Private client group gains drive Raymond James to record quarterly profit

Pretax earnings jump 39% to $81.5 million; profit margins hit 10%

Jul 23, 2014 @ 6:19 pm

By Mason Braswell

Raymond James Financial Inc. continued to build on momentum as pretax profit in the private client group hit a record $81.5 million in the firm's third fiscal quarter, a 39% increase over the same period last year.

Strong growth in recurring fee revenue helped offset expenses at the private client group, which accounts for over two-thirds of the total revenue at the company. The firm's approximately 6,250 advisers across both its employee and independent brokerage channels brought in quarterly revenue of $816.9 million, netting the firm a 10% pre-tax margin, up from 7.7% in the year-ago quarter.

“Record results in the private client segment were driven by record levels of client assets and a continued focus on enhancing margins,” the firm said in its earnings news release.

(See how the private client group was also the star in Raymond James' second quarter.)

Total assets under management climbed to $454 billion, a 17% increase from the year-ago period and up 5% from the previous quarter. Approximately $168 billion of those assets were in fee-based accounts, up nearly 28% from the same quarter last year.

That increase helped boost recurring revenues, which the firm said now comprise around 70% of the segment's total income.

Part of that increase may also come from some fee changes implemented earlier this year. The firm decided to do away with fee-waivers on some smaller accounts, rather than implement minimum account sizes, the firm's chief executive, Paul Reilly, said at a conference in May.

RECRUITING, RETENTION

In addition, Raymond James said strong recruiting and retention of veteran advisers helped push assets under management higher. The firm reported a net gain of 49 advisers during the quarter, putting the total headcount at 6,251 globally, including operations in Canada and the United Kingdom.

The strongest growth was in Raymond James Financial Services, the independent adviser channel, which grew by 74 advisers over the first three quarters of the year to 3,320. The brokerage channel, Raymond James & Associates, added a net of six advisers over the year to hit 2,455.

(Find out who's joining Raymond James and where they're coming from,)

The firm added seven dual registrants to its hybrid channel, which has hovered at around 80 advisers in recent quarters. That channel was launched last spring.

Compensation continued to eat up the largest segment of income. Compensation, commissions and benefits across the company rose 7% from the year-ago quarter to $825 million.

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