Raymond James chairman and CEO Paul Reilly expects the firm to continue recruiting advisors despite pandemic-related delays in their joining.
The firm had a lot of “commits” — or FAs who agreed to come on board — but later pushed back their joining dates due to the pandemic, Reilly said yesterday during an earnings call with analysts. There were more joining delays in the employee channel compared with the independent channel because many advisors did not want to join branches that were closed.
Raymond James ended its July-to-September fiscal fourth quarter with 8,239 advisors, a net increase of 84, or 1%, from the prior quarter. Of that total, 3,404, or 41%, are employees and 4,835, or 59%, are independent contractors.
The employee channel grew nearly 1% in the latest quarter compared to the previous quarter and 3.1% compared to the fiscal fourth quarter of 2019. The independent contractor roster grew 1.2% in the latest quarter compared to the previous quarter and nearly 3% versus the same period last year.
For the 2020 fiscal year, Raymond James added 228 advisors with a trailing 12-month production of $275 million and nearly $49 billion in client assets, Reilly said. Most of the recruits came from wirehouses, he added.
Reilly said organic growth driven by retaining and recruiting advisors is a “top priority” for the firm.
During the call, Raymond James chief financial officer Paul Shoukry called a recent move to cut jobs “unavoidable” and said the layoffs cost the company $46 million in the latest quarter. Raymond James announced in September plans to cut 500 jobs, or 4% of its workforce.
Shoukry said the job cuts would benefit the firm in two areas: compensation ratios and pre-tax margins.
Among all its business segments — which include the bank and the asset management and capital markets arms — compensation ratios were highest for the Private Clients Group segment, largely due to higher payouts to independent contractors, Shoukry said.
The compensation ratio was also impacted by recruiting activity, according to Shoukry. Advisor transition assistance and retention amortization had an impact of around 340 basis points to the front overall compensation ratio.
The firm reported a compensation ratio of 68.1% in the fiscal fourth quarter, down from 70% in the prior quarter and up from 65.2% in the same period last year.
The firm’s business development expenses were down 47% in the latest quarter compared to the same period last year due in part to lower spending for travel and conferences, Shoukry said.
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