Thanks everyone for coming to this session with our very own Dan Simkowitz, Co-President of Morgan Stanley. Thanks, Dan, for supporting us.
Thank you.
... one more year. Before we get started, I'm gonna read the disclaimer. The discussions may include forward-looking statements which reflect Morgan Stanley's management's current estimates and is subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements. This discussion, which is copyrighted by Morgan Stanley, it may not be duplicated or reproduced without their consent. Is not an offer to buy any security. With that, I guess we should start with the current environment. The market has seen quite a bit of volatility, whether it was AI a few weeks ago, geopolitics at the moment. Private credit has also made the headlines. Only two, three months ago, it felt like we were in a bull market.
How do you see the environment based on the conversations you're having with clients? Given the volatility we've seen, how do you see the capital markets environment playing out, and to what extent that's affecting the pipelines?
Sure. Well, first of all, thank you to everyone here. I've been at the conference since yesterday afternoon, and congratulations to you and your predecessors.
Thank you.
your partners, but mostly to everybody in the room and all the companies who are presenting. It's just a phenomenal event and venue to pull all this together. We really appreciate everyone taking the time, both people in the audience, but also all the firms that have done. You got the all-star crowd, and I'm like the, you know, sideshow here. What I would say is I think what's remarkable in a period of maybe uncertainty and unease, because I think you touched on at the end there, the pipeline, is how resilient the capital markets have been. The M&A announcements have been, as I said, in a period of uncertainty and unease.
I think it's worth at least getting our perspective on where the core of that uncertainty and unease is, and I'm gonna say it almost independent for the moment around the conflict in the Middle East. Because some of the economic impact there, especially as it relates to the U.S. economy, is sort of not hitting yet, and so it's still in front of us. If I think about uncertainty and unease, which I would argue stretches back to the last month or month and a half or two, I would first start with, you know, MSCI World is up over 40% in the last two years. Right there, I think both people in this room, and I used to run asset management.
You know, people in this room as asset allocators and investors, but also, you know, our team around risk management. Your awareness goes up after two successive years in that sense. I think you're on your toes in that context. On the other side, I would say that, you know, the primary driver this year is a recognition that the transformational productivity power of AI is right in front of us, and that creates sort of somewhat unclear outcomes in some elements. When we look at it at Morgan Stanley as a user, for example.
There's gonna be extraordinary value in how we deliver a service to our clients, service to more clients more efficiently and with more productivity, and with sort of higher margin and across a broader swath. You know, if we take that extraordinary value that we are seeing and the tools that we're seeing from some of our partners are accelerating, and then we extrapolate that to other industries, you know, this is really extraordinarily productivity tool. And it's pretty clear to us that that's gonna have a lot of. It's gonna have a lot of client value. It's gonna have a lot of shareholder value to Morgan Stanley. I think it's pretty clear in the marketplace. We hosted our conference. We have a comparable conference for TMT.
Just to put it in context around Morgan Stanley franchise. We had 3,500 attendees at that conference in San Francisco two weeks ago. I would imagine everybody in this room had peers representing that. I interviewed Dario Amodei at Anthropic, and we had Jensen Huang at NVIDIA. Jensen's point is compute, and really as it relates to both our revenue as well as our expense base, is really gonna be extraordinarily powerful. If you extrapolate that, there's real value. I think the chip makers, memory are all gonna win. I think a firm like Morgan Stanley, and people who have real client relationships and domain expertise, and in our case, just a truly incredible advice platform will win.
There is a little bit of angst between whether the LLMs, the data center players, and the enterprise technology players, who's gonna win in that? How does that play out? Plus the societal impact. I think that extraordinarily powerful productivity tool combined with data that's moved 40%+ two years creates that environment. Against that backdrop, plus at least the near-term impacts of the conflict in the Middle East, the capital markets and thus our pipeline have been really resilient. It's important to repeat. We raised since the conflict in the Middle East started, I believe $6 billion for Galderma, which is probably the most successful LBO in European history. A reinsurance equity offering measuring in the multi-billion dollars.
The largest LBO that had gone public in December was Medline, and they came back in two months and I think raised $3 billion. We've raised $75 billion in the last six weeks with hyperscaler debt. 50 of that just in the month of March after the conflict. You're seeing some of the private equity LBO financing starting to move through the market. You know, just yesterday we announced a big M&A deal in the real estate storage space. In essence, the underliers and the receptivity to go do capital are pretty strong. In that context, it gives us confidence that the pipelines that we're seeing in investment banking, again, capital markets and M&A, are really robust.
The underlying fundamentals around that are very much intact and people are executing and there is demand against that. Again, just to repeat, those underlying fundamentals, you know, and Betsy, I think is here, your colleague. She does a lot of work on M&A volumes and M&A activity versus GDP. For 2.5-3 years, we're way off the trend line, and we're just on a sort of grind to get back to trend line. We're seeing that translate in M&A volumes. We're seeing it translate also because of the regulatory environment in the U.S. around M&A approvals. We're seeing it also because, despite, and I'm sure we'll get into it, you know, headlines around credit, the actual credit markets that are supplying capital to M&A are functioning as well as we've ever seen them.
Absent, presumably we'll talk a little bit around software as an example. All those are ingredients there. Private equity firms have a lot of dry powder to deploy, but having run the asset management business, it's hard to just deploy the dry powder if you haven't sold some of your backlog and you got to go sell your backlog. The backlog you need to sell for two reasons. The urgency is building. LPs want capital back. I think there is an increased focus across both the equity market and the credit market on liquidity. Also the junior partners at all of these private equity firms, they don't get paid on marks. Private equity only gets paid on cash, and there hasn't been that much cash returned in its entirety.
If you're a founder, it's okay, you made your money in the past. But if you're a junior partner, you haven't been paid in five or six years. There is some level of urgency we're seeing, and that private equity market is also facilitated a bit by the fact that the IPO market is starting to work. I mentioned Medline, I mentioned Galderma. There was a deal we did over the last 12 months for StandardAero, which is owned by Carlyle, all went public. You don't have to just rely on selling it to a strategic investor or selling it back into the private equity market. Even if you don't use the IPO market, you now have choices in that context. You know, again, pipelines are strong.
I will say, you know, the IPO market this quarter, street-wide is down versus the fourth quarter. I think there is some element there that around seasonality and just deals come at different stages in their element. It's pretty clear to us that you'll probably see some of the largest IPOs in history in the next 18 or 24 months, as an example, especially in the United States. There's a sense that being public is great again, to borrow a phrase, and that has been an emphasis out of the SEC and Secretary Bessent. You're gonna start to see some of the companies that stayed private for a long time come into the market.
That resiliency, I think, has been something that I've been quite, you know, sort of impressed and surprised. Maybe not surprised, but I guess impressed about in our. Then that plays through the pipelines and the environment. You know, I think there is still some time to be had before that could change against some oil shock implications that come out of the conflict in the Middle East.
Great. You touched on private credit, which has been in the press. Can you maybe clarify how that touches each part of Morgan Stanley?
Yeah. I think it's also important just to take a step back. I think you know first of all if we have a recession and this is the thing that we watch probably the close. You know we watch the risk markets and the capital markets particularly close when you have two years in a row 40% beta move. You also do it as you see credit spreads tighten and all the rest. The real play in credit is if there's a recession what credit is gonna have defaults. I mean credit is not risk-free right? You're getting a spread for taking some risk and that risk has manifested itself at least at the end result around defaults.
The real play is to keep an eye on recession elements. If you're in a recession, you're gonna have private credit hit, you're gonna have public credit hit, you'll have bank balance sheets hit. It's sort of across the board. I wouldn't lose sight that credit risk is credit risk, regardless of the structure it's in, and whether it's liquid or illiquid, and whether it's on an asset manager, sort of a fund or on a bank balance sheet. I think that is fundamental to the way we think about the marketplace. I think in the case of private credit, and having seen it from a public equity market management perspective, our own public credit market perspective in Morgan Stanley Investment Management, and also servicing the asset management industry.
I think this is largely gonna be an asset management issue, not a systemic issue. I'm gonna make a plug for the Morgan Stanley research department. Tomorrow, Vishy, who is our credit strategist, is running a panel here at the conference, I believe.
Yep.
On April ninth, he's running a full day event on this. He's done a lot of great research in this space. Just like we've seen in bank allocation of credit, insurance allocation of credit, public market allocation of credit, you're always gonna have scenarios where firms will, you know, overdo it on terms or overdo it in a sector or win too much business and get a little lax. That has happened every cycle for my 35 years in watching asset management and this is sort of that moment in maybe private credit. I think what you saw to a degree is private equity probably got a little overexposed to software. Private credit within that probably got a little overexposed to software.
Then certain firms relative to other firms, both in the private credit market, but also versus maybe a public credit benchmark, also got a little overweighted. Their returns will suffer because their default rate will be higher than either their peers or their benchmarks. As their returns suffer, their flows will suffer. I don't think that'll translate into anything systemic because if you look at it at the real core of where people's concerns are today, and again, ex a recession, the real concerns are in software. If you just run through the math around that, around about a quarter of the private credit market is software. You run a default rate assumption, and then you run a recovery rate assumption, and you think about what that does, that doesn't create systemic issues.
It just creates return issues and especially relative return issues. I think that's something to think about. In the context of Morgan Stanley, you know, again, software being the one place. If private credit is a less of a deployer of capital, a couple of things will happen. We are not seeing any impact to our M&A pipeline and the ability for M&A to be executed. The public credit markets are so robust still that they can easily support, and we're already supporting the M&A market and our clients' M&A ambitions. That would be number one. The sort of related element to private credit is software. You know, the software IPO pipeline at Morgan Stanley is in the single digits, so it's not really relevant.
As it relates to direct credit exposure to software, we're de minimis, as an example. From a Morgan Stanley perspective, private credit around the street lending to sort of private credit funds, you know, the protections are at least in our case, where the exposure's quite modest, the protections are really very, very strong around marks, around structural protections, and all the rest. The last element, I guess, would be in wealth management. What's interesting in wealth management, and wealth management has seen at Morgan Stanley 20 or 30 years of experience around this, including real estate funds, in and around COVID.
You know, the key to a wealth management relationship in the private markets, and we've experienced this with hedge funds and then real assets and private equity and now private credit, is the discussion you're having with the client has to start with a liquidity budget. You first have to start with a really intense discussion on liquidity budget, and not until you're finished with the liquidity budget conversation with the client, do you move on to a risk and return conversation with the client. Then you start to have a pretty, I would say, intimate and holistic asset allocation conversation and recommendation.
What's interesting around wealth management, just in the month of March, right, which is probably sort of peak private credit news flow, the flow into private markets at Morgan Stanley is up over 35%. You know, where, you know, and I think credit is still up, is still positive, but, you know, real assets is up, I think about that amount as an example. If you think back to real assets, coming out of COVID, a lot of the same issues that are being debated in the press around liquidity and all the rest were happening in the real estate market coming out of COVID. I think in that context, you know, the market and the impact to us is relatively small.
The shakeout, and that may be too strong a word, but the relative winners and losers, not disasters, but relative winners and losers in credit asset management and private market asset management, you know, that's gonna come around to who was good investors, who was disciplined, who was staying true to, you know, sort of good risk management tools that, you know, that's in front of us, as an example. We don't see it as a systemic challenge. We see it as a classic asset management flow, asset management alpha return and flow issue, and then the business dynamics that come out of that.
Thank you. I want to touch on, in January, one of the highlights of the strategy update was how the equitization of global markets, institutionalization of credit markets and cross-asset innovation, how those were opportunities to drive further durable gains, which is the main goal. Can you unpack what the opportunities across each of those?
Yeah. Look, we've had a lot of debates over the last 10 years, let's say, especially when I was running asset management and then even before when I was running capital markets and some elements of the trading business around de-globalization. I don't know about everybody else in this room, but all of our clients, both asset managers and asset owners and corporates and relatively affluent individuals, they're as concerned about the interlinkages of the world than I've ever seen in 35 years. I think where we are gaining share is having already built and there are places where we're investing, but we've already built a institutional advisory business whether it's to asset managers, asset owners or big corporations, sovereign wealth funds that is both per the prior conversation, public and private multi-asset class.
Equities, fixed income, importantly, in the environment we're in, commodities, as an example, both micro and macro, if I had to split it that way as well, but most probably just as importantly, global. Our ability then to leverage both some of the hedges that are embedded in all those combinations that I just mentioned, but also different growth rates and different flow elements around the world has been really important. Our client base, both asset management and corporates in particular, but the asset owner sits sort of in the middle of that, they want to know where to allocate assets and where we are seeing trend lines.
Our ability to take our best technology, for example, in equities and deploy it in Brazil or in Greater China or in India or in the Middle East, or remarkably in Japan, which had an equity market that was really dead, and deploy it against our best clients in the markets where we can get paid the best margin because we're providing the highest value versus the competitive set, that has driven share. The ability to help a U.S. pharma company think about how to do licensing and other JVs in China, there are very few investment banks, as an example, who could do that.
To help a multi-strategy hedge fund get set up to trade Japan after not being there for 15 years because the market was dead, or get access to the market in Brazil, or even in the last week or two, trade the UAE and Saudi around events. That ability to serve the client wherever they want in a global context with the best technology and the best advice has allowed us to gain share. It wasn't that long ago that we were worried about like Chinese investment banks or securities firms being our competition. The competition set, including people who are no longer here, right? You know, Swiss Bank X not here. Other firms pulling out of equities and prime brokerage.
The competitive set is actually been stable and declining, and our ability to leverage all those existing investments across those multi dimensions has been really quite powerful. We're not standing still. I think there's a technology investment around continuous investment around staying on top of our lead, around electronification in equities and applying that to fixed income, which has been helpful. You know, we're investing primarily in investment banking talent in the U.S., which is a little surprising, but we see the brand and the depth of that market as still a real opportunity for us to go capture share.
You've touched on Asia, EMEA, sort of LatAm regions. How do you think about the international opportunity set more broadly? There was a slide the full year I remember that showing Asia and EMEA businesses growing faster than the Americas. Where does that global footprint having that global footprint show up in your ability to win business and serve clients, do you think?
Yeah. I think again, we see macro themes that we wanna take advantage of and deliver value to clients around the world. As I said, there's equitization in Japan. We think there's the potential of equitization here in Europe, but in particular in Germany. There's equitization, as I mentioned, in Latin America. There is reallocation of risk and equitization in Greater China. We have a leading market share in that context. The ability to service clients in that context, you're seeing real robust volumes and capital formation. I was with a big private equity firm here on Monday. Their largest IPO monetization market in the last year and a half has been India. We have a huge franchise both trading and investment banking in India.
Our ability to take our experience and our technology around all of these global markets is really important. The ISG business is very global in both where it raises capital and where it deploys. I would say even in wealth management, we have a very strong ability to take offshore assets and deploy them in the United States. There is still a view, especially in this kind of geopolitical environment, that, you know, U.S. assets custodied at a really high-quality firm like Morgan Stanley with really high-quality advice is still a very attractive place to go. We run a very, I think, high quality, high growth, offshore Latin American business out of Miami. We have a pretty high-end private banking type of business in both Hong Kong and Singapore.
That ability to go capture wealth that wants to get invested in the United States with the premier advisory brand is still, you know, really, really powerful as well.
Wanted also to touch on the bank opportunity. The firm has talked about the bank being part of the strategy in the past and has moved more assets onto the bank. Can you give us an update of what you're doing?
Yeah. If you take a step back, we have a pretty powerful deposit franchise in the United States. It's not branch-based, it's client-based in that deposit franchise. That deposit franchise emanates out of Morgan Stanley Wealth Management. It emanates out of E*TRADE and the ability to run a digital bank on the deposit side. It has the ability in certain circumstances to get corporate deposits. We've got a deposit franchise that has built and really developed well over the last several years. From a structural perspective, we were not set up like many of our peers on the asset side.
What we've done over the last 12 months is to optimize that so that we are really running a really high functioning, high quality, high profitability, both asset and liability matched bank. What we've done is taken the fixed income derivatives business, which used to sit on the broker-dealer at Morgan Stanley, and we've merged that and moved that into the bank balance sheet. Then we've taken our ISG, the securities business lending in Europe, and also merged that into our bank construct. It has two main benefits. The first is there's just a funding benefit that accrues by having that set of assets and activity on the bank.
The second one, which I think is just as important but not always well understood, we were operating as the only firm running that fixed income business off of a broker-dealer versus all of our peers. From a structural perspective and a complexity perspective, we look different. We look different to our counterparties, whether those be asset management counterparties or corporate counterparties, but we also look different versus to our regulators. The ability to take that complexity down, funding cost down, through work we've done with the regulators around the world has been really important. This was an agenda item that we were focused on, but you know, it was always sort of next year or a different regulatory scheme.
Ted really put this at the highest agenda to push forward. What's fascinating is we were able to push forward. We had to recontract all of that business. Some people in this room were part of that, thank you, across all of our client base and do it, you know, seamlessly, and do it in concert with the regulatory environment. We think it's a big deal as it relates to our overall integrated firm and the approach that we're taking.
Right. We've got to touch on AI. Several members of the management team have been very vocal discussing the benefits of tech and AI from an operational perspective. How impactful do you see it being across the integrated firm?
Well, again, I started with the view that, you know, our ability to service clients, service clients better, more productively, more clients. More clients in the wealth management business, more clients in the sort of corporate investment bank, private equity part of investment bank, more clients in the trading parameter. Because to a degree, Morgan Stanley, if you go back to all of our DNA, you know, we were at the top of the institutional market or even the top of the wealth management market. Some of the challenges around moving, taking that intellectual property, that technology, and that experience and deploy it down a client set, you know, we were just economically unable to do so.
What we're seeing in terms of the power of the tools to be able to deploy that at the customer level and broaden, in essence, our own intellectual property, our own trust and advice across a broader set of clients and do so really powerful is pretty extraordinary. At the same time, you know, I don't think we endeavored to have you know, one of the largest law firms or the largest software development companies or one of the largest finance departments in that sense. The efficiency that we will be able to build in some of the support functions is also gonna be pretty extraordinary. I'll give you a wealth management example.
You know, through the acquisitions and then some of the organic growth around Solium and then E*TRADE, we went from 3 million households in wealth management to 20 million households, as an example. If we didn't have AI tools, the ability to match up that incremental client set with advisors and drive what you're seeing, which is really dramatic growth in our advisory AUM and advisory assets. The AI technology to be able to match that is pretty extraordinary in that context. Also the ability to just give the advisor more time. You know, in essence, what we did, and we were early. We had our first meeting with Sam Altman, I believe, was in the fall of 2021. There was a little COVID break when we got out of the office.
We had OpenAI and Sam come to the Morgan Stanley board in May of 2022. I think it was before ChatGPT had even been released. Some of these tools, we now have three years' worth of experience around taking it and allowing our advisory teams to really get more value out of their time. As we moved from 3 million to 20 million, we were about to become one of the largest physical call center companies in America. The tools that we've received in the last nine to 12 months meant we were able to stop that in its tracks, because you know, no one is employing us because we would be one of the largest call center employers in the United States.
The ability to stop that and allow it to be technology-driven with really high quality has been a huge sort of productivity and client service benefit, just as an example, in the marketplace. We're seeing tools coming out of the partners that we have. We're lucky at Morgan Stanley because of our advisory capability, because we're a big company because we're a big financier of the marketplace. Gemini out of Alphabet, OpenAI, Anthropic, xAI, these are all incredible partners. The engineering talent that we're being provided, including just sitting on a trading desk, so that we're able to now design soft.
In essence, our own at-the-desk software capability to either solve problems that we've had on our desk for years that just weren't rising to the top of the technology budget, is pretty extraordinary. You know, back to our bullish view on overall TAM, when we see what we're able to do, and then I talk to executives in pharma or defense or industrial or other elements of the economy, it's why we do think this is pretty powerful and why it's gonna extend our client base and extend our margin throughout the firm.
I think the theme takes us nicely to Wealth Management. The business continues to show strong net new asset trends as a benefit. The model benefits from that scale, the funnel that you touched on with Workplace and E*TRADE. Where do you see the next leg of growth, and what would you say to some of the fears around AI and wealth?
Well, it's interesting. I think one of our peer firms who does pure wealth management and then does a whole bunch of RIA servicing, you know, went down a lot on a press release, I think. You know, to a degree, that press release, which talked about account statements and a little bit of tax, back to my comment around OpenAI being here since May of 2022, what was released in that press release, I think in January and February, and caused that other stock to go down a lot. We've had those tools on the desktop at the FA for years, as an example. In essence, our value proposition to the client is deep advice and trust, and a brand that's built on trust.
You know, we're not seeing really any attrition out of FAs we like at all. You know, they're not going away, and then what we're seeing is as you get to a certain level of net worth and complexity, you want advice. People talk about, I think, intergenerational. You know, again, that big generational shift in wealth is gonna come out of people who are 70, 80, and 90-year-olds being given to 50, 60-year-olds. It's not being given to the 25-year-old. We have the ability to build real connectivity all the way through the generational element. I think what's important, and Jed Finn talks a lot about this, and so does Andy Saperstein, the way our advisory business is now built is not individual FAs. It's built on teams.
Those teams now have a technology specialist, so someone who can use the tools that I mentioned already. They have people who are of varying ages. The other tool they have is a digital tool, an E*TRADE. As an example, back to growth, because of the workplace, we are getting client engagement with people in their twenties, thirties, and forties that we never had access to. If you're an employee at a big technology company, and you get your first vesting of stock at thirty years old, it automatically goes into an E*TRADE account. We have enormous market share in that market. It's not just public companies, it's private companies. That asset is sitting in an E*TRADE account.
We now own the responsibility of owning keeping that. With the tools that we have around AI and the other algorithms that we've been running now for a couple of years, we see what the formula is to success to retain that client through their thirties. When they compound and they have complexity in their forties, make it an advisory client. We put out a slide in, not this year, but the year before in our strategy deck. Once we have a client as an advisory account, we have 99% retention. That is as close to an annuity growth business. What I would say is in that progression from 3 million households to 20 million households, we're in the very early days of monetizing that element.
Again, I think in a world of AI, the accrual of benefits is to really well-capitalized scale players who can take advantage of that technology. To take advantage of that technology, you have to have access to the client. We have access to the client that is unrivaled in the industry because we have access to workplace. There's only one other firm that has a workplace business in the United States in scale. They have to wait till someone becomes 59.5 and does a 401(k) rollover. I know because I'm 60, so I did my 401(k) rollover right into the Morgan Stanley Wealth Management system. The Morgan Stanley workplace system, it's been added to because of our JV we have with Carta, we get those clients when they're stock vested.
We have decades where we can build a relationship, use technology, meet the client where they want to be met, whether that's digitally, or with advice, and go extrapolate that. I think I've said it to you before, in my role as head of strategy and then at MSIM, I saw wealth management platforms, asset management platforms. I now run the securities business. The best scaled growth opportunity in all financial services is Morgan Stanley Wealth Management in the US. Even though we're number one, the market is not fully served. Our market share is relatively, I think, low double digits. The ability to take advantage of 3 million-20 million households, but then take 20 million up and do it on the back of technology tools is pretty extraordinary.
I think we've gone over the different businesses. One of the big focus has been delivering the integrated firm more systematically. What are you doing differently, and how do you measure success from internally?
You know, I think we came out of, you know, the last ten years having done a fair amount of M&A. You know, we bought E*TRADE, we bought Parametric. We really loved all the component parts. We felt like, to just run those as silos would, or try to buy new things, we loved what we had, but it was the linkages that we felt like we could do a lot more with. Just in what I was describing, again, if the workplace is the big driver of the wealth management engine, where is that workplace? That's at a corporate client. The corporate client is delivering a workplace opportunity, which is delivering NNA and advisory flows to wealth management, there is a linkage.
If we are the largest allocator to the asset management industry in the world, right? Because we're close to 10, you know, we're $8 trillion of wealth management assets, on our way to our goal of $10 trillion combined with asset management. We're the largest allocator to the asset management industry because we've got this workplace thing which comes from corporates. We do have a holistic relationship with the asset management industry that is quite unique. What we did, there is a long history of collaboration and good culture at Morgan Stanley, but what we felt was formalizing that. Formalizing that and going to extract that value from those relationships was better than doing just some the next random M&A deal, as an example.
We took one of our most senior and capable executives, Mandell Crawley, and we put him in a formal role. Putting together these processes is already paying off. It's paying off in more workplace mandates. It's paying off in more holistic asset manager relationships. At the corporate level, we're now going to the CEO and saying, "We can be your advisor not just on your balance sheet, not just on your historical defined benefit pension plan, not just on your M&A. We can help you with your employees. We're gonna give you financial literacy at the employee base to help you hold on to and retain talent." Then what do we get for that? We get those relationships so that when that stock vests we now have a client, and it's on us to hold on to the client.
Maybe a good last question to finish up on capital. The firm has 320 basis points of excess capital. There's now more certainty on the regulatory outlook. How's management thinking about deploying that excess capital? Is this about doing more business with existing clients or what are the new opportunities to deploy capital leasing?
Yeah. Again, I think on the capital side, we like to be in a position of capital strength. Because what it allows us to do is continue to invest the capital in supporting the businesses. You know, right now with SLR reform and the capital buffers that we've built, we can be, you know, quite sort of front-footed in investing in the client business. We can be quite, you know, sort of, positive as we look forward around dividend growth. We can opportunistically buy back stock. We also have the ability to sort of think about both organic and inorganic opportunities that a market environment may present to us without having to feel like we're against the wall.
In that context, we feel like there's real continued growth in both business and dividend around the capital elements. I think that's important as you see sort of varying market environments. Again, we are seeing, as I said, really good pipeline over the next couple of years. There is gonna be dislocations that we can take advantage of in that context. You'll see elements around that. To a degree, we took advantage of when E*TRADE, when Schwab took commissions to zero and TD Ameritrade left the table, we were able to say, "This is an opportunity, a partner that we always wanted." Same is true with Eaton Vance.
It was on the top of our list with Parametric, and then COVID happens and the opportunity presents itself. You know, you're gonna see. You know, even right now, you see situations where, you know, the market has some challenges. You know, for example, you know, our transactional volumes in retail are off of a record fourth quarter, are a little lower this quarter, but then they're gonna come back up. Can we take advantage of opportunities along the way? That capital provides us that flexibility.
Right. I think that's perfectly timed. Thanks very much again, Dan, for joining us one more year. It's a very insightful session. Thank you.
Thank you. Thank you.