Ronald Kruszewski: Yes, I would just add that I’ve always been cautious in an inverted yield curve environment, both as it relates to the behavior on cash client sorting activities. And frankly, that the [SOFR] rate is significantly inverted and the pressure that can put on various credit metrics. So we see, though, from this point, we have been limiting our balance sheet growth, and we see a lot of quality demand. So as I said in my remarks, we believe that whatever cash sorting is left as it impacts our NII will be offset by balance sheet growth. So that we think that we’re at a low part at NII.
William Katz: Great. Just sticking with that theme, just one level deeper, you sort of think through April. So I wonder if you could comment on behaviorally, how clients are funding any tax liabilities? And then as you look in a world where rates sort of stay here and we stay sort of in your framework of maybe plus or minus one rate move, how do you think the mix of client assets might migrate from here? That is what percent might stick in the sweep vehicles versus what might stay in more of the money market, higher-cost vehicles. And when might you start see more favorable inflection to that? Thank you.
Ronald Kruszewski: Well, two things. First of all, every year, the clients, they deal with tax season by wiring money to the federal government, generally out of our accounts and out of every brokerage account. That’s some – and that can be exasperated in years where you also have to make estimated tax payments. So you had a strong first quarter, you might have some more capital gains. So we see what I would say, normal activity, whereby clients just take it out of our various cash products and wire it to the federal government. Thank you very much. So it’s just taxes. As it relates to client behavior, it will be interesting because when and if, at some point, the Fed will begin to cut rates. I’ll say as an aside, if I could be Fed Chairman for the day, I don’t really think that we need rate cuts as much as we need a rate adjustment.
Meaning that if you could just snap your fingers and not signal to the market that you’re beginning a rate cycle, you probably want the Fed funds rate to be about 4.75%, which would be flat to the two-year. It wouldn’t be inverted. That would be ideal, I think, but probably not going to happen. But what will happen as rates do start to decline, as clients like the 5% handle on short-term rates, and they might reach for some duration to maintain rates, we’ve been thinking about that and have some products to make sure that we have that alternative for our clients, just like we got ahead of the curve a smart rate. We will, in terms of what the yield curve might our clients might want to do as the yield curve begins to normalize.
James Marischen: One other thing I think I would add to that is we already have about $18 billion of client assets that have moved into short-term treasuries and money market mutual funds. And obviously, that number can go up some from here, but that’s a pretty big allocation relative to historical norms. And obviously, if rates stay higher for longer, those are probably going to stay somewhat elevated. If we turn around at some point, see rates come back down, that’s a fair amount of investable dollars that aren’t really earning much today that’s potential revenue within our Private Client Group that’s kind of sitting on the sidelines today.
William Katz: Thank you so much.
Operator: We will take our next question from Steven Chubak with Wolfe Research.
Michael Anagnostakis: Hey. Good morning, Ron and Jim. It’s Michael Anagnostakis for Steven. I wanted to start off with one on the DOL fiduciary rule. Ron, you had been relatively cautious versus some of the peers on the implications of the rule back at the conference in November, with the final rule now published, maybe you can remind us your views there? What this means for the industry? Any implications that you would highlight for Stifel’s earnings as well? Thanks.
Ronald Kruszewski: Yes. Look, I mean, it was published yesterday, it’s about 500 pages with numerous preambles and various things. As a first blush, I want to say, I was somewhat maybe surprised that at least an initial review of the rule appears to be less restrictive than what was proposed. I think that a number of people in the administration are trying to not create a rule that is so similar to the one that was struck down by the Fifth Circuit back in 2018 or whatever it was. And so I would say that the rule really targets just to say that it’s primarily fixed indexed annuities, which we don’t really sell at Stifel. However, I would say that, that probably is going to draw a legal challenge from the insurance groups. The rule probably is still susceptible legal challenge.
But they did some things like that you can continue to have education for IRA rollovers. And I thought that it was interesting that they expanded the principal transaction which was always a concern of ours, mostly from investor choice that you should be able to do an IPO in your IRA if you wanted to. And it appears they put that back in. So on balance, I think the rule has an implementation period of about a year. I think it’s going to get challenged. But as I see it today, I think the – it doesn’t really significantly impact our business as I’ve seen it now. We’ve done a lot to implement BI, Reg BI. Overall, I always say the same thing that to the extent that it varies, it has a lot of variance to Reg BI, then that just becomes very difficult to manage.
Most of our clients have retirement IRAs and they have taxable accounts, and we can’t be operating under two standards. I’ll continue to be looking at that. I know the industry is going to look at that. But I guess my first blush reaction was that it appeared to dial back from the proposal that came out a month or so ago.
