Good evening, and welcome to Raymond James Financial's Fiscal 2024 Third Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Kristie Waugh, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Paul Reilly, Chair and Chief Executive Officer, and Paul Shoukry, President and Chief Financial Officer. The presentation being reviewed today is available on Raymond James Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to Slide two. 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 statement 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 10K and subsequent forms 10Q and forms 8K, which are available on our website. Now I'm happy to turn the call over to Chair and CEO, Paul Reilly. Paul?

Thank you, Christy, and good evening. Thank you for joining us today. Last week Paul and I attended our Summer Development Conference for our employee advisors. It's exciting to spend time with so many advisors who embody our client first culture. We hear firsthand what makes Raymond James a great place for advisors who value the breadth of our technology and product platform so they can effectively serve their clients, and importantly, a firm that provides advisors the tools they need to grow their businesses. Paul and I appreciate the passion and dedication of the thousands of advisors who continue to serve their clients day-in and day-out. Turning to our quarterly results, we once again delivered strong results in the quarter. Our diverse and complementary business combined to generate record results for the first nine months of the fiscal year. We continue to invest in our businesses, our people, and our technology to help drive growth across all of our businesses. Beginning on slide four, the firm reported record fiscal third quarter net revenues of $3.23 billion, an increase of 11% over the prior year quarter, primarily due to higher asset management and related administrative fees. Quarterly net income available to common shareholders was $491 million, or $2.31 per diluted share. Excluding expenses related to acquisitions, adjusted net income available to common shareholders was $508 million, or $2.39 per diluted share. We generated strong returns for the quarter with annualized return on common equity of 17.8% and annualized adjusted return on tangible common equity of 21.9%, a great result, particularly given our strong capital base. During the quarter, we repurchased 2 million shares of common stock for $243 million, bringing our fiscal year-to-date total to 5.1 million shares for $600 million. Moving to Slide five, client assets grew to record…

Thank you, Paul. First, I just want to echo Paul's comments earlier on how great it was to attend our summer development conference last week, as well as our elevate conference earlier in the quarter and visiting several branches over the past few months. We truly have a fantastic group of financial advisors and associates who put their clients first each and every day. Now turning on to Slide 10, consolidated net revenues were a record $3.23 billion in the third quarter, up 11% over the prior year and up 4% sequentially. Asset management and related administrative fees grew to $1.61 billion, representing 17% growth over the prior year and 6% over the preceding quarter. This quarter, PCG domestic fee-based assets increased 3%, which will be a tailwind for asset management and related administrative fees in the fiscal fourth quarter. Brokerage revenues of $532 million grew 15% year-over-year, mostly due to higher brokerage revenues in PCG. I'll discuss account and service fees and net interest income shortly. Investment banking revenues of $183 million increased 21% year-over-year and 2% sequentially. Compared to the prior year quarter, third quarter results benefited primarily from stronger debt and equity underwriting revenues. However, M&A and advisory revenues remained subdued. Moving to Slide 11, clients domestic cash sweep and enhanced saving program balances ended the quarter at $56.4 billion, down 3% compared to the preceding quarter and representing 4.3% of domestic PCG client assets. So far in the fiscal fourth quarter, domestic cash sweep balances have declined about $1.25 billion, as cash inflows have partially offset quarterly fee billings of approximately $1.5 billion. Turning to Slide 12, combined net interest income and RJBDP fees from third-party banks was $672 million, down 2% from the preceding quarter. The bank segment net interest margin was relatively flat at…

Thank you, Paul. I am pleased with our strong results this quarter, and looking forward we are well-positioned with record levels of assets and bank loans starting off the fiscal fourth quarter. And while there is still economic uncertainty, I believe we are in a position of strength to drive growth over the long term across all of our businesses. In the private client group, next quarter's results will be positively impacted by the 3% sequential increase of assets and fee-based accounts. Our advisor recruiting activity remains robust, and I am encouraged by a record number of large teams in the pipeline. We are focused on being a destination of choice for current and prospective advisors, which we believe over the long-term should continue to drive industry-leading growth. In the capital market segment, we continue to have a healthy M&A pipeline and good engagement levels. But our expectations are for a gradual recovery and are heavily influenced by market conditions, and we expect activity to pick up over the next few quarters. And in the fixed income business, although we've seen some improvement in depository, results are still lagging historical levels. Depository clients continue to experience flat to declining deposit balances and have less cash available for investing in securities, putting pressure on the brokerage activity. We hope once rates and cash balances begin to stabilize and grow, we will start to see an improvement. Overall, despite some near-term headwinds, we believe the investments we've made in the capital markets business have us well-positioned for growth once the market and the rate environment become conducive. In asset management segment, we remain confident that strong growth of assets and fee-based accounts in the private client group segment will drive long-term growth of financial assets under management. In addition, we expect Raymond…

Thank you. [Operator Instructions] Your first question comes from the line of Michael Cho with JP Morgan. Your line is open.

Hi. Good evening. Thanks for thinking my question. I will go ahead and start with a regulatory piece. Paul, you mentioned, you talked through the interesting comment in RJBDP, kind of doesn't include potential considerations to maybe changes in rates on sweep cash. You mentioned competition. Again, how would you characterize the current changes in the competitive environment from your view, from your seat? And is there a way to frame the magnitude or even type of response by running a game, whether it's either competition or regulatory on the spot? Thanks.

Yes, let me start. The other Paul, the two Pauls here, but let me start by saying first. People are talking about, well, what's the difference to this program, that program? Our sweep programs are very, very different. So I want to set a stage first that if you look at our sweep programs, we offer from 25 to 300 basis points, the programs that people have been talking about offer one basis point to 50 basis points. So we start off with a whole different value proposition. We have $3 million of FDIC per individual or $6 million joint in the sweep. We have also in our programs, very competitive money market funds or institutional class available to everyone irrespective of the size of investments. And you can see how those have grown dramatically. We have enhanced savings program, again, offering high rates and up to $50 million of FDIC insurance, which you've also seen grow. And our advisors and clients, if you look at the shift, have taken appropriate actions to invest the money. So I don't know what's happening in some of the other programs. I can tell you ours are well thought through, we think are very compliant. And as we look at the announcements and changes, they're not very specific yet, right? So we've prided ourselves, subject to criticism, even from this group, maybe at times for having such high sweep rates. But we've done it because we believe both it's the right thing to do. And it's regulatory, that was compliant with what we understand. So we're going to have to look at movements and each of the movements have been a little different. We don't know totally what they apply to. So, we don't see anything that we know of today that's forcing us to change rates, but we meet weekly and we're going to be competitive. So if the competitive landscape of rates change, we have to be competitive both for our advisors and our clients. So that was more of an unknown comment, Paul saying, if things happen, we're going to adjust. But as of today, we're looking at stuff, but with no current plans.

Okay, great. No, thanks for the clarification and some of the thoughts there. I guess just for my second question, I just want to zoom out and ask a broader business question and kind of trajectory for Raymond James ahead. I mean, as you talk through you continue to hit record assets, record revenue, record bank loans, and I realize you have some margin targets out there for the broader company. And clearly there's some aspects and nuances happening in real time as you just talked through Paul. But I'm just curious, how would you frame the trajectory for operating leverage in the business, as this backdrop continues to reach record levels for Raymond James despite maybe some rate normalization ahead?

Yes, I think that, you know, the operating leverage, as we grow assets, we believe we can accomplish it. There were, you know, a number of factors. We certainly have the whole industry has had a strong equity market, maybe until the last week or two, but in cash spreads have also continued to support the businesses. But we believe that as we grow, and especially our use of technology in the back office, and I know that's one of Paul's keys focus as we transition over this next year to double down on that, we believe we can get operating leverage and still be able to keep our very high levels of support. So our advisors and our latest survey gave us 95% satisfaction rate, almost 60% net promoter score on service. So we believe that's a hallmark, but we believe with technology, we can make it better and easier for them as we continue to spend more money on that part of the service and the reason better service, but also much better leverage.

Great. Thank you so much.

Your next question comes from the line of Devin Ryan with Citizens JMP. Your line is open.

Hey, good afternoon, Paul and Paul, how are you?

Good, Devin.

Good. I'll ask another one on the advisory cash rates. Sounds like some of what's going on in the industry is news to you guys as well as you're following along. And so, I guess just what I'd love to know if you can, like what percentage of fee-based accounts is in cash at the kind of the lowest rates? And then, just also trying to understand competitive reasons that could drive kind of a change in your thinking, because obviously one of the firms that's moved, you made their changes in April, which I'm assuming you guys probably, as you evaluate frequently, you probably saw that then. So just trying to think about what else could competitively change your view, especially now that the vast majority, if not all of the yield seeking cash has already been moved on to those higher yielding alternatives for customers as advisors should have already done?

Yes. So if you look at our advisory, sweeps, we'll just focus on those. It's about 2.5% of those assets are in cash and to us that's frictional cash. You can't find an institutional portfolio or anyone that doesn't have some cash in it at those levels for trading, for paying fees, for whatever you do in them. So we view that as frictional or spending cash. The average cash amount in those accounts are $8900. I mean, so I don't know where you go to a bank and get kind of our sweep rates at that amount of cash. So the other thing, if you look at those accounts and you can tell the shift, because before rates started moving, it was just cash in those accounts. Total money markets, CDs and treasuries are 22,600 for those accounts. I'm sorry, the money markets, CDs, treasuries combined are 22,600 in the account. So you can see it's much more invested, certainly on higher yield instruments. So, we believe that at $8900 [ph], 2.5%, that's a very low rate of cash to have sitting for transactions. So, we think it's, you know, we're putting clients money to work with those numbers.

Right. Exactly. So I guess that's kind of my, I guess the root of the question that you've already seen that move. It’s a very small amount that you are playing a higher rate than some other programs, as you mentioned already. So competitively from here, we don't know exactly every action that's happened, but just the catalyst to actually make meaningful change after you're already in the position that you're in as you just described, Paul?

I think the forces that could be happening if there was a squeeze on cash in the industry, where would you get the cash? You would offer higher rates to get it out of treasuries and money market funds and whatever. I think that cash has seemed to have stabilized pretty much everywhere. Starting to anyway, who knows where that goes? We have a very clear buffer still for operating our business. But I think a demand for cash or if rates go up, you start to see, that would pressure. But if rates go down and there's plenty of cash, I don't see what really squeezes that outside of following the market as rates fall. So I don't see anything else barring some unusual thing in the industry.

Yes. Okay. Very helpful. Thank you, Paul. And then just a quick follow-up on the loan growth and really nice to see that, I guess, securities-based loan demand that you guys referenced. And just curious if that's something that, just as you're kind of maybe seeing a shift in appetite and people's comfort with where rates are, if that's something that you'd expect would continue -- can that continue to fuel loan growth? I guess is the root of the question.

Hey, Devin, Paul Shoukry here. The securities-based loan growth during the quarter, as you point out, was really nice to see. And I think it was due to one, payoffs and paydowns really decelerating since rates started rising. That was a big drag on loan growth in the SBL portfolio. So that has subsided, and also in borrowers and clients getting used to the new levels of rates. So that's also been -- they're tapping into their lines and borrowing more from their SBL. So we're cautiously optimistic that trend could continue going forward. And long-term, as you know, we're very bullish on the prospects for growth and securities-based loans. We think it's a very attractive product for clients. And we knew that there'd be some headwinds as rapidly as rates have risen, that there'd be some headwinds as clients get used to the higher level of rates. But going forward, we're growing more optimistic that we'll continue seeing growth in that portfolio.

All right. Thanks so much.

Thanks, Devin.

Your next question comes from the line of Steven Chubak with Wolfe Research. Your line is open.

Hi. Good evening, Paul and Paul. So one is -- this is a bit of a nitty-gritty question just on the same topic of advisory sweeps. One, there's been some speculation that at least one wirehouse peer may have some regulatory scrutiny of cash disclosure, it's disclosed in the filings. So we and others are admittedly scrutinizing some of these cash disclosures much more closely. Your disclosures note that Raymond James shares a portion of the revenue from sweep options with the advisor. So admittedly, you're a firm with a long standing reputation for putting clients first. But as conflicts are scrutinized more closely, is there a concern that that method for which advisors are compensated does create some inherent conflict? And how should we think about that in terms of the go forward?

No, that's a great question. And let me explain the disclosure first. So on advisory accounts, cash has no different payment in terms of the advisor than any other asset class. So if they have a million dollar account and they're charging 1%, they're getting $10,000 in fees. If there's zero cash in there, they're getting $10,000 in fees. If there's 5% cash, they're getting $10,000 in fees. There's no indirect incentives and trips or rewards or points or anything. There is zero incentive in advisory account to do anything but what's in the best interest of your client. And I assure you, there's nothing from home office that even asks them about it, where we've been known and continued, advisors should be doing the right things for their clients. And of course, we have supervision, making sure it doesn't go the other way. But you know, we have a great group of advisors and by the movements, they're doing what they should be doing. The disclosure really talks about some limited things and the brokerage side. And let me explain that one that we've had some fundraising programs like the ESP program, where for high rate money market types of rates that we've allowed advisors to be compensated in those programs, they are not compensated a penny on the sweeps. So the only incentive that they have is to go -- is to put clients for compensation into higher rate accounts. They have zero compensation on the low rate accounts. So brokerages be like dropping a ticket into some of their investment if they put it into those high rate accounts. They're doing the right thing for clients, it costs us more money. So we don't believe there's any conflict whatsoever. But the fact that we've done that in limited cases. We put that disclosure in, to cover that. And regulatory wise, they like it very clear that instead of you could pay that you are paying, but it's been a very nuanced circumstance. But again, it's all for the very high rated, quite high rate types of programs.

No, that's really helpful, very fulsome response, Paul, so thank you. One point I just wanted to clarify, because you specifically mentioned it's not part of the advisor program, which is consistent with what we saw too. But it also notes that you don't share comp directly with the financial advisor, but the aggregate amount of cash gets credit to the overall payout rate and can cause your FA to receive higher comp on transactions and other unrelated activities. It's vague, I don't know what those activities could be, but if you could provide some context around that as well, just give in the focus on this issue?

Yes, when you're looking at the focus on cash, that's the only thing I can imagine, that's the only thing where there's compensation at all for cash directly or indirectly. It's just on those very small investment vehicles like ESP that we've put into brokerage. And that's it. I mean, there is no other -- advisors have opportunities on asset growth and net new assets, but it has nothing to do with cash. I mean, if they bring in net new assets, we have a net new asset program that can benefit advisors, but it's nothing -- it's not centered on cash.

All right, I understand. That's very helpful, color. If I could just squeeze in one more quickly, just Paul Shoukry, on the flat spread revenue guide was a bit better than we had anticipated, so certainly nice to hear. I was just hoping you can unpack some of the factors to support the flat spread revenue quarter on quarter, just given there's been some upward pressure on funding costs, tail end of sorting, but still some incremental sorting, however modest. So I was hoping you could provide some context on what some of the key assumptions are underpinning that?

Yes. So kind of offsetting some of the funding cost pressures that you're describing there is a loan growth that we experienced throughout the quarter and the continued asset growth that we would hope to experience going forward, so that's, we said flat or maybe down nominally, but that's what's driving that guidance.

Perfect, that's great color. Thanks for taking my questions.

Thanks, Steve.

Your next question comes from the line of Dan Fannon with Jefferies. Your line is open.

Thanks, good evening. I guess one more question on this, just in terms of the competitive backdrop. Does your evaluation period, does this imply that you need to see additional changes across the industry for you to potentially react, or are you still digesting these most recent moves and need to get more color on what they exactly were?

I think are we digesting? Sure, we're watching, but I mean, I don't. Again, we don't anticipate anything. We, you know, as you learn things, you might make tweaks here or there, but we're just going to have to see what plays out as what we know today. But we'll talk about it in our next cash meeting, but we have no plans going in to make changes at this point, but that doesn't mean we won't.

Understood. And then just in terms of the backlog around recruiting, you mentioned record backlog of large teams, that's a comment I think you've been making for several quarters. So just curious if there's additional context thinking, given the strong net new assets in the quarter, the funding, kind of bring onboarding that you're seeing versus the replenishment of that backlog, if there's any other additional color that would be helpful?

Yes, we've been, the recruiting is actually backlog has been picking up. It's extremely strong. I've said the last few quarters, we're not surprised by it anymore, but we were surprised the large number of $5 million, $10 million, even $20 million teams. It's continuing and we continue to get new ones, both joining, committed and in the pipeline that I think we're competing very, very well for. So the recruiting activity remains strong and we're still very optimistic on it. And I think we're we don't see anything right now that's slowing down the pace, so that's been really good news for us.

Understood. Thank you.

Your next question comes from the line of Brennan Hawken with UBS. Your line is open.

Good morning, Paul and Paul. Sorry. Good afternoon. It's been a rather long day. Sorry about that. I'm going to I'm going to start with another question somewhat related to this sweep. Is it possible for you to identify what portion of your advisory assets or the advisory assets, I should say, on the Ray J platform where Ray J is considered a fiduciary?

There's so many words. There's so many terms in fiduciary, right? There's a risk of fiduciary, there's best interest, there's, you know, and they all have different responsibilities and rules and everything else. So I don't know the best number we could give.

I mean, what we could say is that within fee-based, all fee-based accounts, we have about $15 billion of cash sweep balances and that excludes the custody business. And then, within that, to Paul's point, it's very, there's some risk of fiduciary, there's some other types of programs within that, but that's all fee-based accounts.

Okay.

And some of those are firm managed, some of them are advisors with discretion and there's some with advisors without discretion where they have to clear everything with a client. So, they -- so but that's the total number if you looked at it.

Got it. The 15 million is the sweep in the sum of all of those accounts.

Yes. And again, almost the average on those accounts is $8900 and 2.5%. So it's not -- it's really the residual cash residing on average in those sweeps in those accounts.

Okay. Thanks for that. And then, net new assets was pretty decent actually this quarter. Was curious whether you guys flagged the OSJ as a as a pending headwind. And I apologize if you touched on this and I missed it. But did that event that you flagged at the Investor Day come to pass? And what was the size of that as far as a net new asset impact?

No, we anticipate one coming. It's probably in the next quarter. So that's the one we've been talking about. But it hasn't happened. It'd be nice if it didn't. But we anticipate it will still happen. That's the one we wanted to flag. But it has not happened yet.

Got it. Okay. So that's coming likely in the coming quarter?

Yes, the fourth calendar quarter.

Okay. Thanks for taking my questions.

Yes.

Your next question comes from the line of Kyle Voigt with KBW. Your line is open.

Hi. Good evening. Maybe a question on the third-party bank sweep yields falling by 18 basis points sequentially and about 25 basis points over the last two quarters. Just wondering if you could clarify, are there any changes made to rates or tiers that partially drove that. And also clarify what's driving this in terms of mix shift towards the higher yield sweep offerings? Is that simply a shift of cash towards higher balance tiers or is there something else driving the negative mix shift?

Hey, Kyle. Yes, a lot of that is initiatives that we run where we offer kind of a higher rate for new cash that comes into the sweep program to the firm and/or maturities from money market funds, treasuries, and those type of things where clients want the functionality of the sweep program, but want a comparable rate to move over and benefit from the FDIC insurance and the availability of the cash in the sweep program. So as we've kind of implemented those initiatives, we've been able to effectively bring over cash from those sources through the quarter, which while it increases the average cost of the funding, it increases also the amount of funding that we have and it's still net attractive. So it's really a win-win-win initiative that we've put into place in the sweep programs.

Okay. Is there any way to quantify the percentage of those third-party sweeps that are in the newer or high yield or the money market fund kind of equivalent yield program?

I think now it's roughly somewhere in the 15% to 20% range of the total sweep balances that are in those type of programs.

Understood. Okay, thank you. And then just as a follow-up, just on repurchases, you mentioned your desire to increase the pace of repurchases from here. You executed on about 240 million repurchases in the prior quarter. Should we think about that ramping to 300 or 350? Any way you can quantify the increase in that pace moving forward?

We're not programmatic, so we're not going to give you a hard number. A lot of factors play into it in terms of the sources and uses of cash and capital. But yes, we definitely intend on increasing the pace from 243, which I know was higher than many people expected even during this past quarter. But we have lots of capital, lots of cash, and we remain committed to keeping that within our targets over a reasonable period of time.

As we said, if we couldn't find the -- we're still looking at M&A activity. It's our preferred, but if we couldn't find it, we'd return it. We haven't been able to find them yet, so we're going to start being more aggressive on returning to keep the capital ratios back where we think they should be.

Got it. Thank you very much.

Your next question comes from the line of Bill Katz with TD Cowen. Your line is open.

Great. Thank you very much for taking the question. I do want to pick up on that last question. So, either you, Paul and thank you both. Just in terms of the commentary of reality, maybe to a little bit more buyback, is the deal pipeline at the strategic level, is it just less fulsome? Is it just harder to make the economics work? Is anything shifting in the backdrop here that sort of pushes out that opportunity? And relatedly, if a deal were to come back, would you then forego or truncate the underlying buyback? Thank you.

I think the, you know, very active, there's reasonable opportunities. Some are pricey. But for us, it's the right culture fit and integration and frankly, we're, as you can see by this quarter, in the last few, our earnings are very, very strong. So, this capital ratio tweaks up, we want to get it back in a proper range. So we think we can still be a lot more aggressive on the buybacks and still have the ample capital if something happens. So it's just saying, we don't expect anything of a size that there's no reason not to be more aggressive on returning it to shareholders.

Okay. Just to clarify, is 10% still the appropriate Tier 1 leverage ratio guidepost, as you think about sort of getting back to sort of normal capital ratios?

Yes, 10% still our target right now for Tier 1 leverage.

Great, terrific. And then sort of second question, just going back to your outlook for the stable NII and cash sweep dynamics. How should we think about any residual adverse mix shift into some of these higher fee products? And is there any leakage here that existing customers that are not necessarily bringing new money in, but would look at that and say, hey, why can't I get that kind of rate and sort of put a little more downward pressure on the net yield? And maybe the other way I'd like to ask the question is, sorry to nest it here so much, but what is now the net rate the client is ultimately getting here on the cash sweep? Thank you.

Yes. So we offer, our grid starts, as Paul said, from 25 basis points, goes all the way up to 3% on the cash sweep program, and you know, there has been some migration and mix shift to the higher yielding programs and initiatives that we've offered, which are actually closer to 5%. And so, what all of this is happening, what hasn't really been there for the us or the industry is loan growth. And that's actually impacted our capital ratios as well, because our earnings have been very strong, but the loan growth across the industry has been muted. So that's ultimately the driver of both NIM and more importantly, net interest income, which actually impacts the bottom line, will be driven by loan growth, which will drive higher yields and higher earnings overall. And so that's kind of what we're as an industry waiting for. We started seeing some improvement on the SBL side, and we're optimistic that with more corporate activity, we'll start seeing more activity on the corporate side eventually as well.

Your next question comes from the line of Jim Mitchell with Seaport Global. Your line is open.

Hey, good morning. Good afternoon. Sorry. Just maybe, Paul, can you talk about deposit betas in the face of rate cuts? How do you at least think your asset sensitivity would look in the first 100 basis points? Can you kind of almost get a one for one offset or how are you thinking about betas?

It'll largely depend on the competitive environment. But because we have been generous in passing rates to clients and through these other programs that have near money market fund rates like Enhanced Savings Program, et cetera, that we should have a lot of sensitivity to the downside as well in both the asset and on the funding side of things. So, we do feel like we have an ample amount of cushion. But again, it'll depend on the competitive environment and the demand for cash across the industry as rates go down.

Yes. If you're in a suite -- if you have a suite program, it's one to 50 basis points. You get a 50 basis point drop over two cycles. It's kind of hard to respond. We have plenty of room in ours and still be very competitive in the market today.

Right. So, so, Paul, when you think about next year and we think about the forward curve on Fed funds, kind of a gradual, say, 150 bps, it seems like you guys might hold up a little bit better, especially if loan growth picks up and you still have some repricing in the securities portfolio, right, because the yields are still pretty low there. You put all that together, do you, I mean, I know there's competitive pricing, but do you feel like you guys can hold in there pretty well next year on NII?

Yes, putting aside whether I believe the forward curve or not.

Right, fair enough.

We've generated record results now for the last three years and three quarters. And those were in very different interest rate environments. And so, we are confident in our ability to perform very well in any kind of interest rate environment, because we have diversified and complementary businesses. So, for example, lower interest rates, at least in the last cycle, certainly supported our M&A business and our fixed income business and supported loan growth. We had records, securities based loan growth, during the COVID period because partly due to the lower rates. So there's different things that benefit us in different rate environments. But to your point, on a relative basis, because we have been so generous in passing on the rates to our clients and offering these other programs, we feel like we're relatively well-positioned on that front as well.

Okay, thanks.

Your next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is open.

Great. Thanks for taking the question. Just circling back to the industry conversation on the movement in sweeps, just curious more broadly how you see potential scope maybe over time for an evolution in the way customers pay for services and a way from cash sweep. Just curious what other ways over time could you envision 10, 20, some years in the future, potentially in some hypothetical scenario where customers pay differently for services. And how one -- how might one still capture economics for the services they provide? What other ways might you be able to capture value?

Yes, well, I guess there's so many ways, it's hard to tell, right? A big source of growth and income used to be, can be one fees and other things and they've become less of a factor over time. Certainly asset based fees, if you look at how they price versus the broker dealers. Asset based pricing is becoming more common. There's all sorts of ways and part of that depends on regulatory. You could have performance fees. You could have -- I think it's hard to tell where it evolves. I think in the business, I don't know, people talked about consulting fees or hourly rates. I don't think anyone likes a lawyer or accountant's bill when they spell out hours. So I don't think it will go there, especially given the value of the relationship with an advisor where they -- it's -- it's everyone always thinks about the investment part. And that that is part of it. But a lot of it is really the advice, the family advisors. And they've become a big part of the lives of clients. So there's all sorts of stuff that they change anyway over time. Maybe it'll get more asset based. We certainly have countries that the UK, Australia, where it's just direct charges, the clients have to be in fees. So it's very clear. It could evolve all sorts of ways. But it's a very competitive, mature industry. And I think that people will find a way to adjust. We've had to adjust through zero interest rates and high interest rates and all sorts of things. And we've kind of adjusted as we've gone along. So 10 years out in our industry seems like forever. Maybe it's because I'm old and Paul has to worry about it.

Great, thanks for that. And just a follow-up question more broadly on cash sorting and cash sweep balances. Just curious how close you think we are to bottom and eventually starting to see that grow again. What catalysts do you see on the horizon that might get us there? And how might the recent evolving competitive backdrop in industry discussions here and debates on sweep rate, how might that impact cash sweep balance? It's just given the heightened focus and attention that it's getting?

Yes, I mean, we continue to believe that we're closer to the end of the sorting cycle than the beginning. And some of the metrics that Paul discussed just in the fee-based accounts, having $8,900 of cash sweeps per account, whereas we have $22,600 of money market funds, CDs and treasuries. A lot of these clients, to the extent they had investable cash balances, have been invested in the higher yielding alternatives. As we've always said since the very beginning, and we're one of the first, if not the first, to say it, we're not going to declare the end of the trend until we have several quarters of history to look back on and start seeing growth in the cash balances. And ultimately, that growth will come from the stabilization of the runoff and the migration and the growth of -- the continued growth, which we've had phenomenal growth of client assets. And as we retain, recruit advisors and those advisors bring on more client assets, there'll be cash associated with that, and that ultimately will drive the growth and the balances.

Great. Thank you.

Your final question will come from the line of Alex Blostein with Goldman Sachs. Your line is open.

Hey, guys. Good afternoon. Thanks for taking the question. So appreciate all the detail, and obviously it's a dynamic backdrop, so we're all kind of navigating it and learning from it. So appreciate that there's still a ton of unknowns there. But I guess as you think about that $15 billion sweep number that you provided, and I think most of us understand that it is fairly small and it's largely operational. But I guess at the heart of the question, what we're all kind of trying to figure out is why is transactional or operational cash, albeit small on a per-account basis, but it's still part of the advisory relationship would be treated differently under the fiduciary standard of Reg BI, and why wouldn't that cash balance, again, albeit small, still receive some of the higher yields that are available out there?

Well, I guess, my quick answer would be, what do you get on your checking account, right? There's a cost to having it on the platform. There's a cost to servicing it. It's transactional, so it has more transactions, so there's a cost. I mean, if the standard for BI is you have to pay a rate that's way uneconomic to operate a business, I don't know what that means. I don't think that is the standard under BI. It's put clients first and be fair and take their interests at heart first. And I think that transactional cash, at 25 basis points, it's a lot more than you're going to get on your checking account, is very reasonable. So I mean, there may be disagreements. I think a standard like that is, I wouldn't understand how you can come up with that.

So I guess the difference is the checking account is not a fiduciary relationship versus this seems to be one. And I guess that's where the disconnect comes in and what could be the outcome?

There are a lot of fiduciary accounts, I agree, that you look at institutional asset managers, they have a fiduciary relationship, but they don't have zero cash in their portfolios. I mean, so if you want to benchmark it to other fiduciary relationships of this type of investments, it would be a real outlier to say, all that cash has to be 100% invested because it's not reality, the way accounts work. That would say we have to not only sort the cost, so we'd have to fund the transactions because there wouldn't be cash in the account or sell out securities in order to fund these transactions or other things. I mean, I think that, to me that's not a reasonable standard.

Got you. All right, understood. All right, my quick follow-up, Paul, the other Paul, back to the discussion around third-party bank sweep and the rate changes and the migration that you've seen there. Do you expect that to be largely done or there could be still some mix shift where some of the larger account balances will kind of push that yield a little bit lower? And to what extent, I guess, is that if it all incorporated in your sort of flattish cash revenue trajectory for next quarter versus this quarter?

Yes, well, we have, I mean, the initiative itself, we have some levers on and around, largely rate, right? So to the extent that we want to continue bringing in cash from the outside, rate is a big lever. We actually just announced that we're reducing the rate on the high-yield portion of the program that brings in the new cash from the outside, because we have pretty big buffers now with over $17 billion of cash swept to third-party banks that we can reposition and bring on to fund our own bank over time. So, it really just depends on how much of the initiative that we want to continue to pull in that we actually, again, just announced that we're reducing the rate. It's still very attractive, higher than 5%. But we're not going to, again, declare completion of any type of trend until we have several quarters of history. Otherwise, it's just speculation.

I got you. Sorry, in the reduction on the, was that ESP or was that the program that sits within third-party bank sweep?

Yes, that's the sweep initiative. That's right.

Got it. Okay. All right. Thank you, guys. Appreciate it.

Thanks, Alex.

There are no further questions at this time. I'll turn the call to Paul Reilly for closing remarks.

Okay. Well, I appreciate all the questions and you're on the call. I want to remind everybody we had a very good quarter, but I understand all the questions and cash sweeps. So, appreciate. Hope we were helpful in all of our responses and thank you for joining us.

This concludes today's conference call. We thank you for joining. You may now disconnect your lines.