Raymond James Targets 2025 ETF Debut

Raymond James Investment Management, the manager of $103 billion worth of mutual funds and separate accounts, has unveiled plans to enter the ETF business nest year.

The St. Petersburg, Fla.-based wholly owned subsidiary of Raymond James Financial Inc. hired Mo Sparks to the newly created position of Head of Exchange Traded Funds.

Sparks, who starts July 22, is the former Director of Exchange Traded Products at the New York Stock Exchange. Sparks also worked at The Vanguard Group, where he held “several product management and strategy leadership roles” and has “nearly 15 years of ETF product, management, strategy and distribution experience,” according to the announcement of his hiring.

 Sparks will begin by “collaborating with Matt Johnson, Head of Product Management and Marketing, to determine exact products for the launch,” according to email correspondence with a Raymond James representative. Sparks wasn't available for comment,

“We anticipate publicizing the initial list of products in the next few months,” the spokesperson said.

Raymond James Responds to Client Demand for ETFs

Regarding the buildout of a team to help Sparks move Raymond James into the fast-growing ETF space, the spokesperson said, “Mo will be leveraging existing talent and teams within the Raymond James Investment Management organization to help build the ETF platform.”

In terms of the portfolio management, the spokesperson said, “our products will be managed by our boutique investment managers affiliated with Raymond James Investment Management.”

According to the announcement, those investment managers include Chartwell Investment Partners, ClariVest Asset Management, Cougar Global Investments, Scout Investments and Eagle Asset Management and Reams Asset Management, which is a division of Scout.

ETF industry watchers were generally surprised by the news even as it follows the multi-year trend of mutual fund complexes migrating toward the ETF space.

“While extremely late to the ETF party, the one thing Raymond James has in spades is robust distribution through their network of advisors,” said Nate Geraci, president of The ETF Store in Overland Park, Kans.

“Distribution is king in the ETF space and I can certainly see a viable path to success for this new product platform,” he added.

Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, said even though it makes sense for Raymond James to have its own ETF lineup, he didn’t understand the timing.

“It just seems like a logical move, but what took them so long?” he said.

Citing financial advisor preferences for brand names and low fees when it comes to ETFs, Balchunas questions whether Raymond James and its boutique asset managers will be able to compete on the brand side.

“There’s enough money sloshing around that they’ll be able to get some of it, but I don’t expect it to be that big,” he said. “Then there’s also the issue of Raymond James advisors being worried about potential conflicts of interest.”

Tim Holsworth, president of AHP Financial in Midland, Mich., who is affiliated with Raymond James Financial, also cited the potential challenge of using Raymond James branded ETFs for his clients.

“We would be hesitant to show any conflict of interest,” he said. “And we already have restrictions on putting proprietary products in fee-based accounts.”

In terms of distribution plans, the Raymond James spokesperson said, “Right now, the plan is for products to primarily be available in the United States. Additional details regarding the platform will be made available in due course.”

The decision to expand into the ETF space, the spokesperson explained, “is based on client demand and is in alignment with putting clients’ needs first.”

“Along with recent growth of ETFs in the active management space, ETF structures have evolved to include more capabilities within the product wrapper … making it an ideal time to bring the platform to market for our clients,” the spokesperson added.