Looking back

Thomas James readily admits that his impending departure from Raymond James Financial Inc., whose roots go back to a firm founded by his father in 1962, is bittersweet. That's because he is relinquishing his role as chief executive just as the company is hitting its stride. “I think the outlook is just outstanding,” said Mr. James, 67, who since 1969 has served as the head of Raymond James, which runs the nation's third-largest independent broker-dealer. “I'm near the twilight of my career in the business. With so much opportunity, challenges and the chance to do so much good, I wish I could do it longer.” That said, he isn't going far. Mr. James intends to remain chairman of Raymond James' board and active on various committees within the firm, including its capital markets committee. Raymond James Financial Services Inc., the firm's independent-contractor unit, is the largest piece of the company's business, with 3,278 reps and advisers. It produced $835 million in gross revenue in its last fiscal year. Among independent broker-dealers, that was third behind LPL Financial with $2.6 billion and Amerprise Financial Services Inc. with $2 billion. Many in the industry believed Mr. James would sell the firm, and some think a sale remains a possibility. “When he said sayonara, most of us thought the family would sell the business,” said Rick Peterson, an industry recruiter. “And I wouldn't rule that out.” Paul Reilly, the firm's president, will replace Mr. James next month. Q. The industry has long speculated that you will sell the firm. If the market continues to rally and a big buyer makes an offer in two or three years, how will you respond? A. That same question has been asked of me for 40 years. I have no intention of selling the company. Q. Will you continue to advise clients? A. I work with about 75 families, and over the past four decades, the accounts have grown to become substantial. I have no intention to stop meeting with them. Q. What was the retail-securities business like when you started out? A. When I came into this business in the 1960s, it was product-driven. My father developed the idea to interview clients and to look at their future and current objectives. He looked at investment objectives and did estate planning. Dad's focus was to do all that before he made investment recommendations. He did all that for nothing. Most financial advisers did not charge fees then; some still don't. He married that idea to mutual funds, not a vastly used product at the time. He then tried to train people to do what he did. And I think he was successful. He wasn't hiring all financial advisers who were capable of doing what he did. He had asset gatherers, and he did the planning. Later, I tried to develop the training methodology and make them planners. If you could train people to do all that work, you could differentiate your offering from the other financial advisers in the business and earn the right to work with the client over time. Q. What are some of the most significant changes you've seen in the business? A. The major firms have tried to change their colors to a large degree. Look at Merrill Lynch. For years, they were making more money from margin and trading than from planning and selling mutual funds, which are long-term investments. Merrill tried two different times to get involved in financial planning. After killing those two early attempts, the third time worked with Launny Steffens [the former chief of Merrill's retail-brokerage business] in the "80s and "90s. We continue to grow financial planning here. Fee income exceeds commissions on transactions. Many financial advisers use both methodologies. We've gone a long way down the road from what my father envisioned. Q. How has financial planning changed over the years? A. It's been vindicated because customers recognize the value of what we're doing — whatever compensation you're on, fee or commission. Q. Do you think employee brokers at wirehouses will continue to move to independent firms? A. More financial advisers who feel comfortable making the transition will do so, only because so many have made the transition before them. That doesn't mean everyone should do it. But it's very rewarding for many financial advisers. They can sell their practices, or bring in their kids or the partners they want. They can spend the way they want, have a bare-bones office or match the best private-banking office in the area. It provides maximum flexibility, so it will grow and be attractive. Q. What changes do you see coming for independent broker-dealers? A. First off, the complexities in the tax system could get worse. That means financial planning is more important than ever. The advice model is going to get stronger, not weaker. Financial advisers develop specialty knowledge with assistance of their firms. The relationship with the adviser is so key, the broker-dealer still must recognize how important that is — and support that. E-mail Bruce Kelly at bkelly@investmentnews.com.