Unlike some large rivals, Raymond James is adding financial advisors. In the quarter ended June 30, the Private Client Group grew by 115 advisors and ended the three months at 7,719 — a net increases of 434 over June 2017.
“We continued to retain and attract high-quality financial advisors across all of our affiliation options,” according to CEO and Chairman Paul Reilly. “We are on track for record financial advisor recruiting results in fiscal 2018,” which ends Oct. 31.
PCG assets under administration rose 14% year over year and 4% sequentially to $719.5 billion. Fee-based assets stand at $343.1 billion and grew more aggressively: 24% over June 2017 and 6% over March 2018.
Plus, the unit boosted its revenue by 13% from last year to nearly $1.3 billion and pretax profits by 3% to about $132 million. Compared with last quarter, though, sales grew just 1%, while pretax income fell 16%.
Across the company, net revenue improved to $1.8 billion in the second quarter, up 13% from the year-ago period and 1% from the earlier period. After-tax net revenues were about $232 million, or $1.55 per share vs. $183 million, or $1.27 per share a year ago, and $243 million, or $1.63 per share, in the prior quarter.
On a conference call with equity analysts, Reilly said some costs that kept net income down sequentially were tied to business development, such as conferences and recognition events.
“But [there are] also significant recruiting and onboarding expenses, about 115 advisors plus a new correspondent from which all should be great investments going forward,” the executive explained. “These are lumpy as to timing, and they’re really investments for the long term.”
Push & Pull Factors
Like Reilly, Tash Elwyn — head of the employee advisor channel Raymond James & Associates — says the firm is “firing on all cylinders across affiliations.”
There’s plenty of interest from advisors with wirehouses, he adds. This includes reps with firm both in the Protocol for Broker Recruiting (Merrill Lynch and Wells Fargo) and outside of the protocol (UBS and Morgan Stanley). Plus, interest at regional and independent firms also is strong.
As of the end of June, the employee channel had 3,126 advisors, up 130 from last year and 73 from the prior quarter; the independent channel had 4,593, a jump of 304 from the year-ago period and 42 from the earlier period.
Factors that might encourage or “push” advisors out of a wirehouse firm, according to Elwyn, include regular changes in compensation, leadership, vision and strategy at rival firms, as well as an emphasis on sales of products and services like loans — which he refers to as “macro factors.”
“Micro push factors,” the executive explains, are related to “a lack of tenure and consistency in branch leadership, turnover and a lack of support at the local level. If you look back over the past several years, you see many wirehouses consistently creating an infinite variety of both types of push factors.”
Pull factors are concerned with the “consistency of the Raymond James culture in which clients come first and advisors are a close second,” Elwyn said, during an interview on Friday, the last day of this year’s national development conference for employee advisors. “Raymond James, secondly, consistently seeks to be a place with unique combination of Wall Street resources and Main Street values.”
Finally, the firm’s stance that “advisors own their book of business,” he points out, benefits recruiting and retention and empowers advisors. “It’s not a complicated premise, but is a daunting business model for our competitors to adopt.”
On Sept. 30, Elwyn and fellow executives Scott Curtis and Jodi Perry will be assuming new responsibilities as Chief Operating Officer Dennis Zank retires.
Curtis, head of the independent-advisor channel, will lead the broader Private Client Group. Elwyn is adding regulatory oversight and reporting tasks to his role. And Perry, national director of Raymond James Financial Services’ independent contractor division, is becoming the entity’s president.
Zank has been COO for 6.5 years, according to Elwyn: “Raymond James is as focused on succession planning at the corporate level as it is at the advisor level. We are very excited about and confident in the strength of our leadership team going forward.”