Raymond James record wealth management earnings offset declines in other businesses

Another record quarter from Raymond James Financial Inc.’s wealth management business helped offset lower revenue from other business lines during the company’s fiscal first quarter.

In the three-month period ending Dec. 31, Raymond James' private client group, or PCG, generated net revenue of $2.06 billion, up 12% over the same period in 2021 and up 4% from the previous quarter, which at the time was a record for the firm. Net new assets increased $23.2 billion, a 9.8% annualized growth rate from the beginning of the quarter.

Raymond James continued to attract financial advisors in the quarter, reporting a total head count of 8,699 — an increase of 235 year-over-year and up 18 from the previous quarter.

“With our unwavering focus on retaining, supporting and attracting high-quality financial advisors, PCG consistently generates strong organic growth,” CEO and chairman Paul Reilly, the firm's CEO and chairman, said on a conference call to discuss Raymond James’ quarterly earnings.

However, PCG’s assets under administration decreased 7% year-over-year to $1.11 trillion, and assets in fee-based accounts fell to $633.1 billion, also a 7% drop. These were market-driven declines, Reilly said.

“During a volatile and challenging market environment, we generated record quarterly earnings as the benefit of higher interest rates more than offset the decline in capital markets results,” Reilly said on the call. “Once again, our results highlight the value of having diverse and complementary businesses. While the economic outlook remains uncertain, we are well positioned with strong capital ratios and a flexible balance sheet.”

[Topic: Wealth management earnings]

PCG’s results, along with net interest income and fees earned by Raymond James’ bank deposit program, offset lower revenues from investment banking and asset management. Overall, the firm’s quarterly net revenue was flat compared to the prior year’s fiscal first quarter, and down 2% from the previous quarter.

The high interest rate environment did have an impact on clients’ cash sweep balances, which ended the quarter down 18% from December 2021. To address this, Raymond James is in the process of launching an “enhanced” yield savings program for clients.

Nearly every firm offers a high-yield cash program now, and Raymond James wants to offer competitive interest rates to prevent customers from taking their cash elsewhere.

“The good news is even at those much higher rates, we can still earn a spread,” Reilly said.

While the executive wouldn’t rule out any upcoming M&A, the firm’s focus remains on organic growth, Reilly added.

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