Raymond James Pays The Biggest Claim In Its History After Appeal Thrown Out

Friday, December 02, 2011 07:59
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Raymond James Pays The Biggest Claim In Its History After Appeal Thrown Out

Tags: client loyalty | client satisfaction

Huge financial incentives for selling variable annuity products -- "suitable "or not -- have cost Raymond James close to $1.8 million, even though the client ended up making money on the advice.

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The issue here was gratuitous churning of an elderly couple's annuity contracts to maximize commissions, even though the client had to pay significant surrender fees in the process.

 

The couple famously earned substantial appreciation on the transaction and decided to keep the annuities after all, leading Raymond James to appeal the original ruling despite the PR liability it entailed.

 

It's a sad story. Whatever happened here evidently wrecked the trust that these high-net-worth retirees had in their broker's decisions, and in Raymond James in general.

 

They were obviously unhappy with the relationship because they changed brokerage firms early on and actually bought one of the contracts in question after that switch took place.

 

Is the moral here that selling junk will wreck a business? Not really. After all, the clients made money when everything was said and done, so the contracts themselves don't seem to have been the culprit here.

 

But by gaming the commission structure, the broker was clearly looking to maximize his profit and thinking of the client's needs second. That's what the rules are there to prevent -- and if the client finds out, it's what destroys relationships.

 

 

 

 

 

 

 

 

 

 

 

http://www.investorfraud.com/documents/TranscriptofSeptemberhearing.pdf

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