Chairman Tom James speaking in 2009 after receiving a Woodrow Wilson Center community service award.

Speaking at the 16th-annual Women’s Symposium on Friday in St. Petersburg, Fla., Raymond James Financial Chairman Tom James and two other executives told the audience of more than 100 female advisors that the firm had several competitive advantages over rivals and would, at least in the independent channel, like to boost annual sales 15% a year over the next five years.

The executives also pointed to other possible changes at the firm, including a product-neutral grid and the elimination of the $30 transaction fee on mutual funds for RJFS advisors.

“We expect to be the least impacted by new rules among all the broker-dealers and banks,” said James. “This is because we are mainly retail oriented and are committed to doing what’s best for clients.” He added that this is also why Raymond James – which has about 5,335 advisors, 625 of whom are women – survived and even thrived during the peak of the financial crisis. 

Private-Client Focus

Dennis Zank, president of Raymond James & Associates, the firm’s employee-advisor channel with about 1,270 advisors, reminded advisors about the origins of the firm, which was formed in 1962 to provide clients with financial advice – which trumps expensive IT and other systems.

“There are arguments over our business model, including the need for a global platform,” he said. “But most clients want someone they trust, who is skilled, answers the phone and is very responsive to their needs.”

As for the notion that a broker-dealer must have 15,000 advisors to survive, Zank asked, “Really? Then how is it that Raymond James has had 14% compounded annual returns, excluding dividends for so long?”

He also disputed the need for a “massive balance sheet.”  “The private client, or retail advisor business, is not a capital-intensive business. We do need some funds for technology upgrades and back-office operations, yes — but not massive capital. That was needed at some firms to fund billions in proprietary trading.”

“This is not a business you can sterilize; it’s a relationship business,” said Zank.

Zank pointed to the “latest craze” at some rival firms to impose fees on clients with less than $1 million to invest.  For some advisors, these types of clients are very important, and “even huge teams with large $1-million-plus accounts have lots of people with $400,000 rollovers,” he explained.

The fact that private-client work is Raymond James’ main business should give it an important competitive advantage vs. rival firms going forward, Zank says, and he communicates with prospective advisors who visit the firm.

He also reminded the audience that 75% of Raymond James & Associates’ advisors have more than 100,000 competency points, which measure their continuing education, professional designations and similar attributes. “We are hugely proud of this,” he said. “We measure our advisors on something other than production.”

Independent Channel

Dick Averitt, chairman and CEO of Raymond James Financial Services, which includes about 3,240 independent-contractor advisors, emphasized that private-client group revenue is about 65% of the firm’s revenue.

“You cannot say that for another other broker-dealer as far as I know, and certainly not for those owned by banks,” he said. “We are a private-client-group firm,” Averitt said.

He said about 15% of Raymond James’ independent-channel advisors are women.  “I’m surprised not to see more women in the business; it’s not on their viewfinders in most cases,” and the firm and industry should do more to change than, Averitt explained.

The average gross revenue per RJFS advisor is now about $311,500 a year, while the average trailing-12 months fees and commissions per RJA advisor is $480,000.

Overall attrition at RJFS is about 9.5%, though it is less than 1% for advisors with more than $300,000 a year in sales.  

And those 300K advisors leaving RJFS for rivals is about 0.3%. At RJA, the regretted attrition is under 1%.

As for recruiting in the last few years, roughly 70% of all recruited revenue for RJFS has come from the four wirehouse plus Edward Jones. And while recruiting is down in 2010 after a record 2009, RJFS is growing the number of $1 million producers.

Regulatory Overview

James described what he sees as “the death of review by the SEC” – a situation caused by the fact there are many new products coming onto the market and few staff members to review all of them. “There are many ETFs trading that are not reviewed [enough] by regulators, and these products are not performing as they were supposed to.”

In contrast to this situation, he pointed to the tighter controls at Raymond James. For instance, he said, its mortgages have experienced only one delinquency. “We have been very careful at Raymond James Bank,” James said. The bank had “one small quarter of loss while other [banks] fell flat on their face and had their net worth wiped out.”

Still, James acknowledged that Raymond James holding company was going to have two regulators assigned to it. The federal government “didn’t do well last time, so they are making an effort. I give them credit for that, but it will be tough to get used to,” he said.

As for the fiduciary standard, James said he doesn’t believe that its advisors should “just be accountable to the standards of salespeople,” since they give more advice and counsel than FAs with some rival firm. “They indeed should be held to higher standards,” James said.

While James was very supportive of the TARP, or troubled asset program set up by the federal government, he equated recent regulatory programs with the Tampa Bay Rays' poor performance in the early games of their American League playoff series against the Texas Rangers.  “I fear collateral damage from overly aggressive regulations by regulators and politicians that don’t understand how things work and the origin of the problems,” he explained.

However, the real issues stem from the real-estate crisis and the bubble in prices, James said. “There have been expensive lessons, especially for those that didn’t cause the crisis,” he shared.

During the crisis, Raymond James hired staff from institutions in trouble, such as JPMorgan Chase.  “We rescued lot of FAs and members of retail and institutional sales forces, which we knew would be good to have as we get out of the downturn, “ James said. “This took nerve, but now we are better positioned today than ever.”

James believes that present tax rates should be extended for two to three more years, “so businesses have money to hire and rebuild the United States.”

He also thinks that JP Morgan and Bank of America are coming out of the crisis in good condition. “They will make a fortune and will restore big dividends,” James said.