What is differentiated about this place is that we have bankers, equities people and fixed income folks who work together. They work together on client solutions. What I’m proposing on our behalf is now we extend that proposition to the firm. We’re at — in the wealth business, the investment management business and inside the investment bank, we can work together around clients ultimately to generate operating leverage and returns. And that is for me, the most exciting part of the next chapter, which is we got the team, we’ve got the excess capital. But again, I like the excess capital because it’s part of what has differentiated us from the group and allows us to weather whatever comes through on a Basel III end game. I would add if, in fact, the Basel III end game outcome is more favorable than perhaps the Street expects.
We will adjust accordingly, but we have tools. And part of that is dividend or that’s investing in the business. Part of that, obviously, is buying stock back. But ultimately, having a real capital cushion is something that shareholders have come to expect from James, and that’s something they should continue to expect for me.
Christian Bolu: Awesome. Very clear, and then maybe another one on Wealth Management margins, unfortunately, maybe for Sharon. I can hear you Sharon very clearly that you think higher revenues will drive margins over time. I guess, but if I guess if I look at the business, 2019 versus today, wealth management revenues are up 50%. This is where they were in 2019, where your margins have compressed. And again, I know there’s onetime items in the quarter, on the year, but it doesn’t seem to me like bigger revenues have driven operating leverage. So what gives you confidence that going forward, our revenue growth will drive meaningful operating leverage?
Sharon Yeshaya: Really around the conversion. That’s why I keep talking about the conversion, Christian. We brought the statistics up last year. We’ve brought the statistics up again this year in terms of seeing conversion from Workplace about seeing net new assets coming in and then seeing those assets migrate. New clients giving FAs time. All of those things are able to give us more durable asset management-based revenue as we move forward. So to your question, and I think Steve asked a similar question, the NII will fluctuate, obviously, based on rates and on consumer and customer behavior. And so the goal, well, that has been something that we say, don’t forget the bank. Don’t forget the margin that you’ll get from that.
Over time, the goal is to have a more sustainable $1 trillion of assets coming through both wealth and investment management, those assets will earn fees to some portion of it, and we see the migration into fee-based, right? We have 50% of advisor-led assets sitting in fee-based accounts. That’s the ultimate proposition from seeing an expanded margin and seeing the benefits of scale. And we have invested in workplace. We’ve invested in getting new channels and getting new participants. The time is now to begin to see conversion, and we have evidence factual evidence that I pointed to on this call to show you that we’re making progress towards those goals.
Ted Pick: What I’d add, Christian, is, again, all goals being equally important, we will hit that $10 trillion number. So part of it is to allow for some of this latency, if you will, on assets held away on assets working their way through workplace. It’s a space that we are a leader in. It’s a space that is relatively embryonic in the wealth business. And we will allow for some time for those assets to convert. But the key, of course, is to have them in-house and then as well to see that folks who are our new workplace customers have assets held away in other existing brokerage accounts that they bring them the firm as well
Operator: Due to time constraints, we’ll take just one question and no follow-up going forward from analysts. Our next question comes from Brennan Hawken with UBS. Please go ahead. Your line is now open.
Brennan Hawken: Good morning and congrats to Ted on the new role. I will — since I only get one shot at this, I will ask on the long-term targets. So we — there were some slight changes here. We lost some pluses and we lost a less than on the efficiency ratio, although in fairness, we gained a plus on the client assets. So was that a reflection of these are long-term targets, so I’m guessing it’s not really a reflection of the current environment. So what drove the tweak there to maybe signal some reduction in some of the upside scenarios? And how should — you’ve referenced the fact that you need the environment to normalize, how should we be thinking about progression towards these targets? And what specific nonenvironmental actions you can be taking in order to move the ball there.
Ted Pick: Yes. Excellent question. And a lot of time given to consideration on pluses and the like. This, for me, was sort of an easy call the page is one that we all own and getting to 30% margins is a number that we want to achieve. And at that level, having hit something that is approaching $10 trillion assets, we’re going to be in a really great place. And that would be a reasonable time to say, hey, how about more. And we’d say, okay, well, clearly, we’re going to continue to grow assets because the asset number way that TAM is gigantic. James has mentioned, $20 trillion at one point. There are client assets that will keep us busy for many generations to come. Whether the pretax margin of wealth’s should go about 30% at that point before or not, I’d like to get to the 30 and I want to get there durably and thoughtfully and the mid-20s is a range that you’ve seen us trade at the business to work well at, and we believe we can when economic conditions normalize, as Sharon described and as new assets get put to work some combination of money markets and T-bills coming into the market again, workplace coming through the funnel.
