From the August 2012 issue of Research Magazine • Subscribe!

July 26, 2012

Raymond James Celebrates 50 Years

While stock-market rallies have come and gone over the past 50 years, solid leadership at Raymond James has been more consistent. That stewardship is being celebrated by the firm nationwide – as well as in Canada and the United Kingdom—on August 16.

Tom James, son of co-founder Robert James and CEO from 1970 to 2010, says the financial and economic swings actually have given the broker-dealer the chance to shine—and grow. The down periods he refers to are those of 1973-1974, 1987-1989, 2000-2002 and 2007-2009.

“Were they the worst years for us? In some senses, yes, but they were also the best,” James shared during an interview. “As we have been able to see in later years, we created discipline, business plans and a strategic approach to the business that has been successful in the long term: You get good opportunities” in bad times, he concludes.

James, now 70, was in his early-20s when he went through his first market decline. “With my background, coming out of business school, and like others of my age, I was very optimistic and looking forward to participating in the family firm, which had about $1 million to $2 million in revenue back then,” he shared.

The current executive chairman of Raymond James says he largely was tapped to become CEO in 1970 because his father didn’t enjoy running the firm in difficult times. “He preferred to focus on financial planning and training others to do that work,” James shared.

With his father around to offer advice as needed, James put his heart and soul into the business. “In the naiveté of youth, I thought I could be successful doing [what I’d learned in business school] and found out quickly that the real world was a lot different from case studies, which are a bit sterile. You don’t just have a good time in the securities business.”

Once he got over that learning curve, the young CEO worked on expanding Raymond James’ network and also got started doing some underwriting. “I hired an ex-Reynolds recruiter, and we built up a series of offices. I do not know why people elected to come with us,” James joked. “If I’d known how tough this job was, with our resources, I’m not sure I would have done it.”

When the ’73-’74 decline came, some offices had to be closed, and the firm had to find jobs for a number of registered reps at other firms. Management went unpaid, and the firm needed to raise money. “You have to take actions that are tough in times like those,” explained James.

“Looking back on that period and others, I’d say we learned many lessons in how to survive that served the firm well,” he noted. “And some of these times were scary, like in ’87 when folks were not taking orders in New York.”

It’s important not to be undercapitalized and not to be “at the mercy of forces outside of your control,” the executive chairman says. It’s also good to be a C corporation and retain earnings, he adds.

“At all times and through all growth stages, we’ve been well capitalized, we adopted an agency model for the business vs. engaging in any proprietary activities,” James said. “We also have treated people as a major resource, and when some firms chose to leverage, we chose not to take such risk.”

These methods allowed the firm to have the capital it needed to “recruit like mad” in recent years, when other firms were being “hit with the loss of their iconic images,” notes James. “It’s not a question of not taking on any risk, it’s about taking controlled risk and not risking the viability of the company and enabling yourself to [spend] some resources … at times when others are not willing to invest.”

Raymond James went public in 1983. Though it did have a small offering of stock and convertible bonds in 1985 and bond offerings in 2009 and 2011, it didn’t need to raise a significant amount of capital again in the public market until the Morgan Keegan merger in 2012, he says.

Looking 50 years out, it’s likely that “what we do—provide advice and counsel—will always be a valuable thing to provide to investors and consumers,” James speculates. “Yet, I am attuned to change, and that could be in a form we can’t imagine today. We have to be open to new opportunities and not get locked into business models and ignore what happens if we don’t pay attention to disruptive approaches.”

Overall, the executive chairman—like other Raymond James managers and the firm’s 6,000 financial advisors—is upbeat. “As long as the evergreen values we’ve established are still followed, and we hire the best kind of people, there’s no reason we couldn’t’ survive another 50,” he concluded.

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