Paul Shoukry - Head, IR Jeff Julien - CFO Paul Reilly - Chairman & CEO.

Steven Chubak - Numora Chris Harris - Wells Fargo Devin Ryan - JMP Securities.

Good morning and welcome to the Earnings Call for Raymond James Financial Fiscal Fourth 2017. My name is Darla, and will be your conference facilitator today. This call is being recorded and will be available on the company's website. Now I'll turn it over to Paul Shoukry, Head of Investor Relations at Raymond James Financial. .

Thank you, Darla. Good morning and thank you all for joining us on this call. We appreciate your time and interest in Raymond James Financial. After I read the following disclosure, I will turn the call over to Paul Reilly, our Chairman and Chief Executive Officer; and Jeff Julien, our Chief Financial Officer.

Following the 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, acquisitions, our ability to successfully recruit and integrate financial advisers, anticipated results of litigation and regulatory developments or general economic conditions.

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

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

During today's call, we will also use certain non-GAAP financial measures to provide information pertinent to our management's view of ongoing business performance. A reconciliation of these non-GAAP measures to the most comparable GAAP measures may be found in the schedule accompanying our press release.

With that, I'll turn the call over to Paul Reilly, Chairman and CEO of Raymond James Financial.

Paul?.

Thanks, Paul, and thanks for that inspiring opening, and we appreciate you all joining the call. We know there are a lot of releases out today both in our industry and certainly the biggest company. So I wanted to spend a second reflecting.

If you had told me a year ago this September that Trump would be President, the market is up 25%; deposit betas would be at an all-time low; of course, I’m not sure to known what deposit beta was a year ago; then we would have these financial results and the Cubs would win the world series. I don’t know what I would to believe more.

If you really look back, it’s been really an outstanding year certainly due to the work of our advisers and our associates with our clients and honestly the help from the markets and the interest rate environment.

We had record net revenue at $6.3 billion, up 18% over the previous year; record net income of $636 million, up 20% over the previous year; and an adjusted record net income of $768 million, up 35% over the previous year.

Even in more impressively images all four of our core operating segments record net revenues and record pretax income for the year. We finished the year with a 12.2% ROE and an adjusted ROE of 14.5%, which is really pretty amazing giving our conservative leverage and capital ratios.

More importantly, we made huge investments due to the, I guess, a new word that everyone is using in our advisor technology. We had robust recruiting and still great momentum. We integrated Alex. Brown, 3Macs and Mummert, which is ongoing, and with the DOL and other regulatory initiatives, we still got all these things done.

So I really want to thank our associates really for all they did this year. I may divert a little because I think one of the most important things that’s enabled our recruiting and retention has been our culture and we talked about it a lot.

But this year we reinforced – continue to reinforce our core values and it really showed up during the hurricanes this year.

And I want to use an example in the Hurricane Irma, where we flew 175 associates, their families and their pets to Memphis, where we actually operated for a number of days as our headquarters as part of our BCP plan, not only a way to keep the – we kept service levels up and we’re able to operate seamlessly.

To thank our employees, we gave our employees a $300 pretax kind of adjust bonus or that help them with their shelter and their evacuation plans. The firm committed to donations over $1 million. Our associates contributed over $0.5 million for the friends of Raymond James to help associates who are impacted.

Ands in Canada, they contributed $100,000 for the floods that really happened in BC and Quebec. So it really speak volumes about the firm, why we are able to keep the retention and our focus on associates and never focused on the firm. Let me talk about fourth quarter results.

We had record quarterly net revenues of $1.69 billion, up 16% from the previous year’s fourth quarter and 4% from the preceding quarter; record quarterly net income $193.5 million, which resulted in a $1.31 fully diluted share, up 13% from the last year’s fourth quarter and 5% over the preceding quarter.

Our adjusted quarterly net income was $217.3 million or $1.47 fully diluted share adjusted, which is up 12% from the last year’s fourth quarter and 17% from the preceding quarter.

We had record quarterly net revenue and pretax income in Private Client Group, Asset Management and RJ Bank, also the quarter record success for capital markets which compared to a record year ago. We had a quarterly ROE of 14.1% and a non-GAAP adjusted of 15.8%. So it really was a spectacular quarter.

Maybe more importantly looking forward is where we ended the quarter with record client assets under administration of $692.9 billion, financial assets under management of $96.4 billion, record loans at RJ Bank at $17 billion and a record number advisors of 7,346, so really great results. I just touched on the segments.

Private Client Group, as I said has record net revenue and free cash to the quarter. We also had great recruiting and retention.

We’re keeping the levels up with a substantial backlog, with substantial growth in fee-based accounts, certainly helped by the market growth and the interest rate environment, entering that time we had the integration of Alex. Brown and 3Macs.

We continued in Private Client Group and across the firm make a substantial investment in our technology, including our advisor’s desktops, the work we had to do for DOL or out our just beta test of connected advisor, which is our answer to robo – not robo but digitally connecting our advisors with their clients and rolling out efficiency initiatives like client on-boarding.

In the Capital Markets segment, net revenue was up 3% sequentially but down 7% from last year’s fourth quarter, which is a previous record, and the quarterly pretax was up 27% sequentially but down 17% from a record quarter, last year’s fourth quarter.

These results were mainly M&A-driven and really a product of the investments we have made over the last three years in our M&A business. And if you remember, we did the acquisition of Mummert & Company and we’ve already seen the fruits of those cross order successes from Mel Mummert and his team in the very early days.

Equity underwriting was down for the quarter but up 34% this year over last year. This business does have headwinds as institutional equity commission continues under structural pressures that has for years and compounded with a low volatility environment.

Fixed income both in commissions and trading profits again was impacted for the same low volatility market in a flattening yield curve and tax credit funds was negatively impacted really due by the uncertain tax laws as developers and banks try to figure out what the real after-tax yield is going to be as all those tax rates discussion goes on.

Asset management had a record about everything. Financial assets under management was $96.4 billion certainly due to net advisor growth and market appreciation and increased use of fee-based accounts. All the factors help the flow into this segment. And we even had a small positive net inflow into our Eagle Carillon Towers Group.

We're still on track to close in the Scout and Reams acquisition this quarter. We expect that to add about $28 billion of assets under management, and we need -- that's going to significant broaden our fixed income platform but also the fees in that type of business or lower than the equity business as we look forward.

RJ Bank, record net revenue and pretax for the quarter and for the year; net loans of $17 billion, up 12% year-over-year. Interesting is that C&I portfolio was actually down 1% as we have been concerned a little bit about pricing and risk of the new deals.

The growth was really driven by private client group SPLs and mortgages and as well as our taxes debt loans from our public finance business. Net interest margins came in at from 314 bps to 311 and I think there is some really some misunderstanding on that.

They would actually be up if it wasn't for the excess cash and securities that we have been investing. Our cash increase in balances impacted that 4 bps, alone took is down, as well as our securities portfolio. So if you really were to look at the bottom line there, our net interest is up $11 million quarter-over-quarter 8% or 23% year-over-year.

So a lot of people keep focusing on that NIM, but that includes the cash and securities we keep investing in. Actually the loan NIM would have been up not down on an apples-on-apples basis. So we continue to invest with using little capital to increase our net interest earnings in the firms.

And more importantly, total non-performing loans of $44 million are down 49% year-over-year and 8% sequentially, and total credit-sized loans of $265 million down 12% year-over-year or 2% sequentially. So all-in-all good shape.

So I'm going to turn it over to Jeff who can give you some line items and some more details and talk a little bit about the outlook of these segments.

Jeff?.

Thanks, Paul. As usual, I try to compare our actual to the consensus model just to see where we didn't achieve the results expected by the Street. In this case, most of our line items were fairly close. So I only have a few to talk about today. Commission fee revenues on absolute dollar amount, we actually came in slightly under expectations.

But it's really is attributable to the decline in the institutional commissions as you can see in the press release detailed. PCG was pretty much right and there is 1% under, so not a huge miss.

The biggest beat would be in the investment banking line, and you can see in the press release the detail of particularly the strength of M&A fees, up 34% from the preceding quarter and up 54% year-over-year. And a lot of that happened kind of late in the quarter, so we weren't able to give you a lot of color on that throughout the quarter.

Except for those two items, all the rest are within $2 million to $3 million of expectations 4 or 5 ahead of consensus. The only other thing I'll point out in the revenues side is that net interest income was actually a several million ahead of expectations and accountant service fees is the one that came in below.

I think that combined basis they’re very, very close and that really has to do with us moving more of their client cash balances on to our balance sheet out of the external banks as we continue to fund the bank’s growth on a combined base. So it’s very close.

Several items to talk about on the expense side, first I will talk about communication and information processing. It took a little bit of a jump from the preceding quarter, but for the year-to-date on average for the year it was right on top of our guidance for the year, which was in the high 70s for quarter.

Going forward though and this was a conscious decision on our part to continue and complete all the initiatives that we have got under way right now. A lot of those are in process to enhance the competitive position of the FA desktop that’ll make it easier for clients to come on board with us et cetera.

We also have some enhanced supervising compliance systems and the several other projects underway and we are going to make the conscious decision at least at this point to continue with all those and some of the ones that were on the drawing board.

So right now I guess our guidance for next year would probably be in the high 80s per quarter as oppose to the high 70s past year. Obviously that’s something we can control to some extent and if the market decides not to cooperate and we could hold that a little bit on that, but given where we are today, that is our current plan going forward.

Plant fitting equipment line also took a little jump from the preceding quarter. There were some what I’d called kind of one-off items in there for the quarter, but on an ongoing basis, this is just a natural consequence of growth. As we bring on more people, we have to have a place form to sit.

We have to have furniture form to sit on at PC formed up et cetera, et cetera. So not only are we increasing the branch footprint in our private client group system we actually are increasing some of the actual branches we currently own as they become all and expand.

And we have also, as we talked about on our previous call, expanded our headquarters footprint by about 300,000 square feet at the end of last calendar year. And we have been doing some renovation work and are getting ready to occupy about another 100,000 square feet of that space.

So a lot underway, but again that one we don’t have as much control over we do needed to place for people to work. So our guidance for next year would actually be sort of about what we ran at this current quarter. It’s not this quarter. You know there were some one-offs, so I think that’s really more indicative of our run rate going forward.

For bank loan loss provision was I am sure a bit of a surprise that we did grow loans about $376 million in the quarter.

But if you look at the nature of the growth, which is also in the press release and the bank details on Page 11, where you can see that a lot of growth came in what you would call a lower risk or lower reserve type of loan which should be mortgages and SBLs.

So coupled with the fact that we sold some loans at decrease and criticized asset, I think some of those represents sale that we were able to take advantage of favorable secondary market conditions and exit some of the loans that were trending poorly, and we actually managed to get prices above where we had in reserves.

So even though it’s an actual loss and doesn’t make me happy, it did have the anomalous effect of releasing some reserves and slightly more than the actual new provision put on for the loan growth, the latter being about $2 million only for the quarter given the mix of loans.

The other expense I just mentioned, it came in really close to consensus, but I did want to just pointed out what Paul was talking about with all these hurricane-related expenses.

We did not try to – did not non-GAAP this item, but we did incur something very close to $2 million of incremental cost related to separation for the hurricane that never hit us directly here in St. Petersburg.

So between the payment to employees to help with their repairs and/or evacuation costs and our own deployment of people to alternative locations and things like that, it was a about a $2 million number. And then lastly, on the expense side, a line item that always seems to deserve mention lately is income taxes.

Once again, I wanted a little Coley dissertation on previous call that when the markets are ahead enough, we’re going to get the tax benefit. We’ve got over $300 million of Coley on the balance sheet.

So when that is trending up, it’s probably a little more than – it’s about a 2/3 equity something like that and a lot of it’s elected by participants, not our choice. So if the equity markets are favorable, we’re going to get a tax benefit, and when they’re unfavorable, we’re going to have a higher tax rate.

So that continues to be a big factor that needs to be considered each quarter. The other thing we got now on an ongoing basis, our bank has its own CRA requirements and it invests in some of the low-income housing tax credit projects that our own tax credit funds group originates -- 5 or 6 on the bank’s books now.

So we’re starting to get a fairly good size amount of credits from that. And then there are other smaller things that happen throughout the year.

The biggest item that’s new, which didn’t happened in the fourth quarter but it happens a little bit every quarter is what I talked about last year, which is the guidance for reflecting the appreciation of equity awards in the tax provision now.

In the past, it was a straight credit to the equity section, now it’s actually flowing through the tax provision. Based on where the stock price is today, that looks like, I gave guidance a year ago there will be about $11 million and $12 million a year, at where the stock price is today, it’s about $16 million a year.

Straight tax benefit that most of which probably 80% to 90% of which will hit in the December quarter for us because that’s after the end of our fiscal year is when most of those awards are granted and they have several divesting days on the anniversary. So the December rate going forward will probably continue to be abnormally low.

Even in 30-ish or sub 30-ish, it was this past December because of that factor. But on an annual basis, I guess our overall guidance, given all these factors, would sort of be in the 35% type range combined state and federal plus or minus whatever Coley does, given all the things that we've got in the magnitude that they're on our books for.

So that's sort of the story on taxes. Some other items I'd like to mention, the margins by business, where I stuck my neck out maybe more than it should have at the analyst/investor day, Tony, what I talked we could accomplish for the second six months of the year, happy to say they were all surpassed. And I've given 12% margin guidance for PCG.

They came in for this quarter at 12.2%. They came in only at 11.4% for the year because they had a rough start that’s a non-GAAP number by the way, adjusted number. Capital markets came in at 16.5% for the quarter versus the 15%. That’s I have mentioned at the meeting.

We continue to try to be an excess of 30% in asset management, which came in at 37.1% for the quarter and 35.2% for the quarter. And Paul already talked about the factors that are supporting the asset management growth right now. So for the total firm, we're on a non-GAAP basis, we had talked about perhaps the 17% type overall firm margin.

It actually came in at 18.7% for the quarter and 17.6% for the year as we had a very favorable equity market and obviously continued interest rate. So the compensation ratio came in at 65.3% for the quarter and it sort to have a normally low, some of that boosted by the surge and some of the M&A fees and other things.

For the year-to-date it fell with 66.4% and we're actually pretty happy with that year-to-date number. We do definitely want to continue to keep it below 67, but kind of our target in the minds is sort of 66.5% or better kind of where we finish this year if things stay like they are in terms of the environment.

So that's I don't think we're not calling 65.3% our new target because we achieved it here in this one quarter. So the return on equity, as Paul mentioned, on an adjusted basis for the year was 14.5%. We're still comfortable right now with the 14% to 15% range.

While a lot of variables will go into that of course, 15.8% for the quarter is an exceptionally good quarter for the ROE. Capital ratios, which are on Page 10 of the press release, I won't go through them all, but just suffice it to say they all improved a little bit with the exceptional leverage ratio which was down just a little bit.

They're all less because of the balance sheet growth that we had during the quarter was in the low-risk assets and so our increased capital and was more than offset the risk weighting of the assets that we're added predominantly the cash higher cash balances on our balance sheet plus some SPLs and other low-risk weighted type assets.

Paul mentioned the NIM at the bank, I just like to repeat it here just for a second, because they've got a lot of mentioned in a lot of comments I saw last night. To me where the rubber meets the road on net interest at the bank, it really is at top Page 11, which is the net interest income that the bank generated.

As Paul mentioned, we're not spending very much additional capital to expand the securities portfolio or add more cash on the balance sheet of the bank, but it’s having a lot to our net interest earnings.

The NIM, we gave 310 or 320 guidance that would have been right in the middle of that range that we not had cash growth during the quarter at the bank almost $0.5 billion on average, and then it’s further exacerbate a little bit by the securities portfolio, but that’s sort of I think to account in our guidance range.

Candidly, if we cash happened to grow and loans happen to shrink because the risk reward trade off is not appropriate in our opinion and that NIM shrink in the low 3s, 3.05 or 3.06 or 3.07 or 3.08 or whatever, that would not bother us as long as we are continuing to grow the net interest earnings at the bank in a prudent fashion.

So to me, the overall net interest earnings is a more important measure in the actual NIM although the NIM certainly factors into that.

We shrink because of the general discussion on deposit beta, which once again may get a lot of questions about, we are currently spread of in excess of 110 basis points, which is historically very, very high on client cash balances. We are starting to see some deposit competition.

You are starting probably to see the same stories we are about people getting more aggressive to compete for deposits. So hard for me is to predict where this is going. If there is increased competition, we could see a little spread compression.

If they raise rates faster than people can raise rates or the clients or faster than people want to raise rates to clients, we can actually be that widen, but it’s really hard to say right now.

My best guess, and again had a good track record on this, but my best guess is that there will be some compression in that spread through deposit competition over the course of the year. We have not seen it manifest itself yet, but it seems very likely that that may happen over the course of the year some time.

So all in all, I read the comments last night and I kind of was a little surprised that had almost a negative tone to it when in fact I look at the core operating results of our four primary segments and they all have good fundamentals working for them right now, and there is a lot favor at one exception would probably be at still not that good an environment for the fixed income division within capital markets.

But all of our other major businesses are doing very well. So we have I would not say this quarter is going to be easily replicated but because M&A had a really, really strong quarter, but a lot of the factors are in place at least for the very short term. And with that, I'll turn it back over to Paul to give you a little more detail on the outlook..

what it going to do? Some people says overvalued and it’s going to come in other people say it’s go a ways to run. We can't make that call from here. Jeff talked about deposit beta that came in 20 bps, I'd say you may improve tax.

If we got another rate expansion and the pressure is so far on rates it’s been on the high end and not on the low end, maybe it will hold up for a while, But eventually I do think that has to come in. So as we get into the next calendar year, it's little harder just because of the markets to really give you a lot of insight.

We have increased spend in technology and really it's just essential to our business that not only will that create efficiencies over time but the cornerstone of our business has really been helping advisors serve their clients.

And these technology tools connected advisor, which is now embedded testing that electronically help with next generation advisors and smaller accounts to more efficiently connect them and give them better connection are all extremely important to attract and retain our advisors, and I believe that those types of technologies are table state.

So although we are a bet, I think it's a good debt. And the investment we made over the last few years has certainly significantly helped our recruiting and retention and we're making the bet that we need to be a leader in those areas where we choose to compete to continue the momentum that we have. I believe we're extremely well positioned.

It shows up in our recruiting pipeline. We have good momentum. We have great people. And we're in an industry that may be always has uncertain markets. But certainly with the equity hives that we're and the deposit beta, that's really the question mark. But our focus right now is long term to continue to invest so that our firm is better in the future.

So with that I'm going to turn it back to Darla for questions.

Darla?.

[Operator Instructions] We have a question from Steven Chubak with Numora. .

Hi, good morning. So I wanted to start up with a question on the AFS book and may you guys have spend some time highlighting the opportunity there and the fact that it is accretive to NII regardless of the adapting NIM effect, so certainly appreciate that dynamic. But we did see the patient growth slow a little bit this quarter.

And I'm sorry if I missed this. I jumped on a little late in the prepared remarks. So I'm just wondering if there is any change in terms of your strategy and long term growth targets for the securities book.

I think you have talked about $6 billion in the past, and I am wondering giving the case of capital build that we’ve seen whether you would be inclined to actually growth beyond that target?.

Steve, I think that’s still our target and may think that’s a little longer to get there than we had originally forecast. The reason is that pace of growth slowed down, if you remember, we had a pretty good size decline in cash balances from the end of March to the end of June.

We talked about that last quarter, about $2.5 billion decline in cash balances, client cash balances, and we’ve got -- so we had a hard time or it would have been a little awkward with some of our bank relationships to ship that much dollars out of some of the other banks over to our own bank quickly.

So we chose to do it on a more possible basis and we slowed the growth for securities portfolio intentionally in the quarter coupled with the fact that it became a higher and higher probability of yet another rate hike, which by given other short term and buying some of these fixed rate securities in the phase of rate hikes is something that you can be cautious about and base with the next rate hike is now all priced in.

So we sort of resumed and also as you can see on the cash balances by the end of the quarter we have sort of fixed that. So the second half of the quarter we had a significant amount of cash balances on the bank’s balance sheet, but it started out the quarter very slow. But we are also being – we have very pretty tight parameters on what we’ll buy.

Now at our core meeting yesterday, there is a fairly narrow band of the securities that really fill of our parameters in terms of extension risk and yield and being in the agency back where also you are taking any credit risk and the back to duration and things like that. So it’s kind of business starts a little bit on that.

It’s not to going to I think to invest a fixed dollar amount every week or something like that. But the reason that it was slow was really because of at the beginning of the quarter the cash balances were – have not recovered until later in the quarter..

So there has been no change in the strategy, it’s just look to kind of little delay this quarter were still on course..

Got it. And as you think about the risk reward potential from steepening more into the bank, there has been some speculation that where the said balance sheet online, you could in fact see term premier arise.

If you do in fact see some steepening as a curve, and that will penetrate your fixed trading businesses certainly, but as we start to think about tire and deploy some of that excess cash, could we see you guys exceed that $6 billion target in an effort to drive some higher returns..

I think for now right now that’s our goal where we get closer, but no, these securities turn over too. So as rates rise, they will turn. We have made $400 million a year in run off right now..

Yeah, they’ve amortized about 25% a year, so it’s pretty quick turnover. I actually think that steepening yield curve may actually help banks loan spreads throughout it, but that remains to be seen..

Right. And just one last question from me on how we should be thinking about the pretax margin outlook for our 2018? You guys certainly gave some very helpful color thinking about the comp dynamics, some incremental non-comps as relates for communication expense.

But just giving some of the tailwinds exiting the year both in terms of asset growth that we seen as well as growth of the bank, what's the reason why expectation for margin expansion if we continue to have relatively healthy market and maybe even some helps and that’s having in the form of the rate hikes?.

Hey guys, it’s not just the rate hikes through the spreads that make a difference to us. I mean, if we could repeat a 17%-plus margin for next year, I think on an expanded revenue base, we would be pretty contemned with that in light of the expense growth that we have talked about that we have planned..

Understood. That’s it from me, and congrats on a strong quarter..

Thank you..

Your next question is from Chris Harris with Wells Fargo..

Thanks, guys. I wanted to ask you about the outlook for the comp ratio. If we think about 2018, you got a couple things growing on. You’ve got a full year benefit of the rate hikes that have happened. There is a PCG payout grid change that you talked about. You’ve got Scott coming on. And so all those things, I think, are tailwinds to the comp ratio.

So I guess where am I missing as to why it shouldn’t be much better than the 66.5% that we’re talking about this morning..

So there is an awful lot of that’s mixed. So right now if you looked at our balance is growing of the PCG segments, it’s been the independent segment which has a much higher payout. So if that continues, I mean, they both are doing well and they come and go, but that’s going to skew payouts up.

If this quarter we’re held by really big M&A volume, which is lower than our average payout, so that brought them down. There is so much delta in the mix that it’s really hard to come out with any other number. And we do have increasing comps with compliance and other things we continue to grow overhead….

And we also had a full of all the compliance AML, risk management people that we have brought up for this year and we’re going to continue into that in terms of compliance of supervision staff..

So in a really constructive market we do better absolutely, but we’re not planning on -- I didn’t plan on a 25% increase market this year. We’re not planning on it next year. But if it happens, we’ll certainly get the benefit of it..

Okay, guys. Thanks for clearing..

[Operator Instructions] The next question is from Devin Ryan, JMP Securities..

Good morning, guys.

How are you?.

Hi, Devin.

Maybe just one on the outlook for some of the fixed income businesses and a lot of moving parts in there between what’s going on with municipalities and taxes relative to yield curve. And we saw marginal uptick in kind of the yield curve kind of towards the end of the quarter.

So I’m just curious kind of that you’ve kind of put it all together, if it feels like we kind of how had low bar year for the fixed income trading, underwriting tax credits kind of all in aggregate heading into fiscal ’18?.

That’s correct. I think the question is certainly, yes, it is raised, caused some trading increases. But how long did they lap. I think the curve is still flat if they raise short-term rates while the tenure follow, I mean there is just a lot of questions.

I think that business has done really well with double digit margins in a really tough environment. It’s down less than its competitors. It’s a great agency business, a big segment of the fixed income business as well as other financial institutions. And so, certainly that has its own dynamics of their own securities buying.

So I don’t see an enough moment in the market to say that’s going to really bounce back, on the other hand when their down equities usually stay constructive. So if you had a really volatile fixed income market, I'm not sure the equity markets wouldn't be any give it back so for us. So that's the challenge, Devin..

Got it, okay. That's helpful. And then just a follow up here around the outlook for some of the fees from product manufacturers and sponsorship revenues, et cetera. Some firms are removing manufacturers that are not willing pay for distribution.

And then I'm just curious if there is obviously a lot of moving parts in here with the DOL and I think renegotiations there but also I think -- on wind up people on the platform with the free launching.

So I'm just curious kind of where you guys are in that conversation with your third party manufacturers and kind a what the outlook is more broadly if you see maybe some firms being removed because of that dynamic?.

So for our mutual fund partners we've taken two steps. The first step is to make sure review all compliant. So we've renegotiated across the platform to make sure that we are complaint with DOL and I think we'll do that pretty much under revenue-neutral basis. So as we close them on the end of the year.

And what we hold on the Step 2 that we would strategically look next year at what we're doing with the overall platform. I know it’s coming from the jump right into it. We feel that wasn’t fair to our partners and it really didn’t give us adequate time for advisors to do their planning.

So we are finishing up with the negotiations with the contract to make sure we're compliant by year end during the transition period. Even if it's delayed we'll be in good shape. And which we expect the DOL to be delayed, but we will still be in compliant.

And then step two, as we're looking to the overall who is paying what's their requirements and how we price it. That's going to be something we're looking at next year and the focus of our executive committee and board off sight actually..

Got it, okay. Maybe there’s a last quick one here. Paul, this has been addressed, but in some of the conversation around that the tax tap on 401k contributions and hopefully that doesn't happen but not sure how we should think about the considerations for Raymond James if that were to happen and I believe in your administrator.

But if we can think about what the implication of that could be just on the business?.

Yeah. So my philosophical answer is it's not good policy that we need more savings. And they even they means cluster or whatever, I think eliminate the 401k deduction is not good policy. From a firm standpoint, it’s not a big part of our business. .

We're an advisor much more than administrator. .

So it doesn't have the impact that it does over the big terms that really do an awful lot of that. .

Yeah, okay. Great, thanks a lot..

[Operator Instructions].

Well, great. If there is no other questions, I know it's a busy day for all of you. We appreciate you're jumping in on this call. We had a big crowd. And I know there is a lot of other calls and releases that you're working on. So thanks for joining us again, and we look forward to talking to you soon. .

This concludes today's conference call. You may now disconnect..