RayJay Lowers Payouts for Brokers in Employee Channel
Raymond James Financial will cut payouts to the approximately 3,000 brokers in its employee channel in late September in response to growing regulatory and technology costs, the company told brokers on Monday.
The compensation cuts will reduce grid-based payout percentages by around 100 basis points for brokers generating $350,000 to $5 million of fees and commissions annually as of the start of the company’s fiscal year, according to a memo signed by Raymond James & Associates President Tash Elwyn that was read to k-tcc by a source who asked for anonymity.
Top producers bringing in more than $5 million will continue to garner 50% payouts but those generating $601,000 to $700,000 will have their share cut to 43.5% from 44.5%. The split falls to 38% from 40% for brokers bringing in $300,000 to $350,000, while the rate for production between $250,000 and $300,000 will plummet to 28% from 32%.
It remains unclear whether the changes will affect the firm’s recent recruiting tear as it expands from its Florida base to large and small markets by emphasizing its broker-first culture. The changes will not affect payouts to the more than 4,000 brokers at Raymond James Financial Services, its brokerage channel for independent contractors.
“It’s not dramatic from what I’ve seen but it’s surprising coming out of a culture like theirs,” Michael King, an industry recruiter in New York said of the payout change. “What people are interested in is that they’re a broker-centric firm.”
Tash Elwyn, president of Raymond James & Associates, the employee channel, tried putting the best light on the compensation reductions by noting in his memo that they are the first plan changes since 2013. Burgeoning expenses related to the Department of Labor’s new fiduciary rule and higher spending on technology and cybersecurity necessitate the changes, he wrote. The company also went over budget on its recent acquisition of Deutsche Bank’s U.S. retail brokerage business, which it has renamed its Alex Brown division.
Publicly traded Raymond James Financial earlier this year hinted at a campaign to rein in costs and improve revenue by trimming upfront commissions to some outside recruiters in an attempt to have them improve the quality of recruits they introduce.
Payout cuts that directly hit compensation by reducing the split of customer revenue that brokers share with their employer are unusual in the retail brokerage world where firms vie for top producers. Morgan Stanley and several other large firms in recent years have increased the revenue hurdles, or breakpoints, brokers must hit to qualify for certain payouts but have not lowered the percentage going into brokers’ wallets.
“It’s getting spun that every other firm will be doing the same thing shortly,” said a Raymond James broker in the mid-south, who spoke on condition of anonymity.
A Raymond James spokeswoman did not return a request for comment about the changes.
“On Wall Street” magazine reported the planned change earlier on Tuesday.