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In adding execuive chair, Raymond James is looking to complete the orchid botanist's task of providing just the right Wall Street water and Baltimore sunlight
April 27, 2016 — 7:49 PM UTC by Lisa Shidler
Brooke’s Note: Can a mid-market wealth management brand be extended upmarket? Raymond James is out to prove it can do just that by not leaving anything to chance. It starts with people, and Seth Waugh’s upper-crust qualifications may make him the right hire at the right time — or a forgetting that Deutsche Bank culture sapped Alex. Brown of its Baltimore essence in the first place, which is likely what led to its being spun off.
Marking just how serious Raymond James Financial Inc. is about keeping the Alex.Brown franchise intact during the interminable nine months between deal signing and deal closing, it has hired a serious dude.
The St. Petersburg, Fla.-based broker-dealer announced it has hired former Seth Waugh, former CEO of Deutsche Bank Americas Holding Corp., to serve as a non-executive chairman of the unit of 200 elite brokers who advise $50 billion of assets and rake in a combined $300 million of revenue annually.
If Raymond James completes a smooth transaction, it not only gains this revenue but establishes a beachhead with larger, more sophisticated clients than it typically handles. See: What to make of Raymond James putting 'Alex. Brown’ back into business and what to make of the $420 million it’s spending to make it happen.
But for now Raymond James needs to convince Deutsche Bank brokers that it will exist in a culture that it is accustomed to — and this hire shows a determination to effect that, says Jeff Spears, CEO of Sanctuary Wealth Services, who formerly worked for Montgomery Securities, a direct Alex. Brown competitor.
“I think it does send a message. Raymond James is a retail mass-affluent brokerage firm and Alex. Brown was not — nor is this guy. I think that’s intentional,” Spears says.
In December, Raymond James announced it was purchasing the Alex. Brown division of Deutsche Asset Wealth Management for about $400 million — including a hidden sweetener in the form of a product deal. But the deal won’t be finalized until September. It seems clear that Raymond James is making announcements to calm any worries from advisors who may be shopping around for a new home. See: How an Alex. Brown spin-off grew to be a $46 billion RIA and how a Brown Brothers breakaway fits in to its plan for accelerated growth.
Waugh spent 13 years at Deutsche Bank. From 2000 to 2013, he served in various roles at Deutsche Bank Americas, the last decade or so as CEO.
Prior to joining Deutsche Bank in 2000, Waugh was CEO of Quantitative Financial Strategies, a $2.5 billion hedge fund. He spent 11 years in various leadership roles at Merrill Lynch, culminating in co-head of global debt markets, which was the most profitable division of the firm at the time.
Waugh’s Wall Street bona fides also include board seats with the Securities Industry and Financial Markets Association, The Clearing House, the Financial Services Forum and the FINRA Board of Governors. He is currently a board member of Franklin Templeton Investments and serves on the advisory boards of Workday Inc. and The PGA of America. He conceived the Deutsche Bank Americas Advisory Board in 2006 and has served as its chairman since his retirement in 2013.
Not a Gilman man
But while Waugh checks all the Wall Street boxes, some observers question whether he is the kind of leader that can lead a group of brokers with a rarer vintage of culture that blends in Baltimore influences of Gilman School nicknames, Roland Park residences and Hunt Cup civility that in some ways grates against New York mores.
A spokesperson for Raymond James deferred questions to a spokesperson at Deutsche Bank, who declined to comment.
In a statement, Raymond James CEO Paul Reilly lauded Waugh’s career.
“Throughout his 35-year financial services career, Seth has earned the respect and admiration of colleagues and clients alike while developing lasting relationships across the marketplace. Adding a professional with his experience and contacts will not only benefit the future Alex. Brown division, but Raymond James overall.”
Indeed, the hire may have broader Raymond James application, which leaves work to do in hiring more true blue Alex. Brown people, according to Joe Piazza, founder and CEO of Robertson Stephens, an RIA that manages about $925 million from San Francisco. The RIA is named after the investment bank that was considered part of a foursome of boutique tigers alongside Montgomery Securities, Hambrecht & Quist and Alex. Brown. See: As Joe Piazza’s 'Robertson Stephens’ venture gears up for '$40 billion,’ he adds Mercer, Addepar, Fidelity and Schwab and subtracts Fortigent.
“It’s important to have the original group of people from the original firm,” Piazza says. “We wanted to make sure we all had Robertson people and the guys at Raymond James are pretty smart. They’ll need to bring on more Alex. Brown people. I’m guessing they will.”
In fact, since Deutsche Bank has owned Alex. Brown, the company has failed to reignite the success of the brand, observers say.
'Conservative and high-end’ brand
At the time the deal was announced, Reilly said he wanted to revive the “conservative and high-end” brand of Alex. Brown. In 1999, the beloved Baltimore-based firm, founded in 1800, was taken over by Deutsche Bank after previously being purchased by Bankers Trust in 1997. See: How a picture overshadowed thousands of words in the coverage of the 1999 Alex. Brown-Deutsche Bank-Holocaust bombshell and how it resonates still.
It’s notable that Waugh never held any posts in private-client divisions working directly with advisors or RIAs, Spears says.
“This sends an interesting message to our industry because this is a person with no private-client experience that is being named to a very important position. This goes against the norm,” he says. “It shows that companies see the private-client business as important and they realize they need to appoint professional managers, and this guy makes that grade in spades.”
Piazza says there are other solid advantages to coming in without an advisory background.
“For Raymond James to bring over someone of his caliber, I’d conclude that Raymond James has very ambitious plans to grow this out and I’d expect them to be a formidable competitor. Raymond James has deep experience in the RIA space and to bring in someone with senior level CEO experience is a smart move.”
Meanwhile, Raymond James is taking a number of conventional steps to woo the Deutsche Bank advisers to keep them from leaving for other firms, a struggle that other companies have faced when trying to expand their brokerage forces, including Stifel Financial Corp. and Wells Fargo & Co.
Raymond James plans to offer seven-year recruitment deals to advisers who will continue to work out of their current offices. It created a side agreement that will give advisers continued access to Deutsche Bank’s initial public offer flow, as well as research and other services. And it is maintaining most of the unit’s leadership team, while reviving its original name, Alex. Brown.
It was previously announced that Deutsche Asset & Wealth Management’s co-head of wealth management, Haig Ariyan, will join Raymond James as president of the Alex. Brown division.
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