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Retirement Planning > Retirement Investing

Raymond James Backtracks on Chargebacks

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Raymond James has reversed a decision that would have required some advisors to cover fund fees and charges being refunded to clients after getting pushback from advisors.

“After continued dialogue with advisors, Raymond James will absorb the cost of mutual fund sales charges and fee rebates to clients with eligible retirement plan and charitable trust accounts, and not require advisors to return commissions received on the mutual fund purchase transactions,” the firm said in a statement in February.

Raymond James had said some advisors would be required to refund certain fees associated with these fund sales. It said the refunds affected less than 1% of client accounts and that the median rebate would be roughly $200.

The firm recently sent a memo to branch managers and advisors to outline its policies going forward, after recognizing a $10.5 million adjustment associated with fund commissions in its latest quarterly earnings report.

“The fact that [Raymond James’] management made a quick change shows they take our views seriously,” said one veteran advisor who declined to be identified. “They managed it well.”

The matter, the advisor noted, is not straightforward: “There is some rationale behind the pushback, though the firm hasn’t really made a mistake. It’s really that the fund prospectuses are not that clear and don’t have a standard language when it comes to waivers for small plans and trusts.”

Raymond James shared a similar view in its extended statement on the matter.

“Given the complexities of the subject—including policy variations among fund companies, lack of clarity in prospectuses and a gap in the industry’s and Raymond James’ abilities to systematically identify waiver availability, we felt this [new policy] would be the best way to limit distraction for advisors and minimize confusion for clients,” it stated.

“In addition, our decision should serve to eliminate any concerns that the chargebacks may have implied negligent or deliberate actions by advisors,” it continued. “As always, we are confident our advisors are working in the best interests of their clients.”

The developments at Raymond James came about six months after FINRA fined Bank of America Merrill Lynch $8 million for failing to waive mutual fund sales charges for certain charities and retirement accounts. It ordered Merrill to pay $24.4 million in restitution to affected customers, which came on top of $64.8 million the firm already repaid investors.

(Most mutual funds on the wirehouse’s retail platform offered such waivers to retirement plan accounts and disclosed those waivers in prospectuses.)

Effective Jan. 28, Raymond James said, it began adding “additional language [to its] mutual fund B and C share policies regarding the use of appropriate sales charge waivers for eligible clients, including qualified plans and charitable trusts.”

The new language states, “When making mutual fund purchases in qualified retirement plan accounts and charitable trusts you should determine whether a load-waived A-share or retirement share is available to the client. Generally, when a load-waived A-share or retirement share is available to the client, it should be purchased.”

With the news that the overlooked waivers now will be covered by the firm, Raymond James is poised to put the matter to rest, experts say.

“The matter has likely embarrassed advisors [at Raymond James] and the firm to some degree,” said a broker-dealer consultant who works with Raymond James and other firms, who declined to be identified. “But these kinds of mistakes come out eventually, so it’s good to be as proactive as you can.” —Janet Levaux


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