[corrected, 5/10/2011: Raymond James stock is up more than 240 percent over the past two years as opposed to 40 percent.]
Broker/dealer executives who speak at their national conventions often aim for a tone that rallies the troops, and the Raymond James Financial Services conference in Las Vegas this week followed the pattern—with one surprising exception during Chief Executive Dick Averitt’s address.
His talk fit the mold for the most part. He praised the 1,600-plus advisors on hand at the conference for their growth in production (April marked a record month for RJFS, with more than $196 million in fees and commissions; nearly 800 advisors—a quarter of RJFS’s total—set personal production levels that month.) He also noted that the value of client assets in customer accounts had risen from $107 billion four and a half years ago to $154.3 billion this year. Company stock was up more than 240 percent in the past two years, he added.
It was when his speech turned to the state of the national economy that some advisors heard something they hadn’t expected. Averitt thinks taxes needed to be raised.
Unemployment is slowly improving and new business development is at a 15-year high, but the federal deficit is unsustainable, he said. Some of the federal spending arguably saved a “dangerously fragile economy” from collapsing following the 2008 financial crisis, he added, but much of the growth in federal spending has been presided over by Republican and Democratic administrations alike over decades. U.S. Rep. Paul Ryan’s proposal last month to curb Medicare and Medicaid programs moves in the right direction, he added, but it didn’t go far enough because it didn’t address the need for federal revenue increases.
Averitt used a visually graphic metaphor to describe the current situation. He likened American economic choices to those faced by mountain climber Aron Ralston, whose arm became pinned by a boulder during a climb in Utah in 2003. Ralston was forced to carve off his arm in order to survive. Ralston still climbs today because he acted when he realized he needed to, Averitt said.
“I believe we have a growing crisis in this country that we should no longer ignore,” Averitt said. “The changes that must be made will cause pain in every part of our economy and our populace. The welfare system that we built was designed to address real needs, and cutting the money will cause real hardships. The sacrifices that need to be made cannot just be made by those with the greatest needs. Yes, folks, we must increase taxes.”
Averitt suggested that political leaders on the right are perpetuating tax breaks for the same reason that those on the left are pressing for social spending—to retain their jobs in Washington by pandering. They misjudge their constituencies, he added. “Perhaps the greatest failure of leadership in our generation has been the unwillingness of both Republicans and Democrats to ask the American people to sacrifice,” he said. “I believe they underestimate our intelligence and our courage. I think we’re ready.”
That line drew applause from the audience, but not from everyone. Speaking with Registered Rep. afterward, Averitt said one advisor approached him after the speech and told him, “You made me so mad, I left the room.” But a few others told him they appreciated his candor.
One advisor at the convention said he wasn’t surprised by the speech. “To me, it made sense,” said the advisor, who described himself as “kind of in the middle” politically. “It’s perceived by the public that people in our industry are all conservative Republicans and are all for having people pay no taxes. … I think for the country to solve its revenue problems, it’s going to have to have a balance of sensible cost-cutting and increasing taxes.”
A helicopter pilot and U.S. Marine Corps veteran who served in Vietnam, Averitt said his remarks about taxes were not delivered lightly. “I labored over it last week,” he said. “I didn’t want to come to that conclusion.”
