Raymond James is trimming close to 4% of its workforce of 13,900 employees in and outside the U.S. — or roughly 500 positions.
But will the firm, which has over 8,100 advisors and added a net 251 in the past year, see any impact from the move on its recruiting efforts — including the transition packages it offers?
“It’s part of an overall industry trend,” said Mark Elzweig, an executive search consultant based in New York, about the job cuts.
Raymond James’ announcement Tuesday about layoffs followed similar news from Wells Fargo and Citigroup, which had paused layoffs earlier this year due to pandemic and recently resumed them.
Worldwide, some 64,000 positions have been eliminated at banks so far this year, according to Bloomberg, which estimates that close to 80,000 layoffs could happen in 2020. The vast majority of the cuts to date this year, about 50,000, are in Europe.
“The pandemic hammered firm profitability. Layoffs are for staff positions,” Elzweig explained.
In Raymond James’ case, most of the job cuts affect those in corporate roles across the U.S. and abroad, according to the firm.
“Given the strong infrastructure we have in place, these steps are not expected to diminish service levels to advisors or their clients, or impair our ability to continue our growth momentum,” said Chairman and CEO Paul Reilly in a memo sent to the firm’s employees and obtained by ThinkAdvisor.
For Elzweig, “So far there has been no effect on recruiting” from banks’ job cuts, “but that doesn’t mean that there won’t be one.”
The number of staffers at Raymond James’ headquarters and in the Tampa, Florida, region should remain at about 5,000, roughly the 2019 level, the firm said Tuesday.
It also is not expecting to make more job cuts. “While we plan to continue identifying efficiencies throughout our businesses, starting with a significant cut in pay for me and our senior leadership team, we do not intend to have another round of job eliminations,” Reilly said.
Still, financial institutions are in a tough situation due to their need to set aside money to cover loan losses as a result of the economic downturn. Raymond James’ loan loss provisions, for instance, were $81 million in the quarter ending June 30 and $109 million in the prior period.
Its total revenue dropped 5% from a year ago to $1.83 billion as of June 30, while net income weakened 34% to $172 million; earnings per share fell 32% to $1.23.
“Firms that are making less money may decide to focus their diminished recruiting dollars mostly on larger producers,” Elzweig said. “We will see.”
Another possibility now being discussed by those in the recruiting field concerns possible cuts this fall to transition money paid to advisors switching firms, according to Jon Henschen of Henschen & Associates, who is based in the Minneapolis-St.Paul region.
“This is due to the fact that money market sweep accounts are paying next to nothing, and that’s an important profit center for broker-dealers,” Henschen said.
Plus, the firms may be “keeping powder dry” for a potential bear market, the recruiter added. “And they are likely to be more conservative with transition money” should the market head south.
Recent Recruits, Red Flag
Over the past few weeks, Raymond James has recruited advisors with a combined $2.3 billion in assets under management, all from wirehouse firms. For instance, it recently added a $1.2 billion team from UBS in Kansas City and a $500 million Wells Fargo group in Philadelphia.
It had total assets under administration of $908 billion as of July 31. Of this figure, $863 billion was with its Private Client Group — up 9% from the prior year and 53% of which is in fee-based accounts.
Industry consultant Tim Welsh of Nexus Strategy called Raymond James’ latest news “extremely surprising,” given that Charles Schwab and other discount brokerage firms are aggressively hiring large numbers of workers.
“Is it an issue of having a full-service model?” he asked, referring to the fact that the firms cutting jobs have large numbers of employee advisors, though Raymond James also works with several thousand independent reps. “Is this a potential red flag for mega full-service firms” in general?” Welsh pondered.
While most financial services firms are “struggling with low interest rates,” the consultant said, “the brokerage firms are killing it” in terms of high trading volumes of stocks and options and asset flows.
Still, even Schwab, which now as $4.5 trillion of client assets, acknowledged this week that its results are facing tough headwinds. And with today’s update from the Federal Reserve, which pledged to keep rates near zero for at least three years, this situation isn’t poised to get easier soon for any financial-services entity.
— Related on ThinkAdvisor: