Pending changes in advisor compensation plans at Raymond James have been “pretty well received,” said chief executive Paul Reilly in a call Thursday with analysts.
The pay cuts will trim the firm’s compensation ratio in its retail business by about a percentage point beginning in September, Reilly said.
Despite the changes, the firm’s payout grids are still “very competitive,” he said, noting that other firms make changes in compensation every year, while Raymond James hasn’t made major changes in about two decades. “We tend not to do that” because it hurts advisor satisfaction, Reilly said.
Reilly and Chief Financial Officer Jeff Julien said some of the savings from the pay changes will be used to cover increased regulatory and technology costs.
As previously reported, Raymond James will be cutting the payout grid in its employee channel by a percentage point or more and moving its independent contractors to a product-neutral grid that will represent a cut in pay for some advisors, depending on product mix. The changes will be implemented beginning in September, the start of its fiscal year.
Meanwhile, strength in its retail business produced a record quarter for Raymond James Financial.
The St. Petersburg, Fla.-based firm reported record net quarterly revenues of $1.62 billion for its third quarter ended June, and a record net income of $183.4 million.
The results “were largely attributable to growth of client assets as a result of both net recruiting of financial advisors and market appreciation,” as well as strong investment banking revenues and a positive impact from higher short-term interest rates, the company said after the market close Wednesday.
Total assets in the retail business reached $908 billion, up 4.2 percent from the prior quarter and up 27.5 percent year over year. Private client net revenues were $1.13 billion for the fiscal third quarter, up 4 percent from last quarter and 25 percent a year ago.
Raymond James Financial Services, the company’s independent contractor unit, added 68 advisors in the quarter, to 4,289. The employee-based Raymond James Associates lost five reps, ending the quarter with 2,995 advisors.
Some advisors in the employee channel retired or went independent in the quarter, Reilly told analysts, but the overall recruiting trend in the employee channel is “very good,” he said.
Reilly said Raymond James also plans a “concerted effort” to beef up recruiting on the West Coast, where it has not had as strong a presence as in the east.