Raymond James Financial Inc.'s move to offer free trades to some clients will have little effect on its top line, but the company does expect pricing pressure in the industry to continue, Chairman and CEO Paul Reilly said during an earnings conference call.
Reilly said the company expects to lose about $7 million to $8 million in revenue as a result of offering free trades to some clients of its registered investment advisers. Raymond James made the change in response to discount brokers offering free trades on their platforms.
"All these actions always remind us there will be price pressure in our business," Reilly said.
Given the pressure, Reilly said it is important to invest in resources that help its advisers strengthen their client relationships and improve cost efficiency. Reilly noted that the "vast majority" of the company's fee-based accounts do not charge transaction fees, and Raymond James' recent change is an indication that the registered investment adviser channel is catching up with the full-service segment.
He added that Raymond James' diversification and scale helps it handle and absorb pricing changes. Raymond James added scale in its fiscal fourth quarter ended Sept. 30, as the company increased its private client financial adviser ranks by 198 to bring its total to 8,011.
On the call, analysts asked Reilly about reports that UBS Group AG will stop charging some fees on separately managed accounts. Reilly said it was difficult to comment because the details of UBS' changes were not yet clear. He noted that it does have the potential to negatively impact Raymond James if it lowered fees, but he noted that the company has done that in the past.
"If you look over time, there's always been pressure on those adviser accounts and the fees that we and third-party managers charge," he said. "It's been very competitive."