Raymond James, Ameriprise Tout Recruiting Results in Tough Quarter

Executives at Raymond James Financial and Ameriprise Financial touted their firms’ recruiting prowess on Thursday despite stepped-up competition from wirehouses and mobility handicaps imposed by the coronavirus.   

Raymond James ended its fiscal fourth quarter on September 30 with 8,239 advisors—up a net 84 during the quarter and 228 over the previous 12 months. The quarter’s recruits produced $82 million of revenue at their former firms in the previous 12 months on $13.8 billion of assets, the St. Petersburg, FL-based company said.

On an earnings conference call, Raymond James CEO Paul Reilly said the company’s primary source of recruiting remains wirehouses. Some big-firm prospects delayed their moves to the firm’s employee channel (59% of RayJay brokers are independent contractors) because they didn’t want to move while branches were closed because of Covid-19, Reilly said.

Given the resurgence of virus infections, Riley was reluctant to make earnings and profit margin forecasts, but “the recruiting outlook looks very good,” he said.  

Minneapolis-based Ameriprise hired 99 advisors in the July-September quarter, although attrition shaved its roster of brokers across its employee and independent “franchise” channels by 25 to 9,905 from the end of its 2019 third quarter.

Reilly and Ameriprise CEO James Cracchiolo touted their cultures as lures for brokers rubbing against big-company constraints, but also conceded that the bigger firms that have fired up their recruiting engines can outbid them.

“There will always be people who toss a bit more money,” Cracchiolo said.

RayJay’s “transition awards” to recruits added 340 basis points to its overall compensation ratio of 68.1% last quarter, but Reilly repeated past observations that the firm’s advisor-centric culture, not its deal, is its “unique competitive advantage.” 

Two large firms, in particular, have become more aggressive recently, he said, without naming them. “They say they’re getting out of the market and they get out for a quarter or two, and then they get back in,” he said. 

Reilly was likely referring to Morgan Stanley and UBS Wealth Management, recruiters said.

Raymond James’ Private Client Group, its dominant business, posted a 12% jump in fiscal fourth-quarter revenue from the year-earlier period to $1.4 billion. However, pretax income fell 13% to $125 million, largely due to a 45% decline in net interest income.

Firm executives touted a 16% jump in fee-based account assets—reflecting market gains and new accounts from recruiting. 

Raymond James ended its fiscal year with $883.3 billion of private client group assets under administration, up 11% from September 30, 2019. Assets in fee-based accounts  rose 16% to $475.3 billion, and net new asset growth for the year in the private client group appears to be the “best in the industry,” Reilly said.

Raymond James as a whole reported a 13% jump in quarterly revenue to $2.07 billion and a 21% decline in net income to $209 million. It beat analysts’ profit estimates on better-than-expected fixed-income and equity trading results in its capital markets sector.

The company took a $46 million charge for severance and other charges related to its layoff of more than 500 employees during the quarter. Excluding those charges and a $7 million loss related to the pending “disposition” of businesses in France, Raymond James’ adjusted net income would have been $249 million—$35 million below its 2019 fiscal fourth quarter. 

Ameriprise, which employs 2,123 advisors and 7,782 in its independent “franchise” channel, reported a loss of $140 million, or $1.14 a share, in its third quarter compared with a $543 million year-earlier gain. Excluding the effect of what it called the “precipitous drop” in short-term interest rates and a yearly insurance product valuation “unlocking,” earnings per share would have risen 18%, the company said.  

Revenue in its Advice & Wealth Management unit fell 1% from the year-earlier quarter to $1.67 billion and profit was down 19% to $320 million. 

Shares of Raymond James were up 0.49%  in midafternoon trading, and Ameriprise stock was trading up 2.03%. The Financial Select Sector SPDR exchange-traded fund was up 0.55% and the S&P 500 index was up 1.75%.