American International Teachers Can Build A Portfolio Of Index Funds Using Raymond James

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This week, I visited the American Community School in Amman, Jordan. 

I showed the (mostly American) teachers how to figure out how much they should be saving for their retirements.  Then we got onto the topic of investments.

The school matches a percentage of the teachers’ salary if they use Raymond James Financial.  Unlike some schools in the region, they don’t offer their American teachers a Roth 401(k).

But I was surprised by one thing.  None of the teachers had portfolios of index funds with Raymond James.  Instead, teachers showed me their high fee portfolios of actively managed funds.  If they want their Raymond James representative to build them a portfolio of low-cost index funds (and they’re American) all they need to do is ask, and make sure they have at least $20,000 USD to start.

Here’s some background.  It’s an edited excerpt from my book, The Global Expatriate’s Guide To Investing.

In 2011 my neighbor, Mark, wanted to know what he paid in fees for his Raymond James Freedom Account.   Taking his account statements, and using Morningstar, I found his total costs exceeded 3 percent annually:  1.75 percent paid to Raymond James for the account’s annual fee plus 1.3 percent for his account’s mutual fund expenses.  I’ve found that Raymond James representatives often charge different amounts.  But I wanted to see if Raymond James could offer a far cheaper service.

In 2014 I emailed Lara Yates, one of Raymond James’s international financial advisors. “Would you be willing to build portfolios of low-cost index funds for American expatriates,” I asked, “charging no more than a 1 percent annual fee?”  I knew it was a tall order.  But if she acquiesced, American expats might have another low cost investment option with a financial advisor. Such portfolios would cost 1.2 percent or less (including index fund expense ratios), which is nearly two thirds lower than what my wife and neighbor were paying when they invested with Raymond James.

Lara was excited by the idea, getting back to me a couple of weeks later.  “I can do it for international teachers,” she said, “and the firm’s other international advisors say they can too.”  This is a huge step.  And it could be great for American expats.  But investors should be vigilant.

 Raymond James has historically rewarded bonuses for advisors who generate high fees for the company.  Bruce Kelly, writing for New York based Investment News in 2007, explains:

“In an effort to charge up its top registered representatives and financial advisers, Raymond James Financial Services Inc. is giving bonuses to its biggest-producing brokers.”  Kelly added, “the new deferred-compensation program this year [2007] gives a bonus of 1% to affiliated 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…topping out at 10% for reps who produce $3.5 million in fees and commissions.” 5

Raymond James Financial is a publically traded company.  People can buy shares on the New York Stock Exchange. In 2008, Roger Lowenstein and Neil Barsky wrote, The Investor’s Dilemma: How Mutual Funds Are Betraying Your Trust And What To Do About It.  They urged readers to avoid using publically traded investment firms, suggesting their primary loyalties are to shareholders.  No, a shareholder isn’t someone using Raymond James’ services; shareholders own company stock. Raymond James’ shares (as with any stock) rises or falls over time in proportion to the company’s profits.  If the company generates consistently higher income (through fees) for its investment services, the share price follows.  According to Morningstar, from August 1983 to April 2014, Raymond James stock soared 8000 percent.  Few other businesses came close to generating such high shareholder profits.

Raymond James may not want you to invest with low-cost index funds.  They might argue that they can predict winning mutual funds and economic directions.  This isn’t likely.  Investors can’t pick winning mutual funds ahead of time.  And when investors accept stock market returns (with index funds) such behavior boosts their returns.  I explain that here.

In sharp contrast, one of the Raymond James’ representatives told this: “Raymond James is the only firm in the industry to use forward looking capital market assumptions. The economic information is purchased from a third party firm called Mercer Investments.” In other words, Raymond James believes the firm they hire helps them strategically speculate which sectors or asset classes to purchase: crystal ball kind of stuff.

Personal finance columnist Jason Zweig, in his excellent book, Your Money And Your Brain figures such firms should be held to an ancient standard:  “The ancient Scythians discouraged frivolous prophecies by burning to death any soothsayer whose predictions failed to come true…Investors might be better off if modern forms of divination like market forecasts and earnings projections were held to biblical standards of justice.” 8

Evidence suggests forecasting is more salesmanship than substance. In his 1992 letter to Berkshire Hathaway shareholders, Warren Buffett said, “We’ve long felt that the only value of stock forecasters is to make fortune tellers look good.9

John Kenneth Galbraith, a former Harvard economics professor was the president of the American Economic Association.  His career also included serving as editor of Fortune magazine from 1943-1948.  “We have two classes of forecasters:” he said, “those who don’t know—and those who don’t know they don’t know.” 10

The broadest evidence, perhaps, is the ongoing data provided by CXO Advisory.

“To investigate [market predictions] during 2005 through 2012 we collected 6,582 forecasts for the U.S. stock market offered publicly by 68 experts, bulls and bears employing technical, fundamental and sentiment indicators…”

 CXO Advisory found just 46.9 percent of the forecasts proved accurate. Odds are better flipping coins. 11

Those investing with Raymond James, however, now have a choice. As Lara Yates explains, “Investors with at least $20,000 to invest can have portfolios of index funds.”  And the firm would charge just a 1 percent wrap fee.

Raymond James investors, however, should be vigilant.  They may have to fight for their indexes. Investors should also be wary of expensive index funds.  David Randall, writing for Reuters in 2013, reported roughly a dozen index fund providers in the U.S. are charging more than the average actively managed mutual fund.  With broad availability of low cost indexes in the United States, no American index investor should pay more than 0.20 percent per year for any stock market index.  Vanguard, Schwab, Fidelity and T. Rowe Price have solid, low cost indexes.  If you use a Raymond James advisor, ensure he or she sticks with these firms.

Finally, Raymond James clients should ask their advisors not to adjust portfolios based on speculation. Forecasting doesn’t consistently work.  As Ben Bernanke, head of the U.S. Federal Reserve said during a 2009 Boston College School of Law Commencement address, “…many smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future.  But the results, unfortunately, have more often than not been underwhelming.”

Instead, encourage your advisor to dispassionately rebalance: Couch Potato style, just once a year.

So… is Raymond James still worth it?  I think it could be.

But keep your eyes open and stick to your guns. Don’t accept anything other than a portfolio of low-cost index funds. 

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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3 Responses

  1. Jason says:


    Great news for those with $20,000 USD, but what about Middle East based schools that force you into Raymond James with less then a $20,000 startup? For example, The school I’m moving to next year will match 18.2% of my pay into RJ.

    Will RJ build a portfolio of low cost index funds for those who are American expat teacher clients with less then $20,000 ? I read the article from guest author, Adrian Juric, on November 22, 2015, but my understanding is that that school has put a new policy in place that requires teachers to keep their money with RJ until they are now longer empoyed by the school. That’s kind of a bummer, as I my plan was to follow Adrian’s strategies and move my 18.2% match to my US Vanguard account



    • Hi Jason,

      Let’s conduct an experiment, shall we? Here’s a Fidelity fund that you could invest in with a minimum of $2,500. It’s a complete portfolio, wrapped up in a single low cost actively managed fund. It costs about 0.54% per year. It gets automatically rebalanced once a year. It doesn’t charge a load fee. It has about 30% in bonds with the rest in stocks. See if Raymond James will buy you this. There’s a fine line between how much money the advisor wants to make off you, and what’s best for your financial future. Would this fund cross that line, putting more in your pocket and less in the advisor’s? Yes, it would. See if the advisor will buy this fund for you, but make sure he or she DOES NOT charge you an extra annual account/wrap fee to do so. Then, if you don’t mind, please get back to me with what the advisor says. Others are going to be reading this and cheering you on! Thanks, Andrew

      • JohnnyNewbie says:

        Yes, I am in the same boat as Jason but at the Anglo American School of Moscow. I don’t have 20k or even 2500k to invest. The school will match 10% if I contribute 3% of my salary going forward. I believe in my case, the best approach would be to go with the American Funds 2040 target date and then just instruct them to “not to adjust portfolios based on speculation” but just once a year. Is that right?

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