3

http://www.jdpower.com/corporate/news/releases/pressrelease. aspx?ID=2007117

Thanks, Dick.

You’re welcome!

 “The primary driver in dissatisfaction among these vulnerable investors is a lack of contact from their investment advisor. Dedicating advisor time and attention can help enhance satisfaction and commitment among these extremely valuable, yet vulnerable investors.”

Duh. If one was cold calling, or coaching clients about making referrals, this would be a good opener. 'Course, ya have to walk the talk.

Outstanding…where do I go to invest with them?  This is a deal closer for me!

Ya gotta say, what they do right they do right.

Innerestin that their clients don't complain about fees and commissions. Here is a company that sells "a" shares, with a 5% hickey up front and people don't complain. But when I charge 2% to take a 20% profit (had a guy the other day, he was up another $8,000 in GNK that day and he wanted me to go easy on him on the commish to sell, he was up 260% from a little over a year ago! He paid full boat!) ...

So there must be a match of the customer to the firm there that is exceptional. It's not my cuppa, but then neither am I!

The 5% "hickey" is a rarity, which is why people don't compain about commissions.  I can only speak about what I do with my own clients, but by the time we get to the point of them telling me they want A shares on $10K we have already discussed A, B, and C shares and the other fees associated with their accounts.  Most of the time the money I'm investing is at the $100K breakpoint or better.  3.5% one time up front doesn't sound anywhere near as menacing as 1% for the rest of your life. 

I think you are correct that there are Jones clients and people who don't belong at Jones.  Just like FAs.  Those who love Jones, stay.  Those who don't, leave (then whine, moan, and complain on this site).  Those who are indifferent deserve what they get.    

Nah that's not it at all, if the dollar amt of the charge showed on confirms I guarantee you'd get a lot more complaints spiff.  Since it's a %, most people don't realize what they're paying.  With a strong market over the last three years the amt is often made up quickly.  Whom, if stock confirms showed a % instead of $ then IMO you'd get less complaints as well.  

Very few people tell the client this 150k purchase is only going to cost you FIVE Thousand two hundred and fifty big ones.  It SOUNDS a lot smaller as a %.   

[quote=Spaceman Spiff]

3.5% one time up front doesn't sound anywhere near as menacing as 1% for the rest of your life.   

[/quote]

What about the 1-2% of mutual fund fees and expenses they'll pay for the rest of their lives? Those don't go down as their money grows like my fees do.

Righto Gad.  I was caught off guard by LPL’s confirms showing exactly the commission on the confirms, down to the last penny.  I was so used to the % quotes…and not the exact dollar amount.

I agree that the % does sound a lot better than the actual $ amount.  I do tell people that number.  In fact, I hand them my calculator so they can do it themselves too.  They don't like it, but that's the way it works. 

EDJ to RIA -  You get what you pay for is the way I look at it.  I'll take the folks at American Funds managing money at .65% year over your brain any day.  Throw in the minds at Goldman and Franklin Templeton and you're way out of your league. 

Now, I don't assume that you're an unintelligent guy and I don't know squat about the way you run your portfolios.  I would imagine your just a guy willing to live and die by the sword.  I'm not that guy.  I know enough to know that I don't know everything.  I don't want to run an individual stock business.  Maybe you do.  Hopefully you're that good.  

I've heard the arguements about the internal trading costs, 12b-1 fees, blah blah blah.  The NAV goes up, the NAV goes down.  Dividends pay.  Cap Gains pay.  I think when you try to complicate things to make yourself look more intelligent it can come back to bite you.   

[quote=Spaceman Spiff]

I agree that the % does sound a lot better than the actual $ amount.  I do tell people that number.  In fact, I hand them my calculator so they can do it themselves too.  They don't like it, but that's the way it works. 

EDJ to RIA -  You get what you pay for is the way I look at it.  I'll take the folks at American Funds managing money at .65% year over your brain any day.  Throw in the minds at Goldman and Franklin Templeton and you're way out of your league. 

Now, I don't assume that you're an unintelligent guy and I don't know squat about the way you run your portfolios.  I would imagine your just a guy willing to live and die by the sword.  I'm not that guy.  I know enough to know that I don't know everything.  I don't want to run an individual stock business.  Maybe you do.  Hopefully you're that good.  

I've heard the arguements about the internal trading costs, 12b-1 fees, blah blah blah.  The NAV goes up, the NAV goes down.  Dividends pay.  Cap Gains pay.  I think when you try to complicate things to make yourself look more intelligent it can come back to bite you.   

[/quote] Spiffy on this one you are simply wrong. I left Jones 2 years ago and the ability to use any fund family no-load or load, big name or boutique is a superior model for almost any client.

I not only get to access the minds @ Goldman, Franklin, American but throw in T Rowe Price, Dodge and Cox and numerous others I have no allegiance to one family and resources of many.

Spiff you are a drone of the GP's. When you leave another one who talks like you will replace you.

Anyone else getting tired of how perfect Spiff contends he is?

There are good posters here and there are douches...

In defense of Spiff, he falls in the former category. I dont think he claims to be perfect or possess the ideal practice- he simply has conviction in the firm he works for. He acknowledges that there are issues at EDJ, and he also states that there are issues at every firm or platform.

While I dislike Jones' business model and personally feel they reduce the integrity of the profession, I commend his willingness to stand up for his beliefs and continually battle the countless former EDJ's who attempt to lob in grenades. The way he handles these encounters gives me way more respect for him than the crew of former reps who spew comments and come off like little children who are pissed at the former babysitter who didnt give them extra cookies before bedtime...

Blarm-

Did he build anything from scratch. NOT.

He waited in the wings, did his time in home office and then took over after someone left. He would have my respect only if he buillt it from the ground up, the old fashioned way. One foot in front of the other.

You like your model portfolio so much, how many people do you have in it? Use EDJ research if you do not trust your own. How about a GS seperatly manaaged account? You have may 100k orders. How many million plus into mutual funds? Not many I bet.

I'll grant you Joe, Spiff seems a bit smarter than the average FA at Jones.

[quote=footsoldier]

Blarm-

Did he build anything from scratch. NOT.

He waited in the wings, did his time in home office and then took over after someone left. He would have my respect only if he buillt it from the ground up, the old fashioned way. One foot in front of the other.

[/quote]

You're assuming I took over a hefty book?  You're an idiot.  You believe that everyone who is successful at Jones was given a handout, a big office with lots of assets?  That there is something magical about building an office from scratch?  That's a bunch of crap and you know it.  There's nothing magical about starting from scratch.  It sucks.  Period.  I think every new FA, Jones or otherwise, should start with at least a few accounts, just to say thay have something.   

Here's my background for those of you who haven't figured it out from my other posts.  I came from the home office.  I spent 6 years there making squat.  When I started looking at going to the field, I really wanted to go back to my home town, but there were already 2 brokers there and not enough room for a third.  So, I asked the RL in the town I live in if he had any opportunities.  He had a small office coming open.  Less than $10 million.  4 miles from home.  Perfect.  I figure a little less than $6 million is what I was left with after the dust settled.  That's where I started with this office.  I'm not a GPs pet project or a RL's favorite son. 

I wouldn't have lasted a year on a book like that without doing the same work as a new/new.  I doorknocked every day.  I still doorknock.  I made the product calls using the Phelan close.  I still make the calls (most of the time).  I'm getting some referral biz, but not enough.  What part of how I'm building my business don't you respect?  

I use the model portfolio for stocks.  I use the preferred funds almost exclusively.  I like A share annuities.  I don't have a lot of $1 mil accounts.  I'll take the $300-$500K accounts all day long (in fact I just took one from Raymond James ).  I like the Jones model.  I've never professed I'm perfect and I've never said that Jones is perfect.  I will say emphatically (that means a lot, with conviction - put  your dictionary away foot) that Jones is not the evil monster you people make them out to be.  I respect that you people may have some ill feelings toward Jones for whatever reason.  Don't paint me with the same brush you have reserved for the mother ship.     

I’ve never understood the Jones bashing that goes on here.  It’s a good place for some people.  It’s not good for others.  It works fine for the way that Spaceman wants to run his business.  If it stops being a good place for him, he’ll leave.  Jones’ top priority is to make as much money as they can for Jones.  This makes them the same as every other B/D.

And this isn't a "How much does the broker love it?" survey its a "how much does the client love it?" survey, and while you can say that the firm stuufs the ballot box in the "greatest place to work in the whole wide world" contest, they can't push the clients to say so.

Percentage on the confirm? That's news to me. yeah, if my clients could see that I'm working for a lower markup than the grocery store, that'd be gooder!

Whomit, what was Hitler’s approval rating in 1939?

Spiff-

Why do you use only preferred families when you know that your firm discloses the obvious conflict?

Why not work outside of the preferreds just to avoid it? What would be the harm?

Otherwise, I respect your post. Even 6M is a leg up to those of us that started at 0. But I will grant you not much of a help.

[quote=bspears]Whomit, what was Hitler's approval rating in 1939?[/quote]

Godwin's law you lose.

I think you take second place as the fastest Godwinner I ever met (First place guy had written an article and Godwinned himself before the forum thread even started, so he'll be tuff to beat.)

foot - I know I got a little bit of a headstart with the $6 mil.  But in STL it is very rare to start with $0.  I'm pissed that the lady that started a month after me got a $20 mil office.  Had I just procrastinated a little longer. 

I use the preferred fund families because they are good families.  I use mainly American, Franklin, and Goldman.  American because...well, they're American.  I use Franklin because they have a better product mix than American, but a similar philosophy and management style.  I like Goldman because people recognize the name and they have great performance since they cleaned house a few years ago.  I'd love to use D&C, but they've closed most of their funds.  And I'd be worried about what happens when the old guys die.  I've looked at MFS, Columbia, Pioneer, Calamos, AIM, Alliance Bernstein, and a few others.  All of them have their merits, but not enough for me to do a wholesale change in what I'm doing now.  I found something that works for me and my clients.  Yes, it was because they are Jones preferred funds.  I would expect if Jones ever launces a fee based platform with any sort of autonomy I'll look at other families.  But for now, I'm happy with the ones we use. 

I don't think the conflict of interest is incredibly important to clients.  That doesn't mean I think they don't need to know about it, I just don't think they look at it as much as the industry does. It's important to brokers when trying to convince a prospect that the local Jones guy is not working in their best interest because of the conflict.  But at the end of the day as long as we're hitting the returns they want, clients are happy, conflict or not.

Spiff-

I like the dialogue. Let's keep going. What about ETF's or UIT's to fit your style boxes? Have you considered them as an options to funds? What about those clients that would prefer NOT to have to pay taxes on their non-retirement assets? Do you still employ the 3 fund families for that strategy?

Capital gains is part of the story. What about trading costs? What are your answers to these issues?

I'm starting to use more ETFs for satellite type investments.  I've looked at both iShares and Powershares.  If someone else has another family they use I'd love to hear it. 

I've used UITs sporadically.  It's Jones, so the UITs I have access to are pretty sparse. 

The tax issues with funds are something I do discuss with clients.  We talk about annuities and individual stocks/bonds as alternatives.  I don't get a lot of those kind of accounts.  Most of the money I deal with is IRA money.  I've never actually looked into the percentage, but I'd guess 75-80%.     

By trading costs I assume you're talking about internal trading costs on mutual funds.  I don't talk about them.  Kind of like the conflict of interest conversation we had before, I don't think the clients are overly concerned about them.  I only hear that discussion from brokers trying to convince their clients that they are controlling the costs by buying stocks or UITs or ETFs.  Or from the people that believe that indexing is the only way to invest.  More power to them.  When the day comes that a client or  a prospect asks me a question about them, I'll answer it.  I'm not trying to avoid it. It's just a non-issue for my clients.  

Spiff-

Look up the term fiduciary. If you were one or acting as one, you would or should be concerned about all costs affecting your clients portfolios. Even ones you don't talk about.

If you know about them and don't reveal them aren't you acting in an unethical manner?

[quote=footsoldier]

Spiff-

Look up the term fiduciary. If you were one or acting as one, you would or should be concerned about all costs affecting your clients portfolios. Even ones you don't talk about.

If you know about them and don't reveal them aren't you acting in an unethical manner?

[/quote]

Does your doctor explain every single detail when they're treating you?

Are they unethical if they don't?

Deekay-

Don't we have a duty to diclose. I thought I learned that recently...

I was unaware.  My firm does not require me to disclose internal trading costs.  As long as my clients' statements are showing that our strategies are doing what they're supposed to, who really gives a rip? 

In other words, I don't ask the doctor how much of the cost of my perscription was the direct result of the idiot at the end of the line who couldn't get the lables on the bottles put on straight.  I ask him if he can cure me, if the drug he's giving me will work, and what the next step is. 

You can't be a fiduciary. Not if you consider knowing all pertinent facts about an investment, and choose not to disclose. Your analogy doesn't work.

It might help you feel better, but it doesn't pass the smell test.

Footsoldier, a fiduciary does not have the duty to disclose all expenses.   The client doesn't need to know all internal expenses of an investment, nor do they care.  Footsoldier, you can't disclose the trading costs because you don't know what they are.  They can be estimated by third parties, but there is no guarantee that the information is accurate. 

It goes back to the old saying that when someone asks the time, they don't want to know how the clock works. 

Is Godwin’s Law that guy from Cocktails? His wife was sexy…

[quote=joedabrkr] [quote=Whomitmayconcer]

[quote=bspears]Whomit, what was Hitler's approval rating in 1939?[/quote]

Godwin's law you lose.

I think you take second place as the fastest Godwinner I ever met (First place guy had written an article and Godwinned himself before the forum thread even started, so he'll be tuff to beat.)

[/quote]

I think Godwin's law is completely gay....
[/quote]

funny Joe, but I think it's interesting that someone even comes up with this stuff. 

http://en.wikipedia.org/wiki/Godwin%27s_law

[quote=footsoldier]

You can't be a fiduciary. Not if you consider knowing all pertinent facts about an investment, and choose not to disclose. Your analogy doesn't work.

It might help you feel better, but it doesn't pass the smell test.

[/quote]

I agree that I'm not a fiduciary.  Never said I was one or was trying to be one.  It' not a word I use with my clients.  I'm a Financial Advisor.  I get paid to tell them what to do with their money.  I make money doing that.  If you want to play a semantics game, I might interpret a role as a fiduciary as one who gives advice, but does not financially gain from said advice.  So, maybe you can't be one either.

I think you're splitting hairs with the internal  trading costs issue.  Personalfund.com is the only place I ever seen that will break down out the internal trading costs on a fund.  They're not using factual data from the fund companies. They're using averages.  So, the difference in transaction costs at a large company like American Funds and some of the smaller ones would be vastly different, but they're lumping them all together for the calculations.  I'm not saying the costs aren't there, but to actually quantify them would be next to impossible.  I think it's interesting that the difference between the transactional cost avg on a Large Cap fund vs the index is only 5 bps.

Also, in the prospectus for CWGIX (and I would therefore assume all other funds too) there is a footnote that says "includes custodial, legal, transfer agent and substransfer agent/recordkeeping payments and various other expenses."  Maybe the "other expenses" includes their transaction costs. 

Like I said before.  The only brokers who use transactional costs are the ones trying to convince someone that they're stock or ETF portfolio is far and away better than a typical mutual fund portfolio.       

Spiff-

Who do you think did most of AF transactions (filling EDJ fund orders) before the SEC banned directed brokerage? Yep. Every step of the way Jones was in bed with AF.

For years Bachman and Hill preached , "There is only one revenue source." The IR (now FA). BS. And you fell for it hook line and sinker.

My way may or may not be better than yours. But its a helluva lot cleaner. I think the time has come for you to educate yourself about options your clients have. Checkout dfaus.com and if you have time between doorknocks read the white papers about costs of funds, and active vs passive management.

Oh yeah, the next time you have lunch with an attorney don't forget to mention that your firm discloses all conflicts of interest, just doesn't change any of its business practices. Your own trust company, (unless they have changed recently) who is a fiduciary, buys only preferred funds and accepts kickbacks!

Ignore it, Spiff.  Another "holier than thou" pundit attempting to pick a fight.

Meanwhile, the local TV store can sell whatever brand of TVs it wants.  Same with the shoe store, or any store.  But the broker/dealer store is a charlatan if it decides it likes to sell certain brands over others. 

When is the SEC just going to make all our jobs obsolete, and make everyone invest in I, F, C, S, or Lifecycle, managed by Barclays(R) ?

Freedom of choice helps to make my country great.  Loudmouth sanctimonious soapboxers doesn't.

Let's see....loudmouth sanctimonious soapboxers.

The tally is SS 359 posts. Foot 232.

I aint as loud BT.

[quote=footsoldier]

Spiff-

Who do you think did most of AF transactions (filling EDJ fund orders) before the SEC banned directed brokerage? Yep. Every step of the way Jones was in bed with AF.

For years Bachman and Hill preached , "There is only one revenue source." The IR (now FA). BS. And you fell for it hook line and sinker.

My way may or may not be better than yours. But its a helluva lot cleaner. I think the time has come for you to educate yourself about options your clients have. Checkout dfaus.com and if you have time between doorknocks read the white papers about costs of funds, and active vs passive management.

Oh yeah, the next time you have lunch with an attorney don't forget to mention that your firm discloses all conflicts of interest, just doesn't change any of its business practices. Your own trust company, (unless they have changed recently) who is a fiduciary, buys only preferred funds and accepts kickbacks!

[/quote]

Seriously, can you deny that American Funds is a top-notch fund company?  A fund company that routinely runs circles around passively-managed funds over every measurable time frame? 

It's a shame that RIAs can only gain by bad-mouthing the competition.  I'm not justifying revenue sharing or the lack of disclosure of revenue sharing, but this whole thing reeks of someone who's bitter because they failed at EDJ.

[quote=deekay]Seriously, can you deny that American Funds is a top-notch fund company?  A fund company that routinely runs circles around passively-managed funds over every measurable time frame? 

It's a shame that RIAs can only gain by bad-mouthing the competition.  I'm not justifying revenue sharing or the lack of disclosure of revenue sharing, but this whole thing reeks of someone who's bitter because they failed at EDJ.

[/quote]

There are so many great actively managed fund managers out there that are worth the expense.

I see it both ways.  I can charge a wrap or flat fee and set clients up with ETFs.  I can use actively managed funds too.  I'll try to find out what the selling point is and figure out which way to steer the meeting.  ETFs are easy to sell to someone narrowly concerned with expense, and they have their place in non-qualified accounts.

IMO, if you're only going to push "the passive investment is always best" idea, write the vanguard or fidelity phone number on a post it, tell your "client" to buy the latest Bogle propaganda, and shame on you for charging ANY fee.

The only thing that reaks is when an FA maintains that one strategy is superior to another. That was my point illustrated by taking a different side (one of indexing). I don't necessarily agree that indexing is better or worse than active management. Just different. But I have developed an attitude of moderation. I want the best of all investments and the option to be able to give the client different offerings (whether it be funds or fund families, UITS, ETF's) as long as its suitable.

Its interesting that when one gets contentious or defensive it is immediately attributed to being disgruntled.  I was considered successful at Jones. I left in good standing. Once I left my eyes were opened to a world of different investments and philosophies. I came to my conclusions over the last 15 years in this industry. Not since I left Jones.

[quote=joedabrkr] [quote=Whomitmayconcer]

[quote=bspears]Whomit, what was Hitler's approval rating in 1939?[/quote]

Godwin's law you lose.

I think you take second place as the fastest Godwinner I ever met (First place guy had written an article and Godwinned himself before the forum thread even started, so he'll be tuff to beat.)

[/quote]

I think Godwin's law is completely gay....
[/quote]

What do you? Live in South Park or sumpthing?

foot - I spent some time yesterday afternoon on the Dimensional Funds site.  It's good reading, but I've heard it before.  I'll probably spend some more time on there doing some more reading, so thanks for the info.

I think there are as many different investment philosophies as there are FAs out there.  It sounds very basic, but the old own vs. loan presentation that all good Jones guys learned in KYC is what this whole thing boils down to.  You can either own something (stocks) or loan your money to someone or something (fixed income).  Everything else is marketing.  ETFs, UIT, active vs. passive management, fee based vs. transactional...all of it is packaging for the ever changing whims of the consumer.  Buy enough ads in Money magazine and you can usually convince the general public of any strategy.  Learn to sell the one that you like and you can convince anyone that everyone else, except you, is out to get them.

A fascinating study has been released. It proves (scientifically) what I have suspected all along. Financial Advisors really don’t add value.  Or higher returns (in fact, advised clients have returns of less than half the DIY’ers returns). The below article was written by an advisor/coach that realized the impact of the study. Read on for an eye-opener…
(Ever since I posted this, the Ameripoff salesmen have been going crazy attacking me and trying to pretend none of this is true… )
 
The Study of the Decade  
by Donald Moine | 06-22-06  
http://advisor.morningstar.com/articles/Doc.asp?docId=4482  
 
Over the next few years, you will be hearing a great deal about a ground-breaking new study that is just now starting to receive nationwide attention.  
 
The only notice of it that I have seen in the public media just appeared in a popular money magazine: “A new study compares the cost and performance of more than 4,000 mutual funds–some sold by brokers, some selected by people on their own–from 1996 to 2002. The people won.” In other words, do-it-yourselfers outperform financial advisors.  
 
Was the difference trivial? In another section, the article stated, “Estimated annual amount by which funds that people bought on their own outperformed broker-sold funds: $8.8 billion.” The number $8.8 billion was in very large type.  
 
Those are fighting words. But more and worse is to come from the popular media. This monumental study will surely be misinterpreted by some in the media. Clients could be outraged. A few may vote with their feet.    
 
The questions we must ponder is, “How do we defend ourselves? How do we establish our economic value?” The vast majority of all financial advisors have long assumed they helped their clients achieve financial goals.     At least when it comes to mutual fund investing (the most common service financial advisors offer), this study implies that financial advisors add no value.
 
Within weeks, the popular media will be writing articles stating that financial advisors harm clients. Jonathan Clements, one of the most popular columnists in The Wall Street Journal, has long contended that most people would be better off by avoiding financial advisors and just putting their money in the bank. He may now have rigorous scientific proof to back up his arguments–and many other journalists and thought-shapers are sure to join the chorus.  
 
The Study  
 
“Assessing the Costs and Benefits of Brokers in the Mutual Fund Industry” is written by Daniel Bergstresser of Harvard Business School, John Chalmers of the University of Oregon, and Peter Tufano of Harvard Business School. While I earned my Ph.D. at the University of Oregon, I have no connection with Chalmers or the other authors.  
 
It is likely that this landmark work will soon become known as the “BCT Study” just as we all refer to the seminal work on asset allocation as the BHB study after the initials of its authors.  
 
The BCT study is an exhaustive analysis of the cost and performance of more than 4,000 mutual funds sold by financial advisors and selected by investors on their own over the years 1996 to 2002. The amount of data analyzed is staggering. The study has been going on for years and various working drafts of the research findings are available on the Internet. The latest is dated Jan. 16, 2006.  
 
The findings of the BCT study will create a firestorm of controversy. Let’s prepare ourselves now.  
 
The Findings  
 
First of all, I must explain the usage of the word “broker” in the title of this study. It does not just apply to Series 7 licensed reps who work on commissions and loads. It truly applies to almost all financial advisors who sell mutual funds.  
 
The authors use the term “direct channel” to refer to what we might call “the public” or “do-it-yourselfers.” This includes investors who buy mutual funds directly, on their own, or through no-load fund supermarkets.  
 
All other mutual funds that are sold through banks, advice givers, RIAs, IARs, broker-dealers, mutual fund wrap accounts, wire houses and captive agents are included in the author’s “broker channel.” Unless you work for a fund supermarket on a salary (Vanguard planners), you are referred to as a “broker” in this study.  
 
In short, the authors’ findings probably apply to the vast majority of all financial advisors, whether they are RIAs, IARs or registered representatives.  
 
This is the first study ever to scientifically quantify the benefits that investors may enjoy if they work with financial advisors. The authors asked these essential questions:  
 
1. Do advisors give clients access to funds that are harder to find and evaluate? The answer is yes, but as you will see, as a whole, advisor-selected funds underperform funds that investors select on their own.  
 
2. Do advisors help clients find funds that are lower cost (excluding distribution costs)? After analyzing several trillion dollars worth of transactions, the answer is no.
 
3. Do advisors give clients access to funds with better performance? The answer is a resounding no. I know this is shocking–and it may not apply to you.     But the scientific evidence shows that many of the other advisors in America not only underperform indexes–they underperform what most people do on their own if they don’t have an advisor.  

Macca,

Any reason why you are writing about an article that's over a year old?   There is nothing about this that makes it Landmark work.

Let's go with the assumption that everything in the study is correct.  You are drawing a conclusion that does not exist:  "Financial Advisors really don't add value.  Or higher returns"

Your conclusion assumes that the job of the advisor is to choose funds that will give higher returns.  This is incorrect.  One should actually expect, on average, that advisor chosen funds will underperform by the cost of the advisor.  The advisor's job is to help the client achieve their goals.  One of the ways to do this is to help the client maximize investor returns.  Anything talking about investors that focuses on investment returns is flawed.  Investor returns is what matter.  Good advisors maximize investor returns.

This deserves to be shouted.  DON'T CONFUSE INVESTMENT RETURNS WITH INVESTOR RETURNS.

Well, if all a person wants in the area of financial advice is mutual fund selection this is probably true.  The value that a financial advisor brings to the relationship is much more than just picking funds.  

The study is a year old so whether its accurate or not, the authors assertion that this study would create headlines and rock the investment world sure hasn’t come to pass.

I'm glad I checked back here.  I read that article and then went to lunch.  While I was at MCD's I picked up an application.  I figured if my clients were going to start reading things like that I might as well look at a career change.  Thought I might beat the rush with all the other FAs out there who are going to be jobless in the near future.

Who do you think stands to benefit the most from a study like that?  Somebody has to, otherwise it's not worth the time or money to do the study.   

continued…    
 
4. Do advisors provide superior asset allocation? After years of research covering trillions of dollars of asset allocations, the finding is that advisors do not provide superior asset allocation. Even without this study, one only had to look at how advisors overemphasized technology funds in the late 1990s and how many advisors are overemphasizing energy, gold, and foreign funds today.  
 
5. Do advisors help correct bad investor behavior such as chasing fads and chasing performance? The sobering answer is no. In fact, the evidence shows that advisors even contribute to such behavior. Again, look at all the money advisors are pouring into energy, gold, and foreign funds.
 
It is important to note that the authors are not anti-advisor. Remarkably, they had the cooperation and support of some of the largest and most respected industry groups and research organizations in America in working on this study. Further, the authors go out of their way to point out that financial advisors may offer significant “intangible benefits.”
 
Unfortunately, these researchers found that the clients of advisors buy funds that have substantially higher fees and lower risk-adjusted returns than funds that investors buy on their own. The implications of these findings are staggering. The BCT study may even affect public policy toward advisors in the future. (I hope so!)
 
What Will Compliance Departments Do?  
 
None of us is perfect. So advisors underperform what investors can do on their own–so what? Underperformance is bad enough, but the BCT study finds that investors pay billions of dollars a year for this underperformance.  
 
Reading this study, one wonders how compliance departments will react. The methodology of the study is rigorous and sound. The massive amounts of data involved have been analyzed for years from many different angles. Researchers from major universities around the country have contributed guidance and expertise to the authors. Morningstar and Financial Research Corporation contributed data (although the findings of the study and the conclusions drawn can only be attributed to the authors.) In addition, staff members of the Investment Company Institute and representatives of various mutual fund companies assisted the authors. This is not a biased study.
 
There are no studies of which I am aware that can contradict the findings of the BCT study. An implication of these findings is that investors suffer a loss of billions of dollars a year in lower performance and in fees if they hire financial advisors to select mutual funds.[/b]  
 
(Note: I, macca, am amazed at this! Even me. I could never have imagined that I could be so right. And yet, it is worse than even I imagined.)  
 
A few advisors who have read the BCT study have asked, “Will compliance departments require advisors to disclose that that advisor-provided advice may hurt them?”  
 
That is very unlikely. You don’t have to worry about compliance departments raising their standards because of the BCT study.      
 
It is a virtual certainty that financial advisors all over the country, even those who have only been in the business for a week, will still be able to tell prospects, “I can pick the best mutual funds in America for you.” Even advisors who have lost their clients millions or tens of dollars will still be able to make this claim because no compliance department forbids or even regulates this statement.  
 
(THIS is what I’m up against. THIS is what all investors are up against. This and the likes of the salesmen you may have met on this site.)  
 
This does not mean, however, that the BCT study will not have a huge impact on practice building. You had best be prepared for clients asking you questions about this study.  
 
Many prospects will probably almost always believe advisors who say they can pick the hottest mutual funds. However, a few years after prospects become clients, questions arise. “Why am I not making very much money?” “Why am I losing money?”
 
In the past, pat answers worked: “We’re in for the long term.” “It’s not timing the market, it is time in the market.” “Be patient. We’ll make money over the next five or 10 years.”  
 
However, there is a good chance that these well-worn answers will no longer suffice once the findings of the BCT study become known. I’ve shared this study with a few million-dollar producers and they are already preparing their responses.  
 
I am myself preparing speeches to help advisors deal with the BCT study, and I’m working with advisors around the country on their responses. However, in addition to knowing what to say, advisors must also change their behavior.  
 
(If that last paragraph sets off a tiny warning bell in your head, it did that for me, too…but remeber who’s writing this article - an advisor coach. He won’t be coaching that advisors give up the huge commissions and teach people how to do low-cost investing - like the DIY’ers do. Watch, it will get worse.) 
 

Skippy, practice with me…Would you like fries with that? Would you like fries with that?..OR…If you have money available, I think you should buy fries with that.

Spiff, here's why this article was written:  This Moine guy is trying to drum up some business for his sideline, and Morningstar let him print this shameful article to do it.

Get practice-building tips and information from our team of experts delivered to your e-mailbox every Thursday. Sign up for our free Practice Builder e-newsletter.

Dr. Donald Moine, trained as a research scientist, has specialized for the past 24 years in marketing, practice building, behavioral finance and the development of low-risk, high-reward investment strategies. His Web sites are www.DrMoine.com (which will be completely redesigned in 2007) and CertifiedIncomePlanners.blogspot.com/.

Based in Palos Verdes, Calif., Dr. Moine is a consultant and coach to financial advisors, insurance professionals, information-marketers, accountants, estate-planning attorneys, investment bankers, pension managers, and Fortune 500 companies around the world. To learn more, write to [email protected] and request a copy of "Helping Financial Advisors Rapidly Build Highly Profitable Practices" and "How to Build Your Practice as a Certified Income Planner." Dr. Moine is the author of 10 books.

The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar. Feedback about this article may be sent to [email protected].

Spears -    - that one actually made me chuckle out loud. 

Macca - please go away.  I get enough junk email at the office and at home.  I don't need any more in the forum I like to participate in.

Does your BOA question your laughter outbursts?

No.  I’m on this site enough times during the day that she’s used to it.  It’s the constant mumbling under my breath of “if you have the money available” that she wonders about.  

[quote=deekay][quote=footsoldier]

Spiff-

Who do you think did most of AF transactions (filling EDJ fund orders) before the SEC banned directed brokerage? Yep. Every step of the way Jones was in bed with AF.

For years Bachman and Hill preached , "There is only one revenue source." The IR (now FA). BS. And you fell for it hook line and sinker.

My way may or may not be better than yours. But its a helluva lot cleaner. I think the time has come for you to educate yourself about options your clients have. Checkout dfaus.com and if you have time between doorknocks read the white papers about costs of funds, and active vs passive management.

Oh yeah, the next time you have lunch with an attorney don't forget to mention that your firm discloses all conflicts of interest, just doesn't change any of its business practices. Your own trust company, (unless they have changed recently) who is a fiduciary, buys only preferred funds and accepts kickbacks!

[/quote]

Seriously, can you deny that American Funds is a top-notch fund company?  A fund company that routinely runs circles around passively-managed funds over every measurable time frame? 

It's a shame that RIAs can only gain by bad-mouthing the competition.  I'm not justifying revenue sharing or the lack of disclosure of revenue sharing, but this whole thing reeks of someone who's bitter because they failed at EDJ.

[/quote]

YES.

Geeeeez…wasn’t there another study that said 401(k) participants did an absolutely terrible job of managing their own accounts?!!



Who can you believe anyway?!!

[quote=macca]continued......    
 
4. Do advisors provide superior asset allocation? After years of research covering trillions of dollars of asset allocations, the finding is that advisors do not provide superior asset allocation. Even without this study, one only had to look at how advisors overemphasized technology funds in the late 1990s and how many advisors are overemphasizing energy, gold, and foreign funds today.  
 
5. Do advisors help correct bad investor behavior such as chasing fads and chasing performance? The sobering answer is no. In fact, the evidence shows that advisors even contribute to such behavior. Again, look at all the money advisors are pouring into energy, gold, and foreign funds.
 
It is important to note that the authors are not anti-advisor. Remarkably, they had the cooperation and support of some of the largest and most respected industry groups and research organizations in America in working on this study. Further, the authors go out of their way to point out that financial advisors may offer significant "intangible benefits."
 
Unfortunately, these researchers found that the clients of advisors buy funds that have substantially higher fees and lower risk-adjusted returns than funds that investors buy on their own. The implications of these findings are staggering. The BCT study may even affect public policy toward advisors in the future. (I hope so!)
 
What Will Compliance Departments Do?  
 
None of us is perfect. So advisors underperform what investors can do on their own--so what? Underperformance is bad enough, but the BCT study finds that investors pay billions of dollars a year for this underperformance.  
 
Reading this study, one wonders how compliance departments will react. The methodology of the study is rigorous and sound. The massive amounts of data involved have been analyzed for years from many different angles. Researchers from major universities around the country have contributed guidance and expertise to the authors. Morningstar and Financial Research Corporation contributed data (although the findings of the study and the conclusions drawn can only be attributed to the authors.) In addition, staff members of the Investment Company Institute and representatives of various mutual fund companies assisted the authors. This is not a biased study.
 
There are no studies of which I am aware that can contradict the findings of the BCT study. An implication of these findings is that investors suffer a loss of billions of dollars a year in lower performance and in fees if they hire financial advisors to select mutual funds.[/b]  
 
(Note: I, macca, am amazed at this! Even me. I could never have imagined that I could be so right. And yet, it is worse than even I imagined.)  
 
A few advisors who have read the BCT study have asked, "Will compliance departments require advisors to disclose that that advisor-provided advice may hurt them?"  
 
That is very unlikely. You don't have to worry about compliance departments raising their standards because of the BCT study.      
 
It is a virtual certainty that financial advisors all over the country, even those who have only been in the business for a week, will still be able to tell prospects, "I can pick the best mutual funds in America for you." Even advisors who have lost their clients millions or tens of dollars will still be able to make this claim because no compliance department forbids or even regulates this statement.  
 
(THIS is what I'm up against. THIS is what all investors are up against. This and the likes of the salesmen you may have met on this site.)  
 
This does not mean, however, that the BCT study will not have a huge impact on practice building. You had best be prepared for clients asking you questions about this study.  
 
Many prospects will probably almost always believe advisors who say they can pick the hottest mutual funds. However, a few years after prospects become clients, questions arise. "Why am I not making very much money?" "Why am I losing money?"
 
In the past, pat answers worked: "We're in for the long term." "It's not timing the market, it is time in the market." "Be patient. We'll make money over the next five or 10 years."  
 
However, there is a good chance that these well-worn answers will no longer suffice once the findings of the BCT study become known. I've shared this study with a few million-dollar producers and they are already preparing their responses.  
 
I am myself preparing speeches to help advisors deal with the BCT study, and I'm working with advisors around the country on their responses. However, in addition to knowing what to say, advisors must also change their behavior.  
 
(If that last paragraph sets off a tiny warning bell in your head, it did that for me, too....but remeber who's writing this article - an advisor coach. He won't be coaching that advisors give up the huge commissions and teach people how to do low-cost investing - like the DIY'ers do. Watch, it will get worse.) 
 
[/quote]

So many words, so little understanding. Today I coached a mom to stay home and raise her kids, she can afford it, and I get to help manage a couple hundred thousand.

My client wil sell a rental, not move, invest in their current property, she won't seek work, will stop paying $800 month for daycare, will spend more money on plane tickets to visit mom who has cancer in another state.

A guy just called me up and stopped by to talk about stopping work and making sure his fiancee is taken care of if something happens to him - he is seventy, and has one million in net worth and about 500k to invest.

You don't have a clue who we are or what we do. Go back to your little corporate hate site where you belong, stop whacking off on this professional site.

Macca, as stated above you have no clue what we do. 

Last week as I met with a client in his late 80's.  He was telling me how after losing some of his teeth he can't eat many of the foods he once enjoyed.  He refuses dentures, but his dentist showed him some implants he could get that essentially are like getting your teeth back.  He thought they were awesome.  Only problem was it was 20k for the number that he needed and to him that was WAY too much money and he had decided not to.  Now, his portfolio is over 1 million and from other sources of income his is ADDING an additional 50k per year.  I walked him through how he could clearly afford to do it.  He walked out of here as happy as a kid in a candy store.  He called me today to say thanks and tell me he set up the apt with the dentist to get started. 

Do you think he gives a flying whack about the possiblity of outperforming by a few basis points?  Do you think he should? 

If someone thinks they can "do better themselves" more power to them.  There are plently of clients out there that need our help just to understand the difference between a stock and a bond. 

Bottom line is: I’ve got business and so does everyone else here, so apparently that article didn’t work. You might want to find our clients and tell them about it personally.