January 20, 2011

Raymond James’ Helck: ‘Cost of Compliance Is Going Up’

The COO also says advisor headcount across the industry has been dropping

“We manage a conservative business, like our advisors,” said Chet Helck, COO of Raymond James Financial, and “the business we’re in is managing risk for clients.”

In a phone interview interview with AdvisorOne on Thursday, the morning after Raymond James Financial reported a nearly 90% rise in first-quarter net income of $81.7 million, Helck (left) spoke of the earnings, of the importance of the advisor channel to Raymond James the company, and touched on the SEC’s report to Congress on the SRO issue and the upcoming report on the fiduciary standard.

The part of Raymond James that Helck runs, the private client group, had a 14% increase in revenue and a 76% jump in pre-tax income for its first fiscal quarter ended Dec. 31 compared to the previous year, and accounted for 64% of Raymond James Financial’s total revenue in Q1.

“Private Client accounts for two-thirds” of revenue, said Helck in a Thursday, and “more than half” of the parent company’s profits. Plus, Helck says his group accounted for even more of Raymond James’ business, pointing out that “a big part of asset management” comes from the private client group, which includes RJ’s financial advisors in the U.S., Canada and the U.K.

As of Dec. 31, there were 4,489 advisors affiliated with Private Client, according to Raymond James’s Q1 earnings release. The majority of its FAs -- about 3,200 -- are independent advisors, but a good number are also employee and bank-based advisors.

Asked to comment on the flat number of advisors, Helck said “We continue to attract high-quality and high-producing” brokers, reps and RIAs, reflecting Raymond James’ strategy of “managing more around dollars than noses.”

Productivity is up” even if headcount is flat or slightly down, he adds.

Headcount in the overall industry is declining” Helck said, but “our independent contractors are not on the margin,” where many financial advisors are “feeling the pressure.”

Our strategy, he shared, is “to treat financial advisors as clients; were good at it, and uncontested among full-service firms.” But he stressed that when it comes to their affiliated advisors of all kinds, “we have to earn their respect and their clients every day — just like advisors have to do.”

Self-Regulatory Organization

As for the SEC and its recommendations to Congress under Dodd-Frank, Helck says that there was “nothing surprising” in the SRO recommendation, released late Wednesday night in Washington.

Mentioning in passing that the SEC’s next moves were discussed in detail during a SIFMA board meeting he attended all day Wednesday, one thing he’s sure of is that “There will be more supervision in the advisory space, and the SEC will be doing it,” Helck said.

Moreover, “The cost of compliance is going up,” he said, especially for the RIA community.

As for extending the fiduciary standard to brokers, Helck said that “We already operate as a fiduciary and have for a long time,” noting that the most popular charge levied by attorneys for plaintiffs in arbitration is "breach of fiduciary duty."

“If we had a firm that sold proprietary products and a distribution arm,” that would be different, says Helck. For those companies, he said, a fiduciary standard would be “a fundamental shift in the business.”

The devil, of course, will be in the details of the SEC’s rulemaking, he says, and while it “may be more aggravating” and will likely be more expensive, but there’s also a chance, he says, “that they’ll get the rulemaking right.”

Page 1 of 2
Single page view Reprints Discuss this story
This is where the comments go.