New regulation pushes advisors to Raymond James' corporate RIA

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ORLANDO — It’s standard practice for advisors to move further away from a captive environment in the independent channel, taking on more and more responsibility themselves over time, but it isn't a one-way street this year at Raymond James.

Amid regulatory changes and new compliance expectations, some firms are deserting pure independence to instead register with the St. Petersburg-based firm’s corporate RIA, according to Scott Curtis, who oversees both Raymond James’ IBD and employee divisions.

“I’d say it’s a handful today, but that’s up from zero," Curtis said in an interview at the firm’s annual Women’s Symposium.

Two kinds of firms are exploring this option: Dually registered representatives operating in the firm’s independent contractor division are dropping their own RIAs and registering with the firm’s corporate RIA. In addition, some third-party RIAs that custody with Raymond James are moving over, too.

When they join the corporate RIA, advisors can operate their fee-based business as they had before, but without needing to handle regulatory responsibilities on their own, Jodi Perry, who leads the company’s independent contractor division, said, adding that the key differentiator is access to more Raymond James resources and technology.

Perry declined to comment on company pricing across divisions.

The challenges of complying with Reg BI has made Raymond James’ corporate RIA an increasingly attractive option to some advisors, Perry notes. In addition, there have been more audits and inspections coming from both the SEC and states — cybersecurity programs and compliance policies and procedures have all been under a closer eye, according to Curtis.

“Now [some RIAs are] feeling like, maybe this doesn't make sense economically because of all the things that you need to have in place now,” he says, adding: “They’re questioning whether it's worth it.”

It’s especially complex for firms that operate across multiple states; each state can have its own regulations around cybersecurity and insurance. “It just gets very complex … I think it’s easier to be under an umbrella,” Perry says.

Speaking more broadly across Raymond James’ independent and employee channels, Curtis says advisor movement is highly correlated to equity market behavior.

“When the market goes down, more [advisors] are interested in the employee market,” he says. “When it goes up, more are interested in independence.”

The shift is due to expenses, Curtis says. When assets and revenue fall but expenses stay static, income declines. In the Raymond James’ employee model, the company takes on more of that risk.

Curtis says 2019 is on track to become the company’s best recruiting year for its employee channel, which includes HNW division Alex. Brown.

“[This] is not what we believed six months ago,” he says.

Across the firm, headcount was up to 7,900 advisors at the end of June, 185 advisors more than the year-ago period. The firm has issued formal hiring offers of approximately $214 million, up from $132 million a year ago, according to the company’s earnings reports.

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