Raymond James Financial posted dismal overall earnings for the second quarter, but its private client group appears to be a bright spot.

The company set aside $75 million for credit losses in its bank, up from $24.9 million in the prior three-month period, and nonperforming loans more than doubled in the quarter to $142.6 million. However, the brokerage operation continues to attract brokers.

“The good news for Raymond James going forward is that they’ve been able to grow their rep base. That’s something not all major firms have been able to do—or have wanted to do. With reps being the engine for future commissions and fees, the growth bodes well for them,” says Doug Dannemiller, senior analyst at the Aite Group, a Boston-based research and advisory firm focused on business, technology and regulatory issues facing the financial services industry.

Since March 2008, Raymond James has gained a net 209 financial advisors. In the second quarter, even while it reported a 90 percent drop in net income versus the prior year, the b/d gained a net 57 reps (153 new reps joined the firm over the three month period, but 96 left). The b/d's total FA headcount is now 4,616, up from 4,559 in the first quarter.

Dannemiller says Raymond James recruiting success comes as the result of its multi-affiliation platform—reps can choose to join as independent contractor advisors with Raymond James Financial Services, or as employee reps with Raymond James & Associates. Today, there are 1,250 employee advisors and 3,366 independent advisors. “They’re flexible in how they work with advisors and that’s really paying off for them right now,” he adds.

According to Larry Papike, president and owner of Cross-Search, a Jamul, Calif.-based recruiting firm, advisors coming out of the wirehouses almost always consider Raymond James. Further, those reps looking to break away from the employee model are interested in Raymond James Financial Services before most other independent b/ds, he says. “There’s a tremendous flow of advisors at least looking at Raymond James. It’s the first place they look. Whether they end up making a deal with them and joining is a different story, but there’s an outstanding amount of interest there,” he says.

Assets at the firm are down 18 percent (to $172 billion from $209 billion) compared to the second quarter of 2008. Revenues dropped 31 percent on the private-client side (to $351 million from $509 million), and pre-tax income was down 78 percent (to $53 million) in the same period. “Raymond James has a good chunk of fee-based assets, so when the market is off those revenues are immediately going to go down,” Dannemiller says.

Chairman and CEO, Tom James, says he expects conditions to be “difficult in the securities sector” for at least the remainder of 2009. “As we have been forecasting for some time, the malaise in the financial sector, which has migrated to the general economy, has manifested itself in Raymond James Bank’s loan portfolio,” he says.