Raymond James Financial’s (NYSE: RJF) private client group added 20 advisors in the U.S. during the fiscal third quarter despite a tough recruiting environment for regional firms. During a conference call Thursday morning discussing the earnings release, CEO Paul Reilly said the firm was helped by its acquisition of brokerage firm Howe Barnes Hoefer & Arnett Inc. at the beginning of the quarter, but retention packages keeping advisors at other firms did affect advisor growth.
The firm reported 4,492 advisors as of June 30, up from 4,472 in the fiscal second quarter but down from 4,515 a year ago. Last quarter, advisor count was down too.
“It’s still a challenging market” for recruitment, Reilly said on the call.
Advisor visits are up, he said, but it’s not a huge recruiting environment, due in large part to the retention packages offered by the wirehouses. Many advisors are locked up for five to seven years, but some shorter contracts wear off next year, he said. “It’s a cycle, and we’ll continue to chip away,” Reilly said. “We just have to be disciplined.”
Aite Group analyst Alois Pirker said there will be a better opportunity for firms like Raymond James to recruit next year, as many of these recruiting packages lose effectiveness then. Pirker said a recent survey conducted by Aite Group found that a big chunk of locked-in advisors who said they’re likely to leave their firm expect to do it next year.
Pirker found Raymond James’ results to be good news, given that this was a tough quarter for on-boarding advisors.
Raymond James also reported a $3 billion boost in client assets under administration, jumping to $278 billion from $275 billion in the prior quarter. Pirker also saw the slight gain in assets as a good thing given the choppy market conditions during the quarter. A lot of investors are sitting on the sidelines, he said.
Reilly said $1 billion of the asset flows were related to the Howe Barnes acquisition, while the other $2 billion came from advisor inflows. Revenues in the private client group remained flat from last quarter at $557 million, which Reilly attributed to the markets.
Overall, Raymond James net income was down 42 percent from the previous quarter to $46.8 million, or 37 cents a share. Net income was down 23 percent from the same period last year. This included a $45 million charge for the repurchase of auction rate securities (ARS) it sold to clients prior to the collapse of the ARS market in February of 2008. In late June, the firm agreed to a multi-state settlement that will require the firm to buy back $300 million in ARS. Last Friday, the firm mailed out an offer to redeem securities to clients, Reilly said.
The firm’s revenues were up 14 percent over last year, but remained flat from the previous quarter, due to the markets, Reilly said.
Raymond James also reported on its residential loan portfolio, which consists primarily of first mortgage loans originated by the bank via referrals from the firm’s financial advisors and first mortgage loans purchased by the bank. The firm said that virtually all its residential mortgage loans are adjustable rate mortgage (ARM) loans.
Reilly also said the firm is actively looking to acquire an international large-cap asset management firm, but the purchase has to be the right size and the right price. “It’s easier said than done.”