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Raymond James Hits Revenue Milestone as Profits Improve 7% in Fiscal Q2

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Raymond James Financial (RJF) posted a 7% year-over-year gain in profits for the quarter ended March 31, as revenue rose 9%. In the most recent quarter, net income was $113.5 million, or $0.77 per diluted share, on $1.3 billion in revenues, vs. profits of $104.6 million, or $0.72 per diluted share, on sales of $1.2 billion a year earlier.

The company announced a record number of advisors in its Private Client Group, which includes both its employee FAs and independent contractor registered reps: 6,384.

In an interview following release of its quarterly results, Raymond James CEO Paul Reilly credited an 11% drop in pretax income from the period ended Dec. 31 to several seasonal and onetime factors, including an increase in advertising for the quarter, higher FICA expenses and the firm’s decision in February to reimburse some advisors’ end clients for certain mutual fund fees.

Looking at results for the first two quarters, Reilly said “it’s the best first half we’ve ever had,” including “record net assets” along with the record advisor headcount. In the first six months of its fiscal year, Raymond James Financial posted $240 million in net income, or $1.64/diluted share, on net revenues of $2.54 billion.

Reilly played down the fear that Raymond James was “getting too big,” saying that since 2009 through 2015’s second quarter, advisor headcount increased at a CAGR of 3.9%, while Private Client Group assets under administration had increased at a CAGR of 15.1%. “We bring our advisors in one by one — that’s our desired growth,” he said, joking that Raymond James only makes acquisitions, like with Morgan Keegan, “every 20 years.”

Speaking during Raymond James’ national conference for its independent contractor reps in Las Vegas, he pointed out that “a record number” of advisor prospects—72—were attending the conference. “Recruiting is robust,” he said, while existing RJ “advisors choose to stay here; our turnover is very low.”

In recruiting, Reilly said the firm is focusing on the Northeast, California and the Pacific Northwest, areas “where we had very little market share.”

Reilly went on to speak about three other topics that are top of mind for many advisors: robo-advisors, the Department of Labor’s fiduciary reproposal and the lack of diversity in the advisor ranks.

On robos, Reilly said that unlike some of its competitors, “at Raymond James we’re making a totally different bet: millennials will be as advice dependent as baby boomers, though how they consume it will be different.” Those millennials, the clients of the future, “will want advice,” and warming to his Las Vegas theme, Reilly said “we’re doubling down on advisors,” saying robo-advisor-like technology should be used “as tools for decision making, not replacing the advisor.”

On the Department of Labor, Reilly said that while “we believe in the fiduciary standard,” he was angered by the leaked White House memo that “essentially said ‘Fee-based: good; commissions: bad.” His concern is that the DOL, especially in its original proposal, would make the rules “so expensive that there will be millions of people without advice.” While on the surface the reproposal seemed that “the Department is listening,” Raymond James and its industry partners at the Securities Industry and Financial Markets Association and FSI (where Raymond James Financial Services President Scott Curtis sits on its board) were still digesting the massive DOL document.

As for the gender, ethnic and racial makeup of advisors, Reilly said “we’re great believers in diversity.” In the case of women, “we believe we have the highest number of women” advisors in the industry, since the RJ “women’s network over the past 20 years” has been very successful. “I hope we can do the same for advisors of color,” he said, noting that “the industry has done a poor job” of encouraging racial diversity in its ranks. However, he said he was encouraged by the formation — announced at the conference — of the Black Financial Advisors Network, which is being led by two Raymond James & Associates branch managers — Joel Burstein from Miami and Tony Barrett from Philadelphia.

— Check out Raymond James Keeps Up Social Media Push on ThinkAdvisor.