Raymond James will offer clients commission-based retirement accounts under the fiduciary rule, a decision that mirrors similar moves at Morgan Stanley and Ameriprise.

"We fully expect to offer commission-based accounts under the BIC," CEO Paul Reilly told analysts during an earnings call Thursday morning.

The Department of Labor's new regulation, which goes into effect next April, applies a higher standard to advice given to clients in retirement clients. Under the best interest contract exemption, brokerages can continue offering clients a commission-based option.

Yet whether to use the exemption is fast becoming a dividing line in the industry. Firms opting to drop commission-based retirement accounts include Merrill Lynch and Commonwealth Financial Network, which have over 14,000 and 1,600 advisers respectively.

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Raymond James' strategy is meant to preserve client choice, Reilly said. "We fully expect to offer a range of options to help our clients."

When asked by an analyst why the firm's strategy was diverging from Merrill and others, Reilly emphasized that Raymond James didn't want to pressure its advisers or clients into moving into fee-based accounts.

"Right now, our plans aren't to push people or heavily influence people onto different platforms," he said.

Reilly, who has served as CEO since 2010, said Raymond James' philosophy is based on flexibility for the adviser and client.

"I know others believe that they want to have them on their fee-based platform and they are pushing them in that direction. When you do that, you get some misallocations. But we're not looking to force anyone onto any platform," he said,

"We will have technology but I don't think it will be a robo," said Raymond James CEO Paul Reilly. Image: Bloomberg News
"We fully expect to offer commission-based accounts under the BIC," said Paul Reilly, CEO of Raymond James, which has over 7,000 independent and employee advisers. (Bloomberg News)

The firm, which has over 7,000 independent and employee advisers, is still reviewing pricing under the rule, Reilly said, emphasizing that "it will impact the client, the adviser and the firm."

Industry observers say that the different approaches in implementing the fiduciary may also have to do with the firms' business strategies. When Bank of America Merrill Lynch announced its decision, it noted that clients also have access to the firm's self-directed platform, Merrill Edge, as well as its forthcoming robo adviser.

The firm's digital platform is expected to launch early next year.

Privately, some Merrill Lynch advisers and executives believe that clients are increasingly conscious of the different standards of care and that the wirehouse's strategy has positioned Merrill for success.

RECORD PERFORMANCE

Raymond James's decision comes as the firm reported record growth during the recent quarter, during which the firm acquired Deutsche Bank's U.S. private client unit as well as a Canadian brokerage firm, MacDougall, MacDougall & MacTier.

Companywide net income soared 33% year-over-year to $171 million.

The firm’s earnings also come as industry observers are anticipating some impact on profits from the Labor Departmet’s rule.

“Expectations were high coming into the quarter and these set of results should more than satisfy the bulls,” Christian Bolu, an analyst with Credit Suisse, wrote in a research note.

The private client group reported a record quarterly pretax income of $106.3 million, up 21% from the prior year. The unit's AUM jumped to $574 billion, up 27% – another record.

The firm's adviser headcount, at 7,146, was up 550 over September 2015 and 312 over June 2016.

"Even without the acquisition, organic growth alone would have achieved these records," Reilly said.

He added that credit for the firm's performance should also go to its back office support staff. "We don't talk much about the ops and tech people, but we should really be celebrating them."

The firm’s earnings also come as industry observers are anticipating some impact on profits from the Labor Departmet’s rule.

“Expectations were high coming into the quarter and these set of results should more than satisfy the bulls,” Christian Bolu, an analyst with Credit Suisse, wrote in a research note.