July 22, 2010

Raymond James Advisors Post Strong Sales, Income

The nearly 5,340 advisors helped the private-client group boost sequential and year-over-year results

Raymond James Financial (RJFS) met earnings expectations on Wednesday, July 21, and beat revenue estimates on strong performance in its private-client operations.

It reported fiscal third-quarter EPS of $0.48, up from $0.35 last year and $0.45 in the previous quarter. Net income was $60.7 million on sales of $747.4 million.

The private-client group - which includes 5300-plus advisors in multiple channels -- has sales of $484.8 million, up 31% from the previous year and 3% from the earlier quarter. Pre-tax income for the division rose to $44.8 million, a year-over-year jump of 144% and a sequential increase of 23%.

"The Private Client Group results were largely driven by past ('08-'09) recruiting success," said CEO Paul Reilly in a conference call with analysts on July 22. "That's the real story of the quarter."

The division, he said, accounted for 64% of companywide revenue and 45% of pre-tax income for the quarter ended June 30, 2010.

The financial-services company says it has $27.5 billion in assets under management (AUM), up from $22.6 billion a year ago and off a bit from $27.6 billion in the earlier quarter.

Assets under administration stood at $231 billion in the April-June period this year vs. $196 billion last year and $242 billion in the January-March period of 2010.

Financial advisors number 5,337 in the United States, Canada and United Kingdom, with the majority affiliated with Raymond James as independent advisors. A year ago, this figure was 5,323, but it rose to 5,345 in the January-March quarter of 2010.

The higher year-over-year advisor headcount and asset-under-management figures "look very, very positive," said CFO Jeffrey Julien during the analysts' call.

Thought the recruiting environment has cooled off from where it was 18 months ago, "It remains a good recruiting environment," said COO Chet Helck, head of the PCG.

In terms of recruiting trends, the company is seeing more interest in the independent-contractor channel, Helck says, rather than in the employee channel, which had been very popular in the past year or so.

"This reflects activities going on at other firms and market conditions," explained Helck. "And it gives us comfort, since we have multiple channels. As one softens, we can take advantage of momentum in another channel."

Company executives do not expect much negative fallout from the financial-reform package, which Executive Chairman Tom James criticized for not addressing the real issues that caused the financial crisis of '08-'09.

"We see little impact from the reform package as we don't do much derivative trading or work in proprietary products," Reilly said. "And when it comes to the fiduciary standard, we were founded on the client-first approach."

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