Raymond James plays the long game on custody

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Even as custodial competitors like Charles Schwab invest in television ads and digital media campaigns, Raymond James says it’s doing just fine without the outlay.

Instead, the firm's divisions for third-party broker-dealer and RIA custody rely on reputation and word-of-mouth referrals for growth, according to Robb Combs, who has led its Clearing and Custody division for the last 14 years.

“To be honest with you, we don’t do a lot of advertising,” Combs says, adding that the firm has relationships with recruiters across the country.

A simple strategy has played out well, according to Combs.

“We’ve had steady growth,” he says, noting that his division, which services broker-dealers and their affiliated RIAs, signs on about one or two new firms each year.

In the meantime, Raymond James’ employee division is signing on advisors more quickly — it’s on track to have a record recruiting year, and is one of the largest broker-dealers in the industry, with 7,900 advisors in June, up 185 advisors from the year before.

In total, Combs’ division services 35 broker-dealers and their RIAs, representing about $25 billion in assets. The Independent Advisory division, headed by Greg Bruce, services approximately 200 standalone RIAs that are unaffiliated with a broker-dealer, representing about $32 billion in assets, according to Raymond James.

Bruce was not available for an interview.

Raymond James’ strategy is clearly different than competitors in the space who have seen more rapid growth. Despite the broker-dealer custodial division having been around for about 35 years and the investment advisory division for approximately 15, according to Combs, it still pales in size to rivals.

BNY Mellon’s Pershing has roughly 750 broker-dealers and 750 RIAs custodying at the firm. Custodial giants Charles Schwab and TD Ameritrade Institutional both have over 7,000 RIAs on their platforms.

“Both of [our custodial] businesses are growing, but relative to the behemoths in both of those spaces, we're still very small,” Scott Curtis, president of Raymond James’ Private Client Group, told Financial Planning in an interview at the regional BD’s women’s conference in September.

With the hire of Bruce, who joined from Schwab’s RIA division in March, executives are anticipating a boost in the number of RIA clients on the platform.

“We brought Greg Bruce on to lead that division to really build a strong foundation for us to grow,” Kim Jenson, chief operations officer at the St. Petersburg-based firm, said in the interview at the conference.

“It’s important that we’re in that space,” Curtis added. He did not specify numeric goals.

In the future, Combs sees a niche for smaller firms at his division at Raymond James — firms he says that are increasingly being overlooked by bigger players and don’t believe their custodians understand their businesses.

While asset custody itself is commoditized at this point, “firms are looking for resources and knowledge and support more so than they ever have been,” Combs says, pointing to regulatory and economic changes. Raymond James offers firms the education and technology tools they’ve built at Raymond James other divisions, he says.

“It’s the same tech we offer to the firms that we own.” Combs says.

Combs says growth at his division will benefit from Raymond James’ reputation — a “conservative firm” that has “not over-extended” itself and whose operations are not dictated by a bank.

“That gives our custody and clearing clients a level of comfort that we’re going to be around to fight the fight the next day,” he says.

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Clearinghouses/custodians Raymond James Financial RIAs Growth strategies Marketing