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Industry Spotlight > Clearing and Custodial Firms

Raymond James Shakes Up RIA Strategy

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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.

Greg Bruce, currently senior vice president and national director of IAD, will lead the combined business as senior vice president, head of RIA & Custody Services “directing support for existing clients and leading RCS’ growth plans,” according to a press release.

Raymond James declined to state the number of investment advisors working with the business, but the firm said IAD assets have risen 37% since Bruce was hired in March 2019 from Schwab Advisor Services.

On Monday, Steward Partners  an RIA that offers it partner firms brokerage services through Raymond James  said it had struck a deal to buy Umpqua Investments, which has 23 bank-based advisors managing $3.4 billion in client assets. Steward currently works with about $16.4 billion in assets.

Last week, Raymond James said its level of fee-based assets jumped 20% from a year ago to $483 billion as of Aug. 30. Total PCG assets under administration were $899 billion, up 14%.

Recent Results 

Raymond James ended the most recent quarter with 8,155 independent and employee advisors as of June 30. That’s up 251, or about 3%, from a year ago, and seven advisors from the quarter ending March 31.

Across the company, total revenue dropped 5% from a year ago to $1.83 billion as of June 30. Its net income weakened 34% to $172 million, while earnings per share fell 32% to $1.23.

Raymond James will release earnings for the period ending Sept. 30 and its 2020 fiscal year on Oct. 28.

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