Confronted by rising technology and regulatory expenses, Raymond James will change how it compensates its employee advisers, the company told brokers Monday.
The new comp plan goes into effect during Raymond James' next fiscal year, which starts Sept. 25, 2017.
It's something of a rare move for the firm. The last time Raymond James tweaked adviser pay was in 2013, when it moved to a product neutral compensation grid, according to the company. It's been about two decades since Raymond James made more substantive changes.
Under the new plan, the company will reduce adviser pay by 100 basis points for those generating $350,000 or more in annual revenue.
"It will continue to be our focus that grid compensation changes continue be rare as well as fair," says Tash Elwyn, president of Raymond James & Associates.
The St. Petersburg, Florida-based company has been considering compensation changes over the past 18 months. Raymond James has spent considerable sums upgrading its technology offerings in recent years. New recruits frequently cite those offerings as among the reasons they chose to join Raymond James. The fiduciary rule and other regulatory changes have also added new burdens to firms.
"This is really a confluence of rising costs over a great number of years," Elwyn says.
Raymond James consulted advisers as part of its study of whether to amend compensation. The firm intends such changes to be fair as well as infrequent, Elwyn says.
"I can't stress enough those two words as guiding principles in this process," he says.
Recently, rival firms have also announced compensation changes in response to the fiduciary rule and its associated costs and regulatory requirements. For example, UBS introduced a new formula for how it pays advisers with regard to retirement advice. The alterations, made ahead of the fiduciary rule's June 9 implementation date, were done in order to avoid perceived conflicts of interests.
"Different firms are making different decisions," Tom Naratil, president of UBS Wealth Management Americas, told On Wall Street at the time. "We've made the choice that we feel is the most client centric and adviser focused."
While the Department of Labor declined to postpone again the fiduciary rule's implementation date, the agency is continuing its review of the rule and is currently seeking yet more input from the industry as well as investors.
Meanwhile, advisers across the industry have become increasingly frustrated with the regulatory environment, changes to their compensation and the leadership of their firms, according to a recent J.D. Power survey. Dissatisfaction was particularly acute among top producers.
Advisers face “an unprecedented degree of disruption" as a result of technological and regulatory changes, J.D. Power wealth management director Mike Foy said in the report.
Raymond James, however, came in second place in J.D. Power's annual ranking of adviser satisfaction in the employee channel.
"We believe both the fairness of this change, the lead time with which we have been studying and discussing this change, and the infrequency with which the firm has made changes of this sort ― we believe this will be understood by advisers as necessary in order to support them in serving their clients," Elwyn says.
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