Why Raymond James Advisors Are Shunning Its Independent Channel

Raymond James Financial Services for years stood alongside Wells Fargo’s FiNet and Ameriprise’s franchisee channel as a preferred off-ramp for advisors leaving the wirehouse ecosystems. Independent broker-dealer models promised the best of both worlds: strong payouts, branding flexibility, business ownership and the backing and credibility of a major financial institution.

But the ground has shifted under the independent movement. What once appeared to be an independent solution looks increasingly outdated against the backdrop of an open-architecture, multi-custodial independent RIA. Fully independent firms are delivering better economics, far superior technology, higher enterprise value and greater control than what the semi-independent chassis of Raymond James can provide.

A tidal wave of private equity investments have supercharged the growth of these independent platforms. Advisors now have numerous well-capitalized alternatives such as NewEdge, Apollon, and One7. These firms have proven unequivocally to be the best model for elite advisory teams as shown by the marquee move this month of Justin Waterman’s $25 million team to NewEdge.

These new firms are unconstrained by the limitations of RJFS, Ameriprise and FiNet that provide an illusion of independence while still operating on the backbone of a W-2 brokerage model. A 1099 Raymond James advisor is still captive to: a single custodian, legacy technology, centralized bank-built compliance, firm-approved marketing, Finra regulations and a continued squeeze on payouts.

Although the advisor’s tax status has changed as a 1099 broker, everything else is essentially the same as a W-2 model. That includes slow approvals, scaled support systems and constraints on product sales, including limits on alternatives, customized strategies and private investments.

Firms like Raymond James are now as large as the wirehouses and cater to almost 10,000 brokers. They’re designing one-size-fits-all systems for $500,000 producers serving mass affluent clients. As a result, advisors are working with outdated CRM systems, clunky reporting, inadequate client portals, no multi-custodial integration, slow data synchronization across client accounts and limited alternative investment workflows.

That’s not only costing advisors time and reducing client service, it’s limiting the value of your practice. It is hard to maximize your margins as an independent broker when your firm is not your partner but also trying to squeeze more margins from you. Advisors who are considering selling their practice or participating in the booming private equity marketplace are at a disadvantage without control over their technology, custodian, operations, compliance and brand.

If you want to grow, Raymond James semi-independent advisors also cannot take backing from a third party to help recruit or buy other practices.

Raymond James has proffered an attempt to keep pace with the market by offering Raymond James Custody Solutions, a custody option for those looking to start their own RIAs but remain in the Raymond James ecosystem. On paper, it’s a strong option, but in reality, it’s encumbered by many of the same challenges facing RJFS brokers.

RCS is easy for clients but still difficult for advisors. Clients can move seamlessly with negative consent letters. But advisors are still bound by outdated technology. Critical systems are built to communicate with Raymond James and are not integrated with some of the largest custodians that clients may also use, including Schwab, Fidelity, Pershing and Goldman Sachs.

That means that client data from CRMs to account values struggle to sync. And when problems do arise, Raymond James’ service model is still built around the 10,000 advisors that are in its core and most profitable business line. Service tickets lag, and wait times continue to grow.

Many advisors are migrating to RCS as a path to becoming a fully independent, enterprise-grade RIA. A handful of firms, including NewEdge, Apollon and One7 offer custody relationships with RCS as a bridge. Meanwhile advisors at these RIAs still have multi-custodial options, modern technology, strong economics, boutique culture, turnkey support and freedom to select their CRM, reporting and portfolio tools.

Perhaps most importantly, they solve the issue of valuation suppression at RJFS and Ameriprise franchisee. Advisors at NewEdge, for example, have valuation frameworks as independent advisors or as part of NewEdge that are far superior to semi-independent models. They provide operational support and capital for elite teams to create mini-empires. Waterman, for example, is set to build out a new 20,000 New York City office.

Modern advisors are realizing that semi-independent platforms are no longer the future. Raymond James has not kept pace, and the winning formula for advisors and clients is full independence with multi-custody, modern technology, hands-on support and enterprise value creation.

In another telling move last month, another Raymond James team managing $1.2 billion left to start an independent practice. Bill Keaton and Alfred Sams opted to use Goldman Sachs as their custodian and align with Concurrent. There are numerous options for advisors to unlock the value of their practice, but the future belongs to true independence.