Some two weeks after announcing layoffs of about 4% of its staff, or roughly 500 workers, as part of its need to cut costs in the face of declining earnings tied to lower interest rates and rising loan-loss provisions, Raymond James says it’s merging its investment advisor and custody & clearing businesses into the newly created RIA & Custody Services Division.
The news comes as the industry awaits the completion of Charles Schwab’s $26 billion purchase of TD Ameritrade, leaving rival firms to position themselves to better compete in a shrinking field of large custodians.
“It’s a case of opportunity meets disruption,” said Tim Welsh of the consultancy Nexus Strategy about Raymond James’ move. “It’s a watershed moment.”
Other custodians, like Fidelity, have integrated their operations, Welsh points out. “This is Raymond James’ response” to its need to take such steps in a rapidly changing industry, “and it gives them an opportunity to go after some disgruntled TD Ameritrade advisors.”
Like other brokerage firms, “Raymond James likely has seen in the past year some advisors contemplate going totally independent or getting caught up in rollups and selling to independent firms,” explained Peter Mallouk, President of Creative Planning, an RIA with over $50 billion in assets.
“This is their answer, [and it's] coming to all the core brokerage houses, too, like Merrill Lynch and others,” Mallouk said about giving advisors a dedicated RIA platform and/or channel. “We will see this all these places eventually.”
Details on the Restructuring
With the expected growth “in the number of independent RIAs and breakaway advisors, we’re investing in the platform and services to support their evolving needs,” according to Scott Curtis, Private Client Group president at Raymond James.
“Rather than operating as separate business units, there are resource and support synergies with our combined RCS division, providing a more comprehensive and efficient platform for our RIA and broker-dealer client firms,” Curtis added in a statement.
The firm’s Investment Advisors Division was set up in 2001 to provide custodial and support services to independent registered investment advisors. The Custody & Clearing Division opened its doors in 1982, to serve broker-dealers with custody and clearing services.