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The week to make sense of these markets with us now is Paul Riley. He is the CEO of Raymond James. Paul is the third CEO in the firm's history, and we'll be passing the rains here to Paul Schukri while remaining on board as executive chair. And we're going to talk about succession the future of Raymond James. But we also want to get your thoughts on how clients are reacting to the market environment and some of the big ticket items that are happening here in.
The world of politics. It is incredible.
We have just reported a story on just how much it would cost here to see the Trump tax cuts be maintained, to see just how much it would cost at the end of the day, and according to certain experts that we're setting here, it would cost more than almost all federal agencies. The text cuts expire at the end of next year. Either president would have to really grapple with this issue. What in your view would be
the most damaging to investors. What is your staff talking about as they talk to clients.
Well, probably depends where you fall, you know, in the in the snack brackets here. So probably the wealthiest investors the proposed not just the expiration which doesn't affect them that much, but some of the proposed tax increases on net worth, on realized gains and stuff really has them concerned. And so I know people are worried about it, but it's way too early to call the election. It's you know,
way too early to know what would even pass. You know, whether House or Senate will be divided or not, and what does it take to pass the tax changes. So there's a lot of speculation, but not much to realize, you know, what's really going to go on yet.
Yeah, it's interesting because you see the two campaigns taking two different strategies. Yes, at unrealized taxes on capital gains here are something that many investors are concerned about.
But then you have a Kamma Harris floating.
That idea about really reducing kind of the tax burden on small businesses. At the end of the day, would you like to see large corporations tax more, small businesses tax less? Where does kind of that tax burden have to come from corporate America?
Yeah, that's that's kind of a hard one because no matter who you picked. Someone's not going to be happy in that. So, you know, corporate taxes, I think in general, individual income taxes aren't at an excessive rate, So the question is can they really go down? Well, you've got to fund the deficit, which will continue to increase, So the question is more where you're going to apply some of those savings, and investors worry about different things. Certainly
the estate tax exemption going down. That's a near term thing when people trying to you know, want to use that up. So when will they get an indication the highest rate you know, going down last time. I personally think that wasn't needed, but there are probably a lot of people that would disagree with me. So again it's it's a matter of how do you raise the money and who pays.
I mean, it's just not an obvious thing.
I think personally a lot about the state and local tax deduction, right, which was capped. Trump capped that before the election. I could write off my property taxes from my federal Now I can't, And if I had that extra money, I would spend it straight back into the.
Economy, every last cent.
So yes, it would cost more according to this accounting in the future. But it might also boost GDP if people like me put it right back into the economy.
Right Well, my question is, I mean Raymond James has an extensive network of financial advisors. I mean, does that dominate conversations with financial advisors right now? Basically those tax questions that Matt is sitting on here.
I think people are more focused on what's going to happen the near term economy their clients. They're talking about what the tax implications can be, but I think again it's too early to really focus on it too much, so they're having conversations over cocktails or in a conversation like we're having today. But I think they're more worried about where's the economy going. You know, what's going to happen,
Will rates go down? And those types of things are more dominating the conversation right now with advisors and their clients.
Yeah, unfortunately, no cocktails on this sense, it's a little early. But shifting a bit away from politics here, I mean when it comes to that financial advisor network, you said recently you have about eighty eight hundred financial advisors as of June thirtieth, that's up one percent from a year ago, and I'm always curious about the role of financial advisors. Obviously, younger investors are entering the market, millennials, gen Z. Is
the role of the financial advisor shifting? How do they remain relevant?
Well, for the last decade there has been a big shift. A lot of advisors what I call asset allocators, where should I put my investment dollars? But that's really shifted into being wealth planners, you know, advisors that are successful or integrated so much into the f family. People don't realize they're helping families make family decisions, allocations, setting plans, and helping people achieve where they want to be. Not just performance, it's what are my goals? Am I in
a good position to hit my goals? So they've really become integrated into the family. And what everyone said, well, X and Z they're going to pick their own we're not seeing that. I take my own six kids from you know, twenty seven to forty. You know, I remember my forty year old said, why whatever invest dollar in the stock market hadn't gone out? Well, she's invested. My
kids are invested. They have advisors, some have their own advisors away from me, but they're all using financial advisors, even though they were the people that were going to make their own decisions. It's too complex and retail individuals need that push to do things. It's right writing the first will. People are afraid to sign a will because they think they're signing their death certificate or something. You know people are going to die eventually. It's it's the
financial planning. But just to get people to sign. It's hard to get people stay in the market when it's off as hard, right, And that's the role.
It's hugely important. And by the way, good for you for tripling the replacement rate with six children, because demographics are going the other way, right. I mean, we talked to Sally Krawcheck on this program and she was talking about the fact that, you know, the the boomers have like seventy five trillion dollars I think your identity gave me that figure. But seventy five trillion dollars in wealth
that they're going to eventually pass on. You have now I think one and a half trillion dollars under management at RAJA. Is that going to keep growing as they pass it on?
Are they spending it?
I mean, how do you where do you see that going?
Yeah, I think that certainly, when you divide wealth and to pieces, probably everyone spends, you get a little more spent, you know, just because they have more and it gets divided up. So but I think it'll continue growing. I mean, do you believe the markets will grow over time? And I believe they will. Doesn't mean we've been waiting for this adjustment. We've had a fifteen year run. When's the last time we've had a really fifteen year run in
the equity markets? But people have been talking about the soft landing for three years right now we're into the next year. There'll be a correction some point, but I believe long term the markets will continue to grow. So
those invested their wealth should continue to grow. And if our advisors are doing their job on succession, making sure their kids are involved, bringing next gen advisors on their teams, which all the good teams do, I think, you know, will continue to keep our share of the wealth and have the business growth.
Paul, It's been really interesting if you look at Raymond James's stock over the last twenty years, for example, you've only had three down years and that includes two thousand and eight, so quite.
The run here.
If you look at the next twenty years of Raymond James's growth.
Where does it come from.
Do you see an opportunity to buy assets, to increase in wealth management, in M and A capacity.
Where are the biggest growth areas for you?
Well, so, first you know, we're long term growth oriented. The number one growth success So the firm has been retention less than one percent regretted attrition a year, so it's easier to grow when you're not replacing people that are leaving. Secondly, it's individual recruiting, our organic recruiting. You know, assets are up fifty percent versus recruited these in the last nine months versus the previous nine months. So we
continue to have success in the marketplace. And when we find acquisition M and A opportunities, if they're a cultural fit, and there probably aren't a lot of firms left that we'd put in that category, you know, we'll execute on them. So we're we don't force them. They happen when they happen, but we believe that we can continue to grow attract advisors.
And remember Raymond James is primarily a you know, a financial planning firm, So eighty percent of our revenue directly and indirectly comes from that part of the business, So that's where we're focused on growth as well as our capital markets, businesses and others.
Okay, so open to organic m and A, but not going to force it there you mentioned that. I mean, if you expect that markets going to continue to grow, then your assets under advisement will continue to grow as well. I'm curious where you think that growth in markets is going to come from, because it's been really interesting watching the IPO market really kind of dry up, and we know that private markets are very hot and only getting hotter.
How are you thinking about that dynamic, you know, companies staying public or staying private rather for longer. I mean, you have a lot of teenagers right now. When it comes to the private.
Markets, Yeah, it's at some point generally those markets only get so big. So the private markets, you see a lot of trading amongst private equity firms, but at some point they get to a size either there's no other exit, you know. But the public markets today, so sure, there's fewer firms going public because private's easier, you know, less regulation, easier to grow the firm for a lot of reasons. But at some point they've got to monetize, and that's
generally the public markets. So you look at Facebook, how big it got before it went public, So I think that's the ultimate exit. So I think public markets are still going to be active. So you know, I think there's a lot of opportunity right now. Private equity, because of the amount of money it raised, has certainly been a bigger factor, and it's been a long period of
time and has helped grow companies. But we'll have to see, you know, sometimes they're buying a lot higher multiples and the public markets are buying at but those can go up and down. We'll see where they balance out over time.
Are you concerned about this election? I mean there are I guess there are a lot of similarities in that both of these parties want to continue to spend as much money as they possibly can and blow up the deficits to unbelievable levels. However, there are differences. Right Trump wants to deport millions, you know, stop incoming at the border, continue the tax cuts. I mean, a lot of seemingly inflationary things, and we don't know a lot about Kamala Harris's plans.
Yeah, so there are few things we can't control one or markets. One are regulations and one are elections, So you know, we have to work with whatever the result is of all of those.
So certainly the Trump administration would reduce regulations. I mean he wants to get the civil service.
Well it probably more likely, you know, his campaign has been more likely to do that than the other. But you know, you have to work within the parameters. And who knows. It seems like everyone and every election that I can remember, would speculate if this party got elected it would be the destruction of you know, the markets, and this one would go up. They seem to not matter, you know, in the short term anyway, long term policy does. And the one thing you don't hear anything is about
the deficit. I mean three campaigns ago it dominated and now no one ever mentions it, you know, and I'm.
Not so sure about that.
It's a bigger and bigger factor that we have to deal with at some point.
So then, at what point does it actually matter? Because you have not seen the bond market react to it yet, not in a significant way. How do you invest in longer term treasuries if you're really worried about the deficit, Well, it's.
Still a relative. You know, the treasury can always print right, and it's still the currency of the world, so it's still the safe place to be, at least perceived whether it is actually so. I think the treasury markets are still safe. It's still in demand. You know. The question is how long do you go before people lose confidence and say, you know, this isn't a good bet, it's too risky. And I don't know what that breaking point is.
Ten years ago or twenty years are ago. There's no way all these countries could have this much debt, but they do, and they seem to still be you know, thout, you know, working with all that debt.
Paul, you mentioned something earlier about how politics is really something that people are talking about in the course of their everyday lives, but when it comes to the market, they're more worried about the economy.
How worried, I.
Would say concerned. You can see that the confidence has gone down slightly, but not materially. I think when they see valuations, they hear, you know, the economy slowing and the job growth may be slowing now, and they see the first signs. They're concerned, but not enough to panic or withdraw right. So when the market's clearly going up and it's you know, going up quickly, then you don't worry about it. But I think it's a reasonable expectation
to say, look it's slowing down. What does that mean? What does that mean for my investments? But the truth is where do you invest? So you've got to put your money somewhere and you know, so again being diversified isn't so bad because you you know, you head your bets.
All right, Paul, great having you in the studio. Thank you so much for joining us on this new program.
Paul Riley.
There of Raymond Jamis