Good morning. Welcome to Raymond James Financial's 2021 Analyst & Investor Day. I'm Kristina Waugh, Vice President of Investor Relations. Today, we're coming to you inside our home office in St. Petersburg, Florida, within our Command and Cyber Threat Centers. The Command Center is Raymond James' centralized operations center, providing surveillance and alert monitoring to ensure the day-to-day stability and performance of all technology across the firm. The Cyber Threat Center is our real-time cyber defense monitoring and incident response team for the Raymond James global network. It processes 2.5 trillion system log events each year and actively blocks malicious security events directed at Raymond James. These dedicated facilities highlight our commitment to providing industry-leading technology to support our advisors and our business. Before we get started, I call your attention to our safe harbor statement shown on the screen. Certain statements made during this presentation may constitute forward-looking statements.
Forward-looking statements include, but are not limited to, information concerning future strategic initiatives, business objectives, business prospects, financial results, anticipated results of litigation and regulatory developments, or general economic conditions. In addition, words such as believes, expects, plans, will, could, and would, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those listed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Form 10-Q, which are both available on our investor relations website. Now, turning to the agenda. First, Paul Reilly will provide a strategic overview, followed by Q&A. Next, we'll hear from three of our core businesses.
Scott Curtis with the Private Client Group, Jim Bunn with Global Equities & Investment Banking, and Steve Raney with Raymond James Bank. Following Steve's remarks, all three presenters will be available for Q&A. Our last presenter will be Paul Shoukry to provide a financial review followed by our final Q&A session. We plan to get this all accomplished in about two hours and hope the virtual environment will run as smoothly as we've all planned. During the Q&A session, I will serve as moderator. If you'd like to ask a question, please submit it during any of the presentations using the Q&A button in the webinar dashboard. Please include your name and firm so I can identify the questioner. We will do our best to address as many questions as possible within the time allowed. This presentation has been made available on our investor relations website.
Biographies of our speakers and non-GAAP reconciliations are available in the appendix. With that, I'm happy to introduce our first speaker, Chairman and CEO, Paul Reilly. Paul joined Raymond James in 2009 and became CEO in 2010. He has served on the Raymond James Board of Directors since 2006 and became Chairman in 2017. Joining from our command center, I'll turn it over to Paul Reilly. Paul?
Great. Thanks, Kristy. Hello, everyone, thanks for attending. We're shooting from the command center, one, to not have the typical Zoom background that you have to look at all day, but also to showcase some of our investments in technology. Here in this room, we're able to monitor not just for cyber threats as we do 24/7 around the world, but monitor all of our networks and devices in case there's a diminution in levels of service. Hopefully, we can go and interact and fix them so our advisors and clients won't even notice any kind of service changes or interruptions. Our investment in technology has been one of the showcases here at Raymond James. Let me start by talking a little bit about where we are and where we're going.
The first thing you have to understand about Raymond James is we're centered on our core values. Our clients are first. Every decision we make is it fair for clients? We act with integrity. We're conservative. We take a long-term view, not that we're not willing to make bets, but we look to make sure they're long-term investments, and we value our independence as our advisors value their independence. It goes a step further. Advisors are our clients. We treat them as clients. In fact, our advisors are free to move anytime they want. We tell them they own their clients. That creates a sense of partnership, an open discussion, an environment where people aren't staying because they feel like they're stuck. They're here because they want to be here.
They want to help us create that environment that not only has driven our record retention levels of less than 1% regretted attrition, but also helps us recruit the next level of advisors and allows us to continue growing. We are a business that is, many of you already know, we are a Forbes 400 and S&P 500 company, investment-grade ratings led by an A-minus with Duff & Phelps. We have over 8,300 advisors in the U.S., Canada, and the U.K. This year we crossed $1 trillion in client assets and doubled the regulatory capital. We're extremely well-capitalized. As the chart shows, we are a Private Client Group business first. Two-thirds of our revenue is driven by the Private Client Group, and that's important as you understand how we operate and the stability of our business.
10 years ago, we made a strategic decision that we wanted to be the premier alternative to Wall Street. This isn't a slam on Wall Street. It's saying we wanted to keep that regional boutique, family-owned firm feel that is our culture, yet grow to a size and scale and service levels that we could compete with the largest providers in our industry. Over our last 10 years, we've reached that. We believe we're at that place where we've maintained our culture, but able to offer most of the services that any global bank can offer to our clients. As we look at our growth over those last 10 years, double digit in revenue, but more importantly, EPS growing over 12% a year. Maybe even more importantly is assets.
Our client assets grow even faster, which is a good segue into the future, because as those asset grows, so does Raymond James. We've talked a lot about our investment in technology, and we've had a focus on it. We have focused on making our advisor's desktop the very best place where advisors can serve their clients. It's built for advisors. It's led by a advisor technology group that prioritizes our investment. The focus is not only just increasing their efficiency, but making it easy to use and allow them to be mobile and do it anywhere. We believe, and we understand from our recruits, that we have a leading desktop in the industry. Now, don't take it from me or the anecdotal comments here by clients, but look at the awards. You can see every year our technology gets awards for being innovative and leading.
It's just another proof point that this investment over the last 10 years has paid off, and yet, I think our plans for the next 10 years are even more exciting. Our businesses are intertwined and complementary. The bank gets a source of deposits from our clients, and the bank is able to give our advisors access to SBLs, mortgages, structured consumer loans. It's an asset to the advisors and their clients, but also to the firm. Capital Markets provides research to the Private Client Group, and where it's appropriate, it's a great distribution channel and access to clients to IPOs, under writings, or other services.
It's the same in asset management, where they give us research, product availability to advisors if they choose to use it, and third-party product, CTA, Carillon Tower Advisers, where they can use that product or not, and obviously use kind of the research that's involved. All these businesses interact, they're intertwined, and they're stronger because they're together. You can see economically, I believe we're stronger. Here's a chart of our % of earnings over the last decade. You can see there's years where the bank is a significant part when we have spreads and interest rates. In times like now when it's tighter, you can see capital markets and other parts of the businesses have picked up. This mix of business has given us steady, long-term earnings and given us that 133 consecutive quarters of profitability. Even in 2009, we made profits in every single quarter.
We believe the model is complementary, the investments are good, and our business units work together. Much for the past. The importance is looking forward. What will the next 10 years bring? I want to talk about really three things that we believe will drive the next 10 years. We're presenting to the board in August at our offsite, actually in-person offsite, three-day meeting and focusing on our next 10-year strategic plan. The three overriding elements are, first, drive organic growth. If you can't grow organically, that says there's something wrong about your model. If you're focused you have to grow by acquisitions, it means you can't compete in your business. It's key. Second, we need to expand our investments in technology. It's not enough to live on the past. We have an exciting future, I believe, and a focus on technology.
Third, although I'll show you, we've done a lot of M&A. We've really stepped up our game and focused on not just our core businesses, but acquisitions around technology that can help grow and position our businesses for the future. In the Private Client Group, we've had best-in-class advisor desktop. Now I'm going to talk a little bit about our rollout and development of the best-in-class client apps that will connect them to their advisors. We want to leverage the resources of all the Private Client Group, of all the resources to the Private Client Group to the advisors if they want to use them. No advisor is compelled or manager has quotas or comp to use Raymond James products. We want to make those services available to advisors to help them service their clients and grow their business.
Third, the hallmark of our success has been our strong retention and recruiting. We have to always focus on retention because that means the culture's right, and then recruiting as we continue to grow. In capital markets, Jim Bunn will talk about expanding our M&A platform, as we've done really successfully. He has driven over the last few years, expansion into new market areas, and always, we've continued to deepen our client relationships in that segment, which he will cover. Raymond James Bank. Its goal is to have a profitable conservative bank. In that focus, we want to continue to grow the Private Client Group loans and assets, including SBLs and mortgages, which have performed very well, are good for the banks, and good for our clients. Expand the securities portfolio, again, to help use some of our excess capital.
Continue to invest in corporate loans, which we've done very successfully. On a selective basis, as we want to continue to manage our risk, which they've done a great job doing over this last decade. Maybe the most important and exciting things is our technology usage. You've seen what we've done with the advisor app. We're going to put that to the client app. We're already using artificial intelligence and machine learning and robotics to make us more efficient, to help our compliance and management systems be more effective, and help streamline the processes. Now we are rolling out really more into using that artificial intelligence to our advisors to look over portfolios, to make them aware of things, to give them ideas. Again, their client, their choice, but we want to use it to make the advisor experience much better.
The board will see a demo of an augmented reality app that we think our clients and advisors and their clients will someday meet in augmented reality segments where they can be in a virtual room and do their planning. That technology is coming along, and we're working on that already. The future is very exciting. Last but not least is our focus on strategic M&A. You can see that we've consistently brought in firms that had our culture and were able to strengthen the Raymond James platform. On this chart, because it's so fresh, Sabal, which we announced at the beginning of this week, isn't even on here yet. We continue to do these niche acquisitions that have made us better and deeper in all of our business lines. We've doubled down.
We've looked at more strategic acquisitions, technology acquisitions, our corporate development department is looking well beyond what we've looked in the past. Last but not least is our ESG focus, is that we printed our first corporate responsibility document. We learned things from it, and we want to benchmark ourselves to get better. People have always been the center of Raymond James. We've always had an environment where people could bring their whole selves to work. We realized there's a lot of other people that we could do more. You've read about our award-winning commitment to the black community, which was signed not just by me, the executive committee, and the operating committee, but by the board and over 2,000 associates. We're monitoring.
We're going to publish our process as we've invested in now 12 community organizations around the country, and we're going to hold them accountable to use those investments. Our sustainability efforts. We've realized that we're not a big carbon footprint user in our industry. Most of it's commuting and travel, but we need to do more. We're putting LED lighting. We're going into LEED certified buildings. We're putting up solar in our corporate campus. All those things to do our part to serve the environment. The community. Even during COVID, we've increased our hours worked by associates through their innovation and being able to serve the community in a tough time, even in a remote environment. The same with the dollar levels have continued to grow. Last but not least is our governance.
We have a strong board, and we're going to add ESG to our governance oversight. With that, I know that's a quick walk through Raymond James. The devil's always in the details, which you're going to hear from the next few presenters. We do have, I think, a minute or two for questions. Kristy, I'm going to turn it back to you for a little bit of Q&A before we get to the other presenters.
Thank you, Paul. We do have a few questions that have come in. The first one is from Devin Ryan with JMP. His question is, as you think about investments in technology or M&A and PCG, is there any opportunity or interest to leverage your offering toward a less affluent customer with a lower touch offering, which is now possible with technology, particularly with so many fintech firms expanding rapidly and getting to the customer earlier in their financial journey?
Devin, I appreciate the question. The answer is a qualified yes. First, our clients tend to be the more affluent. That's our focus market. That's where advisors can add the most value by giving personal holistic advice for families in the future. With our client app coming out, we will be able to allow advisors to go direct or potentially allow other people without a lot of money come in straight into some of our asset platforms. We plan to go ahead and use that, but not at the cost of our advisors and their mainstream business. The app will first be focused on their clients and then developing the next generation of clients as they invest to move up into an advisor-led type of platform when their assets allow that to be a significant relationship.
It's a qualified yes, but an absolute yes as we plan that that will go out more broadly as we roll it out.
Thank you. Our next question, we have a few questions on M&A strategy. I'll start with William Katz from Citi. He asked, can you expand on the M&A comments? What segments most focus on and may sharpen your definition? By contrast, are there any segments that the business are sub-scale?
Subscale is a relative term. In the Private Client Group, we have a very definite set of firms that we believe share our culture. As I've said before, fortunately or unfortunately, a lot of them are private, not for sale. We believe if things change, as we've seen with Alex. Brown, with a firm almost 200-year history, joined us after a long time of talking, I think nine years before they joined us. We're keeping those relationships focused on those firms, and we believe as the regulatory and the technology environment gets so challenging, that we'll have a chance to bring them in over time if they choose that. We're not here just to grow assets and acquire assets. We want to keep the integrity of the culture, which has been a key to our success.
Those targets, we can call them or hire, but they're really our friends, is to continue to work with them, to help them, and hopefully at the right time, if they decide, either generational changes or market changes, that they'll become part of the Raymond James family, just as Morgan Keegan and others have become part and leaders as they've gone through in the Raymond James family. You'll hear from Jim Bunn, who was part of a acquisition, a firm that joined us. You can see, he is now running our capital markets division. People come in, they come in as part of the family, and we work together to grow the business. Jim will talk a little bit, and I think his history will show you the kinds of things that we're looking at in the capital markets area.
We've debated in banking whether we should have two charters and what that could bring or not, and how we could use capital. We continue to look at that. We are looking in CTA for what I'd call hard-to-replicate assets. We're not going to be a large cap asset active manager. Our scale, we're just not there, and we're not going to be there, so that's not the focus. We've had Robert Kendall joined us, who ran Deutsche Bank's asset management. I believe we still have plenty of opportunity to grow at a very good margin in those more boutique areas. Fixed income, we're looking at some trading platforms and everything. I think we have the leading, and our competitors will even say, fixed income platform of the mid-market firms.
There isn't, I'm sure I forgot someone in here, there isn't an area of the firm where we're not willing to invest. The sharpening has become over things like Northwest Plan Services or other tech-driven, process-driven firms that could help us, either from a technology standpoint or from a service standpoint, to expand our offerings and to help our advisors attract clients and to service our clients more closely. That's the biggest area we've expanded in, and we've been more aggressive of going out, making sure we're in touch and seeking out those types of investments. I think you'll see more. We certainly have the capital and balance sheet to do it. We'll only do it if it culturally fits, strategically fits, and it makes sense for shareholders. It's easy to buy back shares. We know what the return is there.
We've got to make sure that if we're going to do something outside, that it's going to drive the business long term and be a good return for shareholders.
Thanks, Paul. You touched a lot on some of the questions that were around M&A. Maybe one quick follow-up on there is Manan Gosalia of Morgan Stanley. Part of his question was, what is the M&A environment like right now? Can you comment on that?
The M&A environment's very strong. In the first six months, our M&A department, our whole capital markets division, certainly in equities, as Jim will talk about, the first six months, we had record profits for a full year compared to even last year's record year. We see the backlog still very strong. We think it's a great environment where companies are looking at their strategic options, and although some people think PEs are elevated, we have a good PE too. I think we have a good balance sheet. We're looking for those long-term acquisitions that have return to shareholders. We still think it's a good environment.
As we've gone through the run-up and people are looking at the environment going forward and maybe saying, "Well, maybe this is a good time," or we're trying to engage, just as our M&A group internally has done a great job for clients doing the same.
Thank you. One on technology. William Katz with Citi is asking, how might expanded technology capabilities impact expense growth? Is there a case to be made to bend down the long-term pace of growth?
William Katz, it's a great question there. I do think you have to make that trade. I quadrupled technology investments when I came in as CEO, and there's no doubt they paid off. Was it a bet? Yeah. Did it drive expenses? Yes. I think the expenses most of you all have asked about really had to do more with the back office and support. These technology investments in our advisor platform, I am convinced, along with our culture, has really led our industry-leading kind of recruiting of wealth advisors. As we go to the future, it's going to be the same. I think advisor apps, for example, are table stakes. You can say, "Well, we shouldn't invest in an advisor app." I don't think you can compete. If you're going to do it, we've waited a while. We've updated our app, I think it's competitive.
Just like our desktop platform, we want to leap where the market is today. That's why we're looking into augmented reality and testing and already working with Microsoft and Google and others. I think it's critical. If you don't want to do it, you start that, what I call the doom loop. If you grow and you grow profitably, you have money, you can invest in people, new products and services, and that fuels more growth. If you start just cutting back, your profits go down, you have to cut back what you invest, and then you start shrinking. Even if you don't grow, if you're just flat. I believe the long-term vision is if you can find the right investments, you're confident you can deliver them, and it may take years.
It may not hit the expenses right away, because as you build those systems, you're capitalizing them till you amortize them. It is key to the future. We made a conscious decision to go to the advisor apps first, it's paid off for us. We always knew that the client app was the end game, is to make sure that that was the best in the market to connect the advisors. We didn't want the advisors disadvantaged to their clients. I believe the technology investments and where we're focused are critical, will drive the business, they'll position us, enable to continue a long-term profitable growth trend that Raymond James has been on for a long, long time.
Thanks, Paul. One question from Alex Blostein from Goldman Sachs. With the new administration in place, what are you watching as key regulatory developments, particularly with respect to fiduciary rules, DOL, and how those could impact Raymond James?
Great question. I don't think I have the answer. Congress is working on infrastructure. We knew that regulation would be number one. We have investments in infrastructure. Certainly, the coronavirus, COVID-19 fight, and other things have really taken front and center, which I think they should, certainly to get the economy in good position to make sure people are safe. Regulation will come. We've already seen kind of the DOL poking back up, but we're already prepared for those rules on RIA accounts, IRA accounts, and others. We're set to comply with those. We'll put the switch on. BI, my guess is that it may get tweaked or interpretations may change. I don't think they'll redo the whole rule. Certainly, the environment has become more and more fiduciary, and it'll continue to.
That's why, as you see that so many of our assets move to fee-based and continuing revenue, I think they're set up well to compete. I'm comfortable with it. We may not like all the regulation, but it applies to everybody. We'll be on the same playing field, and we look forward to competing. Number one is taking care of clients. It doesn't really matter what the rules are. If we're taking care of clients, that's the important thing, and we'll do it according to whatever rules they lay out. If it's to the benefit of the clients, we'll support them. If we think it hurts clients, we'll fight them. At the end of the day, the rules are the rules when they get passed.
Thanks, Paul. We have time for one more question. Craig Siegenthaler with Credit Suisse asks, how has the competition for new advisors trended over the last year, including the levels of transition assistance? Are you seeing the pace of the breakaway broker theme accelerating now that the economy is reopening?
First, we thought during the whole COVID-19 lockdowns, the transitions wouldn't happen. That happened for about three months, but it's robust. As we told you, the employee side, we did lose some ground, but we are now, if you look at people that have joined in commits. Commits don't always show up, but you compare it to last year, we're back on a kind of a record pace over last year. The independent channel's been strong, the employee channel's recovered, is back and running. Scott will talk about it. Again, I think it's the people are looking for a platform where they feel respected, that they are able to grow their business. Our job is to partner with them to help them grow their business and to make sure that they stay within the regulatory framework for their clients' sake, their sake, and ours.
I think that recruiting has had a good pace. Yes, it's gotten more expensive as other people have recognized the value of really the Private Client Group. As we increased our transition assistance, we are now again winning a lot more than we're losing, but we still lose some to price, but that's okay. We see deals that for the advisor, that's great that they go after sometimes significantly more money, but if it doesn't have value, then we'll just say, "Well, you can't have everyone," but we're winning a lot more than we're losing now, and we're back on a great pace in recruiting.
Thanks, Paul. We appreciate your time today. We'll go ahead and move on to our next presenter, Scott Curtis. Scott is President of the Private Client Group. He joined Raymond James in 2003, and prior to his current role, he served as President of Raymond James Financial Services, the firm's independent advisor business. Located within our cyber threat center today, I'll turn it over to Scott Curtis.
Thank you, Kristy, and good morning to everyone. It's great to be here with you virtually from our cyber center here in St. Petersburg, Florida. I'll start with a little bit of background regarding where we are, and then focus most of the attention on where we're headed and what's next for Raymond James Private Client Group. Let's see if I can get these slides here. Here we go. As most of you know, we are now the sixth largest wealth manager in the U.S., as measured by assets. As Paul mentioned, we've now crossed over that milestone of $1 trillion in assets. Fee-based assets growing at a faster clip, as you'll see in the coming slides, growing at a faster clip than assets overall, which is no surprise, and again reflects the preference of clients and that move toward fiduciary that Paul was just talking about.
As Paul indicated, we have over 8,000 financial advisors now in the U.S., Canada, and the U.K. Our focus really is on continuing to provide a robust, full-service integrated platform for advisors, regardless of how they choose to affiliate with Raymond James. We commonly refer to that as advisor choice. When we look at our growth, you can see that we've had a very steady history of increasing assets, operating at greater than a 14% compound annual growth rate over the last five years, aided by equity market growth, but also aided by our retention that Paul mentioned, as well as our success with recruiting. If you look at our fee-based assets, those have grown at almost a 50% faster rate than our assets have grown overall.
If you look at the financial advisor count, the financial advisor count has clearly grown at a slower rate than both of those, which reflects our focus on quality of advisors over quantity of advisors. If you look at how we've done over a one-year period, three-year period, five-year period, and 10-year period relative to peers, as you can see on these graphs, we're outpacing by a pretty fair margin our peer firms and the industry overall. If you look at net revenues over the last five years, pretty attractive growth there as well, reflecting that asset growth. The pre-tax income, which has grown pretty substantially, a little slower in the more recent period, but as everyone knows, that's due primarily to the lower interest spreads that we've experienced.
As we look forward to maybe moving back toward a more normal interest spread environment, whatever that might be, our expectation is that the net income in the years ahead will likely catch up with or get closer to our historical rate that we've seen. When we look forward, what are the three primary areas of focus? Paul touched on this a little bit. Number one is digitally enabling advisors and their clients to help advisors provide the best-in-class experience for their clients and for Raymond James to provide a best-in-class experience for the financial advisors. Second is helping advisors leverage the entire firm's resources so that they can deepen relationships with clients and really provide that holistic planning that Paul mentioned, and I'll talk a little bit more about that coming up.
Continuing our record of strong retention and recruiting with an eye on acquisitions where it makes sense and potentially helps us enhance our capabilities. When we think about digital innovation as that first area of focus, a couple of key areas here for us. Number one is helping advisors become more productive, helping them deepen those client relationships by providing holistic advice, something that goes beyond investment planning, wealth planning. That includes longevity planning, that includes family planning, that includes estate planning, charitable giving. That requires more than just investment-focused applications on our platform. It includes providing advisors with a holistic platform, primarily integrated, but perhaps not fully integrated, depending on what that application is. Second is the operational efficiency and risk management for advisors.
Helping advisors and helping our supervision teams really be focused on what is in clients' best interest, making sure that we're staying focused on regulations and providing guidance and advice underneath that fiduciary umbrella. As Paul indicated, as we move more toward a fiduciary environment, understanding what the rules are, helping advisors comply with those rules, making it efficient for advisors to evidence the advice that they've provided, document the advice that they've provided, and do that in a way that it's not administratively burdensome or less burdensome than it might otherwise be, as we move away from a paper-based, forms-based environment. Which has tended to be the environment that our profession has grown accustomed to, which we're now trying to move away from and move forward much more toward a digital environment where advisors can operate in a virtual office environment. What exactly does that mean?
Perhaps that means an advisor spends a lot less time in the office and spends more time out of the office with clients while their team is perhaps anchored in an office or anchored in various locations, providing support to the advisor and to that team overall. A lot of work being done there to assist advisors to spend more time with clients and deepen those relationships that we talk about and do it in a way that's more efficient than how we do it today and how we've done it historically. Some examples of that. E-delivery, delivering documents to clients. This reflects a little bit of increasing preferences to move away from paper and do better for the environment and perhaps actually improve security and identity theft protections for clients by delivering things digitally.
That may be counterintuitive, many clients prefer that method of delivery versus having hard copy documents end up in their mailbox. The e-delivery to date, we've saved over 35 million documents, and that is becoming more and more adopted by clients every single day. E-signature. If there is a little bit of a silver lining here from the COVID environment that we've been in, where advisors and clients maybe have not been able to get together in person, we've seen a significant uptick in e-signature or DocuSign, where clients are signing documents electronically and submitting them through to Raymond James service centers around the country for processing. That's up over 62%. I don't see that number going backwards. I frankly see that number continuing to increase as we move more in that direction.
Client Access, which is our client-facing website, which is accessible on any device, whether it's a laptop, whether it's a desktop, whether it's a handheld device or an iPad, or a tablet. We've seen the number of accounts, the number of clients accessing that application up more than 34% in the last year. Again, that's another one where we're expecting continued growth in the years ahead. Finally, the vault. What is the vault? That's an opportunity for clients to store documents electronically and to be able to collaborate with advisors on certain documents that they upload into our vault. That continues to be much more widely utilized than it was in the pre-pandemic, pre-COVID-19 environment, up almost 60% over the last year. Another one we expect to see continue to increase. Paul mentioned investing in expanding our offerings and enhancing our existing offerings.
Northwest Plan Services that we acquired last year, a retirement plans-focused record keeper and administrator, but they do more than that. That provides us with a real foundation for a worksite-focused development for financial advisors who are retirement plan-focused advisors, as well as for other advisors who might be working with certain clients on 10b5-1 plans, stock plan administration. We feel like that's a platform we're going to be able to continue to invest in and leverage in the years ahead to provide greater capabilities than what we offer today. The other thing that NWPS provides us is a platform for the advisors who are focused on Pooled Employer Plans, or PEPs, as they're now known.
We do have some of those in the queue already that we're working on, and we feel like that's going to create opportunities not just for those advisors, but potentially for some direct-to-consumer marketing in the months and the years ahead. We're also continuing to focus on expanding capabilities for clients to access their Raymond James information through, as I said, their mobile devices, whatever those devices might be. If you see the picture in the bottom left, that really represents the investments that we've made in ESG and helping advisors respond to clients and more proactively reach out to clients regarding our capabilities, in that arena, which is growing in importance every single day. Then finally, in the bottom right on this screen, that really represents that more holistic planning that I was talking about that goes well beyond investment planning.
We're continuing to invest in each one of these platforms, and partly at the request of advisors, and also because we're anticipating where the market is heading and developing resources to help them. Shifting gears a little bit, talking about recruiting. This map reflects where we have share currently and where we really see significant opportunity going forward. Not that there isn't opportunity all across the United States and elsewhere around the globe where we have businesses, but particularly focusing on the Northeast and the West Coast, where we have less share of the total wealth management pie of client assets. Those are areas where we're focused, especially on recruiting and continuing to develop out our businesses in the Private Client Group space. When we think about, well, how well-positioned are we?
Whether advisors choose to stay employee advisors or they prefer to move to the independent model, or they prefer to move to a fee-only model operating under an independent RIA. One of the things that's great about Raymond James is we have opportunity and we have a platform to support advisors regardless of how they choose to affiliate with us or regardless of how they choose to run their business. You can see in the chart here the growth, particularly in the RIA space and the hybrid space, where that's been growing faster. It's a smaller base, but that's been growing faster than the advisory business overall. Moving on to how do our capabilities stack up relative to some of our peer firms and some of our competitors? You can see we have dots in every one of these categories in this chart, in this table.
We're proud of that and something we will continue to focus on to be able to provide support to advisors regardless of how they choose to affiliate with us. It is a little bit more complex. For us, though, it's a core part of our business, and we will continue to stay focused on supporting human-to-human advice, with some ability and flexibility down the road to perhaps allow prospective clients to initiate a relationship with an advisor, or doing some lead generation for advisors by contacting prospective clients directly. Something that we haven't done historically, but we feel like we can add some value for advisors there who are open to it. An indication of how we're doing. We do a Net Promoter Score survey. We've been doing it for many years, over 10 years, consistently every single quarter.
What you see on this chart is the most recent quarter just ended, our Net Promoter Scores are at an all-time high. You can see how they go up and down. There is a little bit of an influence here regarding equity markets and how the equity markets are moving. The most important thing here is clients and advisors alike are both at all-time highs for Raymond James in terms of Net Promoter Score. This is something that we focus on pretty significantly to just gauge how are we doing with the clients and how are we doing with the advisors. We're proud to say that we're at a point today where we're at an all-time high.
I've talked about a lot of things that will change going forward and where we're making investments. This slide is really intended to reflect some of those things that will not change. Some of those things that differentiate Raymond James, how do we stand out in an industry of firms that are also full service and have a lot of capabilities similar to Raymond James' capabilities. It really goes back to what Paul started with, and that is our culture, our philosophy, how we run the business, treating clients as our advisors, treating people with respect, with care, having an accessible management team, thinking about them really as our partners in business.
Legally, I know the attorneys wouldn't like to hear me say that, but it's the spirit of how we think about working together, and our focus on delivering world-class service to the advisors who are affiliated with us. Why don't I pause there, turn it back to Kristy, and look forward to hearing your questions when we get to the Q&A session. Kristy?
Great. Thank you, Scott. Really appreciate that. Next, I'd like to present our next presenter, Jim Bunn. Jim is President of Global Equities & Investment Banking. He joined Raymond James in 2009 through the acquisition of Lane Berry, where he served as head of the financial technology investment banking practice. Prior to his current role at Raymond James, Jim served as the head of investment banking. Please welcome Jim Bunn. Jim?
Thank you, Kristy. It's hard to believe it's been 12 years since the Lane Berry transaction brought me to the firm. It's been a period of exciting growth, in particular in our Global Equities & Investment Banking business. I'm really excited to have the opportunity to talk to you all about that a little bit. Global Equities & Investment Banking, or GEIB as we refer to it, includes the advisory, underwriting, and M&A components of our investment banking business, as well as the equity brokerage or sales trading revenues. The total capital markets segment, which also includes our fixed income and tax credit funds businesses, generated $1.3 billion of revenue in fiscal '20. That was by far a record year, driven by record fixed income broker results and strong results across all three of our GEIB businesses, including a record year in underwriting.
GEIB was approximately a $600 million revenue business in 2020. As simple math on the chart on the left will tell you, we're very pleased with our final results for the year, and that our revenues were up in a year that was made very challenging by COVID. We had a very strong September year to finish the year that allowed us to generate those results. We've grown the top line at a CAGR of almost 11% since 2016. If you look back at the history of our business going back to 2009, we've doubled the business twice, each time roughly over a five-year period. From 2009 to 2015, we doubled the business. Our first half results this year put us on track to double the business again from 2016 through 2021. Advisory has been the growth engine of the GEIB business for the last 10 years.
What was really rewarding last year was to see the diversity and balance of our business being rewarded. With advisory taking a little bit of a step back because of COVID, our underwriting and our sales and trading results were extremely strong, allowing us to drive that top-line growth. Through the first half of this year, we're really seeing all three GEIB businesses firing on all cylinders. Total revenues are up almost 70%. Our advisory revenues are up over 100%. Underwriting is up 50%, and our sales and trading business is up as well. We built the investment banking business with a specialist approach. Every senior banker is dedicated to an industry sector or a product. It's a different model than the larger firms, where the industry bankers will often pass execution to their product partners.
Our industry bankers have multi-product expertise and manage their transactions from start to finish, oftentimes with the support of a product expert partner. We have approximately 425 bankers globally, 350 of those in the U.S., and 75 in Europe, and we've been growing those numbers very consistently every year. We've also added to our ECM and syndicate team to align with some of our strategic growth initiatives. In particular, we added a SPAC dedicated team a couple of years ago, and that's really helped us to participate in the SPAC activity that we've all seen over the last couple of quarters, last several months. We've also invested in the life sciences side of our ECM team to support the investments that we've made in the investment banking, research, and institutional sales aspects of our life sciences practice.
Our corporate access team manages our investor meetings for client companies and also our annual Institutional Investor Conference, or IIC, as many of you probably know it, which is our flagship corporate access event held in March in Orlando every year. We look forward to hopefully returning to an in-person conference next year in 2022. That typically has over 300 companies presenting and over 1,000 institutional investors, making it the largest conference of its kind in the country. All of our institutional sales, corporate access, and trading businesses leverage our very highly regarded equity research department, which covers over 900 U.S. companies. We'll be talking a little bit more about that in a moment. The key elements of our growth strategy over the past several years have been to, one, grow our advisory business.
That tends to be our highest margin business, often associated with margins of 25%-35% plus. We've been doing that by focus on recruiting, developing, and acquiring bankers with a proven advisory track record and advisory mindset. Two, increasing our market share. The investment banking market and wallet is so big that we have a lot of opportunity to grow before we even start to think about any constraints that market share might apply. Our primary focus has been expanding our coverage to include sectors and products where we think we have opportunity to grow and where we don't play today, or we might be under-penetrated to what the market opportunity could be.
On the equity side of the business, we fight for every basis point of market share, where we take a very disciplined approach to account coverage and to measuring resource allocation versus monetization and direct our equities resources appropriately. We're driving up productivity by pushing our professionals to be aggressive on fees and targeting bigger opportunities. That's been producing very steadily improving productivity metrics, which I'll elaborate on in a few slides. Examples of the expansion of scope and scope of services on the investment banking side would include the fund placement and secondary advisory business that we just acquired this week in Cebile. That's a brand new area for us that we're very excited about. On the equity side, examples of new products include event-driven trading or ET, as it's more commonly referred to, electronic trading, programs trading, institutional trading.
All of those are areas that we've added or invested significantly in over the last few years. Acquisitions like Financo and Cebile will continue to be a core part of our growth strategy. We've been able to grow acquired businesses pretty substantially as compared to pre-acquisition. We'll give some examples of that in a few minutes. We often think about recruiting versus acquiring interchangeably as we're thinking about expanding or investing in any one of our practices and go through a buy versus build analysis to think about that acquisition versus organic build. That's been true in each of our recent acquisitions, Silver Lane, Financo, and most recently, Cebile. Lastly, private equity. Private equity is critically important to our investment banking business. There is less recurring revenue in my business than in other aspects of Raymond James's businesses.
We've been trying to replicate that recurring nature revenue by building relationships with private equity firms that allow us to generate revenue with those firms on some measure of predictable basis on a year-to-year basis. We like to say that we bring all of the product capabilities of a much larger firm to focus very squarely on the middle market. Whether a client company has sell-side or buy-side M&A needs, wants to raise public or private equity or debt capital, or has a need of restructuring or recapitalization advice, we have sector and product experts to advise and assist those companies and clients on a global basis. Our newest capability is in the area of private capital fund advisory, which we're adding through the Cebile acquisition and will also meaningfully deepen our private equity relationships.
Our investment banking revenues are diversified across several sectors with no reliance on any one industry. Now, this was important last year as growth in certain sectors allowed us to offset declines in other sectors that were more challenged during COVID and drive overall top-line growth. At the sector level, we look at each group and try to understand what does the best version of ourselves look like. What's the scale of our aspirational peers and competitors in that market, and what's the gap for us to get from here, where we are today, to there, and how are we going to do that? We've been closest to that best version of ourselves in the technology and real estate sectors. I'd put our investment banking practices and our public capital markets businesses in those sectors up against any other firm on The Street.
Areas where we're investing to close that gap are healthcare, consumer, energy, financials, and industrials. Now, acquisitions like Silver Lane, Financo, and Cebile represent meaningful closing of those gaps in the financials and consumer sectors. We've been investing organically in healthcare, energy, industrials, and we're really excited about some of the results of those investments that we've been seeing this year. Growing our investment banking business is to some extent a simple math function where revenues equals number of managing directors times average revenue per managing director. We've been focused on prudently and consistently growing our managing director headcount through internal development, recruiting, and acquisitions. Over the last several years, each of those strategies have roughly equally contributed to our managing director growth, and we've been able to consistently grow our MD headcount by 6- 7 managing directors per year.
Especially in the last 2-3 years, we've really tried to maintain very high senior banker recruiting standards. We talk a lot about only recruiting proven A players, or those that we think will very quickly develop into A players as part of Raymond James. We're focusing on quality over quantity. That has allowed us to see many of our more recent hires ramp their revenue production and contributions to our top line much more quickly than you would otherwise expect. We've also been fortunate to experience minimal senior banker Managing Director attrition, less than 5% annually. That's pretty good in our business. We think that our culture, entrepreneurial environment that we try really hard to maintain, a competitive compensation system, and a shared enthusiasm for growing our business, and the success that we're having have all contributed to that successful retention.
We try very hard not to give our best, most successful, and most productive professionals a reason to think about going somewhere else. Our revenue per managing director metric has been increasing very steadily as well. That's a result of focusing on larger deals and larger fee opportunities, and of recruiting bankers and teams that we believe will be accretive to our average productivity metrics. MD productivity took a slight dip last year, given the COVID impact, it's running very strongly through the first half of this year, and we expect our full year fiscal 2021 results to ultimately represent a meaningful step up over our historical levels. M&A business has been and will continue to be the growth driver of GEIB.
We show a starting point here of $149 million in 2016 of revenue, but it was only about $80 million back in 2012 if you roll the chart back a few years further. The business quintupled from 2012 to 2019. We set a five-year target of $250 million of advisory revenue for our board back in 2016 as part of our long-range planning process that we go through, and then we dramatically exceeded that goal, doubling our revenues over a two-year timeframe. We don't see any reason why we can't double our revenues again from our 2019 high watermark in advisory over the next several years. Our first half results really demonstrate that potential. During 2020, deal flow and pipelines were obviously significantly impacted during the middle of the year.
As the environment stabilized, we really saw deal activity and pipelines come back very strongly through the course of the summer into the fall, and we booked over $90 million of advisory revenue in our September quarter. Now, sometimes in this business, when you have a really good quarter, you need to hang on because you might be in for a bumpy ride going forward. Deals continue to get pushed or pulled into a quarter because of market or deal-specific factors. That wasn't the case this year. We followed up that September quarter with an all-time advisory record quarter in the December quarter, and then our March quarter was also a top three all-time quarter.
Shifting the chart on the right-hand side of the page, we've certainly been focused on growing our number of transactions, but that can be easy to do if you're just pursuing smaller and smaller transactions. We're not trying to win on volume. Much more important than focusing on number of deals has been focusing on our average fee per transaction, and we're really excited about the consistent, almost linear growth in that metric that we've seen over the last several years. We really saw our underwriting business take off in fiscal 2020 and produce the best underwriting revenue year in our history. A few things contributed to that. Follow-on activity in the latter part of the year as companies built COVID war chests was very strong. Our investments in the life sciences business are really starting to pay dividends.
SPAC IPOs, which we positioned ourselves well to participate in, were an important part of our business, but we're not reliant on that. SPAC-related fees are less than 5% of our revenues in total. It's been a nice additional boost, but in no way has our results been reliant upon SPAC market activity. Lastly, very strong private placement activity, especially in the real estate sector. 2020 was an exciting and rewarding year in the institutional equities business, and I'm excited to be able to say that. We focused the business around U.S. equities in 2018 by divesting our European equities business, and brought aboard David De Luca as our first-ever head of equities right around the same time.
While the business certainly benefited from some from elevated volatility during the early days of COVID, David has driven sustainable, substantial improvements in our equities business, leveraging his know-how and his best practices built over multiple decades in institutional sales at Morgan Stanley and Lehman Brothers before joining us. This is a business that's all about execution and accountability. David has brought a discipline and a strategy that's driving positive growth. Our approach to account coverage is driving significant share gains across all the geographies and markets where we participate in the traditional cash equities business. We also brought on a team in 2019 to develop our electronic trading business. We're really excited about the momentum and progress that we're seeing there and the contributions that business is making to our top line, importantly, without cannibalizing our traditional low touch or cash equities business.
As I mentioned earlier, we've added new product capabilities that leverage our research platform and sales and trading relationships to create incremental high margin revenue streams. These are things like program trading, options trading, agency block trading, EDT or event-driven trading, and develops partnerships to offer our research into foreign markets such as Asia, which again creates nice incremental, highly profitable revenue streams for us. At the core of our equities business and major parts of our underwriting business is our equity research team. We cover over 1,100 companies in the U.S. and Canada with a research team that's 60 analysts strong. Our coverage is diversified by sector and very closely aligns with our banking footprint and strategy. We focus on mid-cap companies because that's where we believe we can be differentiated, and you can see that through the charts here.
Over 50% of our research coverage is of companies under $5 billion in market cap, and almost 70% is of companies under $10 billion in market cap. Greenwich is typically regarded as the authority for comparative ranking research firms and providers, and they've consistently ranked us number one or number two across several important categories, including thematic and forward-looking research, knowledge of companies and the industries that we follow, client service intensity, and mid-cap corporate access. We're really proud of those results. This ranking of North American research firms by number of companies under coverage further illustrates the strength of our equity research department and importantly, the experience of our research analysts, which helps drive those Greenwich rankings. Our analysts have 16 years of experience on average.
That's critical to building the reputation that we've established for expertise in the sectors that we cover, of the companies that we cover, and for the forward-looking nature of our research. We've also expanded the scope of our research over the last couple of years to include macro strategy and financial and healthcare policy research, and we believe that content has been critically important to the market share and mind share gains that we've been able to gain over the last couple of years, especially during COVID. Lastly, having closed the Financo acquisition in March and just announced the acquisition of Cebile earlier this week, I want to spend a moment on our historical acquisitions. We're not an acquisition machine by any stretch. We've done four in the last five years and five in the last 12.
They are an important part of our strategy and expect them to continue to be, especially if we continue to see the types of results with Financo and Cebile that we've seen in these historical transactions. In each historical case, Lane Berry, which brought me to the firm back in 2009, Mummert in Europe, and Silver Lane in the financial services space, we've been able to leverage those platforms to drive much higher revenue streams as compared to the pre-acquisition base of revenues and create a very strong ROI for the firm. Post-transaction revenues, as you can see here, have typically been multiples of the pre-acquisition base of the business. Some of that is taking advantage of synergy and cross-sell opportunities, much of it reflects further investment into those businesses to help them and their leaders reach their full potential.
Able to increase revenues exists very strongly similar to this in each of our recent Financo and Cebile transactions, and we look forward to working with leaders of each of those businesses to grow their practices. Given the strength of our year-to-date results, I do worry about how we're going to follow it up next year, but these additions give me a lot of confidence about the sustainability of the trajectory that we're on. I'm going to stop there and turn it over to Kristy, and we'll look forward to any questions in the Q&A portion.
Thank you, Jim. Our next presenter is Steve Raney. Steve is Chairman and CEO of Raymond James Bank and Chairman of Raymond James Trust Company. He joined the firm in 2006 as the CEO of the bank. Steve, I'm happy to turn it over to you.
Good morning, everybody. Thanks again for your time this morning. I'd like to provide a quick overview of Raymond James Bank. We just celebrated our 27-year anniversary of being in the depository business, and now we're over $33 billion in total assets. One of our critical elements to our business model is our source of deposits. You heard some of my teammates mention that we're over $1 trillion in client assets now. We're over $60 billion of that $1 trillion sitting in cash deposits tonight. Last night, the bank received almost $29 billion of the $62 billion or so in deposits, which we use to fund our enterprise with. That flexible deposit base is a critical element to our business model and our historical success.
Another unique part of our business model is how we're built to support the over 8,000 financial advisors, the nearly one and a half million households that those 8,000 financial advisors help work, as well as the thousands of institutional clients that our capital markets professionals work with. Our bank is really built around the client base of Raymond James. We have a very diversified loan portfolio that we've been able to grow over the last few years and continue the diversification effort. Now we have over $23 billion in loan outstandings, which represents over a 5% growth rate over the last few years. I think you're aware that we did have some loan sales last year, so that 5% includes that element as well, and we'll talk a little bit about that.
One of the hallmarks is the stewardship of the capital that we have here at Raymond James. It's almost $2.5 billion of the firm's capital. An element is the conservative credit standards and the conservative management approach that we have to the banking business. You see on the left chart there, our net revenues on a compounded basis has been growing. You see the right part of the first chart there on the left, you see the reduction in net revenues, which is reflective of the low rate environment and the rate reductions that we saw last year coming through the bank's income statement. As well as in the middle chart there, the impact of low rates as well as some of the higher provision expense and credit charges that we experienced as part of the pandemic last year.
Despite some of those challenges on the rate as well as the pandemic, we've, I think, done a good job of selectively growing our loan portfolio. As I mentioned, we're now over $23 billion in loans, and loans have grown over the five-year period at over a 10% rate. One of the things that we're particularly proud of is how we've gone about constructing the bank's balance sheet and the diversification. Once again, we enjoy tremendous relationships with the firm's clients and the over 8,000 financial advisors. I would tell you, five years ago, a much bigger part of that pie chart on the left was in our corporate lending or C&I, as well as commercial real estate business. We've devoted a lot of time, effort, and energy to growing our Private Client Group, private client banking loans, securities-based lines of credit, as well as our mortgage business.
As well as much more actively growing our available-for-sale securities portfolio, primarily with agency-backed mortgages with relatively short duration. Just as a reminder of how we go about building the loan portfolio, our corporate lending business is very tied to Jim Bunn's institutional business, our Global Equities business. We have a very unique business approach where we lend money to typically larger companies, a lot of public companies or private equity-backed companies with access to capital, typically much larger enterprises, typically with EBITDAs greater than $100 million annually. We are also very selective on the commercial real estate front. We also have a focus in commercial real estate to support our REIT clients in Investment Banking. A lot of our real estate lending is in that category as well. One of the bank's core competencies is working with our high-net-worth clients on their residential mortgage needs.
We have a team of professionals that's very accustomed to dealing with unique borrowers. They may be business owners, they may be retired clients of the firm with unique incomes. Our team is very good at that customized underwriting and really getting to know the underlying client very well. With very low loan-to-value guidelines, very low debt-to-income ratios, a very conservative portfolio that has really stood the test of time over a long period of time, 20-plus years of excellent credit performance on a residential portfolio. As we talked about, we've really been growing our securities-based lending more aggressively, making investments in technology, people, and process. That business has actually grown by over 35% year-over-year, leading to what's one of our asset classes, a very low-risk asset to support our clients' liquidity needs.
As I mentioned, our available-for-sale securities portfolio has grown now to over $8 billion. You see the growth rates that I was referencing earlier over a five-year period of time, and most notably, our private client banking business, SBLs and residential mortgages have grown the most. You see our corporate lending business growing at only 4%. We did take some proactive measures last year at de-risking the portfolio. We sold what's now over $1 billion in loans, but we've been re-engaged in making corporate loans on a very selective basis. I mentioned our very conservative credit culture, and I wanted to share with you our most recent credit trends in the portfolio. You see in the top left part of this slide a long history of what our provision expense has been.
You see a very large spike in 2020 relative to a lot of industries that were impacted by the pandemic, hospitality, leisure, travel-related enterprises in particular, that we felt it was appropriate and prudent to really have a higher level of allowance for those types of loans going forward. Actually, year to date, our fiscal year to date, we've actually had a reserve release because we are seeing quite a bit of improvement across most of our borrowers. We're seeing a lot of improvement in the financial results that we're tracking on a client-by-client basis. You see criticized loans that had been extremely low, around 1% for a long period of time. They are elevated now to over 4%. We have about $1 billion of criticized loans. As I mentioned, we're starting to see performance even in some of those more harshly impacted names resulting from the pandemic.
Despite all this, we've had a very low level of non-performing loans. We had a relatively small number of loans that we actually had to make some kind of modification or deferral of payment. We're down to almost none of those now. We have a handful of residential loans that are still in deferral, but very low level of non-performing assets. As I mentioned, we thought that it was appropriate to increase our allowance for future credit losses that now stands at about one and a half %. I would make a particular mention that we're at around 2.6% against our corporate and commercial real estate loans, which are the riskier loan in our portfolio. Critical to going forward are some of our growth initiatives.
We want to continue to figure out ways to further penetrate our advisors' clients, working with them on educating them on the lending part their clients needs. We want to grow our securities-based lending business as well as our residential business. Scott talked about the recruiting of the financial advisors. With that recruitment, alongside of their investment assets, typically comes a lot of loan opportunities. We work hand in hand with the recruiting teams inside a Private Client Group as those clients are transitioning to Raymond James to help them have that go as smoothly as possible. We want to be smart about how we grow our securities portfolio. I know Paul Shoukry is going to talk a little bit about that in his remarks. We want to be very judicious with how we go about adding securities in this very low rate environment.
Right now, we're facing a situation where in order to get really any reasonable return, we're having to go out pretty far on the yield curve. That's not something that we really are too excited about. I'll let Paul talk about that in a little bit greater detail. We do want to continue to selectively grow our corporate lending business. We would be more inclined to take loans at maybe a lower spread, a lower return, a higher credit quality versus going the other way. All that being said, we've been very opportunistic over the better part of a decade. There have been pretty long when our corporate lending team can be more aggressive given market conditions. Then there's other periods of time when we're much more cautious about adding loans based on the return and risk profile of that particular borrower.
First and foremost is going to be our strict adherence to conservative underwriting standards to our credit portfolio, the new product development, anything along those lines, we will have that very conservative bent that is very aligned with the rest of the firm's approach to running the business. With that, Kristy, I'll turn it back over to you so that we can answer any questions that our folks may have.
Thank you, Steve. Appreciate that. All right. Now we're going to bring back our three business unit leaders that you just heard from and start with some Q&A that's been coming in during those presentations. Scott, let's start with you. We've had a number come in around the Private Client Group. The first one is actually from Peter Blaustein of PB Investment Partners. Pete is actually asking about a slide that he saw in Paul Reilly when he talked about increasing the scope and scale of services to advisors. Scott, can you highlight a few of the newer or better capabilities that we have today that maybe we didn't have five to 10 years ago, and how that impacts recruiting? Then maybe as a follow-on, are there any remaining capabilities that advisors are asking for?
Yeah, that's a great question, Peter, and thanks for asking it. Believe it or not, it's hard to believe. Following up on Steve's presentation, we look back 10 years ago on Securities-Based Loans, and believe it or not, 10 years ago, we didn't have Securities-Based Loans. That's grown into a really meaningful part of the Raymond James Bank loan portfolio and a really meaningful service that financial advisors can provide to their clients. We're really just getting started there in terms of utilization.
When we think about other services, one that I mentioned, Northwest Plan Services that we acquired last year and the ability to have a pooled employer plan or retirement plan that's custodied at and administered at a record keeper that is owned by Raymond James down the road, hopefully providing better integration than we might be able to otherwise afford through third-party record keepers is another service that I think about that we don't really offer today. One of the things that we're really starting to dig deeper on right now is high net worth services. We have all the capabilities, but we haven't probably done as good a job as some of our competitors in pulling all those together into what I'm going to call a bundled solution with some focused resources on the high net worth and the ultra-high net worth space.
We certainly have clients, advisors have clients who are in those categories, but one of the things that we could continue to improve is, and will continue to improve, is how we bring those together into a more complete offering for advisors who choose to pursue or have those clients. One other that I'll mention, which I just touched on in a bullet point in my comments, is around what I'm going to call more holistic life planning, which includes things like healthcare. It includes planning for the next generation, legacy planning, tax planning. We're not going to provide tax advice. We're not a tax accounting firm. As we think about
Those things that are on the minds of clients that will potentially consume financial resources, our belief is that the better we help financial advisors assist their clients with addressing those questions, the more valuable that financial advisor will be to that client relationship. Those are just a few off the top of my head, but I appreciate the question.
Thanks, Scott. Another one for you from Steven Chubak with Wolfe Research. You've seen some acceleration in organic growth over the last 12 months. Can you speak to what you believe is a sustainable organic growth rate within the PCG segment? Across which affiliation models are you seeing the strongest growth?
Thank you, Steven, for the question. Boy, if I had a crystal ball and could predict that, I would love to give you a number. We've actually been impressed and surprised by the organic growth that we've experienced in this pandemic environment, work from home kind of an environment, that has been the primary environment for most advisors and their clients over the past year. When I interact with advisors, it's really impressive to me how much stronger some of those relationships have become, in an environment where those folks can't actually get together in person. Given the things that I mentioned, the focus areas that we have in terms of deepening those client relationships, I don't want to put a number on it, Steven, but I like to think that organic growth number, we'll be able to sustain something higher than perhaps our historical averages.
I'm not in a position where I would want to put a specific number on it, because whatever I tell you is going to be incorrect.
Thanks, Scott. One more that probably is a nice follow-on from Chris Allen with Compass Point. Can you discuss industry turnover trends in the different advisor channels? Is there any catalyst on the horizon that will drive increased advisor movement?
Thank you, Chris. Yeah, the transitioning advisors, the rate of advisors moving from one firm to another, this is another one that frankly surprised us a little bit. Paul mentioned that at the beginning of our fiscal year, our employee channels were having a little bit slower success rate with recruiting than historical, but we probably shouldn't be surprised by that because our offices were primarily closed. We're now in an environment where those offices are much more open, and for advisors who are transitioning, depending on the office and the size and whether it's a new office, we're having much greater success affiliating advisors in the employee channels because now we have offices that they can move into. How long the transitioning advisors and the number of advisors who are making those moves, how long that continues is a big question mark.
Frankly, I think it ties back to how do they feel at their current firms? Are they getting the appropriate levels of attention? Does it feel like a partnership? Do they feel like they have direct access to the most senior leaders at their firms? Are those firms putting restrictions in place that perhaps cause them to rethink their affiliation? Are there other changes going on at the firm that maybe cause them to rethink their affiliation?
As long as those types of things that we over history have kind of referred to as sand in the sheets, you'll only tolerate those things for so long before you start to rethink, is this the place where I think I want to be longer term, which again, is why we are so focused on making sure that we're treating advisors as our clients and maintaining that culture that Paul touched on and that I touched on in my presentation. As long as feelings of am I really valued by my firm and is my firm really focused on assisting me with growing my business?
If there are question marks around that, then I think advisors will continue to rethink, is this the place where I want to be for the years ahead in growing my business and potentially transitioning my business to a successor when that time comes?
Thanks, Scott. One more maybe you can touch on briefly because it did come up a couple times. This one's from Craig Siegenthaler with Credit Suisse. What strategic initiatives are being pursued within RCS, our RIA and custody services business, and what do you view as your competitive advantage?
Boy, that's a terrific question, and I feel like I'm cheating Jim and Steve here getting all the questions, but it's okay. I know they'll get their turn. In the RCS business, which is our custody and clearing business, we are a little differentiated from some of the other major custodians in that we do offer the integrated suite of solutions that I talked about for our advisors who are either employee advisors or independent advisors. If an advisor is operating under an independent RIA, not registered with Raymond James & Associates or operating under Alex. Brown or Raymond James Financial Services, they have access to many of those, not all, but many of those same services that integrated suite of solutions.
We don't have a direct-to-consumer business model, that alone is one of the key differentiators for us relative to some of these other giant and very successful custodians. Our model is a little bit different in that we're perhaps a little bit more hands-on than some of the other custodians, but in the right way. In terms of differentiation, that is one of those things that helps set us apart. It needs to be the right advisor; I think it's unlikely that we would see a multi-billion-dollar independent RIA that's been on one of those other custodial platforms for years decide to pick up their business or a big portion of their business and transition to Raymond James.
The greater likelihood is for advisors who are transitioning from a current independent broker-dealer model or a regional firm or one of the major employee firms, national firms, who's interested in moving to a fully independent RIA model, but they want to not give up.
The full service resources that are integrated, like the environment that they came from, we're finding that we're tending to be a good choice for many of those advisors.
All right, now one for Jim. Jim, a question from Alexander Blostein from Goldman Sachs. In your comments, you suggested you can double M&A advisory revenues again over the next several years. Can you be a little bit more specific in that timeframe, how much of that would you expect to be organic versus acquisitions?
Thanks for the question. To be more specific, I don't see any reason why our M&A business can't be a billion-dollar revenue business. If you just annualize our first half results, again, it illustrates that potential. We're not that far off from that level. If we look at some of our peer firms or firms perhaps a little bit larger than us, we see many that are generating $1 billion-plus of advisory revenues. It's really just a matter of continuing to go deeper and deeper in every one of the sectors where we currently play, continuing to win larger and larger transactions, expanding our footprint globally. Europe, you saw the growth that we've seen there. It's grown ninefold since we entered that market via a boutique acquisition several years ago. That business has the potential to be a few hundred million dollars on its own.
Looking at acquisitions, I'd say that selectively, we're going to look at boutiques that might really enhance our capabilities in a specific industry sector or sub-sector, like a Financo in the consumer space, or bring us into a new market, such as Cebile does on the private capital front. We're also going to be open-minded to larger, more transformative transactions where we feel like everything sort of aligns and it's a good cultural and a business fit. If you just look at a number of the firms that operate around us, there's a lot of support for a firm like ours being able to generate revenues at that billion-dollar-plus type of level.
Thanks, Jim. Okay, Steve, we'll get you in here. A question from Steven Chubak on the SBL portfolio. It's been growing at a healthy clip. Relative to some of the other wealth management peers, you're still under-penetrated in this area. When you benchmark your peers, how large do you believe the SBL portfolio could possibly get, and what focus do you have there?
Yeah, Steven, great question. That is accurate. Despite our unbelievable growth rates, we're still under-penetrated relative to some of the peer firms. Part of this is really just literally going advisor by advisor and educating them and getting them comfortable on us providing these solutions to them. In particular, one thing that we like to impress upon them is there's no cost to set one of these up. There's also no capital charge because these are uncommitted lines of credit, there's not an expense from a capital charge for us. Whenever we set one of these up for a client kind of for a rainy day, invariably they wind up using it because things come up that they want to buy another home, investing in a business, those types of activities. There's a lot of opportunity to continue to grow.
Roughly 60% of our advisors will send us at least one securities-based lines of credit this year. There's still a lot of opportunity. A lot of advisors that are not sending loans to us, that's just not part of their practice. As a reminder, as I think you know, we don't go direct to client. We work through this advisor channel. The other thing that's going to help us with that penetration in growing this business is the recruitment, as I mentioned. Virtually every advisor that is being recruited to Raymond James, they are in the lending business, and that's a core part of their business with their clients. That 60% number that I just cited in terms of number of financial advisors goes up year after year after year. We're now a little over $5 billion in securities-based lines of credit.
Growing, as I mentioned, at a very high rate. I'm just thinking that we're going to grow maybe even more rapidly than what the recruitment will be. I think we're poised to continue to grow on a going forward basis in that business 20%-plus a year, at least for the foreseeable future, particularly as it relates to the recruiting track that we're on that you heard earlier. Very optimistic about the growth of that business. If I could also just mention, about three-plus years ago now, we did introduce a structured lending group to work with our ultra-high net worth clients. That portfolio is now at about a half a billion dollars now in loan outstandings. That's much more of a custom underwrite for our ultra-high net worth clients.
We're very optimistic about the growth of that business that's kind of adjacent to our more traditional securities-based lending business.
Okay, Steve, I'm going to sneak in one more. If you can make this one brief.
Okay.
James Mitchell asks about the loan loss reserve. It has been about 1%-1.1% prior to COVID and CECL, and it now stands closer to about 1.5%. How should we think about the steady state reserve ratio in a normal economic environment, particularly as you grow the secured lending like mortgages and SBLs that you just spoke about?
Yeah, that's a good point. The total allowance to loans will be impacted by that asset mix going forward. I think that it is likely that we'll, although we're very happy with the diversification we currently have, I think that it's likely that our private client banking assets that tend to have lower reserves, securities-based lending, and residential mortgages, if we look out a few years, that'll probably be a larger piece of the bank's balance sheet slightly more than it is currently. That'll have an impact. We also are seeing some more positive news as it relates to our corporate lending business in terms of the reserve level. You know that we had a reserve release in the March quarter that was impacted by economic factors as well as individual loans being upgraded. We're seeing some more positive information coming to us.
I would think that over the next couple of quarters, we'll continue to see an improvement in the credit quality of the portfolio that could lead to lower reserve levels. Obviously, you're subject to one-offs here and there in the portfolio, but I don't know if I could necessarily predict where we'll level out. It'll be impacted by those factors, both credit in the corporate portfolio as well as this asset mix. If we get in a more protracted, benign environment, us getting back to that 1% level is probably very reasonable.
Perfect. Thank you, Steve. Scott, Jim, Steve, thank you, all three of you guys, for your participation today, and your candor during the Q&A. I'm happy to turn to our final presenter now, Paul Shoukry. Paul is CFO and treasurer for Raymond James Financial. He joined the firm in 2010. He became CFO in January of 2020. Prior to that, he served as treasurer and head of investor relations. Paul, the floor is yours.
Thank you, Kristy. First and foremost, I want to thank all of you who are listening and watching us today. We certainly do not take your time or interest in Raymond James for granted. We really hope that we're able to see you in person again next year at our Analyst & Investor Day. I just want to start off talking about our financial priorities, how we think about the financial priorities and the finance function. Not sure if the slides are working. We think about it in terms of three pillars. The three pillars being the long-term attractive growth, the strong capital and liquidity management. Of course, expense optimization. Hold on one second as we look at the slides here. For some reason, my clicker is not working. Good deal. In terms of long-term growth, I think that's really important.
The words long term are critical. Paul opened up his presentation with the words long term. We don't focus on our earnings or results for the next one or two quarters. Frankly, we don't think about the results over the next one or two years. When we make decisions, we think about the results over the next five to 10 years. Sometimes that means sacrificing short-term gains or short-term profitability because we think that that will be better for shareholders over the long term. That's a critical aspect of how we think about financial management is the long-term results over a period of five, 10, and beyond, not just short-term results. Certainly not quarterly, not even annually. Capital liquidity management.
That's always been cornerstone of how we think about managing our balance sheet at Raymond James, is having a conservative balance sheet with ample liquidity and ample capital. Not only to be defensive during those stress times as we saw last year and during the financial crisis and the tech bubble, but also to be opportunistic during those times. Sometimes that's when your best opportunities surface. We saw that with the Morgan Keegan acquisition about 10 years ago, when not a lot of other strategics or private equity firms were able to step up. We were, and it ended up being a fantastic financial and, more importantly, strategic acquisition for the firm. Expense optimization. The word optimization here is really important. It's not that we're trying to bring down expenses. We're a growth company. Expenses are going to grow over time.
We just want to make sure that most of our expense growth is focused on growing the company and providing best-in-class service, and then managing the controllable expenses as much as we possibly can. I'll get in more detail on that topic later in the presentation. All these three pillars combined, they would be that we should fortify our balance sheet and deliver strong long-term returns for our shareholders, which as you'll see in the next few slides, we certainly have a track record of doing over time. See the consolidated net revenues here. I'll go over the history pretty quickly because all of you, in particular, know our numbers very well. You'll see here that we had a 9% annual growth rate over the last five years and a 13% annual growth rate when you compare the first half of fiscal 2021 to fiscal 2020.
really tremendous growth over this period. Obviously, markets were a tailwind, interest rates were a tailwind. more importantly, as Scott, Jim, and Steve pointed out, organic growth was a real tailwind, and which is why we're able to deliver strong revenue growth over this period. You look at our pre-tax income. Obviously, CAGRs are impacted by starting and ending points, and the ending point in fiscal 2020 was a tough one given the COVID pandemic. 6%-7%, whether you look at it a GAAP or non-GAAP basis over the last five years. If you stopped in fiscal 2019, it would've been 15%. If you look at the first half of this year, we're up over 40% in terms of pre-tax income. A lot of you have asked over the years kind of what is our growth algorithm?
How do we think about the growth of revenues and pre-tax income? My predecessor, Jeff Julien, I think explained it pretty well, is if we can get revenue growth over time in the high single digits and realize operating leverage, which we hope to do over time as well, then we should be able to deliver pre-tax income growth somewhere in the 10%-15% range. Now, we're not going to do that every year. Some years it'll be below that. This year, for example, it'll be well above that. Over time, that's kind of the growth algorithm that we target at Raymond James. You see a pre-tax margin here. We'll talk about targets later in the presentation, but starting off the year with 18.5% pre-tax margin, which is really astounding, in a near zero interest rate environment.
It's hard to believe a year ago we lost 40% of our run rate earnings almost overnight when the Fed cut rates to zero. Here we are generating an 18.5% margin, largely attributable to the strong growth in the Private Client Group and asset management segment, but also notably the Capital Markets segment, where both the equity side and the fixed income side are generating record results. That's very uncommon for both of those businesses, which are usually counter-cyclical, to generate record results at the same time. You see the EPS growth here, higher than the pre-tax income growth over this period because of the corporate tax reform. We did some modest buybacks, too. Again, very attractive earnings per share growth over this period of about 11%-12%, and that includes the tough year in fiscal 2020.
We're trending this year over 50%, which again, is amazing considering we're still not completely out of the woods yet from the pandemic. Reinforces the value that Paul discussed of our diversified and complementary businesses. Return on Equity. A lot of folks say we have too much capital, which we acknowledge, and we're going to talk about capital. It hasn't hampered our Return on Equity. We're still generating industry leading type Return on Equity numbers of 18% plus this year. Helped by all the tailwinds that I discussed. We're still focused on deploying capital, which we'll discuss in more detail, but still a really attractive Return on Equity, which is what we ultimately measure in terms of our performance and our returns for shareholders. Second financial pillar I would like to discuss is capital and liquidity management.
I know this is where a lot of you have questions. I thought it was important today to really go into a lot of detail in terms of some of the levers that we think about, some of the constraints that we're bound by, so you have more transparency in how we think about capital. More than ever, as Paul said, we are focused on deploying and utilizing our capital base. We know we're overcapitalized, and again, more than ever, we're focused over time to compromise long-term returns for shareholders just to hit some sort of number. We want to deploy the capital over time. I think when you think of capital, you have to start with our capital prioritization framework. I'll get into more detail, but the primary takeaway here is we're still a growth-oriented firm.
We want to prioritize those capital uses over shrinking the firm. The first priority is organic growth across all of our businesses. This is the most attractive long-term source of returns for shareholders, where we spend most of our energy recruiting financial advisors, retaining our existing advisors, recruiting investment bankers, all the things that we do across the firm to invest in organic growth. I'm proud to say that we do have best in class organic growth when we track those metrics, particularly in our Private Client Group business. The other aspect of organic growth is growing the balance sheet. Steve spoke a lot about that. Again, we want to do that in a way that generates good long-term risk-adjusted returns for shareholders. We're going to be patient and opportunistic there. Second capital priority is acquisitions. Paul spoke about this.
Jim spoke about this in his business. This is something that we've been very focused on, and maybe now more than ever, really focused on casting a wider net and making sure we're looking at all the opportunities, both in our core business and financially when we look at technology and other things. We prefer to grow organically, but acquisitions, as long as you stay true to the criteria we have, which it has to be a good cultural fit, good strategic fit. It has to make financial sense for the shareholders and something we can integrate. We have a track record of really delivering attractive acquisitions. Again, like Paul says, not just growing the business, but making sure that the target company adds to the business.
Most of the target companies that we've brought to the Raymond James family have leadership roles across the organization, and that's critical for us. The dividend target of 20%-30%. We actually increased that from 15%-25% last year. Again, we think that that's a good way to reward shareholders over a long period of time. We're a little bit below that range now given the strong earnings growth. That's something that we'll take a look at in the next couple of board meetings as well, just as the board always does. Then share repurchases. Gets a lot of focus. We have been committed to offsetting dilution, which is about $150 million-$200 million of share repurchases per year. Even with the prices where they are now. We bought back this year $60 million-$70 million of stock.
When the prices was more opportunistic a couple of years ago, we bought over $750 million of stock. We've shown in the last couple of years that we're much more committed to share repurchases because we understand we have excess capital that we need to manage down. With that being said, just like with all of our other investments, we're going to be deliberate and focus on the long-term returns. Balance sheet highlights. This is more informational. We'll talk about a lot of these over the next few slides. I want to talk about the funding source of the business. This is something I'm really proud of. We have one of the most simple and stable funding sources out of any major financial services firm in the industry. Mostly client deposits, 90% of the bank deposits are FDIC insured, and then brokerage client payables at the broker-dealer.
You look at our shareholders' equity, we have no preferred equity. Not that we have anything against preferred equity. I would love to find an acquisition opportunity that gives us a reason to raise preferred equity, especially at where rates are now. Again, a very simple capital structure. We just extended our senior note duration average of 23 years. Again, almost unheard of in our industry. A very modest amount of debt as well. 4% of our overall kind of funding and equity sources. Really stable, strong balance sheet, again, one of the pillars and the cornerstones of Raymond James' financial management. Here's a summary of other financial sources across the firm, just to show that we have lots of flexibility when it comes to liquidity. We just renewed a five-year committed unsecured revolver for $500 million. I always want to thank the banks for that.
We're one of the few financial services firms that didn't have to draw on that revolver this time last year, which made a lot of banks nervous because we had a very strong balance sheet with ample liquidity. Here's a capital ratio slide that kind of shows you where we stand against our peers. Again, you see us in the top right portion of this slide, of this chart. We always aspire to be more conservative than our peers in terms of the amount of capital we hold. Again, we acknowledge that we may have moved too far over time, largely because we haven't been able to find acquisitions that meet our criteria over the last few years. We have announced a target, a Tier 1 leverage target of 10%.
We'll talk on the next few slides in terms of the levers that we're looking at, again, more so than ever, to get to 10% over time. That'll still put us on the conservative end of the spectrum, two times the regulatory requirement of 5%, which gives us ample flexibility. You need that flexibility in our business. A surge in client cash balances, which could occur today or next week. That brings down your Tier 1 leverage ratio, and we never liking our hat on a strategy that's contingent on hopefully the regulators will relax that in that type of scenario. That's not our strategy. Our strategy is let's have the flexibility so if that happens, we can be not only defensive, but opportunistic. The key long-term capital and liquidity targets.
Here's where we're trying to provide a little bit more transparency around some of the constraints we manage to so you, as the investor community, can really understand how we think about capital and liquidity management. We talked about the Tier 1 leverage ratio for the holding company, the consolidated overall of 10%. We'll provide more detail on that on the next slide. Importantly, there's also a standalone capital requirement at the bank. Their Tier 1 leverage ratio target is 7%. It's currently at about 7.5% now. They still have room to grow their balance sheet by let's call it $2 billion-$2.5 billion.
Why this is so important is because if we just wanted to exponentially grow the bank from here, which we would love to do, to Steve's point, if we had good risk-adjusted returns of assets we could find, then we would have to inject in the form of capital from the parent company, cash into the bank or capital into the bank, which is cash to the parent company to support that growth. It is a cash utilization for the parent, which I just want to make sure that the street is fully aware of that dynamic. Speaking of cash, our corporate cash target at the parent company is $1 billion. Again, a conservative number, but we think appropriate given our strategy and the pillars I talked about earlier.
At the end of the quarter, we're about $1.7 billion, which means we have about $700 million of excess cash on the balance sheet. We also have a debt to book capitalization target. We have a 35% covenant in our corporate revolver that I just talked about. We have a target of about 32%. This is the senior notes and other type of debt, not the FHLB advances divided by that debt plus our book equity. It's currently at 21%, which means we have about a billion and a half dollars of debt capacity today before we hit that 32% target. When you look at the levers to get to a Tier 1 leverage ratio of 10% over time, there's two ways to get there. It's a combination of ways, really.
One is to decrease the regulatory capital, and this is a snapshot as of the end of the quarter. Every month, as you earn and your retained earnings grow, this matrix obviously changes. You can reduce your regulatory capital ratio and/or you can increase your average assets, which is what you see on the Y-axis. It shows you kind of sensitivities in this table of what you would have to impact your capital and your assets by to get to our 10% ratio over time. Those levers include acquisitions. One, acquisitions include intangible assets, but some acquisitions also help the Y-axis because they come with a significant balance sheet or assets on the balance sheet. Obviously, for capital dividends and share repurchases or levers as well. For the average assets, Steve talked about the loan growth, the securities growth.
Of course, if you acquire something with a balance sheet, that'll grow your assets as well. We have internal plans. First of all, we run scenarios every single quarter. We have a lot of different permutations because there's so many variables as you see on this page. Again, we're very committed to getting down to the 10% number, and we have internal plans that can get us there by the end of calendar 2023. About two and a half years from now, and that's without the benefit of any major acquisition, and that's with assumptions around asset growth and repurchases and other things. A lot of assumptions go into that. It could be faster than the end of calendar 2023 if the opportunities present themselves that generate good long-term returns for shareholders. Conversely, it could be slower if the opportunities don't present themselves.
Again, we're committed to it, but what we're more committed to is ensuring we deliver attractive returns for our shareholders. You see here just the history of us being more proactive with repurchases, even where prices are now. Some people ask us, "Well, why is your threshold for repurchases so low?" It's because, again, if you look at our capital prioritization framework, our priorities are first growing the business. With the buybacks being the lowest priority, which we have shown a commitment to doing, albeit the lowest priority, we want to make sure that it has a high return hurdle for us because it is a lower priority given that we are a growth business. Finally, expense optimization. I'll go through this quickly because we talk about this a lot.
Most importantly, when you look at our expense base, most of our expense is compensation. Most of that expense, 63% of our overall expenses, are variable compensation that really is related and highly correlated to payouts to financial advisors or incentive compensation to investment bankers. We want that compensation to grow over time. That means our clients are doing well, our producers, our advisors are doing well. The firm's doing well. That's our biggest driver of expense. You know we've implemented initiatives just in the last year to better manage administrative compensation over time. You see the other expense categories. Communication, information processing. Paul told you why we're so focused on investing in technology. Stayed around 5%. As revenues grew, we stepped it up when Paul became CEO.
Since the last five to seven years, it's been right around that 5%, which is why it's so important to grow revenues because as you grow revenues, you can grow the capacity to invest in technology, which reinforces that growth curve that Paul talked about. Another great investment is the transition assistance and retention to financial advisors. Again, PCG is obviously our biggest business, and this has grown over time as we've had more recruiting momentum throughout the years that Paul talked about and Scott talked about. It's important to know when you're comparing us to other peers that may not be as growth-oriented as we are. This impacts our compensation ratio and our pre-tax margin.
A great long-term investment, but short term, over the course of five to seven to even some of them 10 years, it impacts our margins and compensation ratio at the consolidated level by about 300 basis points. Actually, the last couple of years, 340 to 350 basis points. For the PCG segment on a standalone basis, more like 500 basis points. Again, a significant growth investment. A lot of other firms aren't on the growth cycle, or some other firms just strip it out of earnings and say, "This is not really core to what we do." That's not Raymond James. It's an investment, a long-term investment, and we're going to show it in our numbers because that's what investors should look at when they're assessing our performance. The financial targets. Let me just as a little bit of a preemption.
These financial targets, I understand we have been better than these targets over the last two quarters. The last two quarters were sort of exceptional record results. We hope we can repeat them. We hope that equities and the fixed income business can generate record revenues and pre-tax income at the same time as they have for the first half of the year. That's just not our conservative nature. When we provide these targets, we want to be relatively conservative in that, just like we are with everything that we do. We're not going to assume that the slope of the line just continues out into the moon. We want to be somewhat conservative. If that line does go to the moon, we'll take it. Obviously, we're not afraid to take record results.
We want to provide what we think are reasonable targets in this near zero interest rate environment. You see the compensation ratio target. We talk about this a lot of less than 70%. That's really driven by the mix of the independent contractor businesses where their payouts are much higher because they pay their overhead. The pre-tax margin targets, we have increased this from 14%-15% to 15%-16% over time. Can we exceed this if the capital markets results and some of the tailwinds we've seen over the last couple of quarters persist? Absolutely. If they don't, if they moderate somewhat in this interest rate environment, we think this is a very attractive margin to generate. Same with the return on equity, 14%-15% on our strong capital base.
It shows you the benefit of scale as we've grown the business over the last five years, even though rates have come back down to near zero. That generates a return on tangible common equity target of around 16%-17%. Again, amongst the best of the firms that we target that have reasonable capital bases. I want to talk a little bit about interest rate sensitivity. We have about $63 billion of client cash balances. This is a sources and uses table that you all are familiar with. More importantly, we are obviously sensitive to a rise in short-term rates. If rates were to rise 100 basis points, this is based on kind of an instantaneous look if it happened all within once on the existing balances.
That would represent incremental pre-tax income of close to $470 million per year. This is using the deposit beta assumptions of about 10%-15%, which is commensurate with what we saw in the last rate cycle. Again, it could be higher than that, could be lower than that. Can't be much lower than that. Could be higher than that, but this is based on our historical experience from 2015 to 2017. With that, Kristy, I think I am ready for questions.
All right. Thank you, Paul. We do have a number of questions, and as you teed it up, most of them are related to capital. We'll go ahead and jump right in. The first one for you is from William Katz with Citi. His question is, even if you achieve the 10% Tier 1 leverage ratio, it will still be very high, both absolute and relative to peers. Can you rationalize why so conservative, and is there an opportunity to further reduce the ratio? What would be the constraints to driving down that ratio?
Yeah, Bill, that's a great question. I think that what's important to understand is that, in our business, there's a lot of volatility and uncertainty. When you're managing so close to regulatory capital ratios, you're essentially exposing yourself to that vulnerability in the market. What I mean by that, let me give you a hypothetical example. Client cash balances last year increased from mid to high $30 billion to now we're at $30 billion. Now, we are fortunate at that time, third-party banks had demand for cash, which does not exist today. Let's say we had a market disruption next week, and a big market downturn next week. That could drive cash balances up 10%-20%.
Run your sensitivities on what would happen to firms in our industry if they have to bring on 20% of their client cash balances to their balance sheet, and they're running razor thin on their Tier 1 leverage ratio. They would have to raise preferred equity if they can in that environment, or they would have to beg their regulators for some relief if they can in that environment. We would have, hopefully on a relative basis, certainly more flexibility, because we would be able to absorb those client cash balances and still be proactive in deploying capital and otherwise. I think in our industry, over cycles, it's easy to ask at the top of a cycle or when everything's going good, "Why don't you get leaner?
Why don't you get more aggressive?" What people forget is that the reason is because when things turn against you unexpectedly, most of the time, then you lose a lot of that flexibility. That's why we saw so many firms essentially go out of business during the Financial Crisis was because they were trying to manage to razor-thin targets relative to regulatory requirements or just solvency.
Thanks, Paul. One related to capital from Alexander Blostein from Goldman. Why not implement a more systematic share repurchase plan to actually shrink share count as opposed to just offset dilution, given the significant excess capital and excess liquidity?
Alex, I thought two years ago you said if we just offset dilution that'd be a good start. I guess this is phase two. Just joking here. No, I think the first step for us was to offset the dilution, which we've shown a commitment to doing even at relatively high prices versus where we're trading historically. Again, preserve those incremental repurchases for the opportunistic buybacks, which do come from time to time. It seems far away today, they do come from time to time. We think that mix, again, the reason we do that, we truly believe and our history shows, reinforces this, that mix and that approach delivers the best long-term returns for shareholders. It's not that we're being stubborn or trying to hoard capital unnecessarily.
It's that we're trying to make decisions that really drive the most attractive long-term returns for shareholders.
Moving to dividends. Manan Gosalia asks, from Morgan Stanley, you target the range of 20%-30%, as you said, and that suggests a little bit of upside. How are you thinking about that range, especially if the stock price remains elevated relative to your buyback threshold? Can you get to the higher end of that range?
Yeah. We don't manage dividends to a stock price or a dividend yield. We really manage it to earnings. We just increased it from 15%-25% to 20%-30%, and we think that that gives us ample flexibility to continue investing in our first two priorities in the capital prioritization framework, which is growing the business, both through organic growth and through acquisitions. The board looks at those ranges very closely. It's obviously a board decision. To the extent that we're outside of that range, and it looks like we'll continue to be outside that range based on our budgets and forecasts, they adjust accordingly. We just have a long-term history of doing that once a year in the November-December board meeting. We have, on very rare occasions, adjusted it in the interim as well.
Thank you. We've had a couple questions on M&A. Question from Kyle Voigt of KBW. Regarding M&A, you noted that deals would have to make financial sense for shareholders. Can you provide more details around how you evaluate this, and what specific financial hurdles that you are looking for for deals to meet that over the near and medium term?
We look at a lot of different factors. We look at IRRs, we look at ROEs, we look at accretion dilution analysis. We really triangulate all of those factors to make sure that it meets our financial criteria. Again, using relatively conservative assumptions. We don't like to build in a lot of revenue upside and expense downside and profit upside when we do acquisitions just because a lot of times there's more negative surprises when you do acquisitions than positive surprises. You have to be conservative. That means sometimes you miss opportunities because another firm's willing to pay substantially more than we're willing to pay. Just like with recruiting, as Paul said earlier, that's okay sometimes because again, we're focused on not just adding, but making sure we do it in a way that generates good long-term returns for shareholders.
We look at a lot of different things. Some of the criteria that we look at are the same things that we look at in terms of our long-term financial targets that we shared with you earlier. Those are the things that we triangulate when we look at acquisitions.
Okay. A related question from Alex at Goldman. If the right large M&A opportunity comes along, are you willing to temporarily dip below your 10% Tier 1 leverage ratio for some time?
Absolutely. That's another reason there's cushion there is because if there's something transformational that will really be strategic long-term for the business, then that gives us some cushion to dip below that and rebuild it over time. Yeah, absolutely we would have an appetite to do that for the right opportunity.
Okay. Christian Bolu from Autonomous had a question to clarify. He says, "I just want to clarify the 7% bank Tier 1 leverage ratio is a current binding constraint for the firm. Is that correct? Also, if you needed to inject capital to the bank, is the $1.7 billion corporate cash the right way to think about the available resources?
Yeah. The first part of the question is the 7% is the constraint for the bank subsidiary only. The 10% is our target for the firm overall. As far as managing the 7% for just the bank subsidiary, Christian, you're thinking about it exactly right. The cash that we have as a parent is essentially the capital that the bank could have if we contributed it. That $1.7 billion is essentially the pool there. Remember again, we have a $1 billion target to keep at the parent as well.
Okay. Thank you. Now moving to the securities portfolio. Steven Chubak from Wolfe Research asks, "Can you speak of how much incremental spread pickup you're getting on Agency MB S versus third-party cash, and what is the level of incremental spread you would need to see to support more aggressive growth in the securities book?
A great question, Steven. Right now for 3-year type duration, which is the type of duration we'd be comfortable with in the securities portfolio, you're able to earn somewhere around 70-80 basis points. The third-party bank average as last we disclosed is 30 basis points, but that's benefiting from existing contracts that are in place. When they run off, it drops off significantly from there, assuming the bank even still wants the cash. A lot of that cash has come to our balance sheet at the broker-dealer earning per the SEC requirements, we have to invest in short-term treasuries. They're earning almost nothing. We have an appetite to grow the securities portfolio. The problem is there's essentially no supply of the three-year paper out there.
The Fed is gobbling up almost all of it, and we're buying as much as we possibly can, but that's only helping us run in place because we have runoff every month as well. The only way you can get supply right now putting yield aside is going out five to seven years on duration in the 15 to 20-year type underlying paper. That's just more duration than we want to take right now. You can get a higher yield, but if you look at those yields which are north of 1%, you're not getting really paid to take any type of inflation risk at all. We're growing the shorter duration paper as fast as we can.
Hopefully, if the Fed steps back a little bit from purchase adding to their balance sheet, then that'll free up some supply, and we'll be able to buy more of it. It's not that we're opposed to buying Agency Mortgage-Backed Securities. It's just that we don't want to go out much beyond three years in duration, and that supply doesn't exist today.
Okay. A somewhat related question from Manan at Morgan Stanley. You said the third-party deposit programs will come up for renegotiation throughout the next year. Most banks are flush with deposits right now. How do those contracts work? Can the rate you receive go closer to zero given where rates are? In that case, how would you think about moving more to Raymond James Bank versus offering customers the full $3 million or so of FDIC insurance you currently offer?
That's a great question, Manan. A big potential risk for the industry over the next year or two as these contracts renew. Now, the fortunate thing is I think Raymond James is the only financial institution in our space that has two things combined. One is we have a bank charter. Now there are other financial institutions that have a bank charter in our space. Two is we have significant capital flexibility to grow our bank if those cash balances are not wanted by the third-party banks. I can't think of any other financial institutions that have both of those things. It goes back to William's question, why do you manage the balance sheet so conservatively? Why do you want all this flexibility?
It's because it gives us opportunities and optionality if the demand doesn't pick back up with third-party banks to bring it onto our own balance sheet and earn more on it.
Thank you. The questions keep coming in, but we probably just have time for just one or two more. One coming in from Brian Conn with Griffin Capital. Given the excess capital and low yields on the third-party bank deposits, why not sweep all or most into RJ Bank?
It goes back to if we can find the assets that generate good long-term risk-adjusted returns, we would sweep a lot more to the bank. The bank is growing as fast as they can within the parameters they have. Those parameters are contingent on trying to generate long-term returns for shareholders. You start with the SBLs. That's our most attractive asset because it's synergistic with PCG and it's economically attractive in terms of low capital utilization. They grew that portfolio 35%+ last year. It's amazing growth there. Residential mortgage activity up until the last three or four weeks as rates moved up and ticked up a little bit, activities have been very high for that portfolio. A lot of it was refinance activity that wasn't necessarily contributing to net growth in the portfolio.
That leaves us with the corporate loans, which we're back in that business of making corporate loans, but we're doing it on a very deliberate basis. The spreads are very thin right now. We're having to be very patient and opportunistic there as well. I just discussed the challenges with growing agency-backed securities, given the duration, the lack of supply in the shorter-term duration. If Steve Raney were to come back and say, "Hey, we were able to generate more growth and we need that cash," we would absolutely give it to Steve. Right now, frankly, we're holding it at the broker-dealer and investing in short-term treasuries.
Thanks, Paul. I think we have time for two more questions. The next one from-
I'm at the analyst and investor's disposal, so I could do this all afternoon.
All right. The next one comes from Devin Ryan with JMP. Given the strong equity market backdrop and improving confidence, have you been surprised by the resiliency in growth in customer cash balances? Is there anything you expect that could change course, and does that impact how you are thinking about cash management and movement between off and on balance sheet?
That's a great question, Devin. I would tell you that cash balances have plateaued somewhat. It's around 6.5% of assets, which is actually historically below average for us and for the industry. Clients are still heavily engaged in the equity markets. It's just that they have plateaued and stabilized somewhat. I think the risk really or the probabilities is maybe for even a spike in cash balances, as I alluded to earlier, if we see market volatility or downward shift in the overall equity markets.
Okay, shifting gears a minute here. Chris Walsh from Millennium asks, can you speak to the benefits of having multiple bank charters? Paul Reilly brought that up earlier in the session.
Yeah, we want to offer our clients. It starts with the clients like everything else. We want to offer our clients as much FDIC insurance as possible. We do that through a waterfall program where we speak to multiple banks. Now, if those banks are pushing back the cash upon expiration, the only way you offer them more FDIC insurance is by having an additional charter in-house where you can offer them another 250 per individual or 500,000 for a couple. That really is the advantage is to provide a secure and FDIC insurance coverage minimum or threshold for clients. We're not as dependent on third-party banks. It gives us more flexibility for clients.
Okay. Another one from Alex at Goldman. Can you talk about your financial targets when evaluating potential M&A, given you've highlighted inorganic opportunities a few times?
Kristina, I think we covered that one earlier from someone else.
Okay.
A triangulation answer, Alex. We can talk about it over the phone if you still want to hear more.
All right. You know our number. All right. Maybe one more from Tom Hayne. TA, transition assistance, seems to be growing generally as fast as advisor growth. Have there been any changes to TA methodology or is the program the same? Would you expect TA dollar expense growth to accelerate from here or continue to correlate with advisor growth?
Yeah, it's a function of recruiting at the end of the day. Yeah, some of the deals have changed somewhat, as Paul said, on the employee side of the business where we just had too big of a gap, and so we had to up those deals. A lot of those deals actually, a lot of the increase have come on back end for hurdles that need to be hit. Could the number increase from where it currently is, which represents, by the way, several consecutive years of at or near record recruiting results because, again, it amortizes over a period of five to 10 years. It can if we continue to see the recruiting success that we're doing.
As you can see, net growth has moderated or plateaued somewhat over the last four to five years as it's now compounding many years of near record growth.
All right. Let's take one more. Christian Bolu from Autonomous asks, given your deposit and capital capacity at the bank, what are your thoughts on expanding the securities portfolio to buy corporate debt? You already do corporate loans, you have the capacity to access corporate credit risk.
We look at everything. We look at all types of securities. Right now the returns aren't overwhelmingly attractive. Really if we want to take the corporate credit risk, we're very comfortable and have a lot of experience doing that in the loan portfolio. That's where we would rather play than taking credit risk in the securities portfolio. Really right now we look at that securities portfolio as a liquidity portfolio of agency mortgage-backed securities, agency CMOs without the credit risk.
Okay. Well, that was our final question. Paul, any closing remarks?
No. Again, I just wanted to close with what I opened with, which is thanking all of you for your time and interest in Raymond James. Again, we do not take it for granted. We appreciate that you're following us closely, and we look forward to hopefully seeing you next year in person. Thanks again.
Thank you everyone. We appreciate you joining today. Have a great day.