Facing competition, Raymond James boosts recruiting bonus

As the scramble to recruit experienced registered brokers and advisers continues, Raymond James Financial Inc., a top destination for advisers over the past decade, is increasing in 2021 a recruiting bonus to experienced financial advisers who work as employees of the firm.

Paul Reilly, the CEO of Raymond James, said on a Thursday morning conference call with analysts to discuss company earnings that the firm was beefing up its recruiting bonus to advisers who are employees, but did not give details about the enhanced compensation.

"On the employee side, there has been a modest slowdown in recruiting due to the challenges brought on by [COVID-19] and also increased competition for experienced advisers where even our regional competitors have significantly increased their recruiting packages," Reilly said during the conference call. "In response to what we are seeing, we have also enhanced our recruiting packages to be more competitive while also ensuring attractive returns to our shareholders."

So-called recruiting bonuses are typically in the form of a percentage of an adviser's annual fees and commissions, known as production in the industry, and employee advisers can command between two times to three times that number. That means an adviser who generates $1 million in annual sales can command a bonus of $2 million to $3 million that is paid out over a period of seven to 10 years in many cases.

The gap between what its competitors and Raymond James were offering in terms of recruiting bonuses has recently grown "bigger and bigger," Reilly said. The gap was too big for some advisers to turn down, and while the firm would not match such high offers it was "upping" its deal, he said.

Raymond James reported 8,233 financial advisers at the end of December, an increase of 2.1% from the end of 2019. It saw a net increase of 173 advisers compared to the end of 2019, but a net decrease of six advisers compared to the end of the prior quarter ending in September.

For the calendar year of 2020, Raymond James recruited advisers with $40 billion in assets and $270 million in annual fees and commission, known as trailing 12 in the industry.

Reilly did not release details of the beefed-up bonus, but industry executives and recruiters were quick to note that Raymond James in the past has not dangled the largest offer in front of recruits but has pitched advisers on its focus on the wealth management business and its hands-off policy regarding who controls the clients.

Newer competitors like Rockefeller Capital Management and First Republic Investment Management are making it more expensive for Raymond James to recruit experienced advisers, they said.

"For a little while there, Raymond James had a much clearer path without a lot of obstacles," said Louis Diamond, an industry recruiter. "But now, most firms — with the exception of Merrill Lynch — are back in play for recruiting."

"Raymond James had to step up [its recruiting deal] to have the same kind of success the firm has had over the past few years," Diamond said, adding that his firm does work for Raymond James.