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Raymond James CEO: Deutsche Deal ‘Accelerates Shifts’ in HNW Space

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Raymond James (RJF) CEO Paul Reilly says the company’s planned purchase of Deutsche Bank’s U.S. wealth operations “accelerate some shifts we are making” in boutique-style wealth offerings.

“Now we can offer these ultra-high-net-worth services to our existing advisors and better serve their clients,” Reilly said in an interview after speaking to a crowd of about 1,700 independent advisors and 1,400 other guests Wednesday at the firm’s yearly conference in Nashville.

This means the firm will be giving more HNW clients options like multicurrency reporting, alternative investments, mortgage products and other concierge services.

The Deutsche deal should be wrapped up in the fall, the company says. This means about 180 advisors with average yearly fees and commissions of $1.5 million are joining the firm, which will be renamed Alex. Brown (the group’s original name.)

As for the fact that more than 90% of Deutsche advisors are moving to Raymond James, “This is way above our expectations,” Reilly said.

Raymond James’ top 800 reps also produce yearly fees and commissions of $1.5 million and up. And the top 200 reps produce about $2.4 million or higher.

The most recent average yearly production figure for its independent advisors is $560,000.

Views on DOL Fiduciary Rule

With advisors and the press, the CEO also is upfront about what the new Department of Labor fiduciary standard means for the industry. “It’s well intended but very impractical,” Reilly said.

When asked specifically if he and the firm support moves in Congress to block the legislation, the CEO expressed resignation: “It’s frustrating. I believe we should sit down together and work things out,” he explained.

As for regulating the financial services industry, “It would be great to have something like a Simpson-Bowles [bipartisan National Commission on Fiscal Responsibility and Reform] to work this out, get [the bad actors] out of the industry and support those that are doing the right thing,” he explained.

“We have been open with our legislators in saying the rule as it’s been structured is not in the best interest of clients overall,” Reilly said. “But we will comply with it.”

The new DOL fiduciary rule and other recent regulation means they industry is plagued by “lots of overlapping rules … it’s just not the right thing to do, though it is well intended for advisors and clients,” he stated.

Moreover, the growing regulatory burden is “more demanding on everyone,” whereas in the past “you used to have some good-guy exemptions. Now, you have to have processes in place whether [the advisors] are good or not,” he said.

“And it’s not just in our industry,” added the CEO, who mentioned that his brother is a doctor. “It’s the same in health care …The regulatory burden is getting higher.”

In terms of higher costs tied to DOL, these are likely to be imposed on everyone from advisors to clients and also product producers.

“We are still analyzing it and expect it will have a negative impact on clients and others…,” he explained. “We worry the costs will make it prohibitive for some clients to get advice at all. And it’s not just the firm that is going to eat the costs. There are lots of [players] in the value chain.”

While Reilly believe that broker-dealers “should be held responsible” for their actions, the DOL’s “use of the courts for enforcement is a concern.”

On the bright side for Raymond James, he says, is the firm’s menu of advisor options – including the employee, RIA, independent and now high-net-worth boutique advisory with the purchase of Deutsche Bank’s U.S. wealth group.

“This flexibility helps us,” from a regulatory, recruiting and retention standpoint, Reilly says.

“It can be anything – like a tax on independent contractors, which could mean you may then want to go the RIA or employee [route],” he explained. “We have an advantage … though this makes things more complex for us at times.”


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