Raymond James to pay for U.S. client referrals

Raymond James Ltd. is launching a payout program for U.S. client referrals from Canadian advisors in a bid to expand its reach south of the border.

In 2012, St. Petersburg, Fla.-based Raymond James Financial rolled out a unit that enables Canadian advisors to serve U.S.-based clients. Now, it’s drafting a solicitor agreement program that will compensate Canadian advisors for referring clients to their 43 colleagues licensed to serve U.S.-based customers and accounts. Raymond James has more than 400 advisors here.

Read: Cdns demand cross-border banking services

L.J. Eiben, president and chief executive of Raymond James (USA) Ltd., tells Advisor.ca the referral payout could be 20% of the annual commissions and fees generated from the referred client’s account. Advisors must disclose the referral program and fee to clients, he adds.

Raymond James Ltd. launched Raymond James (USA) Ltd. in Canada in early 2012 and now has roughly $120 million in AUM, roughly 60% of which are transactional accounts; the remainder are fee-based.

The firm’s move is part of an ongoing push among some Canadian firms to capture more U.S.-based clients, particularly those who have accounts on both sides of the border. Richardson GMP, for instance, launched Richardson GMP U.S. last summer, and offers American clients discretionary accounts only.

Read: Richardson GMP partners with U.S.-based Dynasty

With Raymond James USA, the unit was initially intended to lure U.S.-based investors to Canadian capital markets through both brokerage and non-discretionary fee-based accounts.

However, with the ongoing weak performance of mining and oil and gas sectors here, Eiben says the unit has evolved into a single point of contact for North American clients who have accounts on both sides of the border.

Potential clients include Canadian residents grappling with 401Ks or IRAs, and Canadian citizens living in the U.S. who still own RRSPs.

Read: Tax problems with cross-border life insurance

The unit is of personal interest to Eiben, too: when he worked as an advisor with Merrill Lynch (now Bank of America) in Washington, D.C., he had to fire his Canadian parents as clients back in 2011. Why? A number of major U.S. brokerage firms decided it wasn’t worth dealing with regulatory issues for Canadian residents with U.S. retirement accounts.

“My focus has been to leverage the centres of influences we have in the Canadian marketplace that deal with either immigration or cross-border taxation. […] Canadian residents truly are abandoned by some of the larger brokerage firms in the U.S.,” says Eiben.

But serving such clients has its challenges. Advisors who want to tap the U.S. market must take U.S. accreditation exams even though they’re licensed Canadian advisors.

Read: Advising non-resident Canadian clients

James Schikkerling, a financial advisor at Raymond James, said it took him and his team roughly five months to complete the Series 7 and Series 66 exams and to become familiar with U.S. retirement accounts and regulations.

James and his father started serving clients with U.S. accounts in February 2013, and now collectively oversee two dozen cross-border clients. He declined to say how much assets they hold, but noted that some are clients with Canadian accounts under Raymond James Ltd., and U.S. accounts under Raymond James (USA) Ltd.

“A lot of these are pre-existing relationships; a lot of them are [also] new relationships that we’ve fostered through either lawyers or accountants who also specialize in cross-border relationships,” says Schikkerling.

He says he can help colleagues who might not want to go through the accreditation process to deal with a mere handful of clients with U.S. accounts.

Evelyn Juan is a Toronto-based financial journalist who writes about the wealth management sector. Follow her @evelynjuan on Twitter.