In our latest interview with top leaders of the wealth management industry, Research spoke with Paul Reilly, CEO of Raymond James Financial, about his career, his company and his philosophy.
How did you get started in your career and in wealth management? When did you move to your current firm, and why did you do so?
I was actually a pre-med major at Notre Dame, intending to follow in my father’s footsteps, but realized as I got close to graduation that I didn’t really want to be a doctor. I stayed in school and got my MBA in finance and returned to St. Petersburg, Florida, where I started my career in financial planning, though it would be quite a few years before I came back to financial services.
I spent most of my early career in real estate and real estate consulting, which eventually led me to sell my consulting firm to KPMG, and then go to work there, where I eventually became CEO.
Throughout my career — first at KPMG, then at the talent firm Korn/Ferry — I watched the growth of Raymond James … I knew Tom James from the tennis community in St. Petersburg and always admired the company. He eventually asked me to join the board, and I gladly accepted. When I stepped out of the CEO role at Korn/Ferry, I often said I’d only consider taking on a CEO role if it was for Raymond James, so it was great to have Tom bring it up, and a true honor that Tom felt I was the right person for the job. I felt we had shared values and that I could continue the legacy that Tom and his father built, while helping the company continue to grow.
What challenges have you faced in your career and how do you see yourself overcoming them?
I sold my consulting firm to KPMG on Black Monday, October 1987. I joined Korn/Ferry on June 30 of 2001 — the year the industry’s stock value fell by 50% because of the tech bubble. I joined Raymond James in March 2009, the stock market’s low point during the worst recession since the Great Depression. I’d say my timing has not been great, but I’ve been fortunate to be a part of the upside … In all of those cases there was basically nowhere to go but up.
The career decisions I made weren’t based on what was going on in the environment around me; they were based on believing that the people involved shared my values and that I could contribute to the organization. That’s been an approach that has served me well — thinking about the fit and the long-term reward, rather than letting short-term trends define my decisions.
What is the biggest issue confronting the wealth management field today, and how should the industry overall — or financial advisors overall — address it?
There’s a lot of change happening all at once and addressing it all — at the individual advisor level and at the firm level — is the biggest challenge I see.
At Raymond James, we’re proud of our long-term focus, which includes proactive planning to make sure we’re well positioned for the future. Part of that has been looking at these changes, which we’ve boiled down to three areas: demographics, technology and regulation.
The first is really a tale of two client groups. Current clients — which are predominantly the baby boomers — are living longer than ever before, which means there’s a whole new definition of retirement and the kinds of services and support people need and expect. The other group is the next generation of investors — including more women as primary decision makers and the millennial generation that’s the most diverse ever.
On top of serving these groups and their differing needs — with an advisor population that is shrinking no less — there’s the whole issue of technology and what it means to how clients want to be communicated with (no matter their age) as well as which tasks it can do that an advisor traditionally handles.
You could narrow that down to the “robo-advisor threat,” but I think that’s a little short-sighted since their focus on asset allocation is something many of the best financial advisors have already outsourced to professional money managers as they focus more on the advice. So, while there are some unique aspects to these new offerings with pricing, I don’t think this or any technology is a threat to the broader planning role advisors play.
For us, technology offers an opportunity to elevate our industry — this profession — to use technology in a way that empowers advisors to do even more for their clients. It can create efficiencies and offer insights, but most importantly, it can allow advisors to have more time to connect with clients to understand their needs, which is what the best financial advice is based on.
Finally, there’s a lot of attention on additional regulation of our industry. The recently announced Department of Labor rule regarding a fiduciary standard for retirement accounts is an example. We as a firm and I personally argued against this rule — not because we don’t believe in a fiduciary standard, but because we believe in one from a regulator with broad authority that applies across account types. There are also the practical logistics of implementing the rule, of course, and I do think the DOL heard what we said and adjusted the final version based on the industry’s feedback. That’s a positive, even though the rule doesn’t meet that broader mandate to really be consistent across the board.
Everyone recognizes and appreciates that regulation is necessary — there need to be ground rules, clients need to understand how they’re being served, bad players need to be held accountable. But it’s such a complex landscape with so many regulators, different rules applying to different account types or scenarios, and changing focus areas from regulators. It’s difficult for anyone to keep up. That’s problematic — particularly for the clients regulators are trying to protect.
Our focus is on doing what’s right for the client, plain and simple. We have a tremendous opportunity and responsibility to make a difference in our clients’ lives. The vast majority of the time, the vast majority of us in this industry do the right thing. Regulation should be about making sure we’re working from the same set of rules and are able to identify those who aren’t playing by them.
What is the most significant change you have you seen at Raymond James, and why did it occur?
Well, being only the third CEO in the company’s history and taking over from the founding family, others might argue that I’m the biggest change. Seriously, though, I like to think I’m just continuing a trajectory that was already well defined.
To that end, Raymond James has emerged as a more recognized player in the wealth management industry over the last 10 to 15 years. We often talk about our “sweet spot” between the big banks and the regional firms — big enough to offer all the resources of our largest competitors, but small enough to maintain more personalized service for advisors and their clients. That unique position has proven popular among advisors and led to some pretty successful recruiting years, though we’ve really focused on managing that growth to ensure we maintain our culture.
What’s more significant at Raymond James is what hasn’t changed — our core values and how we manage the business. I love that I can be in a meeting with people from all over the firm talking about a new product or service or a business change and inevitably someone will ask the question: what does this mean to clients?
That focus on clients really defines Raymond James and is the litmus test for everything we do. Being in those meetings and hearing questions like that tells me we’re doing something right. We’re not perfect, and we make mistakes, but we start from the right place.
We’re focused on growth, yes. But you don’t continue to grow if you make short-term decisions that don’t first consider the people you’re serving … Eventually those kinds of choices come back around, usually with not-so-great consequences.
What is the future of the wirehouse/full-service employee-advisor model? Why?
I don’t think it’s going anywhere. At Raymond James, we’ve made it pretty clear through the years that our approach is about supporting advisors in a way that is platform-agnostic … When it comes to the role of the full-service advisor, whether they are in an employee or independent model, we believe our job is to give them the tools they need to serve their clients and build their businesses.
And as to full service, I think that’s more important than ever. The needs of clients are more complex than ever as they juggle their own needs, care for parents and children, consider things like housing as they age, long-term care or estate planning.
The best advisors are more and more the “hub” for their clients — it’s no longer just about investment advice, it’s about life advice, even about “advisor as therapist” as they help their clients deal with complex issues and bring people, products, services together to address those needs.
For firms, our job is to help advisors better manage their time with tools that leverage technology, big data and the like so they can focus more on what their clients need and be that trusted advisor.
What else would you like to share about the industry and your role in it?
You know, the headlines you read about our industry are often negative. The rogue advisor, the regulatory fines, the political discourse that paints financial services as almost evil.
But that’s such a contrast to the stories I hear from clients. For example, I was trick or treating with my granddaughter a few years ago and the gentleman who answered the door recognized me as head of Raymond James. He proceeded to tell me about his financial advisor. Not about how he’d made him money or protected his savings, but how his advisor had convinced him to reconnect with family he hadn’t spoken to in decades.
A big part of my role is ensuring those kinds of stories are shared, and making sure we’re supporting advisors in a way that they can make more of their clients feel that kind of impact from their relationship with their advisor.
— Check out RBC’s Retiring CEO Talks DOL Fiduciary and the Best Business Model on ThinkAdvisor.