Michael Cho

Michael Cho asked for an update on the Commonwealth integration progress, preparation for onboarding, key takeaways, and how it might influence broader LPL organizational priorities.

Answer

CEO Rich Steinmeier stated that integration is progressing well, leveraging LPL's experience with major integration events. He highlighted completed scoping, ongoing development for new capabilities (e.g., robust feedback engine, single relationship agreement, householding, repricing), and the focus on defining a target operating model that preserves Commonwealth's exceptional service and culture while enhancing tools for all advisors.

Michael Cho inquired about the progress of the Commonwealth Financial Network integration, preparations for onboarding, key takeaways from the process, and how it might influence broader LPL organizational priorities.

Answer

CEO Rich Steinmeier stated that integration is progressing well, leveraging LPL's extensive experience with major integration events. He highlighted completed scoping, ongoing development for new capabilities benefiting all advisors (e.g., robust feedback engine, single relationship agreement), and the focus on defining a target operating model to preserve Commonwealth's exceptional service culture.

Michael Cho asked for more details on the data and listing segment, specifically regarding large wins, accelerating new listings activity, pipeline and pace expectations, and the 2026 outlook relative to the low single-digit medium-term guide.

Answer

Adena Friedman, Chair and CEO, noted that momentum for new issuances built through 2025, with some issuers shifting from Q4 2025 to Q1/Q2 2026 due to the government shutdown. She highlighted active dialogue with late-stage private companies, strong investor interest in liquid assets, and the continued success of Nasdaq's switch program.

Michael Cho asked for more details on the data and listing segment, specifically regarding the pipeline and pace expectations for new listings activity, given the large wins in 2025 and anticipated acceleration. He also questioned if there were any specific factors to consider for this segment in 2026 relative to the existing low single-digit medium-term growth guidance.

Answer

Adena Friedman, Chair and Chief Executive Officer of Nasdaq, noted that new issuance momentum built throughout 2025, with some Q4 issuers shifting to Q1/Q2 2026 due to the government shutdown. She highlighted active dialogue with late-stage private companies and strong investor interest in public markets, driven by a premium on liquidity in the current dynamic environment. Friedman expressed excitement about available risk capital and companies ready to go public, which also benefits Nasdaq's index business and the successful switch program.

Michael Cho inquired about Nasdaq's strategy and growth opportunities within the digital assets ecosystem, including the tokenization initiative and areas where Nasdaq can drive higher growth as the digital landscape evolves.

Answer

Adena Friedman, Chair and CEO, explained Nasdaq's long-standing involvement as a technology provider in digital assets, highlighting the relevance of financial technology solutions, support for markets with trading and surveillance technology (including crypto-specific), and collateral management capabilities. She also noted Nasdaq's role in investable products and index products with crypto assets, and as a listing exchange for crypto index ETFs. Friedman emphasized a broad-based opportunity across the franchise, while also noting the importance of understanding the evolving regulatory landscape with SEC and CFTC cooperation.

Michael Cho asked about Nasdaq's growing presence in digital assets and crypto, inquiring about specific areas with high growth potential and the broader strategy for leveraging the evolving digital ecosystem.

Answer

Adena Friedman, Chair and CEO of Nasdaq, highlighted the company's long-standing role as a technology provider in the digital assets ecosystem, emphasizing opportunities in financial technology solutions like trade and surveillance technology for crypto assets, collateral management, and index products. She noted Nasdaq's broad-based opportunity across its franchise, contingent on understanding the evolving regulatory landscape.

Michael Cho of JPMorgan Chase & Co. asked about the revenue acceleration in the Data and Listings business, seeking clarity on the business mix and the relative contributions from the strong data trends versus the improving listings environment.

Answer

Chair & CEO Adena Friedman explained that data business growth was driven by expanded relationships with global retail brokers and higher usage-based revenue amid strong retail market participation. For listings, she noted that while the IPO environment is improving, the revenue impact has a lag due to amortization, but the business is trending above its medium-term outlook.

Michael Cho inquired about the acceleration in net new assets (NNA) to 8% this quarter, seeking insights into specific areas of strength, the impact of Raymond James' approach over the past four quarters, and the current NNA pipeline compared to recent periods.

Answer

CEO Paul Shoukry highlighted $31 billion in net new assets, the second-best quarter ever, driven by robust and broad-based recruiting, particularly in the independent contractor segment. He emphasized strong advisor retention, a culture respecting independence and book ownership, and significant investments in technology ($1.1 billion, including AI) and products as key differentiators. Shoukry also noted the 'powerfully personal' value proposition resonates strongly amidst competitive noise. Regarding a follow-up on compensation expense, Shoukry explained the 65.4% comp ratio was influenced by revenue mix, specifically the higher payout in the Private Client Group's independent channel and a weaker Capital Markets quarter, but expressed satisfaction with the result given these headwinds.

Michael Cho asked about the acceleration in net new assets (NNA), identifying areas of particular strength, the factors supporting this acceleration over the past four quarters, and the current outlook for the recruiting pipeline. He also inquired about the firm's compensation expense and ratio, considering seasonal billing and the outlook for fiscal Q2 and full fiscal year 2026.

Answer

Paul Shoukry, CEO of Raymond James Financial, highlighted robust and broad-based recruiting, strong advisor retention, and high advisor satisfaction. He attributed success to the firm's culture, platform investments (technology, AI), and the 'powerfully personal' value proposition. Regarding compensation, Mr. Shoukry noted the firm's target of 65% or better, explaining that the current quarter's 65.4% was influenced by revenue mix, particularly the higher payout in the Private Client Group's independent channel and a weaker Capital Markets quarter.

Michael Choe inquired about Raymond James' recruiting success, specifically asking which segments (independent or employee) are seeing more uplift in net new asset growth and what factors are currently resonating most with advisors. He also asked for clarification on the firm's AI initiatives, their objectives, and how prospective resource allocation will impact future technology spending.

Answer

CEO Paul Shoukry explained that recruiting success is broad-based across all affiliation options, with the pipeline for fiscal 2026 being the strongest ever. He attributed this to Raymond James' 'best-of-both-worlds' value proposition, combining a client-focused culture with robust resources and technology, offering a stable platform amidst industry disruption. Regarding AI, Shoukry outlined three key objectives: supporting infrastructure and cybersecurity, increasing efficiency and consistency of service, and enabling advisors to provide more tailored advice. He noted a significant increase in AI expense budgeted for next year, emphasizing its role as a long-term differentiator.

Michael Cho of JPMorgan Chase & Co. inquired about the drivers behind the strong advisor recruiting pipeline, its sustainability, and the balance sheet's growth trajectory, particularly in securities-based lending.

Answer

CEO Paul Shoukry described the recruiting momentum as the most significant acceleration since the financial crisis, attributing it to the firm's value proposition and investments in transition support. He also confirmed strong growth in securities-based loans (up 20% YoY) is supported by a robust deposit base, meeting increased client demand.

Michael Cho of JPMorgan Chase & Co. inquired about the strength and sustainability of the financial advisor recruiting pipeline and the drivers behind the recent balance sheet growth, particularly in securities-based lending.

Answer

CEO Paul Shoukry described the recruiting pipeline activity as the strongest since the financial crisis, attributing it to the firm's culture and investments in transition teams. He also noted that securities-based loans to private clients were up 20% year-over-year, reflecting increased client demand and utilization of the firm's balance sheet.

Michael Cho asked for more detail on the sequential improvement in Wealth Management net new assets (NNA) during the quarter and into April, the size of the recruiting pipeline versus last year, and loan demand trends.

Answer

CEO Paul Shoukry explained that NNA improved throughout the quarter, with strong new commits in March and April set to boost future results. He highlighted a strong recruiting pipeline, driven by the firm's culture and balance sheet. Shoukry noted corporate loan demand was tepid due to volatility but remained strong for securities-based loans (SBLs), which saw continued demand in April.

Michael Cho with JPMorgan Chase & Co. inquired about the long-term outlook for bank M&A, seeking to understand the multi-year tailwind's potential sizing and pace for Stifel beyond 2026. He also asked for clarification on Chairman and CEO Ronald J. Kruszewski's comment about potentially increasing allocation to recruiting, specifically whether this implies more dollars or higher incentives, if it's already factored into the 2025 guidance, and its expected impact on net new assets (NNA) for 2026.

Answer

Chairman and CEO, Ronald J. Kruszewski, anticipates a multi-year period of bank consolidation driven by needs for scale, profitability, technology investments, and deposit/loan origination challenges, further supported by a more conducive regulatory environment. He emphasized KBW's strong position as a trusted advisor with deep client relationships in this trend. Regarding recruiting, Mr. Kruszewski stated he is contemplating increasing allocation, potentially through more proactive outreach, to capitalize on Stifel's robust platform which effectively drives client lending, cash balances, and fee-based business.

Michael Cho asked about the bank M&A runway, seeking to frame the multi-year tailwind and the potential sizing and pace of this opportunity for Stifel. He also inquired about Ron Kruszewski's comment on increasing allocation to recruiting on the wealth side, asking if this meant more dollars or higher incentives, if it was included in the 2025 guide, and if it would accelerate NNA into 2026.

Answer

Ronald J. Kruszewski (Chairman and CEO, Stifel Financial) discussed the drivers of banking industry consolidation, including scale, profitability, technology investments, and deposit/loan origination challenges, alongside favorable valuations and a shift in the regulatory environment. He highlighted Stifel's strong position with KBW, deep client relationships, and separate sales force. Regarding recruiting, Kruszewski clarified that 'increasing allocation' meant potentially more proactive outreach to advisors, leveraging Stifel's platform and appeal, as a consideration for capital deployment, rather than just waiting for advisors to approach them.

Michael Cho of JPMorgan Chase & Co. asked about the prioritization and pace of Stifel's AI investments and inquired about the firm's next strategic focus for its European business following the Bryan Garnier acquisition.

Answer

CEO Ronald Kruszewski detailed that the AI strategy focuses on using off-the-shelf tools to amplify employee productivity across numerous workflows, rather than building proprietary models. Regarding Europe, he clarified the strategy is a "shift in focus" to de-emphasize the capital-intensive sales and trading business and concentrate on advisory and investment banking, which offers better synergies with U.S. operations and improved profitability.

Michael Cho followed up on advisory productivity, asking about the change in MD count and if 2021 M&A levels are a good benchmark. He also requested a relative metric for the recruiting pipeline and commentary on recruiting package evolution.

Answer

CEO Ron Kruszewski confirmed that managing productivity is a factor in the MD count and agreed that benchmarking M&A productivity against 2021 levels is fair. On recruiting, he described the current landscape as 'very competitive.' He explained that Stifel maintains a disciplined, ROI-focused approach to transition packages and does not aggressively adjust them with market highs, which can lead to outperformance in recruiting when markets moderate.

Michael Cho inquired about the magnitude and driving strategies behind positive net sales in Victory Capital's non-U.S. business during Q3 and since the Amundi transaction closed, seeking expectations for uplift in 2026.

Answer

David Brown, Chairman, CEO, and Director, explained that initial non-U.S. sales were primarily driven by the Pioneer franchise within Amundi's network, with a shift expected in 2026 to include legacy Victory products through UCITS and U.S.-listed ETFs, highlighting it as a transformational growth opportunity.

Michael Cho asked for more color on the magnitude of positive net sales in the non-U.S. business during Q3 and since the Pioneer acquisition closed, identifying the strategies driving these inflows. He also sought expectations for the magnitude of uplift for Victory Capital in this segment in 2026. Additionally, he inquired about near-term focus segments within the acquisition opportunity, particularly asset classes or themes like income that would fit Victory Capital's platform.

Answer

David Brown, Chairman, CEO, and Director, explained that most non-U.S. sales since the acquisition have come through the Pioneer franchise due to its established distribution network within Amundi. He anticipates legacy Victory products will contribute significantly starting in 2026 as new UCITS and U.S.-listed ETFs are launched, describing it as a 'transformational opportunity' without disclosing specific flow sizes. Regarding M&A, David Brown confirmed Victory Capital is 'fully open for business,' not ruling out mega-deals or smaller strategic acquisitions. He emphasized a focus on high-performing products with future demand and cited income as an example theme for alternatives, stressing a selective approach to private markets.

Michael Cho of JPMorgan Chase & Co. asked for expectations on the growth uplift from the Amundi partnership's non-US distribution and questioned the near-term margin outlook given recent tailwinds.

Answer

CEO David Brown detailed the Amundi partnership's phased rollout, noting Pioneer products are already distributed, institutional products are available, and new registered products will launch into 2026, with the goal of significantly growing non-US AUM. He reiterated the 49% long-term margin guidance, stating it provides flexibility for business investment, even if margins temporarily exceed that level due to synergies.

Michael Cho of JPMorgan Chase & Co. asked for clarification on margin differences across products, particularly the rules-based ETFs, and requested more context on the institutional pipeline described as the 'largest ever'.

Answer

President and CFO Michael Policarpo explained that Victory Capital's single, scalable operating platform, with over two-thirds of expenses being variable, ensures that all products, including active and rules-based ETFs, are highly profitable. He confirmed the institutional pipeline is the largest in the company's history, is diversified across multiple franchises and channels, and is expected to fund predominantly within 2025.

Representing Ken Worthington, Michael Cho asked for an update on the initial operational priorities for the Amundi distribution partnership and requested commentary on fund flow trends in October.

Answer

Michael Policarpo, President and CFO, explained that operational priorities for the Amundi partnership include evaluating which Victory products to prioritize, working on structuring for the global network, and educating sales teams. Regarding flows, he indicated that October's trend was closer to September's improvement than the softer results of July and August, but did not provide specific figures, instead highlighting the significant 'won but not funded' pipeline for Q4.

Representing Ken Worthington, Michael Cho from JPMorgan Chase & Co. asked about the impact of the large-cap to mid-cap valuation gap on net flows and the potential for an inflection. He also questioned the slight decline in the firm's fee rate and any underlying product-level trends.

Answer

CEO David Brown addressed the questions, stating that a broadening market would create tailwinds for Victory's competitive small and mid-cap strategies. Regarding the fee rate, he explained there is no underlying pricing pressure and the minor fluctuation is due to asset and channel mix. Brown emphasized that the firm is margin-focused, and its adjusted EBITDA margin has remained strong and even expanded, which is a more critical metric for the business.

Michael Cho inquired about the key drivers of trading volume strength in the first half of the year and the competitive strategy for launching registered funds, including accessing the 401(k) market.

Answer

CFO James Nevin noted that Q2 volume saw a higher proportion of institutional trading compared to the mega-blocks of Q1, and H2 guidance reflects normal seasonality. CEO Kelly Rodriques added that Forge's upcoming registered fund aims to be a unique, low-cost vehicle for non-accredited investors. He views potential 401(k) access as a natural extension of the company's distribution strategy through wealth advisors, aligning with broader regulatory trends.

Michael Cho, on behalf of Ken Worthington at JPMorgan Chase & Co., asked for details on the recent mix of clients and trade types and the potential impact on take rates. He also requested guidance on cost expectations for 2025, considering the company's cost-saving initiatives.

Answer

CFO James Nevin, with a clarification from CEO Kelly Rodriques, explained that the take rate is influenced by a diverse mix of liquidity sources. He noted that an increase in larger block trades and activity from third-party SPVs, which often carry lower fees, has impacted the average rate. However, he stressed that the resulting volume growth is expected to more than offset any take rate compression. Regarding costs, Nevin stated that after achieving its savings goals, the focus for 2025 is on cost control, with expectations for some selective investments and variable costs tied to revenue growth.

Asked about recent trends in client mix and trade types, the potential impact on take rates from institutional and SPV activity, and expectations for compensation and headcount in 2025.

Answer

The company is seeing a more diverse mix of liquidity sources, including larger block trades and third-party SPVs, which can carry lower take rates. However, they expect the resulting increase in volume to more than offset any decline in the average take rate. On costs, the company has achieved its savings targets and is now in a cost-control mode, though they will continue selective investments (like offshoring) and have some variable costs tied to revenue.

Michael Chell, on for Ken Worthington, inquired about the outlook for money market fund flows in a 'higher for longer' rate environment and the market positioning of the firm's ESG and sustainability-focused products.

Answer

CEO John Donahue described the current rate environment as 'delightful' for money funds, reinforcing cash as an asset class. CIO Debbie Cunningham noted that new market participants are likely to stay and increase balances. Regarding ESG, John Donahue reiterated the firm's focus on fiduciary duty, using ESG as an analytical tool. Saker Nusseibeh, CEO of Federated Hermes Limited, added that their strategies use ESG to seek better financial returns, while also offering specific thematic funds in Europe to meet client demand for targeted outcomes.

Inquired about Envestnet's 'differentiated pricing' strategy, especially given competitor price hikes, and asked for clarification on their approach. Also asked about the expected cadence of free cash flow for the rest of 2024 and any long-term thoughts on normalized conversion ratios.

Answer

Executives explained their premium pricing in the RIA space is justified by their superior platform. Their strategy focuses on bundling analytics and cross-selling managed accounts to create more holistic, higher-value relationships rather than just selling software. Regarding free cash flow, they highlighted the significant year-over-year improvement in Q1 and stated that one-time cash expenses from 2023 (like severance) will not be a headwind going forward, implying continued improvement, but did not provide a specific cadence or future conversion target.

The analyst asked about the margin progression towards the 2025 target, clarification on expense savings figures, and an update on the timing and revenue potential of the new custody partnership with FNZ.

Answer

Executives stated the margin progression will be linear towards the 25% target in 2025, not back-end loaded. Of the $60M in run-rate savings from actions already taken, about half was recognized in 2023, with the rest to be recognized in 2024. The FNZ custody platform is expected to be in market in Q2 or Q3 of the following year, with a broker-dealer offering later in 2024. The revenue opportunity is estimated at 2-5 basis points on custody economics. They are also pursuing deeper partnerships with asset managers for personalized solutions, which will create new revenue streams.