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Raymond James Boosts Advisor Ranks and AUM

Raymond James Financial reports that its advisor ranks swelled to a record 7,904 in its fiscal third quarter while AUM grew 6% year over year to $143.1 billion.

Raymond James Financial Inc. of St. Petersburg, Fla., announced its assets under management grew 6% year over year to $143.1 billion due in part to positive inflows associated with increased use of fee-based accounts in its Private Client Group segment.

Meanwhile, the company reported its ranks of advisors grew by 185 year over year to reach a record number of 7,904 across both the employed channel and the independent broker/dealer.

“Growth has been driven by strong net additions of financial advisers, equity market appreciation and increased utilization of fee-based accounts, which we believe is a long-term trend that our industry will continue to see,” said Paul Reilly, the company’s chairman and CEO, on the company’s earnings call.

Fee-based account assets ended the quarter at a record $398 billion, representing 51% of total client assets in the Private Client Group and reflecting growth of 16% year over year and 5% from the prior quarter, the company said on its earnings call.

“Even in the increasingly competitive recruiting environment, our client-facing culture, multiple affiliation options and robust service solutions continue to resonate with existing and prospective advisers,” said Reilly. “We may not hit our record for last year, but we may come pretty close. … If you look at the pipeline of commits and visits it’s very, very robust. … Our employee side has really picked up where the independent had led the way the first couple of [fiscal] quarters.”

Eighty-three of the new advisors joined as independent contractors, while 102 joined as employees under the company’s hybrid broker model. More than 59% of the company’s advisors were independent contractors as of quarter-end. 

While the pace of new additions to the advisory ranks slowed somewhat from last year, Reilly attributed that to, among other things, advisor retirement, but noted that the assets largely stayed with the firm. 

Reilly touted the firm as being very disciplined when adding new commits. “What’s most impressive I think to us on recruiting results especially at the high end, our retention agreements are substantially — offers are substantially lower than other firms and yet people still join us.” He added that while pricing has been “competitive … our focus is that although we lose some really good people, we would like the people that join us to join us for the right reasons; it’s not just the biggest check.” He said the company adds new advisers “at a fair price. And it helps reinforce the culture and we get the people that I think are joining for the right reasons.”

Total revenues for the advisory unit rose 6% year over year and quarter over quarter to $1.36 billion, due primarily to a 13% rise in asset management and related administrative fees to $718 million.

However, the company’s compensation ratio of 66.3% was a higher than it had been in recent quarters, due to its “fairly aggressive hiring…over the last year or so in the compliance supervision areas” for the advisor segment and its additions in the independent contractor channel, said Jeff Julien, the company’s CFO, on the earnings call.

“A lot of our somewhat elevated expenses are to get on and to stay ahead of our adviser growth,” Reilly added on the call. “So, whether that’s support or compliance supervision or systems it’s had a big payoff on net adviser growth. I think to help us on comp … it’d be great to slow down recruiting.”

Client domestic cash sweep balances of $38.2 billion decreased quarter over quarter, largely due to quarterly fee payments, tax-related seasonality and increased allocations to other investments, the company said.

Julien noted that the company continues to transition away from commission-based advising. “The people we’re recruiting are heavy users of fee-based alternatives. And it’s just been a continuing trend … a pretty steady decline in commissionable activity in PCG.”

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