As adviser headcount rises at Raymond James, so does the cost of recruiting

Raymond James Financial Inc. continues to enjoy strong recruiting of financial advisers across its channels, reporting a 6% increase year-over-year — a net gain of 434 advisers, according to its quarterly earnings release.

At the end of June, the firm said it had a record 7,719 advisers, up from 7,285 a year ago.

“We continued to retain and attract high-quality financial advisers across all of our affiliation options,” said chairman and CEO Paul Reilly in a statement. “We are on track for record financial adviser recruiting results in fiscal 2018.”

Raymond James, which has both employee and independent contractor brokers and advisers, has been spending more on recruiting.

For example, the firm recently modified its recruiting bonus for top, experienced recruits in its employee channel, industry observers said. Over the past year, Raymond James boosted the bonus to 150% of a broker’s or adviser’s annual fees and commissions, known in the industry as the “trailing 12,” paid in the form of a forgivable loan or note. In the past, the high end recruiting bonus for a top end employee adviser was closer to 125% of his trailing 12, those sources said.

The company also reported higher expenses related to recruiting for the June quarter, its third fiscal quarter for 2018 as the firm’s financial year ends in September. Expenses for “business development,” which include recruiting and related activities like conferences, were $56.9 million for the quarter ended in June. That was a 45% increase when compared with the same quarter last year, when the company had $39.3 million in business development expenses.

During a conference call with analysts and investors Thursday morning, Raymond James’ chief financial officer Jeffrey Julien acknowledged that the level of expense for business development in the quarter was high and would average closer to $45 million per quarter annually.

Mr. Reilly, who said the new recruits are coming from the large wirehouses, noted during the call that recruiting trends at the firm had been good for a number of years.

He pointed to two reasons: Raymond James offers advisers services and technology they can get at larger firms and also offer the culture of a smaller regional firm. “That has continued to resonate,” he said.

The company also reported record quarterly net revenues of $1.84 billion, up 13% over the same quarter last year.

The recent growth at Raymond James has been substantial.

When it completed its acquisition of Morgan Keegan in April 2012, the combined firms had about 6,500 advisers and total client assets of $372 billion. It took time to digest that transaction but it has since added close to net 1,200 financial advisers, and now has $754 billion in client assets.

Related Topics: Raymond James & Associates Inc.