Raymond James custody unit is small – but that’s OK

While Charles Schwab Corp.’s Impact conference in Boston this week generated the most interest among advisers, 1,300 miles away Raymond James’s Investment Advisors Division held its own industry meeting.
It’s easy to overlook Raymond James’ custody unit, which has 98 advisory firm clients with $6.2 billion at the firm. That’s dwarfed by Schwab’s 6,500 RIAs, who handle $605 billion in assets.
So far, Raymond James’ custody division has been somewhat of an internal affair, with about 60% of its assets coming from advisers who have split off from either of the firm’s brokerage divisions.
“In my mind, they haven’t made a big strategic effort to compete with the likes of Schwab or Fidelity or TD Ameritrade” for custody clients, said John Furey, founder of Advisor Growth Strategies LLC, a recruitment consultant.
Raymond James officials said this week at the conference in Tampa, Fla., that their goal is to conservatively expand the firm. And they are steadfastly avoiding a numbers game.
Last year, the firm doubled its maintenance fees for small advisers. Average assets per firm stand at $65 million, and should be even higher by year-end, said Mike Di Girolamo, head of the Raymond James unit.
Small size can be good for recruiting, he said. A big drawing card for recruits is that “you can still have a personal relationship with the top executives,” Mr. Di Girolamo said.
Raymond James officials think their channel-agnostic recruitment program also positions the firm for growth.
The firm pays its independent-channel recruiters the same, whether a breakaway recruit joins the independent contractor broker-dealer model at Raymond James Financial Services Inc. or its Investment Advisors Division. “It makes the [the recruiters’] job easier,” Mr. Di Girolamo said.
Employee brokers at Raymond James & Associates Inc. are recruited under a separate program.
The Investment Advisors Division brought in $600 million for the firm’s fiscal year ended in September, up 50% from $400 million in fiscal 2009.
Wirehouse reps are the firm’s best prospects, Mr. Di Girolamo said, because the firm offers an integrated platform across its channels, including research and individual branding support.
By operating in all channels, Raymond James executives also say they’re prepared for regulatory changes.
“We’re hedged against it,” said Paul Reilly, chief executive of Raymond James Financial Inc., the parent company.
Independent advisers were more profitable in the downturn because they pay their own expenses, Mr. Reilly added, while the employee side does better in good times.
Chet Helck, the firm’s chief operating officer and a board member of the Securities Industry and Financial Markets Association, has been a key player in meeting with regulators as the Dodd-Frank legislation is implemented.
He said regulators “need to define the parameters of the client engagement” from simple unsolicited transactions to full discretionary management, and write rules and set the standard of care accordingly.
Finding the right answers will be a challenge, but is doable, Mr. Helck said.
It’s also a challenge Raymond James faces internally.
Independent advisers generally don’t want to be subject to broker-dealer regulation, while brokers think RIAs are too lightly regulated. The firm serves both constituencies.
How does it balance those competing interests?
“It’s a little tricky,” Mr. Reilly said. “But we’ve just focused on educating the regulators” about the firm’s business. “The risk is that we get rules that don’t work” for each business, he said.

Related Topics: Raymond James & Associates Inc.