Mutual Fund, Annuities and UIT Disclosures
A Guide to Mutual Fund Investing at Raymond James Financial
On this page: |
Related sites: |
A Client Disclosure Document
Raymond James[1] offers clients a wide range of investment alternatives and services, including a variety of variable annuities. Deciding which variable annuity to purchase can be complex. It is important for you to work with your financial advisor to evaluate how a particular variable annuity and its features fit your individual needs and objectives. An important component of any variable annuity screening and selection process includes carefully reading the variable annuity product prospectus and the variable annuity investment sub account prospectuses before making a purchase decision. Each prospectus contains important information that will help you make an informed choice. Your financial advisor will gladly provide you with the variable annuity product prospectus and literature containing the variable annuity investment sub account prospectuses. Your financial advisor will also answer your questions such as how the variable annuity investment sub accounts are priced, your questions regarding the guaranteed benefits and optional riders available, and questions regarding the initial and ongoing compensation your financial advisor and Raymond James may receive.
For a more detailed description of variable annuities, purchase considerations, and the product related expenses, please visit the National Association of Securities Dealers' website at www.finra.org and click on the "Investor Information" tab.
Compensation Paid to Raymond James When You Purchase a Variable Annuity
Raymond James receives compensation from a variety of sources and for a variety of services. The forms of compensation are directly associated with the type of account that you maintain with Raymond James, fee-based or commission-based, or the specific investments in your account. Other forms of compensation may not be as apparent since they do not directly affect the amount that you pay or that you are charged. These other forms of compensation include payments from the insurance and annuity companies or their affiliates that sponsor, manage and/or promote the sale of certain products offered to you by a Raymond James financial advisor. The payments from these companies to Raymond James are intended to cover a variety of expenses, including expenses associated with marketing products to new investors, educating Raymond James financial advisors, and expenses associated with servicing existing client accounts. The insurance company that issues your variable annuity contract recoups the marketing and distribution expenses, including commissions, over time from your annuity contract expenses.
Commission schedules and amounts vary by insurance company and annuity product. How Raymond James and your financial advisor are compensated when you purchase a variable annuity depends on the type of annuity you elect to purchase and the insurance company issuing the annuity. A portion of the commission payment is paid to your financial advisor. However, the commission paid by the insurance company will not impact the compensation formula used to determine the payment received by your Raymond James financial advisor.
You should also be aware that different share classes of variable annuities will usually have different associated ongoing expenses. Your financial advisor may receive more or less initial and ongoing compensation depending on the variable annuity share class you elect.
Feel free to discuss with your financial advisor how he/she is compensated prior to and following your annuity purchase. This document explains in general terms how the compensation arrangements work.
Please be aware that Raymond James does not provide cash or non-cash compensation incentives to financial advisors or branch managers for recommending certain variable annuities or share classes. However, insurance companies that promote and issue the variable annuities may provide various forms of non-cash compensation to Raymond James financial advisors (discussed in more detail below).
Contingent Deferred Sales Charges
As previously described, Raymond James receives a commission from the insurance company issuing your annuity contract. Your financial advisor receives a significant percentage of the annuity commissions paid to Raymond James. The commissions paid by the issuing company are not deducted from your initial or subsequent purchase payments. However, if you surrender your annuity during the contingent deferred sales charge period specified in the product prospectus and the annuity contract, a "surrender charge" will be deducted from the annuity value returned to you.
Contingent deferred sales charge periods, also known as surrender charge periods, vary by annuity contract but typically last from three to nine years. The surrender charge amount may partially or completely reimburse the insurance company for its costs associated with marketing the annuity product -- including the commission paid.
How Your Financial Advisor Receives Commissions
Your financial advisor typically has a choice of variable annuity commission options regarding the timing and structure of commissions paid to Raymond James. In most cases, the structure of the commission selected by your financial advisor will have no impact on your annuity contract expenses. Annuity products may offer the following commission options:
- A single, lump sum commission based on your purchase amount
- A slightly reduced lump sum commission and asset-based trail commissions paid quarterly during the years your contract remains in force
- A further-reduced lump sum commission and higher asset-based trails paid quarterly during the number of years your contract remains in force
Other Compensation Paid to Raymond James by Insurance Companies
Raymond James distributes annuities from at least 20 insurance companies and receives additional compensation from them in the form of sales and asset-based education and marketing support payments. The additional compensation is not paid directly from the assets of your variable annuity. Additionally, no portion of the payments received by Raymond James are paid to or shared directly with your financial advisor or his or her respective branch office. The payments are paid directly from the insurance companies to Raymond James and are not deducted from the separate accounts that hold the variable annuity assets.
Education and Marketing Support Payments. Raymond James provides a variety of marketing and other sales support services to insurance companies related to their annuity products. These services include, but are not limited to:
- providing detailed product information to financial advisors
- assisting insurance companies with strategic planning and sales support
- providing presentation opportunities during professional development workshops, study groups, and other Raymond James events and conferences
- distribution support for sales literature and other promotional materials relating to their annuity products
The marketing service and support fees come in a variety of forms, including payments which are sometimes referred to as "revenue sharing" fees and 12b-1 fees. This compensation may not be disclosed in detail in a variable annuity's prospectus or contract language. At Raymond James, these fees do not provide placement on any preferred or recommended product lists. The following schedule gives you an idea of the potential level of marketing support or revenue sharing fees that Raymond James may receive from a particular insurance company or distribution affiliate:
- up to .15% on variable annuity purchases (e.g., $15 for a $10,000 purchase)
- up to .05% per year on assets totaling less than $500 million
- up to .04% per year on assets totaling $500 million to $1 billion
- up to .03% per year on assets totaling $1 billion to $2.5 billion
- up to .02% per year on assets totaling $2.5 billion or greater
The actual amounts that Raymond James may receive will vary from one insurance company to another and investments in certain variable annuity share classes and/or investment sub account options may be excluded from the above formulas.
For a list of insurance companies that have agreed to participate in Raymond James' 2006 Education and Marketing Support program, click here.
General Promotional Activities. Marketing representatives of insurance companies or their affiliated distributors, who are often referred to as "wholesalers," work with Raymond James financial advisors and their branch office managers to promote their annuity products. Consistent with applicable laws and regulations, these insurance companies and their wholesalers may pay for or provide training and education programs for Raymond James' financial advisors and their existing and prospective clients. Insurance companies may also pay for due diligence meetings, conferences, relationship building events, occasional recreational activities, and/or provide promotional items that are intended to result in the promotion and sale of their annuity products. This could cause our financial advisors to focus on, and recommend to clients, the variable annuities issued by these insurance companies.
Other Services. The subsidiary companies of Raymond James provide 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 companies whose annuity 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. Raymond James professionals who offer variable annuities to their clients may introduce insurance company officials to other services that Raymond James provides.
Please contact your financial advisor with any questions regarding insurance-related products and services, your specific annuity contract(s), or regarding the insurance company relationships with Raymond James.
Investors should consider the investment objectives, risks, and charges and expenses of variable annuities carefully before investing. The prospectus contains this and other important information. Prospectuses for both the variable annuity contract and the underlying funds are available from your Raymond James financial advisor and should be read carefully before investing.
Variable Annuities, issued by insurance companies are long-term investment alternatives designed for retirement purposes. Withdrawals of taxable amounts are subject to income tax and, if made prior to age 59 ½, may be subject to a 10% federal tax penalty. An investment in variable annuities involves risk, including possible loss of principal. The contracts, when redeemed, may be worth more or less than the original investment.
[1]. Raymond James Financial (NYSE-RJF) is a Florida-based diversified holding company providing financial services to individuals, corporations and municipalities through its subsidiary companies. Its three wholly owned broker/dealers, Raymond James & Associates, Raymond James Financial Services and Raymond James Ltd., have more than 4,800 financial advisors serving approximately 1.4 million accounts in 2,100 locations throughout the United States, Canada and overseas. In addition, total client assets are currently over $150 billion, of which approximately $27.5 billion are managed by the firm's asset management subsidiaries.