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Raymond James Posts Flat Earnings, Record Advisor Productivity in Fiscal Q4

Raymond James Financial posted flat earnings for the fiscal fourth quarter. Overall, the firm’s net income was down 0.2 percent from the year-ago quarter to $68.9 million, while net revenue increased to $817.8 million, up 9 percent from last year and down 1 percent versus the prior quarter. Revenue got a boost from record advisor productivity in the firm’s employee and independent contractor businesses for the fiscal fourth quarter, at $543,000 and $357,000, respectively. Production at Raymond James Limited, its Canadian subsidiary, was at $373,000. Raymond James also posted slight gains in advisor headcount and a dip in client assets under administration for fourth quarter of fiscal year 2011, up 3 percent versus the year ago but down 8 percent versus last quarter. The firm’s results were depressed by a decline in the value of non-taxable COLI investments.

“With the S&P 500 down 14.3 percent for the quarter and assets under administration falling 8 percent to $256 billion, revenue was off only 1 percent from the prior quarter,” the firm said in the earnings release, referring to performance in the private client group. Client assets are up about 3 percent year-over-year.

During a conference call Thursday morning, CEO Paul Reilly said the private client group had strong performance driven by record advisor productivity.

Reilly also said the firm is talking to a lot of advisors interested in joining the employee side. These advisors have been in an environment that they haven’t enjoyed at competitor firms that have a lot of news coming out of them, and they’re interested in Raymond James’ platform, he added. “Slowdowns are good for people to take a pause and look around,” Reilly said. “When people pause, they look at us.”

“The Raymond James brand has really come through this market cycle much stronger than our competition,” said Chet Helck, chief operating officer. “People know who we are now, and they respect us.”

Raymond James’ U.S. advisor headcount remained steady this quarter, at 4,504, up just a hair from last quarter’s 4,492. In contrast, FA headcount at Morgan Stanley Smith Barney declined by 300 to 17,291 in the quarter, while Bank of America/Merrill Lynch added 475 net financial advisors.

That said, Alois Pirker, Aite Group analyst, believes Raymond James has an opportunity to recruit wirehouse advisors who will likely defect next year as retention packages expire. A survey from Aite Group that got 75 responses from wirehouse advisors suggests there may be about 550 top advisors at Merrill and Morgan who are currently locked in by retention packages and are more than 50 percent certain they would like to switch to an independent firm in the next 18 to 24 months.

“Particularly for a regional firm, they’re really well-positioned to pick up some of these breakaways,” Pirker said. Pirker said Raymond James’ productivity was at the high end of the regional firms, but the next wave of breakaways is expected to be even larger, with producers of over $500,000.

While client assets were down from the previous quarter, Pirker said this was in the same ballpark as other firms that have released earnings, and the markets have not exactly been kind to financial services firms lately. In addition, about 60 to 65 percent of the firm’s assets are equity-related, said Jeffrey Julien, chief financial officer.

“In the market we’re in right now, there’s some uncertainty going into the next quarter,” Reilly said.

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