(Orlando, Fla.) Raymond James & Associates President Dennis Zank doesn’t mince words when it comes to how the traditional brokerage’s recruiting and growth efforts are going. “We continue to kill it,” says Zank, who met with 360 of the firm’s 1,000-plus advisors at the group’s recent development conference, held in late July at Disneyworld.
The St. Petersburg, Fla.-based full-service brokerage, which is part of 4,800-advisor strong Raymond James Financial, attracted 142 experienced advisors in the fiscal year ended September 30, 2005. In the first nine months of the current fiscal year, 149 signed on at an average yearly production level of over $500,000. And more reps continue to join from firms like Morgan Stanley.
At this pace, says Zank, RJA could add 160 experienced reps and $80 million in production — a nearly 75 percent increase over last year’s $46 million. He’s visited with 276 potential hires in the nine months ended June 30, a big jump from the 162 who visited in the same year-ago period. “I meet with all those coming through St. Petersburg, if I’m in the office and I’m breathing,” shares the executive.
“This is the perfect storm for us,” says Zank, a native of Bloomfield Hills, Mich., who joined the firm in 1978 after graduating from college.
The explanation for RJA’s current success, he says, is two-fold. “As an organization, we continue to believe that the advisor owns his or her book of business. That, combined with the flexibility and ease of transitioning between our different channels, makes for a very powerful pair of motivators.”
In addition, Raymond James’ stock price has been on the rise — up more than 10 percent through early August — and there’s a strong possibility that the firm could be bought for a nice price, experts note.
Raymond James’ Advisor Choice program, rolled out officially in 2004, gives advisors the choice of affiliating with the firm as a traditional employee, independent employee, independent contractor (Raymond James Financial Services), independent RIA or as part of a bank/credit union.
Some reps are initially drawn to the idea of going independent, Zank and other RJA execs say, but then back off from making that move when they better understand what’s involved in running their own business — day in, day out.
RJA provides its advisors “with the tools they need, like technology, to run their business, and we get out of their way,” says Zank. “We don’t tell the size of the account they should have and things like that. We’re like a hospital, and the advisor is the doctor.”
As part of Raymond James Financial, RJA gives its advisors access to a research department and bank, for instance. “This could mean an advisor captures an extra point or two of upside for the client on an investment,” says Zank. “That can be a big deal for both the advisor and the client.”
RJA also is trying to raise its capability for its most elite producers. Though most RJA reps produce from $500,000 to $5 million annually, there are some with even higher sales and a very high-net-worth focus.
“We have to have the capability to support these large producers,” Zank acknowledges. “We have and continue to package an ultra-high-net-worth capability. It is a priority in ’06 as we attract advisors with bigger, higher books of business, which can be based on one or two ultra-high-net-worth relationships.”
Fred Whaley, managing director of wealth services, has been leading up this effort. “We are building a support team with dedicated financial advisors to serve financial advisors” who want to look more closely at alternative investments, trust services, etc., he says.
“They really do look a lot like a wirehouse and therefore are attractive to wirehouse brokers,” shares Chip Roame of Tiburon Strategic Advisors, an industry consulting firm. “They’re in a unique position relative to their peers.” Most industry players of this size have been bought up, he adds.
Meanwhile, RJA has a very strong presence in a booming part of the country. “It’s a good proposition to be selling,” Roame concludes. “They’ve got the right footprint.”
This success, though, does appear to be testing the brokerage firm’s limits, or at least, the image it wants to maintain of itself. “My job is to grow the firm in a logical manner that continues to protect the culture of the firm,” Zank says. And, like running a hospital, this is no easy feat. “We face demands for new systems that are necessary for us to grow. But we don’t want to grow too quickly. That can hurt.”
How is this growth stressing the system? Costs. “We’ve hired about $100 million in gross dealer concessions in the past 18 months, and that’s expensive by nature,” the executive admits. To process these new sales, the company has to beef up its spending on information technology.
While Zank copes with these operational challenges, Raymond James Financial President and COO Chet Helck grapples with some of the broader industry trends — such as the best way to market and sell variable annuities, and to avoid future entanglement with regulators; the company incurred a $6.9 million fine over its lack of supervision of a rogue broker last fall, for instance.
The firm imposed its own deadline of July 31 on insurance firms, requiring them to offer less expensive products through its advisors. “This is how we walk the talk,” Helck explains. Raymond James says that nine of the 18 insurance firms it works with have met the deadline, which aimed to lower the expense and lessen the complexity of these products; four more firms are likely to comply with the company’s new requirements in the fall.
Despite these efforts and the support of colleagues like Helck, Zank seems to be juggling a lot these days, including the highs and lows that go with a fast-growth business. “I’m not as excited over profits today as I am about the prospects for the next year or two’s profits, as revenues get up to speed,” the head of RJA explains, adding that Raymond James staff processing brokers in transition and their client accounts are “busier than they’ve ever been.”
“This is unchartered territory for Raymond James & Associates,” he stresses.
Raymond James Financial Chairman and CEO Tom James, who remains upbeat on Zank’s ability at the helm, is clearly focused on ensuring that the head of RJA lives up to that challenge. “Many financial advisors are happy to have Dennis Zank as their leader. I guess my confidence was not misplaced,” he shares. “We must make growth disciplined and controlled, so that mistakes don’t happen.”
Net New Hires127
Source: Raymond James & Assoc.
What’s the ‘Hybrid Model’?
Raymond James & Associates has a program for advisors that want to be quasi-independent: Advisor Select with 33 advisors in 19 offices — including a former Merrill Lynch advisor who joined RJA in Atlanta earlier this year with just under $1 million in production. And the firm aims to expand the group to 75 advisors over the next 12 months, according to Michael Voigt, the division’s director and a practicing advisor.
Advisors in the program are responsible for most branch expenses. They have access to compliance, human resource and other staff at Raymond James and generally get from 70 percent to 80 percent of their total production, without paying any extra fees or “overhead-allocation charges.”
“They can have their own brand, with their own signs and all the rest,” says Voigt. And they don’t have to handle health care, payroll and similar issues. They do, though, have to negotiate their own lease and get their practice up and running — with plenty of back-office support from RJA.
To date, the offices are heavily concentrated in the Midwest and Southeast. “But we’re seeing strong interest in New York and Pennsylvania because of a recruiter who’s getting calls for us,” Voigt explains. And there’s even interest from as far as Hawaii.
Advisors signing on to Advisor Select need to have yearly production of at least $500,000. “This makes it worthwhile for them to be in the model,” says Voigt.
Raymond James & Associates recently hired two veteran Morgan Stanley brokers in Ponte Vedra Beach, Fla. Elizabeth Lippincott and Carrie Stinchfield came over after spending 21 years and 16 years, respectively, at the wirehouse. Combined, they have total production of nearly $1 million.
RJA has more than 110 female advisors in its ranks, many of whom are former wirehouse reps, including Colleen Schon in Auburn Hills, Mich., Barbara Yount in Dallas and April DeLange in Kalamazoo, Mich. “You are truly welcomed by other advisors when you join,” says DeLange, a former Pru rep. “I always send an e-mail to our new female advisors to encourage women in our industry not to feel like just a number.”
Schon, an ex-UBS and Merrill Lynch advisor, joined 18 months ago and is still “pleasantly surprised” at the contact she has had with RJA’s executives. “I spoke with Dennis Zank one on one during the recruiting process,” she explains. “At the wirehouses, you never ever talk with the CEO, and the top executives usually only speak with the top 10 producers. People here are very caring and want their advisors to be well taken care of.”
The result? Her production is up 15 percent this year, and assets are growing. “It’s easier to be successful,” shares Schon.