By Andrew Welsch
Raymond James Financial has cash to spend and it is actively pursuing potential acquisitions, but any deal announcement could still be a long way off, CFO Paul Shoukry said Tuesday.
Shoukry, who spoke Tuesday at UBS’ Financial Services Conference in Key Biscayne, Fla., said the wealth management company had hired a new head of corporate development and was “in the flow” with investment bankers.
“We are having conversations with firms we have wanted to have conversations with for years,” he said. “But you can’t time these things. Our approach is going out and looking for good cultural fits.”
He pointed to the company’s acquisition of U.K.-based Charles Stanley Group as an example of a potential timeline. Raymond James closed the acquisition in 2022, but had its initial conversation with Charles Stanley eight years earlier.
“We take a long term approach,” Shoukry said. “We’re thinking three to five years out in terms of how we deploy capital. And we are optimistic that M&A will be part of that formula.”
Debt is not a problem, Shoukry said. The company’s leverage ratio stood at 12.1% as of the end of the fourth quarter, well above its target of 10% and twice the regulatory requirements to be well capitalized, he said.
He added that Raymond James would consider doing share buybacks with excess capital, but he said it is a lower priority compared to dividends and acquisitions. “If we can’t use the capital within a reasonable amount of time via those other levers, then we’ll do buybacks,” he says.
Raymond James is one of the nation’s largest wealth management companies. It had more than 8,700 advisors and more $1.3 trillion in client assets under administration as of Dec. 31. The St. Petersburg, Fla.-based company operates an independent broker-dealer, employee broker-deaker, RIA custody unit, and offers a wealth management platform and services to banks and credit unions.
While there have been a slew of acquisitions in the wealth management sector over the past few years, Raymond James’s recent acquisitions have been focused on adding other capabilities, such as its 2021 purchase of bank and asset manager TriState Capital Holdings.
“A lot of the deals on the wealth side have been firms that have advisors that have lower assets and productivity than we typical target, ” Shoukry said. “We are focused on quality over quantity.”
In the bank and credit union sector, there’s been a wave of partnerships announced as more financial institutions seek to outsource back office functions. For example, LPL Financial said last week that it is adding regional bank Wintrust Financial as a client for its financial institution business. Wintrust will move about 85 financial advisors and $16 billion of assets to LPL’s platform. And last year, LPL announced it will become the brokerage and wealth management platform for insurer Prudential Financial’s 2,600 financial advisors, who oversee about $50 billion in assets.
UBS analyst Brennan Hawken asked Shoukry at Tuesday’s conference if Raymond James was missing out on these kinds of deals. Shoukry replied that Raymond James has been active in the sector, supporting banks and credit unions, for more than 20 years. Shoukry said Raymond James doesn’t disclose assets for its financial institutions business, but described it as a meaningful business for the company.
Raymond James targets its offering to financial institutions that have advisors with larger assets under management — advisors that are similar to the staff in the company’s independent and employee broker-dealers, he said.
“A lot of the transactions you have seen recently wouldn’t have been on our radar,” he said. “They fall into the category where there is a large number of advisors but a low ratio of assets to advisor.”
Focusing on scale is not a bad strategy, he added. “It can be an effective strategy if you have the systems and processes to support it. It just isn’t our strategy. Our strategy is to focus on advisors who are financial planners with a high level of assets.”
Write to Andrew Welsch at andrew.welsch@barrons.com