A Guide to Structured Investments Compensation at Raymond James
Structured investments, also commonly known as market-linked investments, generally refer to market-linked notes (MLNs) or market-linked certificates of deposit (MLCDs) whose performance is linked to specific markets such as equities, equity indices, commodities or currencies over a set period of time.
Raymond James offers eligible clients a wide range of structured investments. Deciding if a particular investment is appropriate for you is an involved decision. It is important for you to work with your financial advisor to evaluate how a particular structured investment and its features fit your individual needs and objectives. An important component of the selection process includes carefully reading the applicable prospectus, supplements, and related offering materials (offering documents) prior to making a purchase decision. The offering documents contain important information that will help you make an informed choice. As part of your review process, you need to consider the fees and expenses associated with a particular structured investment, along with the fact that your financial advisor and Raymond James receive compensation related to your purchase. Your financial advisor will answer any questions that you have regarding the fees and costs as well as the compensation your financial advisor and Raymond James receives both from you and the structured investment issuer.
How Raymond James financial advisors are compensated
While each investment will differ in terms of both total fees and expenses and how those fees and expenses are calculated, the following sections will discuss the primary categories of fees and expenses that are common and the different ways that Raymond James and your financial advisors are compensated. For additional information regarding compensated parties and the nature of compensation in relation to each of your investments, please read the applicable offering documents before you make your investment, and the trade confirmation you receive from Raymond James following your investment.
Fee: In fee-based advisory accounts, you will be assessed an annual fee as a percentage of the assets in the account which is typically assessed quarterly (asset-based fees). Your financial advisor receives a portion of this fee. Additional information regarding Raymond James fee-based accounts is contained within the Form ADV and can be found here.
Commission: In a brokerage account, you will pay a commission/sales charge of up to 3.5% of the principal amount of the trade when you buy a structured investment. The specific amount of the commission/sales charge will be disclosed within the offering documents and on your trade confirmation. Your financial advisor receives a portion of this commission.
Subsequently, if you choose to convert your brokerage account to a fee-based advisory account, or transfer one of these structured investments into a fee-based advisory account, your financial advisor will not receive an asset-based fee (described in the ‘Fee” section above), on these investments for two years starting from the original purchase of the structured investment if an upfront commission was paid to your financial advisor.
Processing & handling fee: In a brokerage account, you will be charged a $5.95 processing & handling fee in addition to the commission. This fee is charged by Raymond James directly to investors on both purchases and liquidations of structured investments and is disclosed as a separate item on your trade confirmation. Processing & handling fees do not apply to fee-based advisory accounts.
Offering costs: In addition to the commission or asset-based fees paid to Raymond James and your financial advisor, there are additional costs associated with issuing, selling, structuring and hedging structured investments. Such costs are paid by you to the issuer as part of the initial offering price and disclosed in the offering documents.
General promotional and distribution activities
Marketing & educational support payments: Marketing representatives of product sponsors (sometimes referred to as issuers), and service providers work with Raymond James financial advisors to promote investment products, including structured investments. Consistent with applicable laws and regulations, these sponsors and service providers often pay for or provide training and education programs for Raymond James’ financial advisors and their existing and prospective clients. The entities also pay for due diligence meetings, conferences, relationship building events, recreational activities and other events or activities that are intended to result in the promotion of their investment products. The entities provide financial support to Raymond James sponsored events related to structured investments. The most financial support provided by a sponsor or service provider to Raymond James to sponsor a single event is $35,000.
Structuring fee: Raymond James receives compensation directly from product sponsors and service providers who offer securities and other investments or services, including structured investments, to Raymond James financial advisors. These payments are intended to compensate Raymond James and its affiliates for a variety of administrative and/or distribution related services and support. The structure and amount of payments varies among product sponsors and service providers. These payments are disclosed in detail in a particular sponsor's offering documents where applicable. Raymond James is paid a structuring fee by the issuer for MLNs and MLCDs up to 0.75% of the principal amount of the trade for eligible account types. Ineligible account types include affiliated ERISA accounts and certain affiliated discretionary retirement accounts.
Raymond James and its affiliates provides a wide variety of financial services to individuals, corporations and municipalities. For these services, Raymond James receives compensation. As a result, Raymond James can be expected to pursue additional business opportunities with entities whose investment products Raymond James financial advisors make available to their clients. Consistent with industry regulations, these services could include (but are not limited to) banking and lending services, sponsorship of deferred compensation and retirement plans, investment banking, securities research, institutional trading services, investment advisory services, and execution of portfolio securities transactions.
Risk summary of structured investments
Structured investments involve substantial risks that may be greater than those associated with traditional investments and are not appropriate for all investors. These risks include, but are not limited to, market risk, equity risk, fixed income risk, credit risk, liquidity risk, call risk, correlation risk, valuation risk, tax risk, and principal risk. Investors should consult their financial advisor for investment advice and read all applicable offering documents before investing. Investors should carefully review the risk factors section in the relevant offering documents for a complete description of all risk factors.
Structured investments are priced using evaluations which are typically model-based and do not necessarily reflect actual trades. The complete costs associated with issuing, selling, structuring and hedging a structured investment are not fully deducted upon issuance, but over time. As such, initial statement price evaluations are expected to be higher than the current estimated market values during this initial period. Beyond this period, the statement price evaluations suggest the current estimated market values, which can be higher or lower than the amount you would receive in an actual sale. These estimates, which are obtained from various sources, assume normal market conditions and are based on large volume transactions. Market prices of structured investments may be affected by several risks, including without limitation: market risk, interest rate risk, default risk, credit risk, and liquidity risk.
Raymond James means Raymond James & Associates, Inc., Raymond James Financial Services Advisors, Inc., and Raymond James Financial Services, Inc.