Paul Reilly, the chairman and CEO of Raymond James Financial, credited the firm’s culture, investments in technology—as well as an ever-rising market—for the firm’s record fourth quarter and its yearly financial performance, during a Thursday earnings call.
Capital markets was the only business unit that didn’t log record quarterly net revenue and pretax income in the fourth quarter, he said.
The firm’s Private Client Group, which includes its advisory businesses and accounts for the majority of the money it brings in the door, posted record quarterly net revenues of $1.17 billion, up 21 percent over last year’s fiscal fourth quarter and 4 percent over the previous quarter. Quarterly pretax income also had a record of $142.3 million, a 34 percent over the prior year’s and an 11 percent from the third quarter of 2017.
Reilly credited a growing number of advisors (a record 7,346 to end the fiscal year) and the firm’s investments in technology to help recruit, retain and enhance their practices, for the performance, though he admitted a record stock market gave the firm a lift.
Raymond James has made investments in technology, including its automated advice platform, Connect Advisor, a priority over recent years, and Reilly said that helped recruitment and retention. “Not only will [technology] create efficiencies over time, but the cornerstone of our business has really been helping advisors serve their clients.”
Technology related to compliance and making client onboarding smoother and more efficient were other technology investments Raymond James has focused on, Reilly said.
“Although we are making a bet, I think it’s a good bet and the investments we’ve made over the last few years has certainly helped our recruiting and retention,” Reilly said. “We’re making the bet that we need to be a leader in those areas, where we choose to compete, and to continue the momentum we have.”
Successful integrations of Alex. Brown, the former private client services of Deutsche Asset & Wealth Management Raymond James acquired in 2015, and 3Macs, a Canadian investment advisory firm acquired last year, boosted advisor headcount and assets, Reilly said. Also adding to improved financial performance was a continuing trend of assets moving to fee-based accounts.
Those assets in fee-based accounts hit $294.5 billion, representing growth of 27 percent over September 2016 and 6 percent over June 2017. Meanwhile, the firm reached record assets under administration of $659.5 billion, an increase of 15 percent over September 2016 and 4 percent over June.
Raymond James Financial’s CFO and Treasurer Jeffrey Julien said most of the company’s line items performed as expected by Wall Street. He said the Private Client Group underperformed by about 1 percent and called it “not a big miss.” The investment banking business fell short too, Julien said.
Expenses in 2018 are expected to increase slightly as a result of the firm’s growth strategy.
“As we bring on more people, we have to have a place for them to sit and furniture for them to sit on,” Julien said. “Not only are we increasing the branch footprint in our Private Client Group system, we actually are increasing some of the branches we currently own, as they become full and expand.”
In 2016, Raymond James added roughly 300,000 square feet to its headquarters—100,000 of which it is preparing to occupy, Julien said during Thursday’s earnings call.
Executives didn’t have much forward guidance to offer listeners beyond the first quarter of 2018. They expect this year’s trends to continue into the near future, but the final three quarters of 2018 remain foggy.
“The first quarter of 2018, if things hold up, should be pretty good,” Reilly said. “But the real question is the rest of 2018 and the big question is the stock market...some people say it’s overvalued. We can’t make that call from here.”