Treating their own employees as clients is not a common strategy for businesses, but Raymond James says it has been a key to its success.
The firm, which launched in the UK in 2001, has created a niche for itself in the wealth management market by offering what disillusioned investment managers, pressured by rising costs and regulation, were looking for – a place where they can continue to be independent.
Or at least, that is what Cynthia Poole, director of relationship management and business support, and Anthony Scott, head of propositions and business development, believe.
The rising numbers of wealth managers joining the company from established houses such as Brewin Dolphin and Charles Stanley, and the increase in assets to £8.73 billion from £500 million in 2004, go some way to substantiate the claim.
‘We treat wealth managers as our clients, not as employees. And if we support them and give them all the tools and resources they need, then they will be able to better serve their investors,’ Poole says.
The model is simple. There are three options to choose from: independent contracting; professional partnership; or the firm’s investment management platform.
‘Our bread and butter is independent contracting,’ says Poole. ‘That’s where we’ve had the greatest success. Most [wealth management firms] trade as Raymond James. A small number have their own trade names, but as our brand gets stronger, more and more trade as Raymond James.
‘They tend to be experienced wealth managers stepping out of established firms who want to set up a commercially independent business.’
The professional partnership is for those practices that are independent but sit inside a third-party intermediary, such as a law firm.
The third option offers directly authorised wealth managers access to the investment management platform which provides all of the service and support provided to Raymond James branches, without the compliance.
There are 56 Raymond James branches and 46 directly authorised firms using the firm’s platform. In total there are 257 wealth managers, looking after 31,916 client accounts.
While Scott’s team deals with recruitment, Poole handles the ongoing relationship with the wealth managers that come on board.
However, part of Scott’s job is making sure that all the tools they offer are fit for purpose when a new investment manager comes in, which over the last year has included an increased focus on the provision of research.
‘We have a new canvas, so we have been painting,’ says Scott, who has been working on building a virtual research department.
The past year has been busy for many in the industry as everyone focused on becoming compliant with Mifid II. This included a rethink of what research firms will buy and how they will pay for it. ‘Raymond James has been a beneficiary of regulatory change, and research has been on aspect of it. I’ve been running a project to make sure we can deliver something useful and better,’ Scott says.
‘We are at the beginning of an evolutionary journey. We’re fairly broad, in terms of the research wealth managers can access. Next year and beyond, we are looking to personalise the research each office receives so that it really suits their investment strategy.’
The new hub also allows the different offices to share ideas with those who have similar investment styles.
In the first instance, Scott has negotiated with research providers including Credit Suisse, JP Morgan, Numis and Peel Hunt. However, he says that as he gathers more data from wealth managers based on their usage, he will be looking at more niche providers. He highlights Capital Economics and Lombard Street Research as names he is considering adding.
Given that regulation costs will continue to rise, Poole argues that it is very difficult to run a small boutique investment management practice. For her, research is a clear example of these challenges.
‘The cost to [wealth managers] is a tiny percentage of what it would cost if they tried to get this research on their own,’ she says.
Scott joined Raymond James back in June 2017 after spending 17 years at Charles Stanley, latterly as head of investment management. He initially took on the role of head of propositions, however since then he has also taken on the responsibility for business development, in charge of recruiting new wealth managers.
He says it is a business model that he really believes in and can understand. The recognition that the company has been receiving over the last few years was also an attraction for him.
Since he joined, new branches have opened in Oxford, the Cotswolds, the Home Counties and two in London.
So what attracts wealth managers to Raymond James?
‘Regulation always drives change. Change will drive levels of dissatisfaction and therefore make people look around, particularly if they aren’t happy,’ Scott says.
‘A lot of people joined companies that were relatively small in the 2000s, but a lot of those smaller companies have grown considerably bigger and are more process-oriented and prescriptive. What we are offering is a compliant antidote to homogenisation.’
He points out that while Raymond James tries to tailor and have a bespoke solution for the wealth managers who join, the fact that it will reflect down to the end client is always at the forefront.
‘Look at where you have a large organisation that might have a range of model portfolios. You meet someone to assess the suitability, they say you are B5 and you go into that model. Is that the best thing for the client?
‘There are benefits and a lot is about scale. When we talk to our new and prospective investment managers, we want to make sure what they do fits in, that what the underlying client is getting is genuinely a bespoke service, not something decided by an investment committee that’s run out of a central office. I’m a huge believer in the link between the wealth manager and the client, and that personal relationship.’
However, the company does not just welcome anybody who wants to join. Scott says that despite the numbers that have come onboard recently, the cultural filters are quite significant.
‘The price of freedom is eternal vigilance. So making sure that you’ve got a very good cultural fit in the early days is crucial.’
Poole agrees: ‘Culture is our watchword, it’s the first thing we think about in every decision we make.’
This approach is highlighted by the fact that if a wealth manager ever wants to leave Raymond James, they are free to take their clients.
‘We don’t have any restrictive covenants. If a wealth manager decides, for whatever reason, they need to move on, they take their clients with them. The fact that they know that on the way in is really liberating. And we don’t lose many,’ says Poole.
‘Even for retiring wealth managers, we work really hard within the Raymond James family to help with succession planning.’
To make sure that the decision to leave Raymond James is not commercially motivated, it offers a range of tiered pricing models depending on the amount of revenue generated by the wealth manager. For access to its platform, it has three pricing models that are also tiered. The four tiers reduce from 0.3% to 0.1%, depending on the size of the portfolio.
‘What we are focused on is trying to make the wealth management world as efficient as possible. To take out the things that waste time,’ she says.
‘Raymond James is a net beneficiary of change. That’s been proven with us in the UK over the last several years and it is definitely the case in the US. Where there are changes in regulation or M&A in competitors, it creates a situation where there are unhappy campers.’
Aside from supporting businesses by providing the technology, client reporting, ability to trade and the compliance needed to set up, Poole says the company can also help with both organic growth and growth through acquisitions, as exemplified with Raymond James St Andrews and Prospect Wealth Management.
The St Andrews branch, led by Scott Edmiston, recently acquired a book of business from a retiring wealth manager in his area. Elsewhere, Prospect Wealth, led by Matthew Hunt, which bought CFS Portfolio Management back in 2016, is now looking for further acquisition opportunities.
‘Growth through acquisition can power organic growth. We have the capital to support these types of acquisitions,’ Poole adds.