Raymond James pumps out recruiting loans. Will advisors bite?

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Raymond James may not be the “the high bidder” when it comes to recruiting deals, but the firm is churning out more offers than it did a year ago.

The firm has issued formal hiring offers totaling approximately $214 million as of June 30, up from $132 million from the year-ago period, according to the company’s earnings reports filed with the SEC. Not all may be accepted and the company would not have to fund the total amount offered, Raymond James cautions.

“As part of our recruiting efforts, we offer loans to prospective financial advisors and certain key revenue producers primarily for recruiting, transitional cost assistance, and retention purposes,” Raymond James explains in its 10-Q filing. “These commitments are contingent upon certain events occurring, including, but not limited to, the individual joining us.”

Of the firm’s current formal offers, $128 million consisted of unfunded commitments to prospective hires who had accepted positions with Raymond James. That’s up from $79 million from the year-ago period.

In the filing, the firm did not clarify if the amount increased due to deals getting bigger or more offers being made — or a combination of the two. A spokeswoman declined to comment on the matter.

Frank LaRosa, a recruiter who has worked with Raymond James, didn’t want to discuss specifics of the firm’s deals, but notes that more success recruiting large advisors begets higher recruiting costs.

“A $4 million or $5 million producer gets a bigger deal [than a smaller advisor],” LaRosa, founder and CEO of Elite Consulting Partners, says. And Raymond James is “having a tremendous amount of success on the higher end.”

Raymond James, which operates both employee and independent broker-dealers, has invested heavily in its hiring processes, even offering VIP home office tours for prospective employees to get a feel for its culture and platform. Executives have taken a version of the home office visit on the road for West Coast advisors too far away to make the trip to the firm’s corporate headquarters in St. Petersburg, Florida.

CEO Paul Reilly shed some light on the firm’s philosophy regarding hiring bonuses during an earnings call last month.

“I’d say we’d have some slight increases to close the gap but we’ve otherwise stayed very, very disciplined,” Reilly said, responding to an analyst’s query on whether Raymond James would try to match competitor’s hiring bonuses. “A number of competitors are offering substantially more. We lose some people that we would like, but the people who are joining us are doing so for the right reasons, not because we offer the biggest checks,” Reilly said.

Although Raymond James isn’t “the high bidder,” as Reilly put it, its strategy has paid off. Headcount is up 185 year-over-year, topping 7,900 independent and employee advisors.

Industrywide, recruiting deals have come down substantially after having soared in the years following the financial crisis. As recently as 2016, top advisors were receiving offers up to 400% of their trailing 12-month production.

But three wirehouses (Merrill, UBS, Morgan) have cut back on recruiting efforts. UBS and Morgan Stanley also exited the Broker Protocol in late 2017.

“They’re still doing some recruiting, but not as much as they were,” LaRosa says.

A steady stream of breakaway advisors have changed the calculus across the financial services playing field, LaRosa says. “As more advisors go to the independent space, there are firms like LPL and Cambridge that see an opportunity to capture assets that they couldn’t in the past.”

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Recruiting Regional BDs Independent BDs Compensation Paul Reilly Raymond James Financial