Subscribe to our mailing list

* indicates required







We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.


Stay Informed with the latest fanancialish news.




Investor Protection

Merrill Lynch, Raymond James Overcharged ‘College Plan’ Investors

October 30, 2019

by Howard Haykin


529 PLANS are investments designed to encourage savings for college and other future education expenses. Earnings in a 529 Plan grow tax free and, if funds are used for their intended purpose, an investor will never have to pay taxes on those earnings.



529 Plans are a great way for parents and grandparents to save for a child’s college or private school expense. And they’re readily available for sale through most brokerage firms - including Merrill Lynch  ("ML") and Raymond James ("RJA" and "RJAFS"). Yet, as we recently learned, there can be a downside to the sale of these wonderful products. 


According to the industry regulator, Financial Industry Regulatory Authority (or FINRA), the retail units of Merrill Lynch and Raymond James Financial overcharged their customers on purchases of 529 Plan shares by approximately $12 million. 


  • ML customers overpaid $4 million for 529 Plan purchases from 2011 to 2015.
  • RJA and RJFS customers overpaid $8 million for 529 Plan purchases from 2008 to 2017.
  • The firms agreed to fully reimburse their customers for these errors.


The overcharges occurred because the brokers at both firms failed to fully consider significant factors, like: (i) the ages of beneficiaries, (ii) the number of years until expected withdrawals, and (iii) the various shares classes (that carry different fees and expenses). The unsuitable recommendations caused customers to incur higher fees year-after-year, especially in the case of young beneficiaries.



CAVEAT EMPTOR - "LET THE BUYER BEWARE."    While it’s comforting to know that many firms are on the lookout for intentional and unintentional errors, it's disconcerting to see that errors can continue to be committed over extended periods - oftentimes by the largest and best-staffed brokerage firms. Which illustrates the critical need for investors to understand, as best they can, what investments they’re being sold and how much they’re paying for these securities - while recognizing that certain errors can recur throughout the term an investment (for 529 Plans, that might mean upwards of 20 or so years).



[For further details on these cases, click on FINRA November 6th News Release.]