How Raymond James financial advisors are compensated

While each investment will differ in terms of both total fees and expenses and how those fees and expenses are calculated, the following section will discuss the primary categories of fees and expenses that are common to many alternative investments and the different ways that Raymond James and your financial advisors may be compensated.

Management fees. The manager for any particular investment will often charge a management fee that is based on the total value of your investment. As the value of your investment increases, the total management fees that a manager receives may increase. As the value of your investment decreases, the total management fees that a manager receives may decrease. These fees are similarly structured but often higher relative to the management fees in other, more traditional, investments such as mutual funds. Raymond James and/or your financial advisor may share in a portion of management fees to which an investment manager is entitled.

Incentive-based compensation. Many alternative investment managers receive incentive-based compensation in addition to management fees. Incentive-based fees typically involve the manager retaining a percentage of new profits generated for clients. Fees related to incentive compensation are often referred to as incentive fees or carried interest. It is important to note that these fees are in addition to management fees that are charged and that the exact calculation of incentive fees or carried interest differs from manager to manager. Raymond James and/or your financial advisor may share in any incentive-based compensation to which an investment manager is entitled.

Upfront or ongoing servicing fees or placement fees. Many alternative investments have upfront costs directly related to compensating your financial advisor and/or Raymond James. These fees are generally based on the total amount of your investment. Additionally, there may be ongoing fees, based on value of your investment, that are directly related to compensating your financial advisor and/or Raymond James. The total level of compensation received by Raymond James may be related to the total Raymond James client capital placed with a particular manager or investment.

Redemption fees. Some investments may have direct or indirect costs related to liquidating your position, particularly if an investment is liquidated shortly after being purchased or if an investment is specifically designed to provide limited or no liquidity to investors.

Other expenses. Alternative investment strategies may be accessed through a variety of legal structures, including mutual funds, limited partnerships and limited liability companies. In certain structures, particularly for new offerings, investors may incur organization and offering expenses that are related to the creation of the legal structure and marketing of the fund. These costs ultimately serve to decrease the amount of capital that is available to invest. Additionally, investors may incur other expense that result based on the investment activity of the fund. For instance, in a real estate fund, investors may be charged fees related to the acquisition of a property. In a hedge fund that shorts stock, there are costs associated with establishing and maintaining the short position. Lastly, investors in alternative investment funds generally bear the cost of certain ongoing expenses related to administration of the fund. These expenses may include costs related to tax document preparation, auditing services or custodial services.

Alternative investments in fee-based accounts

Alternative investments often have limited liquidity, intermittent pricing and values based on appraisal-based pricing versus market-based pricing. Additionally, if an alternative investment is reflected on your Raymond James statement, the value reflected is often an estimate subject to revision by the investment manager. One or a combination of these issues impact the value on which you are charged when your investment is eligible for asset-based advisory fees. Raymond James will typically only assess an advisory fee on alternative investment products that are priced at least quarterly and are not assessed an upfront commission or sales load upon initial investment.

Conversely, alternative investment products not eligible for the asset-based advisory fee typically price less frequently than quarterly and/or have an upfront commission or sales load assessed upon the initial investment. A client may hold one of these products in their advisory accounts, but their financial advisor will not receive an asset-based advisory fee as long as they are held in their advisory account.

General promotional activities

Marketing representatives of alternative investment companies (who are often referred to as wholesalers) work with Raymond James financial advisors and their branch office managers to promote their investment products. Consistent with applicable laws and regulations, these companies may pay for or provide training and education programs for Raymond James financial advisors and their existing and prospective clients. The companies may also pay for due diligence meetings, conferences, relationship building events, occasional recreational activities and other events or activities that are intended to result in the promotion of their investment products. The companies may help financially support Raymond James sponsored events related to alternative investments.

Affiliated funds

Raymond James makes available to its clients certain alternative investments advised by subsidiaries of Raymond James or to which Raymond James serves as a general partner or co-general partner. Raymond James may receive more revenue for selling these alternative investments because it receives compensation for providing these affiliated alternative investments with investment advisory, administrative, transfer agency, distribution and/or other services that Raymond James may not provide to unaffiliated alternative investments.

Other services

The subsidiary companies of Raymond James provide a wide variety of financial services to individuals, corporations and municipalities. For these services, Raymond James receives compensation. As a result, Raymond James can be expected to pursue additional business opportunities with companies whose alternative investment products Raymond James financial advisors make available to their clients. Consistent with industry regulations, these services could include (but are not limited to) banking and lending services, sponsorship of deferred compensation and retirement plans, investment banking, securities research. institutional trading services, investment advisory services, and execution of portfolio securities transactions.

Alternative Investments involve substantial risks that may be greater than those associated with traditional investments and are not suitable for all investors. They may only be offered to clients who meet specific suitability requirements, including minimum net-worth tests. These risks include, but are not limited to, limited liquidity, tax considerations, incentive fee structures, potentially speculative investment products, and different regulatory and reporting requirements.