TOLEDO, JERRY D.

MSF 230
RAYMOND JAMES FINANCIAL

I.

CASE AND BACKGROUND SUMMARY

From a small securities broker/dealer, Raymond James Financial (RJF), evolved to diversified
financial services. Its four major areas of activity include individual investments, capital
markets, asset management and commercial banking. Raymond James and Associates (RJA),
a subsidiary of RJF served individual investors through a traditional channel by employing
FAs. Meanwhile, Raymond James Financial Services (RJFS), another subsidiary of RJF,
comprised solely of independent contractor FAs. Chet Helck, President and COO of RJF, is
proposing a new channel for the firm coined as Quasi Model. The new suggestion would
make a semi master who may have a rate of the positive circumstances of being an
operators, however respect a broad measure more open entryway than a standard delegate
in keeping up his or her own particular business.

II.

PROBLEM STATEMENT
Should RJF adopt the Quasi model proposed by Helck?

III.

ANALYSIS
a. RJA Model - TRADITIONAL EMPLOYEE

This model reflects the way advisors have historically affiliated with broker/dealers or
Wirehouse firms. As employee working in a traditional branch setting, the financial advisor
typically receives high levels of support, benefits and resources without the administrative
responsibilities that independents assume. The tradeoff generally is a lower gross payout
than other business models, since the broker/dealer retains a portion of the advisors fees

and commissions to cover many, though not all, of the advisors costs of doing business. A
traditional employee works in a branch with support staff, all under the supervision of a
branch manager.

b. Proposed Quasi Model

This business model combines some features of traditional employee status with a level of
autonomy similar to that of independent contractors.

This model allows more

independence with regard to decisions on office location, staffing and managing day-to-day
operations, but still draws on the firms administrative support services such as human
resources, compliance, payroll and technology. Compensation is based on the net
profitability of your office and gross payout is higher than at traditional full-service firms.
c. RJFS Model - INDEPENDENT CONTRACTOR/AFFILIATED FRANCHISE
Independent contractors generally receive higher payouts than do financial advisors in
employee business models. At the same time, however, they have direct control over all
resources, operations and costs associated with running their businesses, such as office
leasing, equipment and staffing. For access to the many resources and products available to
traditional employees, independent advisors typically affiliate with a broker/dealer and pay
for needed services on an la carte basis.

RJA Employed FAs

Payout

Autonomy

40% of the commission

generated. Payout generally less
than other models; typically
offset by greater level of support.
FA is a traditional employee
within an office environment.

Proposed Quasi Model

Higher than employeerepresentative model but
lower than the independent
advisor
Ability to run own business,
select location and assume
responsibility for profit and
loss.

RJFS independent FAs

Model with highest payout
with commission earned as
high as 75%, net of clearing
cost.
Complete independence.

Support

Highest level of support.

With support from the firm.

Expenses

Firm pays for bulk of expenses

Firm pays for some expenses.

Those who enjoy the

opportunities of support
available within an office setting
and/or want to focus on their
clients and leave management
administration to others.

Those who wish to balance

autonomy with greater level of
office support.

Best Choice
For

IV.

No or less support as
compared to Quasi Model.
Typically advisors
responsibility.
Those who want to manage
their own business.

RECOMMENDATION
The Quasi Model was proposed as a possible solution to the decline of the firms revenue
due to the recession that resulted to contraction of industry revenue. Hence, I recommend
that RJF should try Quasi Model. Employing the Quasi Model can increase the profit as the
firm believes that there is untapped market between employed and independent model.
The Quasi Model aimed to attract FAs from the competitors. When an FA left for another
firm, about 70%-80% of his or her client moved with him or her resulting to additional profit
from repeat customers. This is a good strategy as it is hard to get new customers because of
the economic environment and lower perception of securities industry.
The Quasi Model, however, should be well designed not to attract FAs in the RJFS. The
model should focused on FAs coming from the competitors as not to cannibalized own
market share. To address this, RJF should offer an upfront payment similar to Wachovia,
otherwise, RJF will be at disadvantage. Another issue about the Quasi Model is the
recruiting. Between RJA and RJFS, RJFS is better suited to do the recruitment. FAs in the RJFS
are not sure if independence is right for them. The Quasi Model could address this dilemma.