Insurance Product Compensation at Raymond James
Decision to Purchase Insurance Products
Raymond James [1] offers clients a wide range of investment alternatives and services. Through its advisors, Raymond James offers the following types of insurance products: disability income, long-term care (both traditional and asset based), term life, whole life, fixed index universal life, universal life and variable life. Deciding which insurance product(s) to purchase can be difficult. It is important for clients to work with their advisor to evaluate how a particular insurance product and its features fit their individual needs and objectives. An important component of any insurance review in the selection process includes carefully reading documents such as the product brochure and sample policy. For variable life products, these documents would also include the product prospectus and variable insurance investment subaccount prospectus materials. Each document contains important information that will help clients make an informed decision. Advisors will provide these documents for client review. Advisors will also answer client questions such as which guarantees are provided by the insurance product, what optional benefits and riders are available, and how variable insurance investment subaccounts are priced.
For a description of insurance products, please visit the Financial Industry Regulatory Authority’s (FINRA) website.
For details on long-term care insurance purchase considerations, the National Association of Insurance Commissioners (NAIC) has created a Shopper’s Guide to Long-Term Care Insurance. The guide can be accessed from the NAIC website.
Compensation Received by Raymond James When Clients Purchase Insurance Products
Raymond James and its advisors receive compensation in the form of commissions from the insurance company for assisting our clients through the application, underwriting and delivery processes related to the purchase of an insurance policy. In many cases, compensation is also paid on additional premiums made into the insurance policy for services related to the ongoing maintenance and review of the insurance policy, which are payable on average in years two through 10. Raymond James passes a portion of these commissions on to the advisor. While the commissions paid by the insurance company are not deducted from the client’s initial or subsequent purchase payments, the initial and renewal commission payments are paid out of the insurance company’s assets, which may be derived from product fees and expenses.
The following is a description of the types of payments Raymond James may receive related to a client’s purchase of an insurance policy. Clients should feel free to discuss with their advisor how he/she is compensated for the client’s insurance purchase.
| Product Type | Range of Initial Compensation Paid to Raymond James | Compensation Paid for Subsequent Premiums | Ongoing Servicing Fees/Trail Compensation |
|---|---|---|---|
|
Asset-Based Long-Term Care Insurance |
6.5% - 7%* |
Not applicable |
Not applicable |
|
Disability Income Insurance |
15% - 70%* |
2% - 15% |
Not applicable |
|
Traditional Long-Term Care Insurance |
32% - 65%* |
1% - 12% |
Not applicable |
|
Term Insurance |
31.5% - 110% (varies by term selected) |
0% - 7% |
Not applicable |
|
Indexed and Fixed Universal Life Insurance (including survivorship policies) |
65% - 100% ** |
0.25% - 4% |
Not applicable |
|
Variable Life Insurance (including survivorship policies) |
75% - 100% ** |
1% - 2.5% |
0.25% - 0.50% annually |
|
Whole Life |
42% - 90% |
1% - 5% |
Not applicable |
|
Levelized Fixed Universal Life |
8% - 45%*** |
1.5% - 11% |
Not applicable |
|
Levelized Variable Universal Life |
14% - 47%*** |
1.5% - 12.5% |
Not applicable |
*Commissions are calculated based on the premium paid.
**Commissions are paid based on a target premium, which may or may not be the premium clients pay for their insurance policy. The target premium is calculated based on the premium amount needed for the policy’s cash value to equal the death benefit at maturity (generally age 100), based on the insurer”s current actuarial expectations as to mortality experience and operating expenses.
***Life insurance policies issued for business planning strategies generally have different commission payment structures with more levelized compensation. Your advisor can provide detail on the compensation that will be received by Raymond James.
Raymond James does not provide cash or non-cash compensation incentives to advisors or branch managers for recommending certain insurance policies or types of insurance policies. However, insurance companies that promote and issue the insurance policies may provide various forms of non-cash compensation to Raymond James advisors as discussed in the section entitled “Other Compensation Paid to Raymond James by Insurance Companies.”
Other Compensation Paid to Raymond James by Insurance Companies
Marketing representatives of insurance companies or their affiliated distributors, often referred to as “wholesalers,” work with Raymond James advisors to promote life insurance 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 advisors and their existing and prospective clients. Insurance companies may also pay for due diligence meetings, conferences, relationship-building events, other occasional activities, and/or provide promotional items that are intended to result in the promotion and sale of their insurance products.
Producers Choice Network, an affiliated entity within Raymond James, acts as a wholesaler for several insurance companies that issue products such as life insurance, long-term care insurance, asset-based long-term care insurance and disability income insurance. This entity interacts with Raymond James advisors, as well as with advisors at other broker-dealers and independent insurance agents. In cases where this affiliated entity has facilitated the sale of an insurance policy, Raymond James may receive up to 30% of the premium paid into the policy as a fee for wholesaling, marketing and underwriting services.
Fees for Termination of the Insurance Policy
In general, if a client surrenders the cash value of their life insurance policy or asset-based long-term care policy during the surrender charge period as noted in the policy (or product prospectus for variable life insurance), a surrender charge will be deducted from the cash value returned to the client. Surrender charge periods vary by insurance policy, but typically remain from zero years to 20 years. Surrender charges range from 0% to 100% of the account value, depending on the insurance policy and when the insurance policy is terminated. Typically, the highest percentages occur at the beginning of the surrender charge period and the lowest percentages at the end of the surrender charge period. Surrender charges do not apply to traditional long-term care or disability income policies as there is no cash value associated with the policy. No compensation is paid to Raymond James when clients surrender their life insurance policy.
Investors should consider the investment objectives, risks, charges, and expenses of insurance products carefully before investing. Prospectuses for both the variable life insurance policy and the underlying funds are available from your Raymond James financial advisor and should be read carefully before investing.
[1] Raymond James refers to Raymond James & Associates, Inc., Alex. Brown, a division of Raymond James and Raymond James Financial Services, Inc. as applicable.