Raymond James executives are taking steps to boost the profile of the firm's small custody unit, and they are hinting at bigger things to come.
In the works are a pricing revamp that will cut trading costs for advisers' clients, and a no-transaction-fee exchange-traded-fund program.
Mike DiGirolamo, who heads the Investment Advisors Division's custody business, wouldn't say specifically what the planned pricing changes might be, “but we're not increasing [them],” he said. “We're not going to be the cheapest, because we have a lot of resources to offer.”
Mr. DiGirolamo also said he's in discussions with Invesco PowerShares Capital Management LLC, and
BlackRock Inc., which sponsors iShares, and hopes to begin offering no-transaction-fee ETFs in the next six months.
NO-COST TRADES
TD Ameritrade, Fidelity and Schwab have offered no-cost trades with select ETFs for a year or more.
“We have to be in there competitively [with other custodians],” Mr. DiGirolamo said.
Registered investment advisers got the heads-up on these developments last week at a meeting in St. Petersburg, Fla.
The custody unit serves 88 adviser firms managing a total of $6 billion in assets. That amounts to about 1% of what industry leader Schwab Advisor Services handles.
The pricing changes might help Raymond James grow, said John Burke, president of Starboard Asset Management Inc., who has about $40 million in custody at Raymond James.
“Raymond James commissions are higher” than at competing custodians, he said. “They could probably keep their commissions down to attract more RIAs.”
Mr. DiGirolamo's goal is to quadruple assets to $25 billion by bringing on advisers who have $100 million in assets and are growing.
“We haven't been as aggressive as we should have been” in building the custody business, said Paul Reilly, chief executive of Raymond James Financial Inc., adding that the firm will remain selective in adding advisers and has no hard deadline in terms of reaching the $25 billion mark.
“We're committed to figuring out how to be a real players” in the custody space, said chief operating officer Chet Helck. “There are things we can do that [competing custodians] won't.”
One possibility would be a turnkey compliance program for RIAs. But the firm's executives said that anything like that will have to wait until the regulatory landscape becomes clear.
Right now, Raymond James, as a firm, is focused on making its technology more user-friendly, which should make it more attractive to RIAs.
“We're making big investments in technology — we want to be world-class,” Mr. Reilly said. “We want to benchmark against the wirehouses and the Schwabs and Fidelitys of the world.”
TECH HIRES
The firm has made a number of high-level tech hires in recent months.
In June, Bella Loykhter Allaire became executive vice president of technology and operations, and this month Vincent Campagnoli joined as head of tech strategy and development for the firm's retail units. Both have had IT stints at wirehouses.
A chief tech architect will also be announced soon.
The firm is moving away from account-based functionality to an interface based on relationships, Mr. DiGirolamo said.
A new financial planning tool will be integrated into advisers' workstations within the next 12 months, along with a new portfolio management system from FolioDynamix. The name of the planning software hasn't been announced.
While the firm works on those enhancements, advisers at the meeting said that Raymond James has a lot to offer.
Service is top-notch, and the culture supports advisers. Plus, the firm may be the only true full-service brokerage firm supporting independent advisers, they said.
“What you have [at Raymond James is] the talent of an old-line brokerage firm that supports fee-only firms, which is unheard of,” said Tim Baker, founder of Timonier Family Offices Ltd., who manages about $140 million and is in the process of moving assets to Raymond James from TD Ameritrade Holding Corp.
He said that he was attracted to Raymond James' bond underwriting and loan capabilities.
GETTING THE WORD OUT
The biggest hurdle in capturing more RIA assets simply might be getting the word out that Raymond James is in the custody business.
“They don't publicize movement between divisions [within the firm] so they're trying to recruit from the outside, and they're not a well-known name,” said Alan Goldfarb, director of wealth advisory services at Weaver Wealth Management, which has about $280 million under management and administration, most of it at Raymond James.
Some think that the RIA unit gets lost within the much larger brokerage business. The same Raymond James recruiters work both the independent-contractor side and the RIA side.
That means that the RIA side could be missing out on hybrid recruits who come through the door, said Ryan Shanks, chief executive of Finetooth Consulting LLC, which helps breakaways. Advisers in the division can't use Raymond James for their securities business, he said.
The separation primarily is due to compliance reasons, Mr. DiGirolamo said. Hybrid advisers can use outside broker-dealers for their securities business or they can affiliate with the independent-contractor unit Raymond James Financial Services Inc. and run an advisory business through their own RIA.
Should Raymond James be successful in making its custody unit a bigger player, some of its RIAs wondered if they might lose the personal touch they enjoy now.
Mr. Baker, for one, doesn't think that is much of a risk.
The firm has plenty of support staff at the home office, he said, and the advisers' unit can grow by selectively adding larger advisory firms.
“They don't need [to add] a thousand guys” to get there, Mr. Baker said.
Email Dan Jamieson at [email protected]
