by Howard Haykin

Like most brokerage houses, Raymond James & Associates and Raymond James Financial Services (“RJ Advisers”) offer services to brokerage customers and advisory clients. While brokerage customers typically just pay a commission and other fees whenever trades are executed in their accounts, advisory clients will pay an asset-based fee and other nominal charges to have their portfolio separately managed throughout the year.

INACTIVE ADVISORY ACCOUNTS.    Financial advisers at RJ Advisers are supposed to “regularly monitor” client accounts for trading activity - to determine whether they're receiving sufficient investment advisory services to justify remaining in a fee-based advisory account. Accounts that have no trading over a 12-month period are labeled “inactive” and, in such cases, financial advisers should then consider if keeping a client in an inactive advisory account is suitable, or if the client should consider moving to a brokerage account. After all, why pay for services that aren’t being used?

The Securities and Exchange Commission (“SEC”) drecently conducted an examination which disclosed that RJ Advisers had failed to conduct a suitability review for “Inactive” accounts over a 5-year period – from 2013 to 2017. After being informed of their oversight, both Raymond James firms conducted suitability reviews, which led to the following actions:

CLIENT AWARENESS.    ”Inertia” is the tendency to do nothing or to remain unchanged. And inertia is many investors will remain in separately managed, fee-based accounts, even though they no longer utilize those services to the fullest extend.

So, I'm suggesting that investors break their inertia and develop a greater awareness as to what's happening in their accounts - and reduce their reliance on brokerage firms and brokers, which by nature are incentivized to maximize cash flows (i.e., to retain higher fees, wherever possible). If such a task is too tedious or beyond your their comfort level, don't despair. Seek out a ‘financial watchdog’ who can serve as your 'second set of eyes and ears' while having your best interest at heart.

[For further details on this case, click on SEC Press Release.]