Looking at his company's most recent earnings results, Raymond James CEO Paul Reilly had one word: disappointing.

Recent market volatility has buffeted earnings and continued volatility could affect the firm's results, Reilly said during the company’s call with analysts on Thursday.

"We are certainly watching the financial markets which are extremely turbulent," Reilly said.

Yet the firm’s advisor ranks, including independent and employee channels, have climbed to a record high. Reilly cited that, as well as increasing net loans, for his confidence in future growth.


Raymond James is not the only firm to be buffeted by market headwinds. Earning results for rival firms showed similar dips.

On Tuesday, Morgan Stanley said wealth management profits fell to $480 million from $509 million for the prior quarter. Bank of America's wealth management unit, which includes Merrill Lynch, said net income fell 13% year-over-year to $614 million.

Despite growing market turbulence, Reilly remained confident of the firm's long-term growth opportunities. He pointed to a record number of financial advisors, recruiting momentum, low attrition and increasing net loans. In addition, Raymond James also recently announced a deal to acquire Deutsche Bank's U.S. private client group, which consists of about 200 advisors serving high-net-worth and ultrahigh-net-worth.

"We run this business for the long term and we will continue to invest in recruiting and in our current advisors so that they can serve their clients," Reilly said.

But he added that adjustments may be necessary, telling analysts that "we will certainly look at discretionary spending."

Reilly also said that the firm has historically outperformed in down markets, expressing his confident in the team.


The firm reported that its advisor ranks, including independent and employee channels, grew to 6,687. That is up by 351 advisors from December 2014 and 91 from September 2015.

One analyst on the call asked if continued market volatility would affect the firm's otherwise robust recruiting. Reilly replied that there are multiple factors involved in an advisor making the decision to switch firms. But he added that there could be ripple effects from the markets.

"Historically, when markets are off, advisors typically don't want to go to a client whose account is down by 20% and say I'm moving. …so it's potentially there, but we haven't experienced it yet," he said.

The addition of the Deutsche Bank advisors should also boost the firm's overall headcount this year. But ensuring that those advisors make the transition to Raymond James will not be easy.

Stifel, which signed a deal to acquire Barclays' U.S. brokerage unit, was only able to pull over about half of the advisors. Many passed on the opportunity to join Stifel, opting for rivals such as UBS and Morgan Stanley, which some believed were better suited to serve their ultrawealthy clients. Wells Fargo has recently encountered similar difficulties in attempting to entice over Credit Suisse's U.S.-based advisors.

Raymond James is pursuing a slightly different strategy. The Deutsche Bank advisors will operate in a separate unit, dubbed Alex. Brown, after the old brokerage firm that Deutsche Bank once acquired. Deutsche executive Haig Ariyan will also make the move to Raymond James and serve as president of the future Alex. Brown unit.

And in mid-December, about 170 Deutsche Bank advisors visited Raymond James' headquarters in St. Petersburg, Fla., meeting with executives such Reilly, Chairman Tom James, COO Dennis Zank, and Raymond James & Associates President Tash Elwyn.

Speaking during the analysts call, Reilly said that onboarding the new advisors will require a lot of hard work.

"We've only had two advisors in the whole group leave. Both were very small, under $300,000. We don't think it was anything to do with us," he said.

He added that Raymond James does not expect to retain 100% of the Deutsche Bank advisors.

Reilly acknowledged that onboarding so many advisors would add new expenses. But, he added that it is worth the additional costs, pointing to the benefits brought by the firm's acquisition of Morgan Keagan several years ago.

"Long term we will be measured by the integration," he said.


Overall, net revenue rose 2% year-over-year to $1.3 billion while total non-interest expense increased 6% to $1.1 billion. The rise in costs was attributable in part to a 22% jump in technology costs, which increased to $72 million for the quarter.

Client assets under administration grew 4% to reach $500 billion. The Private Client Group's assets in fee-based accounts increased 9% to reach $190 billion.

Earnings per share dropped to $0.74 from $0.89.

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