Raymond James lures 'largest' teams ever for record sales

Raymond James lures largest advisor teams in history for record net revenue

October 28, 2022 7:37 PM

Raymond James is scoring the biggest teams of advisor talent in its history, a strategy that's paying off despite gloomy market conditions.

The brokerage generated record net revenue for the third quarter and over its fiscal year of the past 12 months, Chairman and CEO Paul Reilly told analysts in an earnings call Thursday.

Reilly attributed the St. Petersburg, Florida-based wealth management firm's gains to a large year-over-year jump in net interest income as well as fees from third-party banks that Raymond partners with through its Raymond James Bank Deposit Program. He also credited the "strong retention" and recruiting of financial advisors and "our multiple affiliation options," in which advisors can choose to be branch employees, independent contractors or bank and credit union affiliates. The talent influx helped fuel what he called "industry-leading growth" of 9% in domestic net new assets over the fiscal year.

"Really the largest teams we've ever recruited continue to come in," Reilly said.

He said the talent market, which saw near-record advisor moves earlier this year, is "still very active, it's very competitive and continues to be such." He added that Raymond James had also seen success in promoting "our platform for high-net-worth and ultra-high-net-worth advisors as well as the advisors that we've recruited for throughout our history."

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To see the main takeaways from Raymond James' third-quarter earnings, scroll down the slideshow. For coverage of the firm's second-quarter earnings, click here. For a look at the results from the first quarter, follow this link.

The big numbers

The firm reported record net revenue of $2.8 billion for the quarter, up 5% year-over-year, and record annual net revenues of $11.0 billion. The Private Client Group reported "record quarterly net revenues of $2.0 billion, up 11%" year-over-year, according to an earnings report. The segment was helped by higher short-term interest rates, Reilly said.

Client assets fell to around $1.1 trillion. That's down 7% on year-ago levels, which Reilly attributed to "equity market declines in the quarter including a 5% sequential decline in the S&P 500 Index."

CFO Paul Shoukry warned on the call that the ailing markets "will create a headwind for asset management in related administrative fees in the fiscal first quarter, which I expect to be down close to 4% sequentially in the fiscal first quarter of 2023."

Financial advisors

Raymond James added 65 new financial advisors to its Private Client Group in the third quarter and 199 year-over-year, for a total of 8,681 advisors across its wealth divisions. Some 3,638 are in the employee channel, and 5,043 are independent contractors, according to an earnings supplement on the company's website.

Reilly said the 199 doesn't include "transition of advisors to our RIA and Custody Service division, where we typically retain the assets but we don't include the advisor in our accounts." He said that adjusting for those other channels, and adding 222 advisors in that unit over the past year, "the number of financial advisors increased 421 year-over-year, a really strong result."

Looking back over the past 12 months which ended on Sept. 30, Reilly said, "we recruited to our domestic independent contractor and employee channels financial advisors with nearly $320 million of trailing 12-(month) production and approximately $43 billion of client assets at their previous firms." He added that in the Private Client Group, the firm generated domestic net new assets of almost $95 billion in that time.

Expenses

Compensation expenses in the past quarter declined 1% year-over-year to $1.8 billion, according to an earnings presentation, while total non-interest expenses grew 4% to $2.2 billion. Shoukry noted that non-compensation expenses had grown over the quarter as the firm financed recent acquisitions.

"We're still heavily investing in technology to support advisors, their clients and really all the businesses and functions across the firm so that's going to continue to be a significant focus for us going forward," Shoukry said, adding that analysts could expect to see "on a year-over-year basis growth in business development expenses as the first half of fiscal '22 travel and conferences obviously were still suppressed by the COVID pandemic."

Acquisitions

Reilly said several recent acquisitions had contributed to diversified revenue growth. He noted that Raymond James' acquisition of Charles Stanley, an investment management firm in London, earlier in the year had "significantly expanded our presence in the U.K., which is a very attractive market for wealth management."

Reilly said that another recent deal, for SumRidge Partners, a fixed-income electronic market maker in Jersey City, New Jersey, had "enhanced our fixed-income platform with technology-driven capabilities" but was facing challenges as the Federal Reserve embarks on monetary tightening initiatives. He also highlighted strength in the bank segment, saying that "loans grew 73% year-over-year and 3% during the quarter, reflecting attractive growth across nearly all loan categories. The acquisition of TriState Capital Bank earlier this year added what Reilly called a "best-in-class third-party securities-based lending capability, while also diversifying our funding sources."