After a wild 2009 the movement of financial advisers from wire houses to independent channels is "stabilizing," Raymond James Financial Inc.'s top executive said Thursday.
"I don't think we are going to be, as an industry, seeing the kind of movement in terms of advisers that we saw last year," Thomas A. James, the St. Petersburg, Fla., company's chairman and chief executive officer, said during its quarterly conference call.
Raymond James Financial reported late Wednesday that fourth-quarter profits declined 20% from a year earlier, to $49 million, or 39 cents a share.
KBW Inc. said last week that, though it remains cautious on Raymond James' bank unit, it thinks growth opportunities exist in other business segments, including the asset and wealth management businesses. Assets under management shrank 19%, to $14.7 billion, from a year earlier, but client assets under administration grew 36%, to $232 billion.
Executives at other large wealth management companies — including Morgan Stanley and Bank of America Merrill Lynch — have also said they think adviser movement is stabilizing. But Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R.I., said that all of this might be wishful thinking or just lip service.
"Everyone wants to believe that they are stable, and from a practical standpoint, that could be a desire to talk it up by talking it down," he said. "With volumes down, one has to assume that people aren't seeing the same activity, and they are starting to think about what they can do differently, and that might mean moving."
James said that productivity per adviser was down 16% to 17% from a year earlier but that assets are recovering.
Chet Helck, the company's chief operating officer, said that productivity has been hampered by retail investors' fears of a "double-dip" recession. "People are gaining confidence, but there are still concerns," he said. "There are still fears out there, and consequently, there are large cash reserves. People are waiting to see what happens."
Raymond James Financial also wants to increase lending in its banking unit. After spending the first half of last year cutting loans to improve credit quality, however, a reversal would be like "turning around an aircraft carrier," James said.
"This is not an easy thing to do," he said. "You can give instructions and turn the wheel, but you don't notice a change for some period of time."
The company's loan portfolio declined $140 million in the fourth quarter, but Steven Raney, the president and chief executive officer of Raymond James Bank, said during the conference call that this comes after two quarters in each of which the loan portfolio declined by $500 million.
The effort to increase lending began in September, he said, and the company is already expanding its corporate loan portfolio, in which it had 18 fourth-quarter transactions. The residential portfolio remains "a bit more challenging," he said. "We are actively looking for channels to make new residential loans. … We are not going to sacrifice credit quality just for the sake of new loans."
Raymond James is in the process of converting from a thrift charter to a national banking charter so that it can shift its loan mix toward commercial credits. Analysts said it is unusual to see a financial institution, especially one based in Florida, talking about added lending.
Bobroff said Raymond James has a national footprint and "I'd take my hat off to them if they are looking to lend more, since so many competitors aren't looking to lend at all. But I think it could be difficult. People just aren't as inclined to do that type of one-stop shopping that Raymond James offers."
