Raymond James hanging onto RIA assets of shifting advisers: Reilly

Raymond James Financial Inc. CEO and chairman Paul Reilly said Thursday the firm was holding off competitors for the assets of financial advisers who drop their securities industry licenses as brokers to work as registered investment advisers, which operate under the aegis of the Securities and Exchange Commission as well as the states.

In a conference call, Reilly didn't give the name of the large RIA that recently shifted, but he said it had more than 170 financial advisers registered with Raymond James. Last year, Raymond James and Steward Partners, an employee-owned firm, announced that Steward Partners intended to move its advisers and client assets to Raymond James' RIA and custody services group.

One of the fastest growing firms in the financial advice industry, Steward Partners has been broadening its industry relationships. A month after that announcement, in June 2021, Steward Partners said it had signed on as the first client of a new business at Goldman Sachs providing clearing, custody and other support services to registered investment advisers. A year earlier, Steward Partners bought assets from a bank, Umpqua Holdings Corp., which included its wealth management and brokerage business.

According to its form ADV, Steward Partners Investment Advisory has 245 state-registered investment advisers and $13.25 billion in client assets. Goldman Sachs isn't listed as a custodian or clearing firm for Steward Partners in its disclosure with the SEC, but Raymond James & Associates Inc. is.

Reilly's comments on a call with analysts Thursday to discuss quarterly earnings gave no indication that Raymond James was losing RIA assets to the competition, although plenty of advisers are interested in working under the roof of an RIA.

"The good news is, when people have switched to RIA, they haven’t gone to any of our custodian competitors," Reilly said. "Almost virtually 100% have stayed at Raymond James. So it’s been a good retention tool."

"This was one big firm whose business model has changed," he added. "We knew it was coming. We’ve been planning on it for a year. The good news is they stayed with Raymond James. Their assets are custodied with us."

"This was a one-off movement that really focused on a changing business strategy for them," Reilly said. "It’s not certainly business as usual, it’s one of the largest firms on the platform that went RIA. People will continue to move but it’s not any different from the movement between the rest of our channels."

Steward Partners said it is developing its custody platform. "While we expect a majority of Steward Partners teams will continue to custody with Raymond James, we are excited to also offer a multicustodial option for those teams," a Steward Partners spokesperson wrote in an email.

"With regards to Goldman Sachs, Steward Partners looks forward to working with them as a custodial partner going forward and having them be an important component of the Steward Partners multi-custodial offering," the spokesperson added.

Meanwhile, Raymond James said its head count of private client group financial advisers was 8,616 at the end of last month, an increase of 203 compared to a year earlier but a decrease of 114 when compared to the end of this March. That decrease reflects the transfer of 188 advisers during the quarter, primarily from one firm, to its RIA and custody services group, as Reilly discussed on the earnings call.

Private client group assets under administration at the end of June were $1.07 trillion, down 3% compared to last June and 11% compared to this March, while assets in fee-based accounts were $606.7 billion, down 2% compared to a year ago and 11% compared to March.