Raymond James Financial was down 41 advisors in the fourth quarter 2012, due primarily to the attrition of low-producing Morgan Keegan reps. But the firm announced record assets under administration of $392 billion, up 45.4 percent from the year-ago quarter, and record productivity for its advisors.
Overall, net income was a record $85.9 million for the quarter, up 15 percent from a year ago, on net revenue of $1.1 billion, a 42 percent jump. The private client group’s pre-tax income grew 7 percent year-over-year to $52.9 million, while revenues grew 35 percent to $712.8 million.
Advisor count fell from 6,330 in the third quarter of last year to 6,289 this quarter, including 5,427 in the U.S. As a result of the merger with Morgan Keegan, the firm brought over 938 new advisors as of June 30, 2012. The number of former Morgan Keegan advisors now stands at 869.
“They locked in the interesting guys, and obviously that’s the same effect that you’ve seen with the large wirehouses,” said Alois Pirker, research director with Aite Group. “Folks that haven’t gotten a lock-in, some of them are looking for alternatives.”
During a conference call Thursday morning, CEO Paul Reilly said there were three regrettable losses of advisors during the quarter, all of which had over $400,000 in production. One advisor passed away.
Pirker said he thinks the firm has advisor attrition under control, and he doesn’t expect a mass exodus. “I think it is a good fit between the two firms, and ultimately for the Morgan Keegan guys, it’s a decisive step up in the infrastructure they have, the product capabilities.”
In fact, Pirker believes they are well-positioned to increase headcount, given the acquisition.
“Raymond James has definitely made a splash with Morgan Keegan, and it indicates that they are a serious player,” Pirker said. “The more scale they’ve got, the better you can do business in brokerage. So they obviously have moved that scale up a notch with that acquisition.”
And the pipeline for recruiting remains strong, Reilly added. The firm is getting a lot of interest from advisors at some of the larger wirehouse firms who are not satisfied where they are but took a big check to stick around.
Chief Financial Officer Jeff Julien said it was a record quarter for advisor productivity, although the firm would not disclose the numbers. As of Sept. 30, 2012, average advisor production was at $516,497, not including trainees and recent experienced hires.
Productivity of Morgan Keegan advisors is 15 percent lower than those at Raymond James & Associates, the firm’s employee division, Reilly said. But the firm hopes to close that gap and bring Morgan Keegan’s productivity up, as advisors are converted to Raymond James’ technology platform.
Raymond James also recently released a new payout grid for its employee advisors, which takes effect in October. Payout will now be “product-neutral,” meaning instead of paying advisors based on the types of products sold, they’re paid based on trailing-12 months production. There are 15 production tiers. For example, if an advisor is producing between $3.5 million and $5 million a year, their payout is 48 percent.