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‘Grid creep’ at Raymond James as firm notches recruiting record

Raymond James’ recruiting efforts are pushing its advisor headcount to new heights.

The firm reported a record 7,813 independent and employee advisors at the end of the third quarter, up 467 from the year-ago period and 94 from June.

The firm’s new recruits generated $300 million in revenue at their prior firms, according to CEO Paul Reilly.

“To put that in perspective, that’s a little bigger than the Alex. Brown acquisition,” Reilly said Thursday during an earnings call with analysts, referring to the firm’s deal to buy Deutsche Bank’s U.S. wealth management business.

Dynasty, Raymond James and Stifel are among the biggest beneficiaries of recent advisor moves.
September 21

Raymond James’ bottom line, however, hasn’t quite kept pace with its hiring spree. Pretax income for Raymond James’ Private Client Group fell to $131 million for the quarter from $142 million, an 8% year-over-year decline. The unit took a hit from higher regulatory bills and advisor pay. The latter is up because the firm’s current advisors and new hires are more productive — what CFO Jeffrey Julien called “grid creep.”

“Those are good expenses because they relate to growth,” he said.

quarterly earnings

Companywide, expenses related to compensation, commissions and benefits rose to $1.2 billion from $1.1 billion, a 12% increase. The firm doesn’t break out costs separately for its wealth management business.

Reilly cautioned that the benefits of recruiting are often felt later, noting that transitioning client assets can take up to a year after an advisor moves to a new firm.

“When you recruit financial advisors, you don’t get all the revenue on day one,” Reilly said.

Raymond James, which ends its fiscal year in September, said this was its best annual recruiting stats since 2009. With two channels, the firm now has 3,167 employee advisors and 4,646 independent advisors.

Client assets for the firm’s private client group were also up, rising 15% to $755 billion. Assets in fee-based accounts rose even faster, growing 24% to reach $366 billion.

Companywide profit was also up; Raymond James reported net income rose to $262 million from $232 million, a 36% year-over-year increase. Net revenue climbed 12% to $1.9 billion.

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