Echoing comments from his counterpart at Stifel, Raymond James CEO Paul Shoukry said Wednesday he doesn’t think the turmoil now roiling markets will weigh on his firm’s recruitment efforts.
In fact, it could help, Shoukry said during a quarterly earnings call with analysts.
Shoukry said “each period of volatility is different” but that Raymond James enjoyed some of its greatest recruiting successes around the time of the 2008 housing-market collapse, “when advisors were looking for a source of strength and stability.”
“And with all the industry disruption and [mergers and acquisitions] and firms exiting the business, we were huge beneficiaries of that because we had a strong balance sheet as we do today,” Shoukry said.
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Earlier in the day, Ron Kruszewski — the CEO of Raymond James’ rival firm Stifel — had expressed much the same thought. Kruskewski said he thought many advisors had held off changing firms while markets were on the rise, in large part because they were “hoping to maximize their trailing production for recruiting packages.” But now that market gains are much more in doubt, recruiting momentum is likely to increase, he said.
Rising revenue but also higher expenses
On Raymond James’ earnings call Wednesday, Shoukry and his fellow executives painted a picture of rising revenues and healthy assets flows hindered somewhat by rising costs. The firm’s wealth management unit, called its Private Client Group, saw its net revenue rise by 6% year over year to $2.49 billion in the January-to-March period, technically Raymond James’ second quarter. Its pretax income, though, dropped by 3% year over year to $431 million after being weighed down by higher compensation to advisors and other expenses.
Outlays for financial advisor compensation and benefits were up 11% year over year to $1.4 billion in the quarter. And non-compensation expenses were up 10% to $256 million.
With most advisors’ pay tied to the amount of assets they have under management, many firms have reported increased compensation costs in recent years as rising markets lifted the value of their clients’ portfolios. That trajectory started to change last quarter amid market turmoil stemming from the Trump administration’s tariff policies.
But Raymond James still managed to accumulate assets at a healthy pace last quarter. Its Private Client Group’s assets under administration tally swelled by 6% year over year to $1.48 trillion. Its assets in fee-producing accounts — which are particularly coveted because of their ability to generate steady revenue — were up 9% to nearly $873 billion. The firm said in an earrings report that those fee-based gains were driven largely by “market appreciation and net asset inflows.”
But that intake of new assets was nonetheless down from the same period last year. The Private Client Group’s net new asset tally fell 8% year over year to $8.83 billion in the firm’s second quarter.
March and April strong months for recruiting
Shoukry told analysts Wednesday that the new asset figure did not reflect assets that would eventually be brought over by advisors who committed in the first quarter to later joining the firm. He said Raymond James had strong recruiting gains in both March and April.
“These are new commits that will be affiliating with us at a future date,” he said. “So that’s not reflected in the NNA number. And this is really from a variety of firms and across our affiliation options.”
Raymond James is among a growing list of wealth management firms no longer providing quarterly updates of their advisor numbers. At the last count, in October, the total stood at 8,787 — 3,826 direct employee advisors and 4,961 independent contractors.
Shoukry did say Wednesday that Raymond James in the past 12 months had recruited advisors who had managed $50 billion at their previous firms and had $316 million in annual revenue production in total.
“Including assets recruited into our RIA and Custody Services division, we recruited total client assets over the past 12 months of nearly $59 billion across all of our platforms,” Shoukry said.
What M&A shakeups mean for recruiting
And the prospects for bringing in more may only grow brighter amid the current economic uncertainty, he said. Devin Ryan, an analyst at the investment bank Citizens JMP, asked if big merger and acquisition deals in the industry are also giving Raymond James some recruiting opportunities.
Ryan mentioned no firms by name. But LPL Financial’s announcement late last month that it would be buying its former independent broker-dealer rival Commonwealth Financial Network for $2.7 billion has been viewed by many other wealth managers as an opportunity — a rare chance to try to draw to their own firms Commonwealth advisors now suddenly feeling uncertain about their futures.
Shoukry also named no firms, but acknowledged that merger and acquisition deals can provide openings to industry stalwarts like Raymond James.
“Whenever there’s a change of control, potentially change of leadership and culture and capabilities and service levels, that always creates a catalyst for advisors to take a look at other options,” he said. “And so, to the extent those advisors are looking for the type of culture and capabilities that Raymond James provides, and that would absolutely increase the opportunities with those advisors that are interested.”
Shoukry has said in previous quarterly earnings calls that Raymond James itself was looking at making some acquisition deals itself. On Wednesday, though, he said the firm is no longer pursuing those prospects, implying that prices are being bid up too high.
Prospective acquisitions, he said, “are often part of competitive processes.” Raymand James, he added, has committed to “not stretch on valuation, especially if we do not have conviction that we could generate strong risk-adjusted returns for our shareholders at those prices.”
Eschewing M&A deals and investing in AI
Rather, Shoukry said, Raymond James plans to use its strong store of capital to invest in itself. One of its latest priorities, shared by many wealth managers, is artificial intelligence, machine learning and similar technologies.
Raymond James recently promoted its head of front-office technology, Stuart Feld, to a new position: chief artificial intelligence officer. Shoukry said part of Feld’s job will be to monitor how competitors are using AI and similar technologies and find lessons Raymond James can glean from their examples.
That’s not to say, though, that Raymond James will simply be copying its rivals’ uses of AI.
“Whereas we’re really wanting to use AI to help our financial professionals and our financial advisors better serve their clients, many of our competitors have used technology and are planning on using AI to essentially try to get around their financial advisors to go direct to their clients,” Shoukry said. “That is not our goal. Our goal is to use AI to better empower our advisors and financial professionals so they can provide even better service to their clients.”
