Good morning and welcome to the Earnings Call for Raymond James Financial Fiscal Fourth Quarter and Fiscal Year 2016. My name is Raquel and I will be your conference facilitator today. This call is being recorded and will be available on the Company's website.

Now I will turn the call over to Paul Shoukry, Head of Investor Relations at Raymond James Financial. Please go ahead, sir..

Thank you, Raquel and good morning. And I thank all of you for joining the call. As always, we appreciate your time and interest in Raymond James Financial. After I read the following disclosure, I'll turn the call over to Paul Reilly, our Chief Executive Officer; and Jeff Julien, our Chief Financial Officer.

Following their prepared remarks, they will ask the operator to open the line for questions. Certain statements made during this call may constitute forward-looking statements.

Forward-looking statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, market conditions, acquisitions, our ability to successful recruit and integrate financial advisors, anticipate results of litigation and regulatory developments, or general economic conditions.

In addition, words such as believes, expects, anticipates, plans, and future or other conditional verbs, such as will, may, could and would, as well as any other statements that necessarily depends on future events are intended to identify forward-looking statements.

Please note that forward-looking statements are subject to risks and there can be no assurance that actual results will not differ materially from those expressed in those forward-looking statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 10-Q which are available on our website.

During today's call we'll also use certain non-GAAP financial measures to provide information pertinent to our management's view on ongoing business performance. These non-GAAP measures should be read in conjunction with and not as a replacement for the corresponding GAAP measures.

A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedule accompanying our press release. So with that, I will turn the call over to Paul Reilly, CEO of Raymond James Financial.

Paul?.

Good morning, Paul, thank you. Kind of a very interesting year if you'd asked me in the first or second quarter if we were going to finish on record. So I would have said, with that assets down at the start of the year in a tough market, oil prices plunging, the underwriting markets is almost freezing up, I would have been very surprised.

So needless to say, we're very pleased about the record quarter and record fiscal year. We kind of achieved this remarkably in a very unremarkable fashion with just a relentless following up of a long-term implementation strategy.

Tom celebrated his 50th year at Raymond James and he constantly reminds us that our mission is to focus on the well-being of our clients, and assist advisors in helping clients achieve their financial objectives, and to make all our decisions for the long-term.

And if you look at this year there is nothing in particularly that stood out, except all divisions had record revenue. This year as our record revenue and profits were achieved while we underwent robust recruiting. The integration of three groups that joined our family; the Duestche Bank U.S.

Private Client Service Unit that we've rebranded Alex Brown, a division of Raymond James and added capability in the Northeastern expansion of our ultra-high network capabilities.

3Macs; the firm actually older than the country of Canada, has well joined us after almost a 200-year partnership, great divisors and giving us some multi-language capabilities, back office capability in Canada. The company is expanding our M&A capability in Europe will Mel [ph] numbered his group.

The implementation of masses of world-class AML system in very short order in our platform. New client and advisor technology including advisors have been able to do all their work on their iPhone or iPads, so unique technology. So this year was achieved really by our associates.

They accomplished all this, we don't talk much about the Austin, Texas people but we ought to thank them. Through all of this, not only did they achieve the above but they kept the outstanding service levels to our clients and advisors that drive our retention and satisfaction. So they really deserve the credit for this year.

First, I want to cover our fiscal year-end highlights. I'm going to turn over to Jeff and he is going to cover the Q -- the quarter, and certain line items. Then I'll kind of discuss the segment year, how we did in the segments in our kind of outlook in some of the segments.

So with that we achieved record annual net revenue of $5.4 billion, up 4% over last year's record. And that was driven by annual net revenue in all four records, in all four of our core operating segments. Record annual net income of $529.54 million or $3.65 per diluted share.

Again, this was driven by record profit in our capital market segment and RJ Bank, and still the second best year of pre-tax profits for both, the private client group and asset management group combined they in this record by a less than $5 million. So it really was a good year for everyone.

The record diluted EPS of $3.65 for the year represents a 6% growth over fiscal 2015. On adjusted basis, and that if you take out the $41 million of acquisition-related expenses, our non-GAAP net income of $556.3 million or $3.84 per diluted shares. That represents a 12% growth over the fiscal 2015 diluted EPS.

We also ended the year with several new records and key operating metrics which should bode well for revenue going forward.

Helped by the aforementioned acquisitions, we hit some of these records but I also wanted you to note that even without the acquisitions, our organic growth alone would have achieved records in most of these segments that drive our forward revenue.

Record client assets under administration of $604.4 billion, a 26% year-over-year increase; again augmented by the $50 billion roughly of client assets brought over from Alex Brown and 3Macs.

However, even if you excluded those additional assets, our client assets under administration would have grown roughly 15% on a year-over-year basis which reflects our solid organic growth.

We had a record number of private client group financial advisors, 7,146; a net increase of 550 over the last year, which was augmented by approximately 265 advisors added through the acquisitions we talked about. We are proud of this result because we've retained approximately 90% of the Alex Brown team, and nearly 100% of the 3Macs advisors.

So during the year on an organic basis, even if you excluded those, we added 285 advisors during the year. That combined with our low regrettable attrition which remained below 1% in all of our divisions drove advisor growth.

Record financial assets under management of $77 billion, up 18% over the last year lifted by our asset management group which exclusively serves clients in our private client group. Record net loans of Raymond James Bank of $15.2 billion which is up 17% over September 2015.

More importantly, a lot of that growth this year was slanted in categories of strength in our client relationships and our PCG in capital market segments such as securities based loans, residential mortgages, commercial real estate loans, and tax exempt loans.

So with those highlights, I'll now turn it over to Jeff to talk about the record quarter, and even though it was almost half driven by tax benefits or a lot of -- the other half was driven by solid operating trends.

So Jeff?.

Thanks, Paul. As Paul mentioned we had a record revenue quarter, $1.46 billion, up 9% compared to last year's fourth quarter of 7% compared to the preceding quarter. That -- this revenue growth was really across the board, all four of our core operating segments had record quarterly revenues and in the September quarter.

Furthermore, three of our four segments, private client group, capital markets and the bank all generated record quarterly pre-tax profits. So a very strong quarter. Net income was $171.7 million, 19 per diluted share. That represents the 35%% growth over last year's fourth quarter and 37% over the preceding quarter.

And then on a non-GAAP basis, kind of a headline number I guess that people are talking about. The adjusted net income of $185 million was $1.28 per diluted share which is a 38% increase over the preceding quarter. So obviously the $1.28 far exceeded everybody's expectations including our own.

So let me touch on some of the major variances from the consensus model that really drove that feat [ph]. On the revenue side, the biggest line item that really varies from everyone's expectations was the strength of the investment banking revenues and that was really a combination of several businesses we had.

We seem to have a tradition of having strong Septembers in lot of these businesses and this year was no exception. M&A, equity underwritings, both picked up and our tax credit fund business which is also in that line item had a phenomenal quarter, a lot of syndications closing in the quarter.

So while we -- most of all still under that -- maybe not commissions on the institutional equity side but the other cylinders were all firing pretty well.

So we're -- we have a good pipeline in most of the businesses but I'd be surprised if we stay at that level in the equity capital market side, all year next year but that one's a hard one to predict as you all know.

Interestingly, almost all of the other revenue items were ahead of the consensus numbers but all by mid-single digit type percentages, so nothing really -- nothing else really blew the cover off the ball on the revenue side of an investment banking.

So while we're on the revenue side let me talk about a couple of the other line items and give you a kind of a little help in terms of what we see going forward here.

On our biggest line item, the commission and fees line, you can see in the release fee-based assets, our assets in fee-based accounts ended the quarter at $231 billion, 12% up from the preceding quarter.

A lot of that was -- we've got about $11 billion to $12 billion or $11 billion-ish of fee based assets from the acquisitions that we made, so that obviously helped that increase. That certainly is going to provide a good tailwind for the security and commissions and fees going forward.

But all those are aren't going to manifest themselves in a percentage increase in fees but we think that the bill -- the billings in the October versus the preceding quarter were up about -- between 9% and 10%. So a good start on that line item for the quarter going forward.

Similarly the increase in assets under management of 7% sequentially provide a help for the investment advisory fees as well.

Let me touch on net interest for a moment; in the release you can see the increase in secured client lending ended the quarter at $4.3 billion, about $800 million higher than the preceding quarter, about $75 million of that was organic growth and the rest was really all attributable to the increase in margin loans that came as part of the Alex Brown transaction.

So those -- that will obviously help interest earnings going forward. Net interest was $140 million for the quarter which is 3% above the preceding quarter despite the additional interest expense during the quarter from our bond issue in July. So I mean -- most of that was driven by the strength of the bank and its growth.

Going forward, we're -- it looks like net interest will pick up about $30 million of net interest such as the -- no rate change, it will pick up about $30 million of net interest next year from the Alex Brown related cash, to customer cash balances and margin balances.

And then we'll obviously expect to have some continued bank growth with the NIM somewhere in the current range, and we're guessing somewhere between 10% and 15% growth in the bank. So all those things will lead us to some nice continued growth in the net interest income line item.

If we're fortunate enough to get a rate increase which is being rumored more and more strongly all the time; any rate increase we're projecting would add somewhere between $12 million and $15 million pre-tax per quarter for us.

Of course that's dependent upon how much gets passed through to clients but just so you can do sensitivity, we're assuming that that somewhere between 40% and 50% of it gets passed through to clients but you can -- for sensitivity purposes, every basis point means about $4 million. So if that assumption is wrong, that's the sensitivity of that.

Now let me turn to the expense side; the comp ratio for the quarter was a very nice 65.9%, much lower than it has been recently and lower than expectations has largely to do with revenue mix there in the quarter.

The comp ratio for the overall year was 67.1% which I think was nicely below our target of 68% and I think that we would be happy to repeat that in fiscal '17.

So we're not necessarily going to lower our compensation target of 68% but maybe we have some soft expectations that we do better if we can continue to grow revenues but there are other things that are coming into play next year as Paul talked about that could impact that line item as well.

But most of the reason the comp was up for the quarter obviously relates to the increases in the related revenues. The communication information processing was a little bit below our $70 million for quarter guidance but it did finish the year almost directly on at $280 million for the year.

Going forward, I think our -- I would tell you that our guidance on this would be something like 10% higher, somewhere in the $7 million to $80 million range per quarter and the biggest driver of that is the systems work that is already underway related to the DOL rule; and the work we're having to do to comply with that which becomes effective in the middle of fiscal '17 for us.

So that's the biggest driver, there are other projects of course as well. So that's just -- where we are we think it will be somewhere 10% higher going into next year.

I mentioned the occupancy expenses just briefly, even though that wasn't way off of expectations, obviously we're going to have -- we have 16 more branches with the Alex Brown acquisition.

So we'll have some increased occupancy related to that and we're also at the point where we are going to be considering some home office expansion space which may well start hitting in '17 as well, hard to quantify that one but I would expect it -- that may have some modest impact.

Most of the other expenses were closed, I'll talk about the bank loan loss provision; it was only one -- only -- I'd say only $1.2 million for the quarter which was much lower than expectations.

I mean that loan growth was just over $400 million but the growth for the year and for the quarter is -- has become more balanced between the commercial loans and the rest -- we'll call it retail loans, the residential and securities-based loans which carry lower provisions with them.

So we have to kind of look at about the mix of loans but coupled with that -- where we had some downgrades during the quarter, you can see the increase in criticized loans on the last page of the press release -- but we also had some very nice pay-downs and pay-offs, particularly the more harshly criticized energy space which freed up some reserves of energy credits; the portfolio of energy credits definitely improved over the course of the of the year, and those more than offset the downgrade.

So as the net results -- the provision was a little low even though the overall reserve remains pretty close to the 130 basis points level. And other expenses; last quarter really we told you they were little bit elevated because of some legal and regulatory expenses or dejavu [ph].

I would say that this quarter again there -- we're seeing elevated legal expenses of provisions I should say, then Paul will talk maybe a little bit more about that later on but that that -- I don't know -- but I can tell you this maybe sort of the new normal for now with the regulatory environment that we're in. So just accordingly, I suppose.

Acquisitions expenses were about $19.4 million for the quarter and $40.7 million for the year. Most of those related to Alex Brown, some relate to the 3Macs acquisition as well and going forward we're looking at somewhere between $12 million and $15 million of additional expenses to hit that line item over the next two quarters.

We expect to stop using that line item at the end of the March quarter. So we expect most of those incremental cost to be complete by that time. As we talked about in the press release, 'the biggest variance in the quarter and -- which all of you noted in your early comments was that it's abnormally low effective tax rate of 27.4% for the quarter'.

The three biggest factors which we also mentioned in the release related to the tax benefits associated with the planned divestitures of our Latin American businesses, they are all under contract at this point or most are under contract at this point.

We have been providing for taxes on repatriation of earnings from those entities but that obviously will not be happening now, so we had to reverse that tax associated with that.

We had a very good quarter on the firm's corporate on life insurance portfolio which is closing in on $300 million in terms of size and even though the S&P might have up 3% or so during the quarter, it's more diversified than that and it's been a lot of long midcaps and stuffs from international and other things that -- that portfolio had a little over a 4% return for the quarter, so that was a big non-taxable gain for us in the quarter.

That one set us in prior years and prior quarters as well and -- but I just wanted to give you a feel for the rough size of it. So that will continue to impact us in both directions going forward but long-term it's been -- certainly been beneficial to us.

The third item we mentioned was a favorable resolution of some state tax issues which was -- we're able to resolve favorably and release some of the reserves we had related to those items.

So all those things led us to what I would call an abnormally low rate and I would tell you that going forward I guess that would steer you sort of towards a 36% type effective rate going forward, it's a little lower than we've guided in the past, we have an increasing number of -- increasing amount of tax exempt interest income as the bank builds its portfolio of tax exempt loans to municipalities.

That's becoming a bigger factor in the bank, also for CRA purposes as investing in certain tax credit funds, and that's starting to give us bigger tax credits as well. So just for my link purposes, I guess they've used the 36-ish.

So we -- all that -- when we're just all that down we generated a pre-tax margin of 17.5% on non-GAAP basis, well over our 16% target. I gave us 15.6% for the year which is good relative to where we started the year certainly but it -- it's just below our recently adopted 16% target that we have kind of on our pre-tax margin basis going forward.

And my guess is right now we would be -- will probably leave that target intact as we do pretty comfortable in that 16% target for all of fiscal '17. Just a couple other points and I'll turn it back to Paul.

One is the weighted average shares, you can see that's having an impact on EPS, it's lower this year's fourth quarter than last year's, given the share buyback that we did in the January/February timeframe where we purchased about 3.2 million shares for $145 million.

One of the things that kind of jumped off the page to me was our total assets for the quarter increased $2.8 billion in one quarter and we really want to get to the bottom of that and the biggest factors of course were our $800 million bond issue, $700 million of growth in the bank between the security loan portfolio and the securities portfolio which I'll talk about in the second.

And the rest really was the client cash balances and margin loans brought onto our balance sheet from the Alex Brown and 3Macs transactions so we don't expect that rate of growth for the overall balance sheet on a quarterly basis going forward; this was of an abnormally big jump.

Because of that increase in assets and some of higher risk-weighted -- risk weighting assigned to some of those assets such as advances to FAs, intangibles and things that came with the Alex Brown transaction, we had a slight decrease of about 80 basis points in our total capital ratio. So we're still well over comfort level, we're at 21.5%.

So we're not concerned about it but that's just again is something that has -- pointed out that's the reason there is balance sheet growth during the quarter even though capital increased.

I mentioned the securities portfolio previously at the bank, it increased about $300 million during the quarter, we have decided to modestly increase the securities portfolio; agency mortgage-backed securities primarily, a short duration under three years.

The deal is somewhere between 1.5% and 1.6%, we just think that's the prudent way to invest some of our excess cash balances and capital at the bank while we maintain the liquidity there.

So we're not taking any credit risk but we're taking some modest duration risk and that will have the effect of increasing the bank's earnings increasing their ROE because this doesn't take a lot of capital to do as we're buying high quality paper. But it will impact in NIM somewhat negatively going forward.

So it will offset some of the loan growth -- the NIM creation from loan growth. And I've talked about the interest rate sensitivity; I don't know if anyone is building that into models but if that happens it's about like I said $4 million for every basis points of additional spread that we keep for the next hike.

So with that I will turn it back over the Paul to talk a little bit more about the year-end and some macro trends going forward..

Thanks, Jeff. I know there is a lot to go over on the annual call but I'll try to get through this is quickly as possible. Private Client Group segment, let me start there; record annual net revenue of $3.62 billion which is 3% over fiscal 2015.

And note, it's the second best pre-tax profit of $340.6 million, down just $2 million for last year's record. Driven by really advisor recruiting, it was record independent advisor recruiting; and the employee group, probably the second best year. So very strong organic growth, it's not just the acquisitions.

We also in the Private Client Group, the segment was helped by higher assets and fee-based accounts during the year, as well as higher fees earned on cash balances in the Raymond James Bank deposit program following the increased rates of last December.

However, revenues were negatively impacted by declines in transactional revenues, especially new issue credits, really attributable to the market slowdown in underwritings. And retail equity commissions was a result of lower client engagement, religious training through the year.

And we think we'll see a continuation in the fee-based accounts which will be pushed by the DOL [ph], sure it will.

The revenue growth of 3% was lower than our asset growth during that transition year and we should note -- we also had elevated regulatory expenses in the Private Client Group segment for the year which Jeff talked about, continued into the fourth quarter.

And capital markets generated record annual net revenues of -- I don't know why it can't stay a $1 billion but 99 -- $999.9 million for pre-tax over 20015 and record annual pre-tax income of $139.2 million, up really 30% over 2015; driven really by record revenues in our fixed income division and record revenues through agreements in tax credit.

Our fixed income division had a fantastic year, institutional fixed income commission is up 11% and varies all in net trading profits. Our net trading profits which include other divisions was actually up 57% this year to $92 million.

Now I also want to note that we didn't have the same phenomenon that the big banks with this explosive fourth quarter, it's been very, very steady through the year; we are variation fee driven business and those profits are like little pieces traded at time. So it's been very steady, very different than what other people have reported.

Offsetting some of the strength in fixed income and tax credits plus the equity capital markets division -- as equity revenues were down 27% -- underwriting revenues were down 27% from last year; actually little better than the overall market.

And institutional equity commissions were down 8%, so it's been a tough year I think for everyone in underwritings. M&A fortunately had a strong fourth quarter resulting in M&A revenues only being down 8% from last year's record.

Additionally, we're happy to welcome [indiscernible] company to Raymond James family expanding our cross border M&A activity. Asset management segment generated record annual net revenues of $404.3 million, up 3% over last year and at a second best pre-tax profit of $132.2 million, down 2% from last year's record.

As I mentioned earlier, financial assets under management and it is $77 billion which is up 18% over the last year. So again, very good results. The asset management division has continued to benefit from the growth in the Private Client Group segment, as well as increased utilization of our fee-based accounts.

In fact at the end of September, fee-based assets and PCG totaled $231 billion, up 29% over 2015 and represents about 40% of our total client assets in PCG. Eagle was challenged by an institutional net outflows during the year which I think is consistent with the macro-trends.

We're still believers in active management which seems to be out of favor right now but have continued to focus on augmenting both, our portfolio management sales team and Eagle. The bank records annual net revenues of $494 million, 19% over last year, recorded annual pre-tax income of $337.3 million, 21% over fiscal 2015.

The record results for the bank were typically strong on loan growth, net loans ended at -- up 17% at $15.2 billion. And the bank's net interest margin for the year was relatively stable at 3.04% compared to 3.07% for the previous year.

With short interim rates increasing in December '15, you may have expected them to an increase more broadly but primarily that decrease had to do with excess cash in the bank as well as the loan mix growth outside of the C&I portfolio.

Most importantly, our credit quality of the loan portfolio remained very solid through the fiscal year despite increased provisions we took earlier, largely due to the precipitous drop in oil prices. The other segment -- that generated $21 million or 31% decline in revenues, mostly due to lower private equity gains this year.

So overall, a fantastic year; record revenues and profits fueled by record revenue in all of our segments and record or near record profits in our core operating segments. ROE for the year is 11.3 on a GAAP basis and 11.8 on a non-GAAP basis which we're very pleased, especially given that our capital ratios have stayed over 20% throughout the year.

The outlook certainly with the political and economic and regulatory with DOL, uncertainty is always hard to predict coming this year. But in the private client group, the records and assets should bode well to a good start for the year; both in client assets under administration and the balances in our cash suite programs.

We're excited about the high quality advisors and people from the Alex Brown and 3Macs acquisitions.

But if you remember us through Morgan Keegan, we don't expect those to be big contributors to profits this year because we're going to be very deliberate through our integrations and keeping support levels high until the transaction is fully -- you know that is down and people are very comfortable with our systems.

We also have about $35 million of additional retention from Alex Brown running through the P&L this coming year. Further, we expect legal and regulatory expense to remain elevated as we comply with DOL and other regulations. So that's going to have an impact.

We also -- by no questions will come up with the DOL, we've been very clear from the beginning that our focus has been complying with the rule of giving the maximum flexibility for our advisors to serve our clients and have clients have choice. So we fully expect to offer commission-based accounts to the big and comply with the rules.

In the capital market segment, we're cautiously optimistic but investment banking making a return familiar -- very hard year for everyone in the market. But again, that's hard to predict with the political and economic uncertainty.

Our fixed income business had a record fiscal 2016 held largely by trading profits but as we've said, we have a flow business and we can expect trading profits to indefinitely stay at this level. So we wouldn't be surprised that the contract is somewhat during this coming year.

The asset management segment, we expected continued growth as we grow our number of advisors and increase utilization of fee-based accounts. Raymond James Bank, we believe is in position to continue to grow to the extent we can find loans that meet our criteria under risk-return.

We expect the growth, we -- if you ask us, we'd expect a slight expansion of the NIM as we invest some of that cash but we think the bank is in very good shape. So in closing, we're entering 2017 with a lot of uncertainties but that seems to be lately the last couple years have been like that.

But we're convinced that we continue to focus on our mission and helping our clients and advisors in this challenging environment, we'll continue to deliver good results. So with that I'm going to turn it back to the operator and open it up for questions.

Raquel?.

Thank you. [Operator Instructions] Your first question comes from the line of Devin Ryan with JMP Securities..

Good morning. Maybe just starting on the deal while I appreciate some of the comments but obviously a lot of moving parts there. And we're hearing from some that they're looking to apply kind of the fiduciary requirements across all brokerage assets; and then others are talking about going to level commissions for similar products.

So I appreciate you're going to offer choice but I'm curious maybe where you stand on those? And then also you'd spoken about the overtime here, renegotiation that could occur with products manufacturers, just around the economics of the sale.

And I'm curious if any of those have already occurred and kind of how you see the economics changing?.

So first from an advisory standpoint, we will be leveled fee in those accounts. So we will be moving -- but that we're already there and our employee division and we will have to move there on fee-based accounts for our independent contractors.

So we believe that the -- we're lots of discussions with our partners that we think most of the revenue impact if any will be pushed off into next year as we get through the transition fiscal year '18.

So on the DOL impact, so that's hard to quantify; and I believe that to the best of our knowledge right now that in our operating technology in operations kind of cost guidance that we have the cost of that transition building for next year or so. So we'll see more as we go.

But also the DOL is going to release the questions -- answered the questions that they've talked about releasing in the summer -- so late summer this year has been warm around the country.

So we expect those times to -- and that maybe some weeks -- some of our response but we fully expect to offer a range of options for advisors to help their clients..

Got it. Okay, that's helpful. And maybe the increase in the securities portfolio in the bank and I think some people will like to see that you're moving in that direction.

I'm just curious if you can put in more context around how much more you look to expand that? And then just in terms of the economics, so you're picking 150 basis points in a ballpark in the securities; what's the current give up on that -- I guess, I'm assuming it's coming from the third-party bank deposits, so I'm just starting to think about the net benefit there?.

Yes, we think the overall securities portfolio -- it's been $400 million type range already, we're thinking about growing it to by about $1 billion. So over the course of the year just to put a frame of reference on it. In terms of the give up, we're still earning a little over 50 basis points from the banks we programmed.

So to redeploy that cash -- we'd be picking up about 100 basis points by doing this -- and deploying a little bit of capital..

We're staying mainly with all agencies in the short-term. So our portfolio will probably be more short-term..

Yes, the duration down as [indiscernible] itself three years on what we've been putting on over the last quarter..

Yes, Devin. The -- as a reminder, we have a lot of our corporate loans to have LIBOR floors as such -- about $4 billion of our corporate loans have floors so they would not enjoy the benefit of that LIBOR increase until we really get over 100 basis points in LIBOR.

We also have a mix of 30 day in LIBOR based loans; loans that are based on 30-day and 90-day. There has obviously been a lot more increase in the 90-day rate over the last year as compared to the 30-day rate. But that would be beneficial to the us in general but the impact is not as great as it may appear on the surface because of the LIBOR force..

Got it.

And just one last quick one here; just on FA recruiting; you still seem to have some pretty good momentum, I'm just curious is that shifting at all with the uncertainty around DOL where FA's may be waiting to make a move or even you would think about slowing -- just to kind of get some better perspective around what the real revenue implications could be?.

Surprisingly not. We've kind of expected that but we haven't seen it. And the pipeline is robust, this month's a little slower but it always is going to go through the year and we -- our backlog is very strong and we have not seen a slowdown, it doesn't mean it won't happen as we get closer but we haven't seen that yet..

Got it. Okay, thank you guys for taking my questions and congratulations on the strong quarter..

Thank you..

Your next question comes from the line of Chris Harris from Wells Fargo..

Thank you. So the margin in private client; I thought it was particularly good. It sounds like you guys still have some elevated legal expenses running through there.

So can you maybe talk just a little bit how the margins were so good? And related to that, is Alex Brown coming through at a higher margin; maybe that's providing some advances [ph]?.

Unfortunately Alex Brown -- actually for the month it was been because the amortization starts hitting but it's not going to provide -- it's going to provide some pressure on the margins because it's more of a breakeven business before we -- on our internal accounting.

So that's how allocate cost between advisor retention and costs -- but it generates a lot of activity, both in the bank and the cash sweep and other things that make up a good investment. And we've got great advisors, so the -- we don't -- we think that both 3Macs and Alex Brown, if anything we'll put a little pressure on the margin, the other way..

As well as the impact of DOL, whatever it might be – extend the expenses..

So what I mean -- so margin was up 200 basis points from last quarter in that segment, I'm just trying to figure out what happened there?.

We just had a lot higher fee billings in that quarter than we had in the preceding quarter.

We -- and we did enjoy most of the quarter, some of the interest spread on these balances, we got one from one-third of the quarter, things like that -- but we haven't really looked at what the margin target is for PCG next year but maybe between that 10% to 11% range we got to look at what it is and if there is another interest rate hike it may go up from there.

But I don't think this was -- and any one thing you can really point to is saying that it was really strange. So it was just more solid and a little help from the acquisition and the interest earnings from those balances..

Very good, thank you..

[Operator Instructions] Your next question comes from the line of Jim Mitchell with Buckingham Research..

Good morning guys. Maybe just quickly on -- Jeff, on your commentary on rate sensitivity; I think if you think about 25 basis points, you said about $4 million per basis point, I know you're not assuming -- you recapture 25 but that would be about $100 million if you did capture 25.

I think you guys have been targeting about $80 million for the next 75. It seems to me you should be able to get 25 out of another 75.

So are you taking up the rate sensitivity because of Alex Brown or something else or how should we think about that?.

That's exactly right, our cash balances the loan at $43 billion now which is -- was $34 billion a year ago. So it's obviously a big delta there and so our sensitivity is much higher.

We get the $12 million to $15 million a quarter saying if the rates get up 25, and if we pass 40% through, that's 10 basis points, we keep 15 at $60 million a year; as such $15 million a quarter. If we pass-through 13, the client which roughly have -- we keep 12 which is $48 million, which is the $12 million quarter.

So it's kind of how we get that range. I think from the next -- if that's true and a lot of that depends Jim on what the competition is doing.

I mean we're trying to be fair to clients and then we have to look at the alternatives the clients have if -- money market funds or competitors etcetera are much more aggressive than that in terms of passing rates through declines and we probably would have to respond accordingly.

But so far we've kind of been leading the pack, and my guess is if we pass-through 10 or 15, we still be leading the pack of the next hike. But then the next two rate hikes if and when they happen – there would be much less for us to retain I believe.

So definitely that total capture from the first 100 basis point increase is very, very front-loaded here..

Fair enough. And just maybe on your pre-tax and large a target of 16%; I think you guys are sort of indicating the acquisition are net depressing for margins but you still feel comfortable with the 16.

Is that relying on an improvement in banking which tends to be higher margin or do you just feel good about the rest of the business that you had with [ph] Alex Brown?.

I think to realize it's an improvement in all three of the other segments. I mean at the bank we expect to continuing growth in the bank, we do expect I think better results in equity capital markets for the year than we've just saw in the most recent year.

We're hopeful fixed income can come close to matching this year but at least within year short and we've already talked about the tailwinds that asset management has with the balance levels at the beginning of the year. So we actually expect some nice improvement in all of those.

The acquisitions themselves -- yes, you're right, the Alex Brown acquisition particularly will not be help the PCG margins. It's very difficult to have a good operating margin when virtually a 100% of the advisors are on transition assistance deals which starts hitting.

As Paul mentioned, $35 million, next year roughly of amortization of those retention deals, that's hard to overcome, at least have a big party of margin..

Okay, great, thank you very much..

Your next question comes from the line of Conor Fitzgerald with Goldman Sachs..

Good morning. First one just on DOL, I know you mentioned continuing the migration towards the fee-based accounts. One of your competitors when they stopped offering commission-based retirement accounts offered; fee released to customers who might have been a little -- had a little bit of a sticker shock coming from the advice based account pricing.

Do you think that's something you would consider cutting fees in advice-based account that hope migrate customers over to that channel?.

I think our whole philosophy is to offer kind of products -- roughly flexibility with clients and advisors. And I know that others believe they want to put them totally on fee-based platform and they are pushing them that way. And then when you do that you do get some misallocations where you discount.

I -- we're not looking to force anyone under any platforms. So with the pick [ph] or maybe some more limitations in that we have to make sure that everything complies but our goal isn't to force someone onto a platform and kind of lower the fees and induce it.

And I'm not saying there is anything wrong with that but it's not our strategy; our strategy is to offer the flexibility.

So our pricing is not done, when we're through, the DOL is going to impact the client and advisor, and firm; and we're still going through that but right now our plans aren't to push people -- try to push people or heavily influence them under our fee-based platforms..

Got it.

And then on the 16% pre-tax margin guidance; can you just help us understand what you're assuming for in terms of interest rates? I mean you think about that and if we did get a Fed hike in December, how would that impact that assumption?.

Well, if we took -- if we did get the benefit of another 25 basis point rate hike based on what we're assuming we would keep and that would probably lead to another -- probably lead to 1% percent increase in the pre-tax margin, and roughly $6 billion type revenue base. So if we make $60 million, that's another one.

So we would probably up the target -- internal target by about 100 basis points if we get that..

It's very helpful. Thanks for taking my questions..

[Operator Instructions]. This concludes the Q&A session for today. I would turn the call over to management for closing remarks..

First, thank you all. We appreciate your taking the time to follow us. Another -- lots of earnings is coming out last week and this week. So we'll continue to stay hard focused on the long-term and talk to you next quarter. Thank you very much..

Thank you, ladies and gentlemen. This concludes the Raymond James Financial fiscal fourth quarter and fiscal year 2016 conference call. You may now disconnect..