2019 Comp: RayJay Leaving Pay Plan Untouched for Branch Brokers
Raymond James Financial is keeping payouts to brokers in its core employee channel unchanged in its upcoming fiscal year, according to two sources at the firm, after riling some advisors a year ago with a cut to its current plan.
The decision to hold payout percentages and grid levels steady for the 3,100 Raymond James & Associates brokers keeps payouts—the amount of fees and commissions brokers keep for themselves—in a 28-50% range for the fiscal year that begins in two weeks in October.
The Florida-based firm reassured the brokers at an annual conference this summer that it would not be upsetting the compensation apple cart this year, despite the fact that its aggressive recruiting campaign throughout its employee and independent broker channels has been eroding profit at its flagship private client group.
In fiscal 2018, which began in October 2017, Raymond James lowered payouts across its grid breakpoints by around 100 basis points. Company Chief Executive Paul Reilly, who has been championing the firm’s broker-centric culture with a Financial Advisor Bill of Rights, at the time defended the payout cut to shareholders as a counterbalance to the high costs of complying with the Department of Labor’s fiduciary rule.
A federal court earlier this summer vacated the rule that was adopted in the Obama administration but opposed by the Trump White House.
The decision to remove the drama from the annual compensation document is widespread. UBS Wealth Management USA and Morgan Stanley earlier this summer preannounced their 2019 compensation programs in apparent attempts to quiet concerns about more stringent sales targets and, in Morgan Stanley’s case, to give brokers time to make changes in certain client accounts in order to qualify for 2019 bonuses. (UBS, to be sure, will pay bonuses next year only to brokers who agree to abide by client-solicitation restrictions if they leave.)
Firms also may be attempting to reassure brokers of compensation stability amid widespread change in traditional brokerage industry models, including moves toward financial planning models that charge annuals fees instead of commissions and reliance on third-party investment management rather than discretionary decisions made by brokers.
Morgan Stanley, UBS and Merrill Lynch have, unlike Raymond James, slashed their recruiting budgets for veteran brokers in the past two years.
Raymond James, in contrast, has added advisors—and costs. As of June 30, it was carrying $928.5 million of loans to financial advisors (primarily related to signing bonuses), up 9.3% from a year earlier. The company expects to spend about $247 million in fiscal 2018 on forgivable recruiting and retention loans in its employee channel, impacting the bottom line of the private client group by about 4.9%, executives told investors earlier this year.