When Tom James became CEO of Raymond James in 1970, the Dow Jones Industrial Average was in the low 800s. The company's total revenues were $3.3 million. Young, tall, hip-he started a band in college, and until recently still worked out his collection of guitars-James had earned his MBA from Harvard less than five years before, and was full of ideas for the advisory firm his dad, Robert James, founded in 1962. "Because of the arrogance of being 27 and having gone to B-school, I thought I could do this," James says today. "My mother says my father always thought that if things went badly wrong he could fix it."

Today, Raymond James Financial is a $3.71 billion, publicly traded corporation with annual revenues of about $2.6 billion and offices in the U.S., Canada, the U.K., France, Argentina and Brazil. Its independent broker-dealer division, Raymond James Financial Services, ranked No. 2 in Financial Planning's2009 Independent Broker-Dealer Survey. Last year was the firm's best recruiting year ever; the company brought 770 advisors on board. It also has a major regional brokerage, and is engaged in investment banking and asset management. Outside the office, the Raymond James stadium hosts NFL games in Tampa. Tom James has had quite a ride.

Now, however, at age 67, James is not stepping down-"retiring means you die," he says-but making room for a new executive. Paul Reilly, a member of Raymond James' board since 2005 and former chief executive of Korn/Ferry International and KPMG, became president of Raymond James last May and will become CEO this month. It's the beginning of a new era.

MANAGING IN ADVERSITY

James' ascent was not smooth by any means, as you well know if you can remember what investing was like in 1973. "That was the real school of hard knocks," he says-and it inculcated him in a business philosophy that has endured. He made sure to retain earnings and protect against the downside. Employees were brought in with low salaries but incentivized with generous bonuses.

The caution James learned then is behind what he says he's proudest of today: "We survived 2008 and 2009 without a loss in a quarter," he says. "We insulated ourselves from mistakes our competition made." Convinced that company could not rely on uncommitted lines of credit, James built up a huge trove of cash. "I had to call in a lot of cards," he recalls. "We had $2 billion in net worth, so we could survive."

CLIENTS FIRST

Business acumen aside, much of Tom James' success is built on the foundation laid by his father Robert, who was one of the founders of the financial planning movement. Robert James first came to Florida to develop real estate and encountered a lot of retirees who were seeking advice. He was skilled at helping them make better decisions, and created a client-centered process with a questionnaire-back in the 1960s. "Other professionals wanted to use the Bob James method. It was better than the traditional approach of selling products," says Chet Helck, Raymond James' COO. "My father really cared about financial planning and training people to do it," James reflects.

Over time, the Bob James method became "wildly successful," Helck says. "He changed sides of the table and was an advocate for the client. And as clients became more knowledgeable and had access to more information, that required that advisors become better educated and have more support."

When Tom James joined the firm, he embraced his father's values, even earning a CFP in 1978. "He turned financial planning from a good idea into the business we know today," Helck continues. "Adherence to those ideas has been the reason for our success, and we use the principles of planning for all activities-due diligence as well as practices with end clients." To this day, James has $150 million under management, in addition to his own money.

Case in point: Raymond James, which formally has published its Client Bill of Rights since 1994, distributes 250 kinds of trade confirmations. Each one is a full page, James says, and lists both risks and benefits of the product. This was the case for auction-rate securities (ARS), James says: "The ARS confirmation says it's subject to failure risk. . .and you can lose money." (Raymond James is fighting a class-action suit by ARS investors; it was dismissed once but refiled, and Raymond James filed a second motion for dismissal this past January.) "For heaven's sake, read [the confirmation] when you get it," James exclaims.

Over the years, the industry has come around to the Bob James method. Helck, who himself has been with the firm 20 years, points out that the push for the fiduciary standard fits neatly with the company philosophy. "Independence is in vogue," he observes. "Clients want an advisor who's working for them and has no agenda. The bar is being raised for everyone-independents, RIAs, CPAs, insurance agents, bankers. Protections will be higher and more similar."