run in

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<v Speaker 3>the equity markets? But people have been talking about the

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<v Speaker 3>soft landing for three years right now we're into the

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

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<v Speaker 3>believe long term the markets will continue to grow. So

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<v Speaker 3>those invested their wealth should continue to grow. And if

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<v Speaker 3>our advisors are doing their job on succession, making sure

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<v Speaker 3>their kids are involved, bringing next gen advisors on their teams,

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<v Speaker 3>which all the good teams do, I think, you know,

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<v Speaker 3>will continue to keep our share of the wealth and

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<v Speaker 3>have the business growth.

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<v Speaker 2>Paul, It's been really interesting if you look at Raymond

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

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<v Speaker 2>only had three down years and that includes two thousand

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<v Speaker 2>and eight, so quite.

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<v Speaker 1>The run here.

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<v Speaker 2>If you look at the next twenty years of Raymond

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<v Speaker 2>James's growth.

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<v Speaker 1>Where does it come from.

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<v Speaker 2>Do you see an opportunity to buy assets, to increase

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<v Speaker 2>in wealth management, in M and A capacity.

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<v Speaker 1>Where are the biggest growth areas for you?

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

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<v Speaker 3>The number one growth success So the firm has been

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<v Speaker 3>retention less than one percent regretted attrition a year, so

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<v Speaker 3>it's easier to grow when you're not replacing people that

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

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<v Speaker 3>assets are up fifty percent versus recruited these in the

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<v Speaker 3>last nine months versus the previous nine months. So we

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<v Speaker 3>continue to have success in the marketplace. And when we

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

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<v Speaker 3>and there probably aren't a lot of firms left that

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

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

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<v Speaker 3>but we believe that we can continue to grow attract advisors.

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<v Speaker 3>And remember Raymond James is primarily a you know, a

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<v Speaker 3>financial planning firm, So eighty percent of our revenue directly

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<v Speaker 3>and indirectly comes from that part of the business, So

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<v Speaker 3>that's where we're focused on growth as well as our

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<v Speaker 3>capital markets, businesses and others.

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<v Speaker 5>Okay, so open to organic m and A, but not

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<v Speaker 5>going to force it there you mentioned that. I mean,

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<v Speaker 5>if you expect that markets going to continue to grow,

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<v Speaker 5>then your assets under advisement will continue to grow as well.

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<v Speaker 5>I'm curious where you think that growth in markets is

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<v Speaker 5>going to come from, because it's been really interesting watching

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<v Speaker 5>the IPO market really kind of dry up, and we

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<v Speaker 5>know that private markets are very hot and only getting hotter.

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<v Speaker 5>How are you thinking about that dynamic, you know, companies

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<v Speaker 5>staying public or staying private rather for longer. I mean,

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<v Speaker 5>you have a lot of teenagers right now. When it

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<v Speaker 5>comes to the private.

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<v Speaker 3>Markets, Yeah, it's at some point generally those markets only

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<v Speaker 3>get so big. So the private markets, you see a

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<v Speaker 3>lot of trading amongst private equity firms, but at some

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

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

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

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<v Speaker 3>easier to grow the firm for a lot of reasons.

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

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<v Speaker 3>generally the public markets. So you look at Facebook, how

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<v Speaker 3>big it got before it went public, So I think

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<v Speaker 3>that's the ultimate exit. So I think public markets are

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<v Speaker 3>still going to be active. So you know, I think

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

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<v Speaker 3>of the amount of money it raised, has certainly been

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<v Speaker 3>a bigger factor, and it's been a long period of

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

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<v Speaker 3>you know, sometimes they're buying a lot higher multiples and

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<v Speaker 3>the public markets are buying at but those can go

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

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<v Speaker 4>Are you concerned about this election? I mean there are

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<v Speaker 4>I guess there are a lot of similarities in that

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<v Speaker 4>both of these parties want to continue to spend as

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<v Speaker 4>much money as they possibly can and blow up the

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<v Speaker 4>deficits to unbelievable levels. However, there are differences. Right Trump

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<v Speaker 4>wants to deport millions, you know, stop incoming at the border,

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<v Speaker 4>continue the tax cuts. I mean, a lot of seemingly

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<v Speaker 4>inflationary things, and we don't know a lot about Kamala

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<v Speaker 4>Harris's plans.

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<v Speaker 3>Yeah, so there are few things we can't control one

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<v Speaker 3>or markets. One are regulations and one are elections, So

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<v Speaker 3>you know, we have to work with whatever the result

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<v Speaker 3>is of all of those.

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<v Speaker 4>So certainly the Trump administration would reduce regulations. I mean

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<v Speaker 4>he wants to get the civil service.

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<v Speaker 3>Well it probably more likely, you know, his campaign has

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<v Speaker 3>been more likely to do that than the other. But

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<v Speaker 3>you know, you have to work within the parameters. And

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<v Speaker 3>who knows. It seems like everyone and every election that

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<v Speaker 3>I can remember, would speculate if this party got elected

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<v Speaker 3>it would be the destruction of you know, the markets,

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<v Speaker 3>and this one would go up. They seem to not matter,

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<v Speaker 3>you know, in the short term anyway, long term policy does.

0:11:33.720 --> 0:11:36.280
<v Speaker 3>And the one thing you don't hear anything is about

0:11:36.280 --> 0:11:39.760
<v Speaker 3>the deficit. I mean three campaigns ago it dominated and

0:11:39.760 --> 0:11:41.920
<v Speaker 3>now no one ever mentions it, you know, and I'm.

0:11:41.760 --> 0:11:42.800
<v Speaker 1>Not so sure about that.

0:11:43.760 --> 0:11:46.440
<v Speaker 3>It's a bigger and bigger factor that we have to

0:11:46.480 --> 0:11:47.320
<v Speaker 3>deal with at some point.

0:11:47.440 --> 0:11:50.000
<v Speaker 2>So then, at what point does it actually matter? Because

0:11:50.120 --> 0:11:52.360
<v Speaker 2>you have not seen the bond market react to it yet,

0:11:52.200 --> 0:11:54.320
<v Speaker 2>not in a significant way. How do you invest in

0:11:54.360 --> 0:11:57.920
<v Speaker 2>longer term treasuries if you're really worried about the deficit, Well, it's.

0:11:57.800 --> 0:12:00.720
<v Speaker 3>Still a relative. You know, the treasury can always print right,

0:12:00.800 --> 0:12:04.439
<v Speaker 3>and it's still the currency of the world, so it's

0:12:04.440 --> 0:12:07.920
<v Speaker 3>still the safe place to be, at least perceived whether

0:12:07.960 --> 0:12:10.920
<v Speaker 3>it is actually so. I think the treasury markets are

0:12:10.960 --> 0:12:13.800
<v Speaker 3>still safe. It's still in demand. You know. The question

0:12:13.880 --> 0:12:17.240
<v Speaker 3>is how long do you go before people lose confidence

0:12:17.280 --> 0:12:19.600
<v Speaker 3>and say, you know, this isn't a good bet, it's

0:12:19.640 --> 0:12:22.079
<v Speaker 3>too risky. And I don't know what that breaking point is.

0:12:22.440 --> 0:12:24.440
<v Speaker 3>Ten years ago or twenty years are ago. There's no

0:12:24.520 --> 0:12:27.240
<v Speaker 3>way all these countries could have this much debt, but

0:12:27.320 --> 0:12:30.280
<v Speaker 3>they do, and they seem to still be you know, thout,

0:12:30.280 --> 0:12:32.360
<v Speaker 3>you know, working with all that debt.

0:12:32.440 --> 0:12:35.160
<v Speaker 2>Paul, you mentioned something earlier about how politics is really

0:12:35.160 --> 0:12:37.720
<v Speaker 2>something that people are talking about in the course of

0:12:37.720 --> 0:12:39.880
<v Speaker 2>their everyday lives, but when it comes to the market,

0:12:39.880 --> 0:12:41.319
<v Speaker 2>they're more worried about the economy.

0:12:41.800 --> 0:12:44.600
<v Speaker 1>How worried, I.

0:12:44.559 --> 0:12:47.880
<v Speaker 3>Would say concerned. You can see that the confidence has

0:12:47.920 --> 0:12:51.199
<v Speaker 3>gone down slightly, but not materially. I think when they

0:12:51.240 --> 0:12:55.320
<v Speaker 3>see valuations, they hear, you know, the economy slowing and

0:12:55.320 --> 0:12:57.960
<v Speaker 3>the job growth may be slowing now, and they see

0:12:58.000 --> 0:13:01.800
<v Speaker 3>the first signs. They're concerned, but not enough to panic

0:13:01.920 --> 0:13:05.480
<v Speaker 3>or withdraw right. So when the market's clearly going up

0:13:05.520 --> 0:13:07.440
<v Speaker 3>and it's you know, going up quickly, then you don't

0:13:07.440 --> 0:13:10.400
<v Speaker 3>worry about it. But I think it's a reasonable expectation

0:13:10.520 --> 0:13:13.720
<v Speaker 3>to say, look it's slowing down. What does that mean?

0:13:14.200 --> 0:13:16.959
<v Speaker 3>What does that mean for my investments? But the truth

0:13:17.040 --> 0:13:18.680
<v Speaker 3>is where do you invest? So you've got to put

0:13:18.760 --> 0:13:22.640
<v Speaker 3>your money somewhere and you know, so again being diversified

0:13:22.720 --> 0:13:25.760
<v Speaker 3>isn't so bad because you you know, you head your bets.

0:13:26.080 --> 0:13:28.240
<v Speaker 4>All right, Paul, great having you in the studio. Thank

0:13:28.280 --> 0:13:30.720
<v Speaker 4>you so much for joining us on this new program.

0:13:30.800 --> 0:13:31.400
<v Speaker 1>Paul Riley.

0:13:31.440 --> 0:13:32.800
<v Speaker 4>There of Raymond Jamis