Raymond James CEO Paul Reilly and CFO Paul Shoukry took part in a discussion Monday, part of Morgan Stanley’s US Financials, Payments and CRE Conference.
Moderated by Morgan Stanley Vice President Manan Gosalia, the presentation focused on St. Petersburg-based Raymond James’ strong growth amid the coronavirus pandemic and how the financial services firm is positioned for even greater success over the next five to 10 years.
Raymond James did very well in 2020, generating gross revenues of $7.76 billion, up from $7.69 billion in 2019. The firm’s 2020 earnings were $818 million, down slightly from $1.03 billion in 2019.
With its network of some 8,300 financial advisors, Raymond James manages about $1.09 trillion in client assets. Gosalia, in his introductory remarks, commented on the firm’s 2020 performance, stating that it generated about 7.5 percent of net new money growth.
“It’s been even higher, at 9 percent annualized, in the past six months,” he said. “That’s a pretty high bar.”
Reilly credited “constructive markets” for the firm’s solid returns. “A high Dow, a rising Dow, certainly help our organic growth numbers,” he said. “And so what we really focus on is recruiting and retention. Our retention number stayed very strong and our recruiting has been very strong, except for the employee channel, which had slowed down.”
Reilly said Raymond James has a “backlog” of advisors who’ve committed to join the firm’s network that could stretch out into the next quarter and beyond. “We’re on a higher pace than last year,” he said. “The most beneficial growth is advisors growing their business. There’s not any real cost to us. It means the clients are happy and that means the advisors are growing. They’re happy and we’re happy.”
Gosalia brought up Raymond James’ spending on technology, which was around $400 million last year. Reilly characterized that as a “modest” outlay.
“The problem with tech,” he said, “is you could spend unlimited amounts of money. How do you spend it really well and make sure what you do pays off? If you look at percent of revenue, our tech spend has been down, but it will go up.”
Reilly said Raymond James is working on new tech projects, such as a revamped client app, that will require additional investment. He characterized the spending as essential if Raymond James wants to continue to be competitive in the financial services market.
“I don’t know, in this world, how you hold down tech and compete,” he said. “You just can’t.”
Gosalia also queried Reilly and Shoukry about Raymond James’ approach to mergers and acquisitions. Reilly said the firm takes a long-term approach to M&A strategy, with some deals taking nearly 10 years to come together.
“We certainly have firms that we think, with our culture, would help us strategically and would be integratable, but they’re not for sale,” he said. “We just have to stay at them and stay close to them.”
Click here to listen to the full 37-minute presentation.