Raymond James financial advisors – your interest is their interest

It’s easy to feel really good about Raymond James financial, and all the help they give international school teachers worldwide.

They really want to do the very best they can for their clients.

I’m always impressed when I see a Raymond James account, filled with actively managed mutual funds and such a tiny wrap fee.

It’s fabulous.

If the stock and bond markets make 6% in a given year, then the aggregate return of actively managed mutual funds is going to be 4.5% after the funds’ expense ratios, 12B1 fees and internal trading costs. That’s pretty much what the average fund picker with Raymond James is going to provide for you, after fees, if the stock and bond markets make 6%. And that’s pretty cool.

Oh, and I forgot that the company’s advisors sometimes charge a further, miniscule fee (up to 1.75% per year) for its Freedom Account. This is really popular with international school teachers–and it’s easy to see why.

And in a taxable account for Americans, a further 1.4% goes to Uncle Sam when the account makes money.

Let’s see how this works:

7% for the stock and bond market return

  • -1.5% expense ratio (including 12B1 fees and internal trading costs) … read more
  • -1.75% advisors’ fees
  • -1.4% taxes
  • -3% inflation
  • = -0.65%

Oops, I must have done something wrong. But wait, what’s this?

There has to be another mistake here. Financial advisors aren’t supposed to get paid more when they charge higher commissions—are they? No, this has to be wrong. Financial advisors at Raymond James (and firms like it) are your friends. This commission news bulletin can’t be right.

“In the style of a 401(k) plan, the new deferred-compensation program this year gives a bonus of 1% to affiliated [Raymond James] reps who produce $450,000 in fees and commissions, a 2% bonus for $750,000 producers, and 3% for reps and advisers who produce $1 million.”

I know what it is. The more fees they charge, the better the service they’ll provide. I’m feeling a lot better about it now. Making money is a cold thing that should definitely take a back seat to service. Don’t you think?

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School and Millionaire Expat: How To Build Wealth Living Overseas. My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions.

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13 Responses

  1. @Myke@In Search of Salt

    Thanks Myke,

    Here's the complete quote and the source:

    Published in “Investment News—The Leading Source for Financial Advisors” we find, from this June 18th, 2007 article, that Raymond James representatives are rewarded more for generating higher fees:

    “In the style of a 401(k) plan, the new deferred-compensation program this year gives a bonus of 1% to affiliated [Raymond James] reps who produce $450,000 in fees and commissions, a 2% bonus for $750,000 producers, and 3% for reps and advisers who produce $1 million. After that, the bonus, which will affect about 500 of the firm’s 3,600 reps, increases 1 percentage point for every additional $500,000 in production, topping out at 10% for reps who produce $3.5 million in fees and commissions. That pushes those elite reps’ payout to 100% — or even more — of their production, according to the company.”

    So–what do you think motivates these guys?

  2. It's great to work as one of these guys — or perhaps to be a shareholder, but it's entirely different to be an investor getting fleeced!

    Education, education, education. I would also add fiduciary responsibility as a legal requirement of these guys and as the default position, unless someone signs a scary disclaimer (and not fine print buried away on page 99).

    I don't find it right that they can essentially gamble your money away, or steal it in excessive fees, and this remains legal. I am not saying that actively managed funds should be illegal, and I don't really have a problem with hedge funds so long as it's rich people deciding to voluntarily gamble with them and not elderly people being hoodwinked, but I think that these companies and personal advisors owe their clients a much greater degree of responsibility, disclosure, and transparency than they practice today.

  3. @Kevin@InvestItWisely


    There are loads of international schools mandating that their teachers MUST use this financial service company. Some, like a school in the Dominican Republic, for example, take part of the teacher's salary and invest it with Raymond James as if it's a tax.

    Other schools match contributions made up to a certain amount, as if it's a non U.S. resident 401K of sorts. But there are such better options available of course. And those in the position of choice and power to make these kinds of decisions for their teachers just don't know any better.

  4. Wow. (And I love the sarcasm.)

    Teachers being mandated to use this company? Is that normal?

  5. That's saddly funny, Andrew.

    Oh, I know what motivates them, and it certainly isn't my financial well being.

    I especially find the line "…payout to 100% – or even more – " to be interesting. I suppose that means they would take from the commissions generated from other reps to pay for the top-dog… (is RJ Financial a subsidiary of Amway?) 😉

    That's pretty terrible about some international schools… But is it really that those making the decisions don't know any better? I wonder if there are kickbacks that RJ Financial has organized.

  6. @Dividend Monk

    Hey Matt,

    In the cases where Raymond James is mandatory, it's simply a relationship that obviously gets struck at some point in time between the RJ rep and the respective school's administration. I think it stems from the admin wanting to ensure that the teachers are looking after themselves—so a forced saving plan is established with Raymond James. Those (like you) who understand the ramications of the RJ account costs see it as shocking. But it doesn't get questioned. As Kevin suggests, it's all about education. For kicks, have a look at Raymond Jame's stock appreciation over the past twenty years. It has easily beaten Apple and Microsoft!

  7. @Myke@In Search of Salt

    Hey Myke,

    There could be endowment fund donations involved, but I'm not sure if that affects the respective administrations decisions. I really do think the teachers' admin have the best interest of their staff at heart.

  8. It's understandable then. I just read your response to Matt, and can see how that would happen. It is similar to some pension funds that only have their list of funds that can be chosen. While it is limiting to those who know better, it is probably an administrative headache to allow anything and everything.

    Still, why they can't establish a relationship with a company that has index funds is beyond me.

    Also based on your response to Matt, not a bad 20 year chart on Raymond James. Similarly, I would never own an Investors Group fund or pay for their management, but I would certainly consider buying Power Corp's common.

  9. @Myke@In Search of Salt

    Hey Myke,

    Here's something I wrote in May that you might enjoy. It's in line with what you're suggesting in your comment: http://andrewhallam.com/2010/05/dancing-with-the-

  10. Jean says:

    I will continue thanking you for educating me enough, Andrew, to ditch the Raymond James Freedom Account and another one, to move over entirely to a diversified portfolio of index funds. Hurray for informed sanity! So glad I have personal choice, as well.

  11. Marty in Georgia says:

    Thanks for the info Andrew. I was researching why my two (2) RayJ Freedom Funds charged 5.16% & 5.37% respectively. Actually I was trying to ascertain the performance of these two funds vice an S&P Index Fund. My Raymond James managed fees for two small funds costs more than my mortgage and property taxes combined. Not a good situation.

    • I’m glad the article was helpful Marty. Raymond James is in the business of making money for Raymond James. Vanguard, on the other hand, operates like a non-profit. It would be a much better firm for you to use.


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