For important disclosures, please see Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosure. The taking of photographs and the use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. Okay. Thanks, everybody, for joining us this afternoon. We are pleased to have with us Jim Crowley, Global Head of BNY Pershing. Pershing is the second largest business at BNY and sits in the market and wealth services segment.
Right.
It has the highest revenue growth rate and the highest pre-tax margin for the company.
I don't know if that's exactly right, but we're doing okay. Thank you for the compliment, though.
Okay.
I'll take it.
Okay. Just so you know, Pershing provides execution, clearing, custody, business, and technology solutions, delivering operational support to broker-dealers, wealth managers, and RIA globally.
Yes.
Okay.
Thank you.
I got that right.
You got that right, Betsy. Thank you.
All right. Jim, could you take us—well, we are going to go through the products as we have the discussion. Take us through the strategic priorities you have. You did take on this role about six years ago?
July of 2019, just in time for COVID.
Oh, great.
Yes.
You could work from home while heading a new division or you're new to heading a division.
Or something like that. Yeah.
Okay. Great. I'm sure there's a lot that's evolved since then. Pre-COVID seems like a long time ago. Tell us about your strategic priorities today.
Yeah. Thank you, first of all, Betsy and Morgan Stanley, for having us. It's our real privilege to be here. Maybe as quick background for everyone, we are the second largest business inside of BNY, and it's our privilege to serve about 1,300 different intermediaries around the world. Those intermediaries have about 8 million client accounts on our platform and about $2.7 trillion of assets. BNY globally has about $3 trillion of assets when you add back in our BNY Wealth business to our total wealth assets on the platform. We have this really cool seat to sort of see what's going on in the wealth industry. When it comes to priorities, I would say that the first priority is about growth. I don't think that that would come as a surprise to anyone.
I would say the second priority would be Dermot's North Star, about positive operating margin. You talked about that earlier. For us, it really is about growth. I would say even more broadly and importantly, it is how do we sort of show up in the marketplace? Custody is at our core as a service, but really what is different about what we do is all the variety of things in the BNY ecosystem in terms of solutions that we can offer those clients that you spoke about. That is what we think really differentiates us. That, in terms of strategic priorities, is how do we sort of show up in the market, how are we able to sort of help our clients grow.
Okay. We're going to unpack that as we go through the questions. First, I realize you recently hosted your flagship Insight Financial Advisory Conference, right, keying off of the wealth scene here. What were some of the key themes that came out of that conference?
Yeah. Again, just sort of unpacking that a bit more. Insight is an event we host. We had it this year at National Harbor, 2,000 attendees, actually a few more than 2,000 attendees. We bring together a variety of different product providers as well and sponsors that attend that event, but about 2,000 clients. That is really obviously who we want to sort of speak to. This year, it was, I think, different than—I know it was different than every year prior. This was the 26th or 27th year we have had this event. This year, we showed up for the first time as BNY rather than as just a business within the BNY ecosystem. That was really cool about the event because this year we had our asset servicing team there. We had our investment management team there. We had our treasury services team there.
We brought together all of those sort of—all of my partners and colleagues who really are in the wealth ecosystem in different ways and different forms, but really to demonstrate how BNY can show up differently for the wealth managers that we serve.
You came this year with a broader product set.
Much broader product set. You'll have to come one year. The really interesting thing that we do, not different than a lot of other sort of big events, is that we have an expo. In that expo, we allow people to sort of—and advisors—to have a real-life experience and really immerse themselves into what it means to sort of be a client of BNY and all the different things that we do. Because as you've heard us say before, the best way that we can grow is to do more for our clients. It's one of Robin's pillars to be more for our clients. As part of Insight, that's exactly what we're trying to do, to introduce to our clients the more things that we can do at BNY to help them grow.
What was the driver of doing that? Is it bringing all the different services to the Insight Conference this year? Is Wove a part of that?
Wove was absolutely a part of it. Thanks for the product name mention. For those of you who may not know what Wove is, it is a platform that we launched two years ago at Insight. What we are striving to do with Wove is to solve what we think is a pretty significant industry challenge, which is the advisor sort of productivity. Our mission is to help advisors serve more people. The Wove platform, when we set out to do this, we were looking for sort of breakout growth ideas. What we learned is that 60% of advisors are frustrated by the technology that they use because of the disparate pieces, and they spend 70% of their time doing administrative tasks.
What better way, we thought, to do something great for advisors to help them serve more clients and more people, but to sort of help them get at that big problem? We launched Wove two years ago. It is the entire ecosystem, if you will, that an advisor would need to run their practice from CRM all the way to billing. What we decided to do was design a system that was put together with sort of best-of-breed partners in that continuum, but a couple of sort of grounding principles. One is that all the data and all of the apps in the ecosystem had to be interoperable and that we wanted it to be multi-custodial.
The concept is that an advisor would have a single pane of glass for everything from CRM all the way to billing, and they could run their business that way. Importantly, because we did not want to sort of tell firms they had to totally disrupt their technology stack, what we said was that we will build this in such a way that it can be modular. While we picked best-of-breed partners to be part of the Wove platform, it can be modular too. If someone only is sort of seeking out a tax transition application or someone is only seeking out a model marketplace, they can sort of lift that particular app out of the Wove platform and execute on that. That is the big sort of target market for Wove, and we are going forward.
Do I have it right that Wove drove in 2024 an incremental $30 million in revenues?
That's correct. The target, which we're on track for for 2025, is an incremental $60 million-$70 million of new revenues. More broadly, that's made up of different revenue sources. That's another one of the keys. If you think about our business model, how do we sort of build our economic model? We can build it through selling technology apps. We can build it through adding assets to the platform. We can build it through adding balances to the platform, accounts to the platform. That's the other cool sort of thing about our business. You talked about our margin at the very top. We have a high degree, a high level of recurring revenues. It allows us to continue to invest in the business and to continue to innovate and deliver products like Wove.
Okay. So that's 2024 is $30 million and then an incremental $60 million-$70 million.
And 2025.
Right. Running at the high end at $100 million. We should see that in the numbers as we go through. Because, well, I guess.
I think as we go through the years, we'll see that materialize. Yeah.
Okay. Because is there any seasonality in it, or should we just assume it's quarterly running?
The seasonality that is in it is only as fast as we can enable clients to get them on the platform. So no real seasonality to it. From an earnings perspective, it's just a function of how quickly we can enable clients on the platform.
The underlying question that I'm asking here is, how big can Wove get if we look out to end state?
That's a great question. When we came up with the thesis for Wove four years ago, we believed that it was a breakout growth idea. Now, we've gone really fast to get a product to market. Actually, when we started to build to when we got product to market was just one year. We were in market. We started to build in 2023. We were in market in 2024, and we just had our second, just passed our second anniversary. The total addressable market, again, back to this point that Robin talks about a lot, which is being more for our clients. We have got 1,300 clients. Roughly half of them are U.S. wealth firms, actually a bit more than half are U.S. wealth firms. That's RIAs and hybrid broker-dealers. That captive group is all potential opportunity for us.
The other thing about Wove is that we're custodian agnostic. You do not have to do custody with BNY in order to take advantage of the Wove platform. We're having some very interesting conversations with firms around the edges of how we might put Wove in their tech stack or major pieces of it in their tech stack.
Okay. When you think about your installed base clients right now, what percentage have taken up the Wove platform?
It's relative to the total number. It's a big denominator. What we've reported, I think so far, is 52 firms are enabled on Wove. We do have a backlog of firms that we are in the process of enabling. We've got quite a long runway. The numbers that we've talked about already are relatively small given what we believe the total addressable market might be.
The revenue model here is app usage. Is that it?
It's multi. There are multiple parts to the revenue model. It's app usage. Every sort of client that might be onboarded could be paying account fees. They could be adding balances to our choice money market fund program. They could be adding assets to the platform under a basis point pricing model. There are three, at least three, maybe four sort of substantial revenue streams from the product.
Okay. Attracting those new clients is important for driving this incremental revenue?
Attracting new clients is always important.
Yeah, yeah. Okay. Very good. What other areas of innovation can you talk about that you're thinking about working on in driving top-line growth for Pershing?
I'm sure everyone that's sat in this chair has talked about AI. This is the year for AI at everyone at BNY. We have roughly 90% of our employees now have signed up on our own AI platform called Eliza, which is our own hub. 13,000 employees have created their own agents. I've created my own; I've created three agents now. I'll give you a real sort of commercial example of how agents are working in AI for BNY. You receive an RFP that could be hundreds and hundreds of questions with a really tight timeline to sort of respond to that. Submitting that RFP document into an AI tool, which we have, you can get good first drafts of RFP responses very, very quickly and allow people to sort of add real value to an RFP.
For me, I've put my own goals into my AI agent, and I write a weekly report to Robin. In my weekly report, versus my AI agent can tell me how I'm doing and what I need to focus on. It has real sort of commercial impact for us. That's just like a personal example. I gave you an example about how institutionally with RFPs, we have AI embedded in our financial planning tool in Wove. We're partnered with a company called Conquest Planning. In Conquest Planning, they have an AI tool. The really cool thing about this financial planning tool is it allows an advisor to do a plan in what normally may take a couple of hours and literally minutes, 15-20 minutes, they can have a plan done. It really zaps up what their productivity rate can be.
It really does sort of help us sort of think about what our addressable market is with financial planning because we have not talked about trends yet in the industry, but as more and more firms shift from brokerage to advisory, planning is going to be a big part of that. Now, if you look at our book of business, more of our clients, more than 50% of our clients' books are advisory versus brokerage-based. More and more of those advisory books, more than 50% of those advisory books are using outsourced investment management tools and capabilities, another BNY opportunity for us to do these things at scale. Planning-led AI is something that really gives us commercial scale and our clients.
Okay. Excellent. That is already embedded.
Embedded, yes.
Okay. As you look even further out, the innovation that you're anticipating is coming off of the AI investment that you've made already?
Yeah, I think it's going to, the use cases for AI in the wealth management business are going to continue to evolve. At Insight last week, I talked to the group in my opening remarks, and I did mention how AI is sort of transforming BNY. I made the comment that this could be the BlackBerry moment for us if we don't embrace AI. Not that we believe that AI is going to take over wealth management. That's not what I'm saying at all. What we believe, though, and I know that Morgan Stanley is very much on this track as well, that AI is going to play a much, much bigger role in terms of how do we interact, how an advisor interacts with their clients, and how we operate our business going forward.
I think the use cases are only limited by what we can think of and how creative we are with prompts.
Since we're on AI, can we talk a little bit about the efficiency driver portion of it in terms of that expense ratio, that margin that you alluded to?
I will give you another sort of great classic example. Platform operating models and what we think about at BNY and how we sort of run the business more efficiently. We are thinking about how do we sort of realign the entire institution to bring expertise in a specific area into one place rather than in multiple places of BNY. It focuses the expertise, it focuses the investment, and it drives the efficiency that you just talked about. Probably more importantly, or just as important, it creates a much better client experience. With better client experience, better service levels, it sort of begets new business. AI is going to play a big part as we think about how do we do all those things within platform operating model.
I should also sort of mention that Pershing, the classic sort of Pershing business, is now fully in the platform operating model. We moved 2,800 or so people. No, actually, it's more. It's closer to 4,000 people into the platform operating model. When you think about classic Pershing now, it isn't the business that does everything from start to finish in the wealth management business. We outsource things like clearing to another enterprise platform inside of the platform operating model of BNY. All those things are going to play a bigger part in us running it more efficiently.
Okay. You moved on to the platform model last year?
We moved in March 26, 2025. We just moved in. The big thing for us is we've organized, reorganized the Pershing business into 15 different groups now. We've brought in all of our technology partners. We have a couple hundred different pods inside of the Pershing business. This is really going to sort of change the way that we operate the business.
That efficiency benefit will be rolling through your business over the course of the next year?
Yes.
Okay. All right.
Yeah. We will continue to tune and refine it as we find more opportunities to sort of do things as the broader BNY evolves with the different areas of expertise that we have.
All right. Thank you for contributing to the goal of positive operating leverage.
Yep. We're reminded quite frequently.
Yes. You did mention we have not yet talked about the industry dynamics. That would be useful to get your point of view on that and RIA consolidation and how that impacts your business.
Yeah. A couple of things on this, and I'll start where you ended with RIA consolidation. We had someone at Insight, and this is kind of one of the other cool things of being at events where you bring great sort of thought leaders together. In particular, we had a couple of the private equity firms there who are strong partners because of their ownership in the wealth space. One of the partners was talking to us about what's going on in the RIA business. Just to sort of step back for a second, the 80/20 rule is definitely applicable here, which is that 20% of the RIAs are driving about 80% of the growth in the RIA business. The larger RIA firms are growing much faster than the mid to smaller size firms. That's not news to anyone in this room.
What might be news to some of you in the room is that when you think about the RIA consolidation business, the growth rate of those firms is about one and a half times greater than a traditional RIA firm that is not going through any inorganic growth activity. We believe that that consolidation is going to continue to sort of carry forward. The reason why is because organic growth is a challenging thing in the RIA business and where it really is concentrated, where scale gets created, and where there is capital sort of fueling that M&A, which fits into our strategy, Betsy, which is our ideal client or our optimal client is the billion-dollar-plus firm. We know that we cannot be everything to everyone.
Given the BNY franchise and our go-to-market strategy, we're more, I think, better prepared to serve professionally managed, growth-minded, large RIA firms with all the sort of things that we bring to the table. That sort of fits right in with our strategy because there are lots of RIAs. There are about 20,000 RIAs in America. About 1,200 of those firms are billion-dollar-plus firms. We know exactly who we want to serve and how we want to serve them. The first thing around sort of mega trends is this continued consolidation, which is going to happen. The breakaway business is going to continue. I do not say that too loudly. Maybe I am at a Morgan Stanley conference. The breakaway business is going to continue to be important to us.
The thing about breakaways, which we are excited about, is that breakaways do not have a custodial relationship. They are not embedded within a custodian yet. That always leaves an opportunity for us to sort of capture breakaway opportunities. The way that BNY now can sort of mobilize itself and help breakaways, again, I do not know if I should be saying this loudly in this room, but help breakaways join either another firm or stand up their own RIA, it really is meaningful. Technology plays a big part in how the digitization of documentation and how quickly we can sort of mobilize around that now makes it much easier for a firm to think about that.
When you bring platforms like Wove into the sort of narrative, and when you can bring things like outsourced investment management into the conversation, it really does sort of help that dialogue, that narrative, that value prop that we have for breakaways. M&A is going to continue. The breakaway business is going to continue. The last thing I sort of touched on this a moment ago that we feel strongly about is the outsourced chief investment officer role is going to continue to sort of be a practice where RIA firms in particular, they do not differentiate themselves by or through investment management performance. They differentiate themselves by being a provider of holistic services to their clients that they are serving, whether it is tax preparation, philanthropy, trust estate work, legal work.
They are focusing their time, attention, energy, and capital in a collection of all of these services. That is the thing where we believe that another sort of area with outsourced CIO work, we can help firms do more of that.
Okay. Very good. So consolidation, a positive for you?
Consolidation, a positive. You win some, you lose some. More and more, we do business with the largest firms. We're in a very privileged position with many large clients that have been with us for decades. We're excited about it.
Okay. Can you give us a sense as to the size of the RIA that you need for a break-even or the size to hurdle your return needs?
Sure. That's why we're focused on large RIA firms. The hurdle rate with an RIA less than $1 billion is obviously much higher. We are focused on we do a client P&L. This may not surprise you. We do a P&L on every deal that we do, so that we know walking in what the hurdle rate is and what the expectation is. Now, the market's evolving very quickly as cash programs change, as the way clients bill for services change. We remain really nimble when it comes to pricing, when it comes to all the other economic levers and relationships. When we sign an agreement, we believe it's got to be a win-win for both parties. Otherwise, you can't continue to invest and innovate.
What percentage share of your market would you say you have today?
It varies by market segment. In the broker-dealer business, we're clearly, I think, number one in terms of market share relative to our competitors. In the RIA business, there are two large incumbents that have been in the business forever. I'm trained not to say their names. They have great market share. Both are great competitors. Their business model is very different. They both have direct-to-consumer businesses and a variety of other businesses. Even though we're number three in terms of market share by the number of RIAs that we serve, our optimal client is that billion-dollar RIA. There are 1,200 of them. We do business with 600 of the 1,200. We know who we want to serve. We know, frankly, who we don't want to serve. We know what our hurdle rate is.
We think that we're uniquely aligned on a values perspective of what they're trying to achieve in their strategy and their business.
Could you talk a little bit about how you are expanding what you offer to the clients in terms of products? I'm thinking about alternatives. Also, I'm wondering about crypto. As Genius Act rolls its way through Congress, how are you positioning for that?
Sure. I talked a little bit about this at Insight as well. It is interesting. Crypto is not sort of a thing that the RIA community has been coming to us and asking us to help them with. They certainly are coming to us and asking us about alternatives, private assets, private credit, private equity, real estate, infrastructure, whatever the asset type or class is. We are working hard on making certain that custodial and processing of those asset classes is really a seamless process. It really is a very difficult process today. We have, as I said, $3 trillion of assets on our wealth platform. It is a small fraction in the private asset alternative class. We think it is going to be much more in the years ahead.
What we are doing now is that we're working on all the things that we need to do from an infrastructure perspective to make certain that the custodial process works, to make certain that we're getting great reporting from the general partners in those asset classes, and to make certain that the client experience in terms of what the application process might be, if it's an app process document, or if it's an exchange-traded product, what that experience is. Again, it's an area of focus for us given the area of focus for the wealth management industry. This is something that I heard the other day, which is quite interesting, maybe news to some of you, that last quarter was the first quarter that retail issuance of alternatives, exchange-traded alternatives, exceeded non-registered product.
The marketplace is trying to figure out how to deliver these products more and more to what I'll call sort of the retail or wealth marketplace. As a custodian and a service provider, we are, again, sort of working hard on trying to make certain all the building blocks are in place and the client experience is really what it should be.
Okay. Great. Is there any operational improvements that need to be made to do that, or?
Absolutely.
Okay.
Yeah, there are absolutely operational things, improvements that need to be made. I say that more broadly. It's not just a BNY thing. I think it's an industry thing that we all have to get better at making that experience better. It's the same thing for GPs. I think that they've got to make the products easier for advisors to understand what it is that they're selling. As you know, there's a lot of effort going into what the educational process is for advisors, the awareness of what the products are, what the features are, liquidity, and so forth. We've got a long road still with Alts, but we're excited about it.
How are you thinking about the possibility for Alts in retirement accounts?
Not my area of expertise. I think that there's a lot of momentum. The whispers that I hear is that there's a lot of momentum for maybe first private credit to be a product introduced into retirement qualified plans, but it may be more broad.
Okay. And then separately, digital assets generally, not just crypto, but tokenized assets. Thoughts there? Is the platform ready to roll those out?
We're there, right, in terms of tokenized assets and being able to custody tokenized assets. Again, this is something I talked about at Insight. The tokenization of traditional assets is something that we clearly believe is going to be a trend going forward. Having the ability to sort of process tokenized assets and other forms of digitized assets is going to be something that's for sure going to be part of our ecosystem.
You're ready to roll that if you need it now?
BNY probably is ready to roll that now. We within Pershing, we do not have any clients yet who are sort of transacting in tokenized assets, but I think the day is not far away.
Okay. Great. Thank you so much, Jim, for joining us today.
Betsy, thank you.
Pleasure.
Thank you.