Raymond James is raising minimums for new RIAs who want to custody assets on its RJFS-IAD platform from $30 million to $50 million. The firm said the move will both help it cut the cost of serving RIAs and also act as a draw for bigger RIAs, who tend to want to work with other RIAs of similar size. Advisors who do not meet the new asset minimums will be referred to existing Raymond James RIAs and encouraged to partner with them.
“Every RIA that we talk to, every prospective advisor considering the RIA platform, wants to know what the average size advisor is and where would they fit with existing advisors, would they be with their peers or not,” said Mike Di Girolamo, senior vice president and managing director responsible for the division. And the smaller RIAs “don’t provide enough revenue to justify the resources we provide,” he said.
Fewer than a dozen RIAs now affiliated with Raymond James fall below the $50 million threshold today, says Raymond James spokesperson Anthea Penrose. These firms will not be dropped, but they will be incented to raise assets to $50 million under the firm’s asset builder program, just relaunched, which provides fee waivers and cuts for certain new accounts. Raymond James, which opened the RIA platform in 2002, custodies $5.8 billion in assets for 97 RIA firms, about 40 to 50 percent of which are dually registered. Those 97 firms represent 275 financial advisors, and, on average, manage around $60 million in assets.
So far in October, RJFS-IAD has added 8 new breakaway advisors from UBS, Wells Fargo Advisors, Morgan Stanley Smith Barney and Zions Bank. Year-to-date the firm has added 12 firms with about 36 advisors, from roughly the same firms, says Penrose. The firm gathered $750 million in new client assets during fiscal year 2009, a 25 percent increase versus the previous year. They plan to continue growing at that rate.
Raymond James offers transitions services to such breakaway advisors, including turn-key real estate services, a dedicated transition team, a technology team and onsite and web-based training and education.
Raymond James trails LPL by just a hair in terms of the size of its RIA custody platform. LPL’s hybrid RIA platform custodies $6.1 billion—also for 97 firms. These LPL RIAs represent 418 advisors and manage, on average, around $63 million in assets. LPL’s strategy differs slightly from that of Raymond James. It has no asset minimum for RIAs joining its custody platform. “Our Hybrid RIA platform serves RIAs across the AUM spectrum, but we typically attract – and are a best fit for – advisors with $25 million or more of fee-based assets,” says spokesperson Joe Kuo.
Still, both firms are far behind the leaders in this business: Schwab Institutional and Fidelity Institutional Wealth Services. Schwab Institutional custodies $564 billion in assets for 6,000 firms, about a third of which are dually registered. Fidelity custodies $324 billion in assets for around 3,500 RIAs.
Under RJFS-IAD’s asset builder program, from October 15 through March 15, the firm will waive transaction charges for the first three months, or 30 trades, whichever comes first, on all new accounts with more than $250,000 in assets. In additional ACAT fees of up to $100 will be waived on accounts with more than $500,000 in assets.
Schwab and Fidelity have their own fee waiver programs in place. In September Fidelity announced it was reducing prices and waiving fees on assets custodied with the firm effective the first of this month on any new money that RIAs bring to IWS; some cuts would go through 2011 and other waived fees would last until June 30, 2010. The firm is discounting10 to 35 percent on annual service fees for its Oracle Customer Relationship Management (CRM) system and up to a 50 percent reduction on licensing expenses for Advent portfolio management software. Meanwhile, in June, Schwab introduced a series of fee waivers and cuts. It is waiving commissions on electronic equity trades and reimbursing account transfer fees for RIA clients.
Raymond James is offering other perks as well to keep current RIAs happy and lure in new ones. It recently launched a new optional E&O insurance program for IAD-affiliated advisors. Available through Arthur J. Gallagher & Co., the program provides errors & omissions coverage for RIA entities, its employees, independent contractors, officers, directors, spouses and heirs, with liability limits of $500,000 to $5 million, deductible options from $5,000 to $250,000, and a general premium savings of 15 percent over comparable plans. The firm has also has also made significant recent investments in its Albridge Wealth Reporting Technology system.