Raymond James Financial Inc. Business Information, Profile, and History

Company Perspectives:

Our Pledge: We, the Associates of Raymond James Financial, commit our energies, intellect and knowledge to attaining the financial objectives of our clients by providing the highest possible level of service and delivering superior investment alternatives. We believe that putting the financial well-being of our clients first ultimately serves the best interests of our shareholders, our communities and ourselves. Remaining responsive to the needs of our clients in a financial environment characterized by constant change is our continuing challenge.

History of Raymond James Financial Inc.

Raymond James Financial Inc., a diversified financial services company, earned national recognition from a mixture of investment savvy and high-profile placement of its name. Subsidiary Raymond James & Associates provides securities brokerage, investment banking, and financial advisory services. Raymond James Financial Services, the independent contractor unit, offers both individual and institutional clients financial planning and brokerage services. Asset management, trust, and retail banking also fall under the umbrella of the holding company.

Financial Business Family Beginnings: The 1960s to the Mid-1980s

Robert A. James Investments incorporated in 1962, producing revenue of less than $100,000 for the fiscal year. The St. Petersburg, Florida-based business started out selling mutual funds. Membership on the Philadelphia-Baltimore-Washington Stock Exchange allowed the company to fulfill orders for stocks and bonds.

During 1964, the company expanded into the Bradenton-Sarasota region through a merger with Raymond and Associates, another family named company. The combined company was renamed Raymond James & Associates (RJ&A). Thomas A. James joined his father's firm after his 1966 graduation from Harvard business school. Following his arrival, the company began handling private placements of debt and equity offerings for small local companies.

During the late 1960s the company expanded its services, beginning investment banking and general insurance agency activities. Raymond James Financial (RJF) incorporated as a holding company in 1969. That same year, Thomas James became CEO and Robert James became chairman. Thomas recruited other Harvard M.B.A. graduates to the firm, Francis S. "Bo" Godbold, among them, who would be named company president in 1987.

Revenue topped $5 million in fiscal 1972. During 1973, RJ&A gained membership on the New York Stock Exchange. Thomas James put his business background into high gear when the 1973-74 recession and stock market crash created havoc for small stocks and, consequently, RJF. Emphasis had to change from sales to administration and finance. Five of 14 offices were closed and neither Thomas James nor his father collected a salary until the market revived, according to a 1991 Forbes article.

Revenue began climbing again in 1975, a trend that continued for the remainder of the decade. In 1979, the company was cited for its leadership in the area of financial planning services. RJF had been ahead of the curve when it came to providing this service to small investors.

In 1980, RJF's net income exceeded $1 million for the first time. The company completed a $14 million initial public offering in 1983.

In the Public Eye: The Late 1980s Through 1999

In the late 1980s, RJ&A opened international offices, first in Paris, France, in 1987, then in Geneva, Switzerland, in 1988. Overseas expansion aside, the difficult days of the early 1970s riveted the need for cost control in Thomas James's mind and continued to be a priority.

The stance aided the company during volatile times. In 1991, the vast majority of RJF's nearly 700 offices paid their own fixed costs and overhead out of sales commissions, according to Forbes. The measure helped keep the company's net margins up even during a market decline during the last half of 1990. RJF's net margins were 7.6 percent versus an industry average of 2.7 percent.

By 1994, RJF had established a national presence. The company's stock pick record gained recognition from the Wall Street Journal. Fiscal 1993 marked the posting of a fifth straight year of record results. Expansion plans were in the works, including entry into the banking industry.

The general trend toward broadening services drove a spike in buyouts in the financial industry. RJF, with about 50 percent of shares controlled by Thomas James, his family, firm officers, and employees, looked like an unlikely prospect for an unfriendly bid. But the company did look appetizing. "We've done three times as much business in the past six years as we did in the entire first 29," Godbold told Florida Trend in 1997.

RJF had 1,100 offices versus 680 for Merrill Lynch and 250 for Charles Schwab, Florida Trends reported, yet was still billed as a regional broker by many despite its size and nationwide business. According to the publication, RJ&A's $475 million offering of Miami's CHS Electronics stock was the largest underwriting done outside New York on the year. In addition, nearly 20 percent of the offering went to large foreign institutional investors via its European offices.

RJF was intent on matching its promotion package to its size and in 1998 purchased naming rights for Tampa's football stadium, housing its NFL Buccaneers team. The 2001 Super Bowl would provide the company name with national television exposure. On a local level, the company's name was now synonymous with a significant landmark.

The company's independent contractor subsidiaries Investment Management & Research (IM&R) and Robert Thomas Securities merged in 1999 to form Raymond James Financial Services. IM&R, established in 1967, served independent financial planners. Robert Thomas Securities, established in 1981 as a discount office, worked with independent stock and bond brokers.

Robert Thomas Securities, named after father and son, found early success in the discounting business in Milwaukee. But when brokers from other discounters came on board and found themselves paying their own costs the practice fell by the wayside.

Highs and Lows: 2000-04

Just as businesses change over time so does an industry. The merger trend continued among financial concerns into the new century. According to a 2001 American Banker article, 30 broker-dealers had dropped off the radar since 1997, the majority due to consolidation. An RJF competitor, St. Louis-based A.G. Edwards & Sons Inc., was among the companies warding off suitors.

Earlier consolidation had surged with the stock market as banking companies sought firms in order to get into the game. Brokerages, in turn, were looking for the financial gains made from selling out. When the bear market hit, a new wave of consolidation ensued, this time driven by brokerages hurt by declining commissions and investment banking fees. Lack of capital, increased competition, and need for larger distribution systems also made larger look better to some independents, but not to RJF.

Both RJF and A.G. Edwards continued to stick with their traditional retail brokerage business despite the capital market downturn and subsequent drop in consumer business, according to American Banker. Baltimore-based Legg Mason Inc., on the other hand, had been recreating itself as an asset management concern and was buffered somewhat from falling brokerage revenue.

Chet Heick, an executive vice-president and chief recruiter for the firm's independent contractor subsidiary, was appointed RJF's first ever COO in March 2002. Among his goals was an increase in coordination among the company's retail units.

In 2003, RJF was reshaping its board of directors, placing more weight on outside directors than management, in line with Congress-mandated reforms prompted by misdeeds in the financial industry.

In fiscal 2003, RJF posted a 9 percent increase in profits, reversing a two-year downturn. The company earned $86.3 million on revenue of $1.49 billion versus $79.3 million in 2002 on revenue of $1.51 billion. The third and fourth quarters of the fiscal year were bolstered by increases in commissions and fees thanks to an upswing in the stock market. The company's best year was 2000, when net revenue reached $125.2 million on revenue of $1.7 billion.

During 2003, more than 66 percent of revenue was generated by individual clients, 22 percent from institutional sales and investment banking, 8 percent from asset management, 2 percent from Raymond James Bank, and 2 percent elsewhere. The company managed or co-managed 58 U.S. stock offerings on the year, a 50 percent increase from 2002.

In early 2004, American Banker reported that RJF was among six financial securities companies that had agreed to settle with the Securities and Exchange Commission regarding allegations of failure to give customers promised mutual fund discounts during 2001 and 2002. The companies were to pay fines and reimburse customers.

RJF posted records for sales and profits in fiscal 2004. Net revenue was $1.8 billion, up 23 percent over the previous year. Net income climbed 48 percent to $127.6 million. Securities commissions, along with a nearly 50 percent jump in invest-

The weather in Florida late in the year prompted expansion of offices in the Midwest. RJF, headquartered in St. Petersburg, found itself in an evacuation zone during the hurricane season. "The Detroit center is equipped only to take over 'mission critical' processing in an emergency, and workers have to be brought in from St. Petersburg to handle it. When Hurricane Ivan was churning in the Gulf, Raymond James sent 100 people to Detroit for two days," wrote Huntley for the Times. The company decided to create a more comprehensive backup of its computer operations in its Detroit office to offset the effects of any disaster, natural or otherwise.

Principal Subsidiaries: Raymond James & Associates, Inc.

Principal Competitors: A.G. Edwards & Sons Inc.; Jones Financial Companies; Morgan Keegan.

Chronology

• Key Dates:
• 1962: Robert A. James Investments is incorporated.
• 1964: Raymond James and Associates (RJ&A) is formed with the merger of Raymond and Associates into Robert A. James Investments.
• 1969: Raymond James Financial (RJF) incorporates as a holding company.
• 1973: RJ&A gains membership on the New York Stock Exchange.
• 1980: RJF's net income tops $1 million for the first time.
• 1983: RJF completes a $14 million initial public offering.
• 1987: RJ&A opens its first international office in Paris, France.
• 1994: The Raymond James Bank subsidiary forms.
• 1998: RJF purchases naming rights for Tampa stadium.
• 1999: Investment Management & Research and Robert Thomas Securities merge.
• 2001: RJF is named to the Fortune 500.
• 2004: RJF posts record revenue and profits.