Why Raymond James' Purchase of $35B Retirement Plan Firm Is a 'Strategic Fit'

Raymond James headquarters in St. Petersburg, Florida.

Thursday’s move by Raymond James to buy a retirement plan administrator with $35 billion in plan assets and 400,000 participants is being praised by industry consultants for its strategic value.

The deal includes Seattle-based NWPS and Northwest Plan Services, as well as its 160 employees, and comes a week after rival broker-dealer LPL Financial said it was buying the wealth unit of Waddell & Reed, which includes about $63 million in assets and 920 advisors, for $300 million.

“As basis points get squeezed out of the investment management supply chain, manufacturers and distributors — of which Raymond James is both — need to find new ways to grow and diversify revenues,” said Tim Welsh, head of the consultancy Nexus Strategy.

“Retirement plan servicing is a key component in that marketplace, so this provides them with a new channel and capability — a very strategic deal,” Welsh explained.

Terms of the deal were not disclosed, but Raymond James says it expects the transaction to close by year-end.

“Access to expanded retirement service capabilities is a big plus for advisors,” said executive search consultant Mark Elzweig. “Many advisors feel that they have more of a sense of control  with an in-house department than with an external relationship. If NWPS has any proprietary competencies that’s of course helpful, too.”

Since assets in retirement accounts tend to be “sticky,” Elzweig added, “this is a worthwhile area” for Raymond James to invest and dedicate resources.

What Comes Next

Raymond James is “excited to add this important capability to our broad suite of advisor and client-centric retirement services,” said Scott Curtis, president of the firm’s Private Client Group, in a statement.

The addition of NWPS means Raymond James is able to expand retirement services offerings, such as retirement plan administration, to its advisors and their clients, according to the firm, based in St. Petersburg, Florida.

“The timing is opportune as the industry prepares for new solutions created by this year’s SECURE Act, such as pooled retirement arrangements, and increases the investable market for employer and employee small business solutions,” it explained.