Dually registered financial advisors with at least $100 million in discretionary client assets under management will retain 100% of their advisory fees under a new compensation model that Raymond James Financial Services is rolling out April 1.
In addition, mutual fund 12b-1 trail commissions paid to Raymond James on fund shares in clients managed portfolios will be reimbursed to the advisors’ clients instead of retained by the firm, reducing portfolio management costs.
Under the new model, qualifying “hybrid” advisors will pay a quarterly fee to Raymond James based on discretionary assets under management. They can choose to either establish and operate their own registered independent advisory firm or provide advisory services for an incremental fee.
Advisors who do not qualify for the new plan will continue to be paid under the traditional model of a percentage of fees and commissions based on products and services they sell.
Fierce competition for breakaway brokers was a prime motivation for the move, Raymond James Financial Services president Scott Curtis told Financial Planning. “It’s an extremely competitive space and we needed to develop a model where a 100% payout was available,” he said.
Industry consultant Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy, called the 12b-1 announcement a death knell for rival commissioned brokers and a boost for open architecture and transparency. “End clients will now be informed of what they pay [in 12b-1 fees],” Welsh said. “Look for custodians, RIAs and [fee-only planners] to capitalize on this strategic decision,” he predicted.
At Raymond James, qualifying dually registered advisors who select the new compensation model will still eligible for the firm's "recognition council" memberships, as well as full access to the firms’ resources, Curtis said.
“We are confident top advisors with a discretionary approach to managing their clients’ portfolios will appreciate the simplicity and transparency of this pricing structure,” he said.
Raymond James Financial Services division works with over 3,200 independent advisors and broker-dealers around the country and has $170 billion in assets under administration.