Ryan Krueger: Great. Thank you.
Operator: Your next question comes from Alex Blostein with Goldman Sachs. Please go ahead.
Alex Blostein: Hey, Jim, Walter, good morning. Just one for me. You guys talked about expense management and in your earlier comment, you suggested that there’s a little bit maybe of a broader effort that’s holding across the organization to focus on efficiencies, and it’s great to see G&A being held flat versus 2023. So, but I guess looking beyond ‘24, how do you think these efficiencies went back to G&A growth sort of like on a multiyear basis? Should we think of that being below the trend of what we see from the kind of the prior several years or sort of 2024 was a one-off benefit? Thanks.
James M. Cracchiolo: So, on the expense side, Alex, certainly we will garner a reasonable amount in ‘24, but there’ll be carryover and certainly of the initiatives that we take in ‘24 and then of course the ones that will continue. So, you should expect that this is part of, we’ve always done reengineering, but this I would say is an improved trajectory as we look at it and the opportunities to process reengineer.
Alex Blostein: Great. Thank you.
Operator: Your next question comes from Craig Siegenthaler with Bank of America. Please go ahead.
Craig Siegenthaler: Good morning, Jim, Walter. First one is on recruiting. So, I know you don’t disclose this before the Q, but advisor loans grew 20% last year. And, I’m wondering how you expect them to grow this year in 2024. And, also given your comments to an earlier question on recruiting, how have your transition assistance rates changed roughly over the last three years, just given intensifying competition on the advisory recruiting front?
Walter S. Berman: Okay. So, on advisor loans, yes, we have increased and certainly we are competitive. So, you should expect that that would increase as we are on trans-com proposals and as we start tracking more and more advisors, but that would stay within our limits. But you should see those loans increasing for sure. And we certainly have the cash capacity to do that.
Craig Siegenthaler: Thanks. And, I have a follow-up on wealth manager operating efficiency. So, if you look at the ratio of distribution expenses relative to management fees and distribution expenses, sorry, distribution revenues, it sort of a payout ratio, but that ratio hit an all-time high this quarter. And, at the same time, G&A growth remained elevated at 7%, which was in-line with last year, but it’s above your mid-single-digit target for the year. I’m just wondering what drove up expenses in the first quarter and how should we think about the forward trajectory within the Wealth Management segment?
Walter S. Berman: On distribution, it was payroll taxes and of course you have high distribution when you have higher transactional elements from that standpoint. And as far as the 7% as we indicated, the first quarter usually does flip up, but we are staying within what we’ve indicated in the middle-single-digits, it’s a growth area for us. And so, we’ll be investing, but that’s the target range.
Craig Siegenthaler: Great. Thank you, guys.
Operator: Your next question comes from Michael Cyprys with Morgan Stanley. Please go ahead.
Michael Cyprys: Hi, good morning. Thanks for taking the question. Wanted to circle back to your commentary on the large amounts of customer cash on the sidelines, I think over $80 billion overall, about $39 billion or so, and money fund balances and brokered CDs. I was hoping you could speak to some of the steps that you’re taking to help facilitate the movement of this cash into wrap accounts in terms of what can you do to make it as frictionless as possible, and what rate backdrop do we need to see for this cash to move more meaningfully, into wrap accounts? And if you look out over the next couple years, what would success be in your view in terms of capturing? What portion of this cash?
James M. Cracchiolo: Oh, I mean, listen, it’s hard to say because it does depend a little bit on market conditions. And what I mean by market conditions it’s like the equity market has been up strong. But, if you look at how fast it ran and then you looked at where rates dropped so quickly initially on the long-end of the curve and now that’s starting to come back up again and they are up nice again back to a more reasonable level. I do believe that there is an opportunity as people start to think about rotating back into fixed income for the longer term as well as with the equity markets do pull back as they have over the last month, so to speak, and become a little more, what I would call, less reliant on just a few of the high-tech stocks, etcetera, you will see a rotation back in because of that amount of money is abnormal to sit on the sidelines.
But again, at a 5% rate, in the short-term, it makes sense. And, it’s not like our clients or advisors are active traders back in and out of the market. So, I do believe that as they are able to read what that market is over time and they feel more that it’s not like they’re getting caught on the high-end, that money will start to rotate. Now, how much goes back in, it’s anyone’s guess, but we’re no different than what you see out there across the industry today. We saw some flows as an example even our asset management on our growth side start to pick up a little and same thing in fixed income, but some in equities. So, I think some of that money will go back, but it was a high-point as we hit last year because of the cycle.
Michael Cyprys: Great. And, just a follow-up question. I was hoping you could maybe update us on your lending solutions, including pledged assets, lines that you have for advisors and for their clients. Just curious how built out this lending offering is compared to where you’d like that to be. And, maybe you could speak to some of the steps and initiatives that you might be looking to take over the next, year or two, in order to drive greater uptake amongst the advisors and clients from the lending solutions?
Walter S. Berman: Looking at a bank CDs and certainly, we are really looking at to launching our basic checking capabilities and also new mortgage capabilities, HELOCs and things of that nature. So, there’s a full program that is there, plus, as you know, we have a fairly extensive pledge and that we’ll certainly be looking to penetrate that more. And, that is certainly totally aligned on building the relationship with our clients and deepening that relationship.
James M. Cracchiolo: Yes, we just came up with a segment of that fixed pledge as well. And so, that is also going to help grow. So yes, we’re probably still underpenetrated on the pledge side of it compared to some others that we think will be an opportunity for us.
Michael Cyprys: Great. Thank you.
Operator: Your next question comes from Jeff Schmitt with William Blair. Please go ahead.
Jeff Schmitt: Hi, good morning. So, you’ve been signing some partnerships in the financial institution channel recently. Is there potential for that pace to pick up or maybe for you to sign larger partnerships just given some of your competitors may be running out of capacity right now?
Walter S. Berman: Yes. We certainly with Comerica, that has turns out to be a very good relationship. And yes, we have pipeline that we are certainly evaluating and we feel we do have the value proposition not to basically satisfy the clients and really provide them with the capabilities that we provide for basically planning and other aspects from that standpoint.
James M. Cracchiolo: And, we are signing some small deals. We don’t put them out there as much to publicize them, but we are bringing in some other deals and our pipeline is good. So again, the larger ones, we wanted to really do Comerica really well, etcetera. And so, we’ve learned a lot from it and set up our capabilities. So, we think there’s an opportunity as well in that category.
Jeff Schmitt: Okay, great. And then, on client cash levels, how much is sitting with Comerica right now? And I guess do they, so they all have to transition to Ameriprise sweep options in the second half, is that right? So some of that cash could kind of either leave or go into the market or what have you?
Walter S. Berman: Yes, it is about $2.5 billion and they are certainly, they are as part of program they are transitioning and we’ll see. We just don’t have the full information now about what that’s going to be. Is probably have a better idea at the end of the second quarter.
Jeff Schmitt: Okay, great. Thank you.
Operator: Your next question comes from John Barnidge with Piper Sandler. Please go ahead.
John Barnidge: Good morning. Thank you for the opportunity. Can you maybe talk about the slowdown in institutional asset management mandates that was cited? Is the conversion rate being elongated along with fewer discussions and what are you hearing as the most common pushback? Thank you.
James M. Cracchiolo: Yes. I mean, some of it was a bit elongated that you would expect the fundings or even the cycle. But there is a growing interest back again, both in the fixed income area as well as in the equities. So, we actually think that this will pick up as we go further into the year. And, the mandates that we sort of lost in the first quarter were sort of some lower fee or pension things like that they’re a little lumpy in that regard. So, but we feel that we can win some more as we go forward that the appetite is there out there in the industry, both not just in the U.S., but internationally. So, we’re very much focused on that.
John Barnidge: Thank you. And, then my follow-up question, I think there was a bit of severance in the quarter. Is that expected to impact flows prospectively at all?
James M. Cracchiolo: We had some of the remnants of the changes we made that came out in the first quarter that was in the flow picture. But no, we don’t expect more from that.
John Barnidge: Thank you.
Operator: Your final question comes from Steven Chubak with Wolfe Research. Please go ahead.
Michael Anagnostakis: Hey, good morning. This is Michael Anagnostakis on for Steven. I guess just a couple here on capital. BMO largely integrated at this point. How are you thinking about prioritizing excess capital deployment? And is strategic M&A something you’re looking at more closely? If so, where might you look to buy rather than build? Thanks.
James M. Cracchiolo: So, we actually, we continue to buy back nicely. I mean, in the first quarter it was a little less than we normally have done but that will pick up as we go through the year. And, I think, Walter had mentioned that we’re targeting initially around the 80% mark. And then as we said, we just raised the dividend again, that will take some more of the cash. But, we still have a healthy balance sheet. We’re not out there looking to acquire per se. There’s always if there’s an opportunity or the market falls out or something that gives us value, we’ll look at it. But, we’re very much focused on continuing to invest organically and really focused on getting the operating efficiencies, particularly in the asset management business now.
And, we feel good about that, including what we do from an overall investment cycle for our technology and capabilities and products. I mean, we’re working on a number of different new product areas for us in asset management, like active ETFs, etcetera. So, we feel good. We’re looking to build out a little further on our international property areas, etcetera, our CLO business. So, there are things that we’re investing in a bit more organically as well. But again, we don’t rule out acquisitions, but we’re not necessarily looking to target things at this point.
Michael Anagnostakis: Okay. Great. That’s super helpful. And, just on the buyback, so 80% payout is still the expectation. It sounds like you guys are more focused on the organic internal investment. But, given the bank’s largely built out, maybe M&A is less of a focus here and you’re generating strong cash flow, why not ramp the payout ratio back to the 90% to 100% zone that you historically ran at? Thanks.
James M. Cracchiolo: Well, we certainly have the capacity to do that and we evaluated on optimistic situation as we look at it. But yes, we do have the capacity at this stage. We feel the 80% is a good return level. And, there are other areas that we certainly as I said, we will be growing the bank. So, it would require additional. But, I would say at this stage, we have the capability, we just feel it’s opportunistic. We look at it and then we evaluate it. And, you’ve seen in prior times, we have gone up. But at this stage, we feel the 80% is an appropriate level.
Michael Anagnostakis: Got it. Thank you.
Operator: We have no further questions at this time. This concludes today’s conference. Thank you for participating. You may now disconnect.
