Raymond James eyes interest rates, hits new high on adviser head count

While it continues to add financial advisers to its broad brokerage and advisory platform, Raymond James Financial Inc., like the rest of the securities industry, is paying close attention to rising interest rates, which can lead to a boost in a wealth management firm's bottom line.

In its earnings report for the first three months of the year, Raymond James Financial, which has employee advisers, independent contractor advisers and registered investment advisers, on Wednesday reported a record total of private client group financial advisers of 8,730, which marks a net increase of 403 compared to last March and a net increase of 266 compared to the end of December.

Rising short-term interest rates are also of keen interest to the firm.

“We should have significant upside from rising short-term interest rates," Paul Shoukry, Raymond James' chief financial officer, said Thursday morning in a call with analysts to discuss the firm's quarterly earnings.

Raymond James calculates that based on clients' current domestic cash-sweep balances of $74 billion, Federal Reserve tightening moves that boost short-term interest rates by 100 basis points will translate into pretax income of $600 million per year for the company, Shoukry said.

The retail wealth management industry is likely to see a welcome boost to revenue from rising interest rates in 2022, as Raymond James predicts. That's good news for the retail securities industry as a whole, which charges clients interest for borrowing on margin and captures the interest-rate spread on the cash clients hold in money market accounts. 

In March, the Fed raised short-term interest rates by a quarter point, its first rate hike since 2018. More rate hikes are anticipated.

Two hundred of the advisers the firm added during the most recent quarter were part of Raymond James' acquisition of U.K.-based Charles Stanley Group.

Raymond James' private client group's assets under administration totaled $1.2 trillion at the end of March, an increase of 17% compared to a year earlier and unchanged from the end of December. The firm reported that assets in fee-based accounts totaled $678 billion, an increase of 19% compared to the prior 12 months and also flat compared to the end of December.

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