Raymond James sweetens the pot for hybrids

Firm sees 'simplicity' and 'transparency' in new fee structure for target group

By Bruce Kelly and Dan Jamieson

Mar 18, 2013 @ 9:42 am (Updated 1:15 pm) EST

hybrid advisers, raymond james

Bowing to competitive pressures, Raymond James Financial Services Inc. is sweetening the pot for its top independent hybrid advisers but the moves might not be enough to move the attract loads of new advisers.

Advisers with Raymond James Financial Services who have at least $100 million in discretionary assets under management can choose to retain 100% of their advisory fees and pay a quarterly fee based on assets under management, instead of the traditional payout on fee revenues they produce.

The changes, announced last Monday are “getting [Raymond James] closer to the top tier custodians, but they’re still charging something” to advisers, said Chris Winn, managing principal at AdvisorAssist LLC, a consultant.

Custodians such as Schwab Advisor Services or Fidelity Institutional Wealth Services don’t charge advisers, he said, and instead make money from commissions and other fees.

“It seems like [Raymond James] is trying to get more competitive, but I’m not sure they’re there yet,” Mr. Winn said.

In another piece of the plan, Raymond James will charge six basis points on the first $100 million under management, three basis points on the next $100 million, one basis point on assets between $200 million and $300 million, and nothing after that, for a maximum of $100,000 per year.

Hybrids are among the fastest growing segments of the retail securities market and a key target for Raymond James.

“It's about getting competitive for advisers we want to attract, and partly a defensive move so we remain competitive for advisers here already,” said Scott Curtis, president of Raymond James Financial Services.

“We have had a few significant teams [leave] in the last two-plus years,” he said.

“It turned out that economically we couldn't match offers from other organizations,” Mr. Curtis added, mentioning competitors like Schwab Advisor Services, Focus Financial Partners LLC, Hightower Advisors LLC and Dynasty Financial Partners.

The top 1% to 2% of the 3,200 advisers at Raymond James Financial Services qualify for the new arrangement. Mr. Curtis expected most would make the change on either April 1 or October 1, the latter date the start of Raymond James' fiscal new year.

Raymond James will also reimburse clients' 12(b)-1 fees on fund shares in clients' managed portfolios.

“No other organizations that we've seen that are [supporting hybrids are] allowing 12(b)-1 fees to flow back to clients,” Mr. Curtis said. “In all other cases they're being retained by the custodial firms [and] it's a material amount of revenue.”

Matthew Enyedi, senior vice president of RIA business development at LPL Financial LLC, said his firm has no annual fee for custody of advisory assets by hybrid advisers, and no minimum.

At Cambridge Investment Research Inc., payouts can go as high as 100% on fee-only business, but each deal is customized, said chief executive Eric Schwartz, in an email.

Raymond James needed to act because “large reps with large advisory businesses at all the firms [are] very seriously considering leaving the [independent broker-dealer] platforms,” said Joe Duran, chief executive of United Capital Financial Partners, Inc.