Raymond James next growth engine? Alex. Brown
Thousands of advisers got their start at storied firms that are now long gone, such as Smith Barney, A.G. Edwards and Dean Witter. Now, Raymond James has pinned part of its hopes for future growth on the revival of one such name: Alex. Brown.
"Right now, there are almost no boutiques left in our industry," Mark Elzweig, a New York-based recruiter, says. "You have Alex. Brown now, and J.P. Morgan, and beyond that you don't really have many other boutique choices."
Raymond James closed on its acquisition of the former Deutsche Bank unit in September, and now aims to build off its successful transition — the firm reported that it retained over 90% of the advisers — to create a growth engine focused on wealthy and ultrawealthy clients.
Haig Ariyan, president of the unit and who transitioned with his advisers to Raymond James from Deutsche Bank, notes the regional BD already serves high-net-worth clients, but wants to boost that business.
To that end, the firm aims to grow Alex. Brown's adviser force by about 15% per year for the next five years, Ariyan says.
"The business in its size and form today is validated as a good investment, even as a separate division for Raymond James Financial. But by doubling the business and achieving even greater scale while maintaining our discipline, it validates the franchise for the long term within the industry," he says.
The firm will soon engage in an aggressive recruiting push, while also increasing its lending capabilities and other services that are attractive to wealthy clients.
And in reviving a storied brand — Alex. Brown was the first investment bank in the U.S. and its old headquarters in Baltimore is listed on the National Register of Historic Places — Raymond James is also playing up a cultural angle which has attracted many wirehouse recruits to the firm in recent years.
Indeed, bringing back Alex. Brown helped entice advisers such Paul Ruane to stay. Ruane, 52, worked for the original firm in the 1990s, and has numerous keepsakes from those days, such as mugs, a bowtie and a clock — all with the Alex. Brown logo on it.
"You can't imagine the excitement for people who had worked there before, excitement that the brand and name is coming back," he says.
KEEPING THE UNIT TOGETHER
As rumors of a sale spread in late 2015, Deutsche advisers worried about what the future held for them. Some, like Ruane, worried that the unit could be sold to a big bank-owned brokerage, and that their culture would disappear in that environment. At the time, Barclays and Credit Suisse were also exiting the U.S. wealth management market. Barclays sold its unit to Stifel while Credit Suisse entered into an exclusive recruiting arrangement with Wells Fargo. About half or more of the advisers ultimately left for other brokerages.
"We were cautiously optimistic because we all saw Barclays and Credit Suisse. It's a small Street. Everyone talks," says Alex. Brown adviser Theodore McDonagh, 44.
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When Raymond James announced it was buying the unit for about $420 million, the regional firm was somewhat of an unknown entity to some Deutsche Bank advisers. Raymond James & Associates only opened its first office in Manhattan in December 2014.
Deutsche Bank had been "a good home for us," says John Sutton, 48, a regional executive who joined the bank from Credit Suisse in 2013. "And Raymond James is not as well as known as it is down South. Being in a New York-centric business, I don't think that there was a negative perception. But people maybe didn't know the firm."
Raymond James executives moved quickly to establish a rapport with the unit's nearly 200 advisers by inviting them to visit the company's headquarters in St. Petersburg. Top brass, including CEO Paul Reilly and founder Tom James, were present at the meetings.
That effort mirrored the personal touch Raymond James has typically taken with other new recruits; potential hires are often asked to come on a home office visit in order to meet with senior leaders, according to recruiters and industry insiders. But the firm's effort to woo Deutsche Bank advisers did not end there.
"On Valentine's Day they sent packages of Alex. Brown M&Ms," Ruane says. "So attentive to detail. It showed, 'Hey, we're glad you're going to be here.'"
"The clients are going to cue off how I feel. If I feel good about Alex. Brown coming back, they'll feel good about it," says Paul Ruane, who worked at the original Alex. Brown in the 1990s.
Advisers also say there was a concerted effort to make the transition process as smooth as possible, even with entire new systems to learn, which entailed hours of additional labor.
"Was it seamless? No, of course not. There are always some things. But there were no major headaches, and I can tell you that there was an army of people there to help us," Ruane says.
Those efforts ultimately paid off. Raymond James retained over 90% of the Deutsche Bank advisers to stay on with the transition, and that has provided the firm with the building blocks for its next moves.
Raymond James' technological capabilities are a "big improvement" over what advisers had at Deutsche Bank, Sutton and others say. Technology for the wealth management unit was lagging in part because the unit just wasn't central to what a big organization like Deutsche Bank did, according to industry insiders.
"At Deutsche, you had this great business, the platform was terrific, the brand was good, but day-to-day you sort of struggled a little bit with the fact that you weren't a core part of the firm," he says.
Advisers and executives say Raymond James expended a lot of effort training its new hires on how to make the most of its digital tools.
"The people who are probably impacted the most are the support staff," Sutton adds.
The firm has plans to upgrade its capabilities, which will continue to prove to be a necessity in order to attract new recruits. Across the industry, firms are upping such investments in a kind of digital arms race.
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"When advisers choose firms they all want to test-drive the technology. It's an important component in their decision as to whether to stay with a firm or to join a new firm," Elzweig, the recruiter, says.
He adds that if good technology upgrades attract advisers, then the reverse is also true. "If they are constantly wasting time on unproductive technology fixes, then they're less apt to stay with a firm."
ALEX. BROWN 2.0
Raymond James is also working on boosting its banking and lending capabilities, which are key aspects of its bid to appeal to more high-net-worth clients, according to Ariyan. Raymond James' bank is of a much different size than what Alex. Brown advisers were accustomed to at Deutsche Bank, he says.
"The capabilities both within the bank and within the capital markets franchise have existed for some time. Connecting those capabilities with the private client franchise has been a little less focused in the past but is being recognized as a strategic opportunity for the overall firm," he says.
Raymond James also picked up additional expertise in alternative investments as part of its acquisition of Alex. Brown.
"The integration of this alternative platform, particularly private equity and hedge funds, onto the existing Raymond James platform continues to evolve. But it has been a rapid improvement in a short period of time," he says.
In early 2017, the firm also plans to open a new headquarters for Alex. Brown in Manhattan.
For his part, Sutton says he looks forward to meeting with potential recruits.
"It doesn't mean that you have to come here," he says. "But why wouldn't you have the conversation now that we have the scale and technology and other capabilities?"