© 2020 Arizent. All rights reserved.

Why Raymond James kept over 90% of Deutsche advisers

Raymond James added 193 advisers after closing on its deal to acquire Deutsche Bank's U.S. Private Client Services unit, now rebranded Alex. Brown, the regional firm said.

Raymond James' high rate of retention – more than 90% of the unit's advisers made the transition, according to the fast-growing brokerage – stands in contrast to other recent acquisitions.

Profits and revenues are down for all but one of the brokerages.
August 16

Last year, Stifel acquired Barclays' U.S. wealth management unit, but almost half of the advisers departed for other firms before the deal closed. Wells Fargo, which entered into an exclusive recruiting arrangement for Credit Suisse's U.S. advisers, won less than half of the brokers. UBS picked up nearly the same number as Wells Fargo, though the firm did not sign a similar agreement with Credit Suisse.

"The key to success in this deal was finding the right partner and having the right combination in Raymond James," says Haig Ariyan, a former Deutsche Bank executive who oversaw the unit and who now serves as president of the Alex. Brown division.

The unit has 16 offices, and support staff and managers have also transitioned to Raymond James, the firm says. And as part of the deal, Deutsche Bank and Raymond James have a seven-year distribution agreement giving Alex. Brown advisers access to new issue securities from the German bank. Raymond James says the agreement also provides access to alternative investments and other products.

"How many of us get to go back to a name we think fondly of?" says recruiter Bill Willis.

"You have to have the right commercial and platform components in order to serve the high-net-worth and institutional client set," says Ariyan.

A Raymond James spokesman declined to say how many assets had transitioned with the advisers and what the acquisition cost. When the deal was announced last December, the St. Petersburg, Fla.-based firm said it expected to pay approximately $420 million for the acquisition of the unit and retention of the advisers. At the time, the firm said there were approximately 200 brokers in the unit overseeing $50 billion of client assets under administration, which generated about $300 million in annual revenue.

Industry insiders attribute Raymond James' high retention rate to the combination of branding, technology, platform and continuity. Many of the advisers will continue to go to work in the same offices with the same managers.

"They made it very easy to stay," Bill Willis, a recruiter in Los Angeles, says.

Among the handful of advisers to leave prior to acquisition were Stephen Brady and Joseph Coffey, who joined Wells Fargo in Washington. The team managed $230 million in client assets, according to Wells Fargo. They both had worked at Alex. Brown in the 1990s prior to its acquisition by Deutsche Bank.

"I think the retention rate at the day of the closing is pretty representative of the effort," says Danny Sarch, a recruiter and president of Leitner Sarch Consultants in White Plains, N.Y.

Sarch says that he doesn't expect many advisers to leave immediately following the closing of the deal as it would be putting clients through a second transition – and all the paperwork that entails.

Recruiters also cited the firm's decision to resurrect Alex. Brown as further motivation for brokers to stay put. It stands in contrast to other M&A deals, which have resulted in well-known brands disappearing from the industry, such as E.F. Hutton, A.G. Edwards and Smith Barney.

Alex. Brown, which was acquired by Deutsche Bank about fifteen years ago, was founded by Alexander Brown in 1800. The Alex. Brown & Sons building in Baltimore, which served as the company's headquarters for much of the 20th century, is listed on the National Register of Historic Places. Ariyan started his career at Alex. Brown in 1996 and stayed through later acquisitions.

"I'm very excited to use the brand," Ariyan says. "It's one I've always been proud of."

The new Alex. Brown headquarters will be maintained in midtown Manhattan in an office due to open early next year, Ariyan says.

Recruiters say the resurrection of the name will appeal to industry veterans.

"How many of us get to go back to a name we think fondly of?" says Willis. "It was very smart, very strategic and so far very successful."

"The key to success in this deal was finding the right partner and having the right combination in Raymond James," says Haig Ariyan, a former Deutsche Bank executive and current president of the Alex. Brown division.

Deutsche Bank said on Tuesday it will focus its remaining wealth management business on select markets of ultrawealthy clients in the U.S.

In recent years, the German bank had been investing fewer resources into its Private Client Services unit, according to recruiters.

"In terms of the technology, both from the client and adviser points of view, it was archaic," says Willis.

Ariyan says a sale of the unit had been in the works for some time.

"Over two years ago, we were discussing within the leadership team at Deutsche Bank if we would be able to find an appropriate partner for the Alex. Brown business and maintain the ability to have distribution connectivity for Deutsche Bank," Ariyan says.

About a year ago, Raymond James emerged as top contender for the business because "they were absolutely the right combination for Alex. Brown," he says.

Ariyan's initial discussions were with CEO Paul Reilly and President John Carson, he says.

"At that point the vision was laid out for maintaining connectivity with DB while becoming an already successful wealth management platform," he says. "I think all of us felt from the beginning that the chemistry was strong and we've worked hard to get to this point."

Ariyan adds that the Raymond James team "has been remarkable in their level of preparation and attention to detail." He says there are plans to begin recruiting among advisers who serve high-net-worth and ultrahigh-net-worth clients.

The closing of the deal also suggests that scale is ever more important in wealth management, industry insiders say.

"Being in retail requires enormous investments in compliance, technology and you have to continually update your platform," says Mark Elzweig, a recruiter in New York who has worked for Raymond James. "That's not something you are going to do if you have 150 to 350 advisers. No matter what they gross, it's too expensive."

For reprint and licensing requests for this article, click here.