EDJ Unveils Fee Based Platform
It’s Summer Regional Time! Jonesers, what’s the scoop on this topic- been promised for years- was it worth the wait?
Wow this is Cutting edge stuff they are doing lol
Reminds me of the Paul Simon song....
Still waiting after all these years. Oh still waitng after all these years. But I am sure Spiff will be telling us how truly different their platform is.......................on Monday when he gets in the office. Rumor has it that the compliance officer at the regional will be pulling him aside to discuss the magnitude of his defense addiction, and suggest that perhaps he take some time off to decompress. Meanwhile he was just voted most inspirational at the meeting by his peers and asked by the regional leader to volunteer (some would call it a donation to the firm) 1 hour a week (just for the next 6 months or so) to mentor another new rep who is moving in two blocks from him. The reason for the request.... because others before him gave back to the firm and so should he. Besides LP is calculated with a subjective formula after profitability (still paying 1300/mo for that T1?) that supposedly is enhanced by volunteering. Spiffy....we are more alike than you can imagine....It will be interesting how this is presented to my local market since two different Jones reps have taken an account from me by telling my clients how awful fees are. I don’t know how many times they’ve badmouthed my fee accounts…all I know is that it’s worked twice…both times with clients I’d had less than a year. Once clients have some history with a fee-based arrangement, they’re generally not fooled by the evil fee-based broker story. I don’t see this fee-based platform at Jones being difficult to compete against as it sounds pretty limited from what I’ve heard thus far.
Indy- How much in fees were you charging? How big were the accounts? Did you find out what the EDJ reps put them into? I'm assuming they were wrapped mutual funds.It will be interesting how this is presented to my local market since two different Jones reps have taken an account from me by telling my clients how awful fees are. I don’t know how many times they’ve badmouthed my fee accounts…all I know is that it’s worked twice…both times with clients I’d had less than a year. Once clients have some history with a fee-based arrangement, they’re generally not fooled by the evil fee-based broker story. I don’t see this fee-based platform at Jones being difficult to compete against as it sounds pretty limited from what I’ve heard thus far.
I am piloting the program.
It is made up of approx 200 funds/etf/index funds. Their are 24 research models that fit into the edj pyramid. Which are Core, Core plus( includes niche funds like commodities, real estate), and index/etf portfolio, and a tax efficient model.
However, you can also customize it using any mix of the available funds to your liking. It does have to fit in the parameters of the pyramid. You can’t have all Growth and no Growth and Income for example.
The fee is 1.35, and is discountable up to 30%. Payout is 40% up to a 15% discount. Any bigger discount, payout is cut to 30%. Also when you build your portfolio you can also see the average expenses for the individual mutual funds that you are adding. which range from 10 basis points to just over 100bps. Some of the mutual funds are Class A, some are Class F. Revenue sharing and any 12b1’s not deducted from the expense ratio are rebated back to the client.
The minimum account is 100k and you can have any account you want. You can also change an A share client into the program. If the client had paid the up front sales commision in the previous 2 years, the prorated fee will be deducted from the monthly fees over a two year period. This also applies to CDSC if you are changing into the program.
Currently you cannot do bonds/stocks…yet so I hear. But not a bad program to start. Obviously not as flexible as Indy’s but acceptable for 95% of FA’s
If you charge 1%, which seems like a fair price for the investment options available,the payout will very little more than the fund service fee. That doesn’t seem like much of a deal for the FA when you consider it is also reduced by national charge etc. I must be missing something.
The 1.35% charge is your gross commision. This is vs the 25 bps on service fees that you get gross. So its a 5x increase in commision gross and net.
You are correct, I was not thinking straight.
Indy- How much in fees were you charging? How big were the accounts? Did you find out what the EDJ reps put them into? I'm assuming they were wrapped mutual funds.[/quote] 1% - 200K & 80K - about half were transfered in kind and the remainder were liquidated because the rep said they could not be held at Jones. I assume the free funds were reinvested in load funds, but that's just a guess. - they were wrap accounts...mostly mutual funds and ETFs.[quote=Indyone]It will be interesting how this is presented to my local market since two different Jones reps have taken an account from me by telling my clients how awful fees are. I don’t know how many times they’ve badmouthed my fee accounts…all I know is that it’s worked twice…both times with clients I’d had less than a year. Once clients have some history with a fee-based arrangement, they’re generally not fooled by the evil fee-based broker story. I don’t see this fee-based platform at Jones being difficult to compete against as it sounds pretty limited from what I’ve heard thus far.
Remember, it is 37-40% of 1.35% at EJ.
Versus 85-90% of the same and pay my own way, picking the services from headquarters I want. Hmmmmmm.....[quote=footsoldier]
Reminds me of the Paul Simon song....
Still waiting after all these years. Oh still waitng after all these years. But I am sure Spiff will be telling us how truly different their platform is.......................on Monday when he gets in the office. Rumor has it that the compliance officer at the regional will be pulling him aside to discuss the magnitude of his defense addiction, and suggest that perhaps he take some time off to decompress. Meanwhile he was just voted most inspirational at the meeting by his peers and asked by the regional leader to volunteer (some would call it a donation to the firm) 1 hour a week (just for the next 6 months or so) to mentor another new rep who is moving in two blocks from him. The reason for the request.... because others before him gave back to the firm and so should he. Besides LP is calculated with a subjective formula after profitability (still paying 1300/mo for that T1?) that supposedly is enhanced by volunteering. Spiffy....we are more alike than you can imagine.... [/quote] Funny. The platform is nice. At least for me. It's not much different from an investment standpoint than what I see with 95% of the wonderful FAs at places like ML or MS doing these days. Most people are using a mixture of funds and ETFs. They might have the ability to throw individual stocks in there, but most of them aren't. I don't know enough about the other platforms nuts and boltsout there to know exactly how different ours is. I know our fee is competitive. I know the funds chosen are good. There are three levels of scrutiny placed on the program. IPAC (Investment Policy Advisory Committee) sets the general guidelines for asset allocation. A group of CFAs do the due diligence on the funds and ETFs to make sure to get what they perceive as the best of class to put into the program. Then there is an Advisory Solutions Committee that oversees the whole thing to make sure the other two are doing their job. There is a threshold rebalancing program instead of a timed program like I see most of the time. Meaning, when the Income portion gets over or underweighted as compared to the target by some percentage, they will rebalance. Most of the time I see rebalancing quarterly if they are rebalancing at all. And it's not based on anything other than a calendar. 12b-1 fees, shareholder accounting fees, and revenue sharing are all rebated to the client. However, those rebates don't take any money out of my pocket. That may be SOP with accounts like this, I just don't know. There is also a Jones requirement to have a minimum annual meeting with these clients. They will sign off to say it actually happened. On the volunteering - I enjoy helping the new FAs, the region, and the firm. I see it as helping my LP return currently, but also helping me get more in the future. I figure every dollar I put into my LP is a another chunk of income I don't have to worry about in retirement.[quote=Effay]Remember, it is 37-40% of 1.35% at EJ.
Versus 85-90% of the same and pay my own way, picking the services from headquarters I want. Hmmmmmm.....[/quote] You do know you're comparing apples to oranges, right?Sounds like a pretty good program-- i am impressed that so much has changed for the better so quickly at Jones.
Spiff,
As Ricky so often said: "splane, Lucy!" Thanks...!i’m sure glad i left 4.5 years ago. that’s the difference between having built a 15 mill fee based book now, vs. having to start building one today had I waited for good ole EJ to intro a fee based program. I’m sure as hell glad I trusted my insticts on that one. my life is a whole lot easier today, and EJ speaks with forked tongue.
If you are starting new at Jones and you actively use this platform how are they going to determine your rolling average and gross?
If you are starting new at Jones and you actively use this platform how are they going to determine your rolling average and gross?
This is the scary part. It's the chicken-and-egg conandrum. I think once Jones sees how much activity goes through the program, they will re-evaluate the production-only goals for new FA's (in other words, give credit for building fee-based biz). At some point, I can see some sort of bonus system for adding annuitized AUM. Otherwise, nobody other than veterans can afford the program (maybe they're OK with that). But, like the program itself, the change will take time.
Broker24- The whole reason that the program was EVEN introduced was to keep the veterans happy. They are going to be able to transition those A share portfolios where they were getting 25 BPS and now get 1.00- 1.35 BPS. It was not even a consideration for younger brokers, it’s all about revenue… I was talking to one of my former buddies who is still at the Green Empire and he tried to tell me that the all in cost to client was 1.35%. Once I explained to him that you add to that the expense ratio of the fund or etf to the 1.35% to get the cost. He is a broker that has been out 6-7 years and makes that mistake, what is the average Eval/Grad person going to do? Scary, scary.
So how are you (EDJers) going to explain this to the clients? So, Joe, we bought these funds 5 years ago, and remember how I explained the whole upfront commission and that we would essentially break even after 5 years and then have really low fees and expenses from then on? Remember that...yeah? Well, now we're going to tack on an extra 1.35% per year on your account because I want to get paid to service you. Is it just me, or does anyone else see the opportunity here? If you have EDJ prospects on your list, wouldn't you call them now and tell them this just to put it in their ear? It seems that it might be a good way to drive a wedge.Broker24- The whole reason that the program was EVEN introduced was to keep the veterans happy. They are going to be able to transition those A share portfolios where they were getting 25 BPS and now get 1.00- 1.35 BPS. It was not even a consideration for younger brokers, it’s all about revenue… I was talking to one of my former buddies who is still at the Green Empire and he tried to tell me that the all in cost to client was 1.35%. Once I explained to him that you add to that the expense ratio of the fund or etf to the 1.35% to get the cost. He is a broker that has been out 6-7 years and makes that mistake, what is the average Eval/Grad person going to do? Scary, scary.
I dont know about you guys but by the time I get to the point where a client is ready to buy, the fee is an after thought…I really dont think it is going to be that big of a deal…I know a top producer in our region (who is in the pilot) is mainly focusing on people that are currently in a MAP account that isnt performing up to par.
If all you do is sell based on fees then your just shooting yourself in the foot.
[quote=noggin]Broker24- The whole reason that the program was EVEN introduced was to keep the veterans happy. They are going to be able to transition those A share portfolios where they were getting 25 BPS and now get 1.00- 1.35 BPS. It was not even a consideration for younger brokers, it’s all about revenue… I was talking to one of my former buddies who is still at the Green Empire and he tried to tell me that the all in cost to client was 1.35%. Once I explained to him that you add to that the expense ratio of the fund or etf to the 1.35% to get the cost. He is a broker that has been out 6-7 years and makes that mistake, what is the average Eval/Grad person going to do? Scary, scary.
So how are you (EDJers) going to explain this to the clients?
So, Joe, we bought these funds 5 years ago, and remember how I explained the whole upfront commission and that we would essentially break even after 5 years and then have really low fees and expenses from then on? Remember that…yeah? Well, now we’re going to tack on an extra 1.35% per year on your account because I want to get paid to service you.
Is it just me, or does anyone else see the opportunity here? If you have EDJ prospects on your list, wouldn’t you call them now and tell them this just to put it in their ear? It seems that it might be a good way to drive a wedge.[/quote]
At some point, most veteran advisors at other firms “transitioned” to fee based. Nobody started out 25 years ago doing fee-based. So it’s not some big dillema where Jones is the only firm in the world transitioning to fee-based. And plenty of advisors (yes LPL, Merrill, SB, etc.) still do transactional business (most firms are less than 60% fee-based). It really comes down to what makes sense. This transition will take some time, as Jones has always pounded a-shares into people’s heads. But you might be surprised how many advisors at Jones (a) want feee based, (b) will be able to sell it, and (c) are doing the right thing for clients.
Bottom line, no matter what Jones does, most people on this forum will bash them for it.
Noggin-
That guy is just an idiot. If he hasn’t educated himself enough about fee programs, then that’s his fault. Plenty of us know what they are and how they work. I don’t think the ONLY reason was to keep vets happy. I think it came to to demand from clients/competitive landscape as well. I mean, it all comes back to business decisions. The bottom line is to be profitable. So whether it was to retain veterans, add more revenue, compete for fee-based business, whatever, it all comes back to business and profits. Anyone that can’t see that is just fooling themselves. I have been around long enough in other industries to know that you spin these things however you want, but it all results (or is trying to) in a larger bottom line.
Unfortunately for EJ, they did a half-assed start on this. This is a mutual fund wrap program with funds selected by Jones. Imagine transitioning an American Funds/Franklin Portfolio into this. The clients will be forced to liquidate all of their positions, give up the history on their statements, and probably get a transaction confirmation on every transaction. The client will go from 5-6 funds per account to 25 funds per account. (I have no idea what the hell is going on inside my account!)
Second, it forces you to maintain a balanced portfolio in each account, rather than across accounts. It creates duplication rather than consolidation. It is taking the advisor out of the investment selection process almost entirely. They did the rebalancing right-this is the method I use on my own. The downside to the auto rebalancing is it eliminates a reason to contact the client and removes all "credit" from the advisor. This is not even close to what other firms have to offer their clients in terms of flexibility. CIBReal question would be…can a joneser leave and transfer the fee based accts??..IF so…move as much to fee base platform and LEAVE to garner the larger payout…WIN WIN…
CIB-
I know that when I transitioned some of my American funds I was able to switch to American F shares from A without tax consequence. A little known secret, but they will do it if you ask them.I have been doing this as well. The Jones plan will sell any fund holdings that don’t match their model.
(EJ people-are they turning over the whole portfolio on one business day?)[quote=footsoldier]CIB-
I know that when I transitioned some of my American funds I was able to switch to American F shares from A without tax consequence. A little known secret, but they will do it if you ask them.[/quote] Actually, a well-known secret. In fact, in the advisory account site, it explains how/when to do this. They also list all of the funds that will transfer in-kind (i.e. a-share to f-shares for each MFD)[quote=Broker24] [quote=snaggletooth] [quote=noggin]Broker24- The whole reason that the program was EVEN introduced was to keep the veterans happy. They are going to be able to transition those A share portfolios where they were getting 25 BPS and now get 1.00- 1.35 BPS. It was not even a consideration for younger brokers, it’s all about revenue… I was talking to one of my former buddies who is still at the Green Empire and he tried to tell me that the all in cost to client was 1.35%. Once I explained to him that you add to that the expense ratio of the fund or etf to the 1.35% to get the cost. He is a broker that has been out 6-7 years and makes that mistake, what is the average Eval/Grad person going to do? Scary, scary.[/quote]
So how are you (EDJers) going to explain this to the clients?
So, Joe, we bought these funds 5 years ago, and remember how I explained the whole upfront commission and that we would essentially break even after 5 years and then have really low fees and expenses from then on? Remember that...yeah? Well, now we're going to tack on an extra 1.35% per year on your account because I want to get paid to service you.
Is it just me, or does anyone else see the opportunity here? If you have EDJ prospects on your list, wouldn't you call them now and tell them this just to put it in their ear? It seems that it might be a good way to drive a wedge.[/quote]
At some point, most veteran advisors at other firms "transitioned" to fee based. Nobody started out 25 years ago doing fee-based. So it's not some big dillema where Jones is the only firm in the world transitioning to fee-based. And plenty of advisors (yes LPL, Merrill, SB, etc.) still do transactional business (most firms are less than 60% fee-based). It really comes down to what makes sense. This transition will take some time, as Jones has always pounded a-shares into people's heads. But you might be surprised how many advisors at Jones (a) want feee based, (b) will be able to sell it, and (c) are doing the right thing for clients.
Bottom line, no matter what Jones does, most people on this forum will bash them for it.
Noggin-
That guy is just an idiot. If he hasn't educated himself enough about fee programs, then that's his fault. Plenty of us know what they are and how they work. I don't think the ONLY reason was to keep vets happy. I think it came to to demand from clients/competitive landscape as well. I mean, it all comes back to business decisions. The bottom line is to be profitable. So whether it was to retain veterans, add more revenue, compete for fee-based business, whatever, it all comes back to business and profits. Anyone that can't see that is just fooling themselves. I have been around long enough in other industries to know that you spin these things however you want, but it all results (or is trying to) in a larger bottom line.[/quote] B24, I agree with you. I won't bash them for being late to the party. I just see it as potentially an opportunity. If I have 10 EDJ prospects, and 1 guy becomes a client because of the transition, then it's worth it to me. I just see it as a way to possibly drive a wedge. Could he eventually leave me because of fees? Sure, anyone can. But I'll take my chances. Say you have a client that is upset over returns, service, and his nagging wife. One tiny thing could throw him over the edge. Maybe you didn't return a phone call, maybe it's a fee. If I get the guy, I'm going to try hard as hell to build a relationship that's above fees. I do agree with you though for the majority of people. And I'm happy for you that you now have another tool in your toolbox...Miss J, not so much.
Snags,
I suppose you could do that. It might make sense in an area with heavy concentrations of Jones offices, where you are competing for business. In my area, there are only 4 Jones offices in my county of 250K households. Each office probably has a few hundred "real" households, so there is not a lot of competition among brokers (much of the business in our area is "new" business - 401K rollovers, small business retirement plans, etc. - people that did not previously have a "real" advisory relationship). There are a handful of established advisors in the area at ML, UBS, SB, MS, WACH, and a few small solo indy offices. A lot of them are "baby boomer" advisors that have been in the biz 25 years and are pretty much coasting. They are dealing mostly with old money, established accounts, family money, etc. Although there is a lot of competition, it is not a real "competitive" area. But if that works in your area, go for it. You have to use whatever edge (or "wedge"!) you can get.With the Jones buy and hold strategy, and the American funds history, what exactly is the advantage to the client? Seems to me like you are just piling on a fee to something they have already bought. If you can move A share funds into the platform, and they are currently only paying .25 or whatever the current expense ratio is, what is the advantage of moving it and charging them an additional 1%?
It sounds like a negative for your clients not a positive. It sounds to me like you are openning a can of worms unless you have a way of proving or justifying a client benefit. You are effectively moving A shares to C shares (or the equivelant of C shares) and no companies compliance department would approve that.[quote=new_indy]With the Jones buy and hold strategy, and the American funds history, what exactly is the advantage to the client? Seems to me like you are just piling on a fee to something they have already bought. If you can move A share funds into the platform, and they are currently only paying .25 or whatever the current expense ratio is, what is the advantage of moving it and charging them an additional 1%?
It sounds like a negative for your clients not a positive. It sounds to me like you are openning a can of worms unless you have a way of proving or justifying a client benefit. You are effectively moving A shares to C shares (or the equivelant of C shares) and no companies compliance department would approve that.[/quote] My thoughts exactly.what compliance department…
[quote=CIBforeveryone]Unfortunately for EJ, they did a half-assed start on this. This is a mutual fund wrap program with funds selected by Jones. - Jones CFA’s to be exact. Imagine transitioning an American Funds/Franklin Portfolio into this. The clients will be forced to liquidate all of their positions, give up the history on their statements, and probably get a transaction confirmation on every transaction. - Only if they choose to make the change in their account. It’s no different in my mind than moving someone’s mutual funds to a VA for the income rider. They get trade confirms on that move too. They do it because they see a benefit to do it. The client will go from 5-6 funds per account to 25 funds per account. (I have no idea what the hell is going on inside my account!) - It’s designed specifically for people who a) don’t really want to have to make a decision about rebalancing, or when to switch AMCPX for NEWFX or b) recognize that one fund family cannot possibly be the best at everything and value the diversification. Mr. Client, let’s say you get to take a team to take to the world series this year. Would you pick the Cardinals or one of the All Star teams?
Second, it forces you to maintain a balanced portfolio in each account - This is a bad thing?, rather than across accounts. It creates duplication rather than consolidation. - I'm not sure I understand why this is an issue. If I have two IRAs of equal size for the same person, chances are I'm going to build identical portfolios in each account. I'm not sure I'm following why this is a detriment to the client. BTW, I see this all the time with other similar programs. It is taking the advisor out of the investment selection process almost entirely. - Who would you rather have picking your investments - A team of highly qualified, educated, and monitored analyists whose only job is to make sure that the investments in this program are the cream of the crop OR Spaceman Spiff. They did the rebalancing right-this is the method I use on my own. The downside to the auto rebalancing is it eliminates a reason to contact the client and removes all "credit" from the advisor. This is not even close to what other firms have to offer their clients in terms of flexibility. CIB[/quote] Flexibility how?
Do you get the choice of cherry, grape, or watermellon or do you have to drink the lemon lime flavor?
What kool aid?
I know alot of guys who are making the move to fee based. Its fairly simple to move existing clients. It makes sense for the broker and the client. We all know the benefits of the fee based account to the client. Now the broker at EDJ does not have to serve 500 households on top of searching for new blood. They can service 250 households better and not have to worry about the $$$. Less conflict of interest. You dont have a broker shoving a bond to make a few bucks anymore.
The advantage of a client also having the Advisory Account if they already have American is more diversification. American has great Growth & GI funds on the conservative side of the spectrum. They do not have everything. Now a client can diverisify without having to pay another upfront charge to have another fund family to get that.
I think as far as flexibility is concerned he is talking about the limitations of the program (no stocks, individual bonds, etc.). Which is really just a Jones thing.
I’ve done a little research on how much our analysts are paid (by the way, very few have earned the CFA charter). And not to quibble, but I have to point this out because it is on the ethics portion of the Level 1 exam - you can’t BE a CFA, only earn the CFA charter. Sorry, I’m a just showing off a little.
Second, our analysts are some of the lowest paid in the industry. I think that results in low quality analysts.
I personally think the program is ok. Except that it’s another method of control for the HO to exert on us “business owners”.
We didn’t have an advisory fee program - we got bashed.
We now have an advisory fee program - we get bashed for using it.
Nobody said everyone was going to move all their A-share clients to it.
If you are giving up the buy and hold strategy, the case is legitimate. Otherwise not getting called on a bond is not a “client benefit”. If you stick with the buy and hold strategy, it is not a benefit to the client. You are getting bashed, because you bashed the program of everyone else and built a culture and investment strategy around buy and hold with no advisory accounts. Now you have one, and all of a sudden they are a wonderful idea. Can’t have it both ways.
Tell me what the benefit of any A share being moved into the advisory program might be?The retarded part of the program is the account minimum. I’ve got a statement on my desk right now 200k in NQ and a 50k IRA. Sorry buddy, I have to charge you 4.5% up front on the IRA. Why the hell can’t all the accounts be handled the same way?
[quote=new_indy]If you are giving up the buy and hold strategy, the case is legitimate. Otherwise not getting called on a bond is not a “client benefit”. If you stick with the buy and hold strategy, it is not a benefit to the client. You are getting bashed, because you bashed the program of everyone else and built a culture and investment strategy around buy and hold with no advisory accounts. Now you have one, and all of a sudden they are a wonderful idea. Can’t have it both ways.
Tell me what the benefit of any A share being moved into the advisory program might be?[/quote] First, nobody said everyone was goign to move all their clients into it. Much of it will be new money. Some clients want it. Some clients have added significant money since they first opened their accounts, and need/want a new level of service. I have a few clients that had 25K IRA's, and now the retired and rolled over 700K from their 401K. At the time, they had no need for a sophisticated program for 25K. But when you are talking about that amount of money, you can't just put it all into an asset allocation fund and call it a day (jesus, I can't believe I am actually trying to sell and advisory account on this forum...who woulda thunk?). Second, many of us sold A-shares to our clients because that's what we had. Not everyone believes advisory accounts are bad, despite what John Bachman or Fes Shaughnessy might have said. Finally, you are right. Jones was very disingenuous for many years, saying they are not best for clients, then turning around and offering them. But frankly, I think there is some old guard/new guard dynamics at work. Because advisory accounts are not the only thing new to come about in the past few years. That is why I say that not EVERYONE felt they were bad.[/quote] Flexibility how? Because with a true advisory fee platform you don't need to liquidate a client's positions to get them there. It is what creates an unbiased platform. This is NOT an unbiased platform....either the client pays you an advisory fee to go into the plan you have to offer, or they don't. A true fee program would you base a fee on holding their assets, and it's up to the client if they want to follow your recommendations or not. You are only recommending the change because you believe it is in their best interest, and you receive no compensation or change in compensation because of it.[/quote]
Broker24: Valid point, but unless you change the buy and hold strategy, which is unlikely, you are just charging them 1.3% annually to sit on their money. Which if you look at break points on a 700k account, creams them in a very short period of time. I still fail to see the advantage to the client. You can rebalance at NAV in A shares, so once again, unless you are going to be moving clients in and out of etf's and mfd's to respond to market conditions, which I doubt Jones will, where is the client benefit?
[quote=LuvIndy]
I'll chime in here, I think I see where CIB is coming from. (I've been lurking long enough) [quote=Spaceman Spiff][quote=CIBforeveryone]Unfortunately for EJ, they did a half-assed start on this. This is a mutual fund wrap program with funds selected by Jones. - Jones CFA's to be exact. This is the same line all advisors (Indy or not) use when they say "that's why Mercer makes the big bucks!" Come on, they are putting together asset allocation models, it's not rocket science. - No, it's not rocket science, but they do the due diligence on the funds and managers to make sure that the portfolios are built and maintained correctly. No more complaints from you guys about using all American and style drift. Imagine transitioning an American Funds/Franklin Portfolio into this. The clients will be forced to liquidate all of their positions, give up the history on their statements, and probably get a transaction confirmation on every transaction. - Only if they choose to make the change in their account. It's no different in my mind than moving someone's mutual funds to a VA for the income rider. They get trade confirms on that move too. They do it because they see a benefit to do it. Uh, yeah it is. They are selling 3-6 positions and buying 24? A VA is one transaction. Anyway, as we all know...good clients don't choose, they follow their advisor's recommendation. - The point was that if you move to another product, you still have to liquidate the funds thus losing the account history. The client will go from 5-6 funds per account to 25 funds per account. (I have no idea what the hell is going on inside my account!) - It's designed specifically for people who a) don't really want to have to make a decision about rebalancing, or when to switch AMCPX for NEWFX or b) recognize that one fund family cannot possibly be the best at everything and value the diversification. Mr. Client, let's say you get to take a team to take to the world series this year. Would you pick the Cardinals or one of the All Star teams? When it comes down to it, the more activity there is in an account that the client is not involved in, the more they feel like they don't know what's going on. If there are fewer holdings, and the advisor is selectively talking to them before making minor adjustments, they feel much more informed. - You must have missed the part in the conversation about this being designed for those folks who don't necessarily want to worry about talking to you before making minor adjustments. They just simply don't care. They just want you to make them money. We are going to keep up with them on so many other things that what changes in their investment portfolio is almost an afterthought for them. Second, it forces you to maintain a balanced portfolio in each account - This is a bad thing?, rather than across accounts. It creates duplication rather than consolidation. - I'm not sure I understand why this is an issue. If I have two IRAs of equal size for the same person, chances are I'm going to build identical portfolios in each account. I'm not sure I'm following why this is a detriment to the client. BTW, I see this all the time with other similar programs. This is an issue when you realize the Jones method of reverse-DCAing out of mutual fund portfolios is not a good way to draw income. It is far more effective to have an account invested based on when it is going to provide income, and to take income specifically from the appropriate source. Besides that, if you want two separate strategies for diversification, now you are going from 25 funds to 50 funds! Imagine the annual reports and proxy statements! - Funny that something that has been done for 50 years successfully suddenly become a bad idea. But I guess since you're an indy guy you have a lot better ideas than us lowly Jones people do. It is taking the advisor out of the investment selection process almost entirely. - Who would you rather have picking your investments - A team of highly qualified, educated, and monitored analyists whose only job is to make sure that the investments in this program are the cream of the crop OR Spaceman Spiff. See above-this is not rocket science. - So you keep track of management changes, go to shareholder meetings, talk with all of your fund managers personally to learn their money management philosophy,style, and procedures to determine if it is reapeatable or appropriate, look for overlap, manage for risk, etc? You have the time for that and talk with your clients about their estate plans, LTC plans, retirement, education, home ownership, cash flow, business interests, Life Insurance? You must be more of a man than I am. They did the rebalancing right-this is the method I use on my own. The downside to the auto rebalancing is it eliminates a reason to contact the client and removes all "credit" from the advisor. This is not even close to what other firms have to offer their clients in terms of flexibility. CIB[/quote] Flexibility how? Because with a true advisory fee platform you don't need to liquidate a client's positions to get them there. It is what creates an unbiased platform. This is NOT an unbiased platform....either the client pays you an advisory fee to go into the plan you have to offer, or they don't. A true fee program would you base a fee on holding their assets, and it's up to the client if they want to follow your recommendations or not. You are only recommending the change because you believe it is in their best interest, and you receive no compensation or change in compensation because of it.[/quote] [/quote] So in your unbiased platform let's say an EDJ client who owns $500,000 in ICA walks into your office. He tells you that he doesn't want to work with EDJ anymore and wants to know if you can handle his money. You tell him sure, but you charge 1% a year for your unbiased platform. Whether you make any changes or not, you still charge him 1%. You're telling me because he didn't have to liquidate anything to get into your fee based office that he's better off? Because you are unbiased. But still getting paid. For doing nothing. Forever.
First I can almost promise you I would make a change if a client had 500k in ICA. I might diversify it within others within the fund family and put a portion of the assets with a third party manager. I probably wouldn’t use an advisory account in that instance. It just doesn’t make sense. So to answer your question, I don’t have to do an all or nothing scenario and I wouldn’t be storing his funds for the 1%. I don’t do alot of funds anyway, so it isn’t a likely situation for me. Still the scenario you presented backs up my concern regarding what is going to happen with your new advisor program.
I agree to some extent, but if a client already had the A shares, and had no reason to liquidate the full position, I would still offer the two accounts. Put a portion into a managed account program that I get paid on, and leave a portion in the funds and just take the trails. In time, the full positon might end up being managed since like I have said, funds aren’t my thing, but until then the additional 1% is unnecessary.
Your example is why an advisory fee makes so much sense Spiff. He comes to me, and I don’t need to sell him another product just to “get paid.” He becomes a client equal to any other 500k client of mine because he is paying me based on how much I am helping him with.
This way when I saw, “Client, I think you’d be far better off with x y and z”, he knows I am recommending it strictly because I believe that to be the case, and not because it’s what I need to do to generate an income. I am amazed at the significant difference in decision making that has come from my clients since I’ve gone to working on fees. It is easier for them to make decisions they know are right, even if they might not have made them otherwise, and in the end, that is a significant part of the value of the fee-only comp.
Icecold is right on…the client gets far too much value in some years, and far too little in others, but in the end everyone wins.
I’m not disagreeing with your stance. It just isn’t the way I do it. I work alot with structured investments and principal protected securities. As such, I can’t really justify advisory accounts for all of my clients holdings. It is one of the advantages of being Indy, we can all do the things we are best at and hopefully the client always wins. My primary concern when I started mentioning this is that Jones has no background in anything but by and hold mutual funds. As such it is a straight loss for the client unless they change their core beliefs.
If they had wanted, they could have sold C shares to their clients and gotten the 1%, but they went with A shares. Now they want to double dip and put the same A shares into wrap accounts and get the 1%. That isn't really acceptable unless they can justify it.Iceman, I can’t answer for most other professions, but I can tell you that absolutely, CPAs DO charge more for more complex tax returns. I’m not sure that was what you were trying to say, but that’s the way I read your example. I would also not be surprised to see dentists start surcharging potty mouths if some aren’t already. It makes sense to me that if there’s a lot more work involved, the charge may well reflect that. I certainly charge more for fee-based accounts if I believe there will be proportionately more work. Larger accounts are generally more complex (how many ways can you realistically and effectively slice $100K vs. a million?) and the overall fee generally reflects that, even if the charge as a percentage is the same of less than smaller accounts.
Iceman, I can’t answer for most other professions, but I can tell you that absolutely, CPAs DO charge more for more complex tax returns. I’m not sure that was what you were trying to say, but that’s the way I read your example. I would also not be surprised to see dentists start surcharging potty mouths if some aren’t already. It makes sense to me that if there’s a lot more work involved, the charge may well reflect that. I certainly charge more for fee-based accounts if I believe there will be proportionately more work. Larger accounts are generally more complex (how many ways can you realistically and effectively slice $100K vs. a million?) and the overall fee generally reflects that, even if the charge as a percentage is the same of less than smaller accounts.
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True story on the CPA example. I also charge more for a fee based account if they are going to be very very active. Trading options for example or lots of actively managed stock trades and portfolio rebalancing (I mean not portfolio rebalancing across the board for all clients as a group)[quote=new_indy]I’m not disagreeing with your stance. It just isn’t the way I do it. I work alot with structured investments and principal protected securities. As such, I can’t really justify advisory accounts for all of my clients holdings. It is one of the advantages of being Indy, we can all do the things we are best at and hopefully the client always wins. My primary concern when I started mentioning this is that Jones has no background in anything but by and hold mutual funds. As such it is a straight loss for the client unless they change their core beliefs.
If they had wanted, they could have sold C shares to their clients and gotten the 1%, but they went with A shares. Now they want to double dip and put the same A shares into wrap accounts and get the 1%. That isn't really acceptable unless they can justify it.[/quote] I believe that your issue with this is that you are seeing the fee from an investment only standpoint. You are correct that if the ONLY thing that were going to happen with these accounts is to move an A share portfolio into the fee based platform and start charging 1% for nothing extra, it is just a fee to increase revenue. However, the program is far from that. In addition to the investment management that either HQ does or we as FA do (there is a custom model we can use if we choose), there are service requirements that must be fulfilled every year. Using a platform like this will allow us to focus more attention on the planning aspects of this biz than the investment side. I can recommend a client utilize this platform knowing that the CFAs at HQ will be doing their job to watch the portfolios, while my clients and I focus on the bigger picture. There are no biases towards one fund family, no breakpoint issues, no buy and forget mentality, no commission concerns. Just focus on giving attention to the client and working through solutions to their problems. I don't see it as a change in our core belief. I see it as giving our clients one more way to work with us.So what you are saying is that you are going to charge 1% to do what you should have been doing all along? You already got paid on the A share sale and then the trails and revenue sharing to cover your ongoing time.
The platform may be exactly what you say, but the brokers are the same old guys. Are you saying you as a company are really walking away from the buy and hold strategy? Are you truly saying that you guys will dump american funds and move them into a no load or an etf? I will believe it when I see it. Until then I still think it is just an effort to double dip. I sat in a meeting one time with Goldman Sachs and a bunch of Jones guys and remember the outcry when the GS Portfolio manager stated "we are in the money movement business, not the money storage business". It was like the Jones guys were slapped in the face, or their dog got kicked. Until that attitude changes, it won't be a true advisory account.[quote=new_indy]I’m not disagreeing with your stance. It just isn’t the way I do it. I work alot with structured investments and principal protected securities. As such, I can’t really justify advisory accounts for all of my clients holdings. It is one of the advantages of being Indy, we can all do the things we are best at and hopefully the client always wins. My primary concern when I started mentioning this is that Jones has no background in anything but by and hold mutual funds. As such it is a straight loss for the client unless they change their core beliefs.
If they had wanted, they could have sold C shares to their clients and gotten the 1%, but they went with A shares. Now they want to double dip and put the same A shares into wrap accounts and get the 1%. That isn't really acceptable unless they can justify it.[/quote]I regards to your double dipping comment......if a client purchased A shares within the last two years they get that commission rebated back to them. Why only two years? Well anyone who has held for over two years has pretty much broken even as to what they would have paid in the advisory program. You can bash all you want but as a fairly new FA this is a darn good start and only going to get better.The day is about to start...have a great one everyone!!!
[quote=Eyetattoo] I regards to your double dipping comment…if a client purchased A shares within the last two years they get that commission rebated back to them. Why only two years? Well anyone who has held for over two years has pretty much broken even as to what they would have paid in the advisory program. [/quote]
Please elaborate on the math used that results in a two year break even between A shares and your advisory program.
Eyetattoo: two years does not cover the fee #1 and #2 it still doesn’t answer the primary concern that Jones is a buy and hold firm, so why should they give up the lower fee so you can charge them 1% to tell them to hold everything will be fine. I doubt Jones will change decades of tradition and investment style just to justify advisory accounts. I would tend to think investment style will stay the same, the fees will just go up.
Spaceman, if you or other Jones broker takes old A share money and now puts it into Advisory accounts I sure hope you explain to them either how absolutely wrong you (or Jones if you originally disagreed) were in the first place or how hypocritical you are being. What a freaking joke for Jones to say accounts that have been in A share over 2 yrs can be converted to Advisory. And you sit here and wonder why we hate Jones so much. I think advisory is a great way, and Jones SHOULD adopt it. However to convert anything less than 10yrs old goes completely against ever thing they ever claimed. And it probably should be 15 yrs.
Another note is that I THINK that under 2 yrs doesn't get a refund, but rather a DISCOUNT on the advisory fee. Which I imagine is less beneficial to the client and better for Jones. The reason Jones is doing all of this is to benefit Jones not the client. If they would just come out and say that it would be much better. Firms are supposed to make money, just not claim that they exist for the purpose of serving the client.Test
[quote=Dark Knight]
Spaceman, if you or other Jones broker takes old A share money and now puts it into Advisory accounts I sure hope you explain to them either how absolutely wrong you (or Jones if you originally disagreed) were in the first place or how hypocritical you are being. What a freaking joke for Jones to say accounts that have been in A share over 2 yrs can be converted to Advisory. And you sit here and wonder why we hate Jones so much. I think advisory is a great way, and Jones SHOULD adopt it. However to convert anything less than 10yrs old goes completely against ever thing they ever claimed. And it probably should be 15 yrs.
Another note is that I THINK that under 2 yrs doesn’t get a refund, but rather a DISCOUNT on the advisory fee. Which I imagine is less beneficial to the client and better for Jones. The reason Jones is doing all of this is to benefit Jones not the client. If they would just come out and say that it would be much better. Firms are supposed to make money, just not claim that they exist for the purpose of serving the client. [/quote]
Good idea. Brilliant. Jones is the first company to come up with a concept/product/service that will make more profit for the company. Now they should come out and tell everyone that it is simply to make more money for the firm. Boy that is just a brilliant business move. What freakin’ planet did you come from? Anyone that has ever had responsibility for running a major company knows that this is the dumbest statement you have ever heard. Jones (and every firm, and every little “indy” advisor) is in the business of making money, plain and simple. Don’t use your disdain for Jones to somehow change the rules of business. You come up with ideas that will make more money, save more money, create more profit, retain good employees, make happier clients, whatever. But no company comes out and says “oh, yeah, we are going to do this to be more profitable” - except of course when they are talking to analysts.
And if you have actually seen our 5-year plan, it is explicitly stated that we rely too much on a single revenue stream. I think far more than MAKING more money for the firm, it is meant to diversify our revenue base. It’s as much a risk management tool as a profit driver. I think the “new guard” saw the light and knows that AMF and revenue sharing are too big a risk to the firm right now (it’s the equivalent of having 65% of your 401K in your company’s stock). They are simply doing what the “old guard” could not or would not do.
The problem Grasshopper is that for years and years and years Jones said that fee based was evil and wrong and the right way was A shares. Now, they are saying it is ok and the reason they are doing it is somewhat jaded. You are a very smart guy and soon you will understand more than you want to about your company. I had enough and maybe it was helped along by the events in my region but I would have eventually have left Jones even in the best region. I wish you well as you are a genuine article and you can succeed wherever you hang your hat.
Grasshopper? You know, in A Bug’s Life, the Grasshoppers were pretty tough (yeah, I know, they talked a big game, and in the end they got squished). Ohhhh, life with kids…
And frankly, I could care less what Jones said for years and years and years. I care how I can grow my business today and in the future. If you look at my post a bit more carefully, you will see that I am not really defending Jones. I am saying it was a business decision, pure and simple, and that they are correcting past mistakes.It shouldn't suprise me that there is the negativity about this program from you guys, but it does. You griped for years, some of you even left because, Jones didn't have a fee based platform for the average account holder. I'll bet some of you are the ones that would send Suggbox wires to Bachmann and Hill complaining that you were losing business to the fee based planners out there and that Jones was missing the boat by not having it. Now, with Weddle in the drivers seat it becomes an option and you complain that Jones is only doing for the money and that we shouldn't have existing clients utilize the plan.
Perhaps I'm interpreting it wrong, but Jones isn't abandoning the buy and hold philosphy. In my mind it will still be the most cost effective option for my clients. We are simply offering them a different solution. A shares will still be available and discussed, at least in my office, but the client should have some choice in how they invest with us. I for one am happy to be able to give them that option. I am going to talk to ALL of my existing clients who are eligible for Advisory Solutions. I'm going to put the program on the table for them and let them decide if it is something they are interested in doing. I DO NOT plan on apologizing for selling them A share 4 years ago. In my office, I've never told anyone that fee based business in general is bad. And if some of you guys did, you were stupid. And Jones never told you to do it. I heard Bachmann say several times that fee based business isn't bad. It simply wasn't something he believed in and that meant Jones wasn't going to do it. I'll bet he still doesn't like that we're headed this direction. However, he's not in charge anymore and he doesn't get to call the shots. Let me ask a question. If I decided to leave EDJ and set up shop as an indy and in doing so decided that I was going to be a fee only advisor, what do I do with all of my good clients that bought A shares from me a few years ago while I was a drone at EDJ? After all, I've seen the light, stopped drinking the kool aid, and my IQ suddenly went up by 50 points, and I can see the error in my ways and FEES are the RIGHT way to do business now. What about Mr. and Mrs. Smith who have a portfolio of American Funds? I certainly don't want to lose them as clients or leave them for the next drone in my EDJ office. What do I tell them?If I decided to leave EDJ and set up shop as an indy and in doing so decided that I was going to be a fee only advisor, what do I do with all of my good clients that bought A shares from me a few years ago while I was a drone at EDJ? After all, I’ve seen the light, stopped drinking the kool aid, and my IQ suddenly went up by 50 points, and I can see the error in my ways and FEES are the RIGHT way to do business now. What about Mr. and Mrs. Smith who have a portfolio of American Funds? I certainly don’t want to lose them as clients or leave them for the next drone in my EDJ office. What do I tell them?
Personally, I think it is a big mistake to be FEE ONLY. Not all clients are served by a fee for advisory account and you eliminate a lot of good accounts that could turn into something bigger in the future. People who are dollar cost averaging into IRA or 529 accounts. Many of my clients hold portfolios of muni bonds. Not a great deal of active management there and they would object to paying a fee for AUM. If you do transfer those American Funds class A shares to a managed account the 12B-1 fee is eliminated or the shares are converted to I shares (depending on your platform). I certainly wouldn't want to change out an account that "Just" recently paid a commission to purchase but I would tell the clients "Being in a fee based account eliminates the mandate that I must continue to put you into the same fund family to get breakpoints. American Funds are very fine funds and that is why I recommended them to you in the first place and I think that we should keep much of the portfolio in this strategey. HOWEVER,...... many other fund families may have sector or specialty funds that are not covered by American Funds and a fee based account will allow us to have a lot more flexibility in actively managing your portfolio to respond to these difficult financial times with out worrying about commissions or breakpoints."Actually my A share clients still have A Shares. Some of the longer term holders I have moved to different asset classes and away from mutual funds completely as they really aren’t my thing, but I haven’t moved any A share into fee based accounts.
Bottom line I feel that it is just pissing the others off that we now have the fee based program…now they cant say “why go with Jones you know they are the most expensive guys in town”
[quote=Eyetattoo]Bottom line I feel that it is just pissing the others off that we now have the fee based program…now they cant say “why go with Jones you know they are the most expensive guys in town”
[/quote]
Whether Jones has finally added an advisory program or not is of little consequence to me, but I am still curious to hear how you come to a two year break even calculation on the program, as asked previously:
Originally posted by Eyetattoo
I
regards to your double dipping comment…if a client purchased A
shares within the last two years they get that commission rebated back
to them. Why only two years? Well anyone who has held for over two
years has pretty much broken even as to what they would have paid in
the advisory program.
Please elaborate on the math used that results in a two year break even between A shares and your advisory program.
You’re right, it’s not quite a breakeven at two years. The max fee is 1.35%. The break at $100K (also the minimum for Advisory Solutions) is generally 3.5%. So, 3.5/1.35 = 2.6. So the appropriate answer is two years, seven months, and 6 days. Somebody please check my math.
I would like to thank all of you for asking such pointed questions. It has been a great help to me in developing the conversation to have with my clients who will be hearing about Advisory Solutions. I know that I have clients who will ask some of these same questions. It's better to come up with the answers now, rather than with them at my desk.Let's not go jumping off the deep end with that ETF or UIT portfolio talk. After all, it does say EDJ on my office door.
Seriously, I've not done any research on the ETF/Index driven models in Advisory Solutions. I would guess that for some asset classes you are correct, but with others you are really off base. But I think there's a whole other thread that's debating that issue.Spiff-
I think I directed you once before to the white paper published by DFA funds. Now with some of the dynamic ETF's available, you can almost have the best of both worlds without the excess costs. The only asset classes where you might be right would be small cap value/growth. Myabe midcap, but I would tend to think that most managers would be considered absolutely exceptional to consistently beat the bench. Don't fret they still need us, and now that you have the model, run with it. Imagine....a book without American Funds. Koombuyah.... What a concept.for those that do a lot of fee based business, are you having client complaints about their portfolio going down and still getting dinged 1% in fees. Curious for feedback.
I am curious to see the historical performance of all of our models once they aer loaded into Morningstar. I think that’s in 2 weeks?? I am not going to go through the exercise of setting them up myself. But it will be interesting to see how they comapre to the models I do myself right now.
Bro-
The best part of your new model is now you have one to compete with the rest of us. You are giving clients choice and rarely is that a disadvantage. Yeah there were will be challenges bridging old clients to fee based. But those that take the time to review it, should buy into it. As far as costs are concerned with down markets. In the absence of value price is an issue. If you differentiate yourself you should have less questions about your fees. I have had more clients complain about taxes due to mutual funds held in non IRA accounts (my old EDJ days coming back to haunt me), than I have had about fees in down markets. When times are tought clients look to us for support. Many of us tend to hide. It's the rare FA who remains proactive and in constant contact. After 15 years in the industry, just my 2cents.ICE< that is also a lost concept sometimes. But it bites hard when you invest someone into A-shares at the beginning (or even several months) prior to a bear market. Over the past few years, I had clients make up their commissions in literally months. But anyone that I invested after, say, July of 2007 is probably still underwater (except for some of the older, or more conservative investors). Even if the % was low, at say 2 or 2.5% percent upfront, the dollars can be large (30-40K down). So by the time we climb out of this, they are going to be underwater for maybe a year and a half or more. It is a bit easier for my C-share clients or annuity clients to stomach. But then again, you put someone into an advisory fee platform over the past year, and they are wondering why they are paying $500 every month to lose money. In some ways, timing can be everything in this business.
Foot-
Regarding the tax mangement benefits of advisory, Jones FA's are not getting this because they are going to be using models diversified across asset class. This eliminates the flexibility of owning domestic stock assets in non-qualified accounts and fixed income or global in qualifed accounts. This certainly is a benefit to advisory fees that I didn't see when I was at Jones, and Jones is not yet there. Another unfortunate part of this is that if someone were to move out of their current taxable portfolio and into the mutual fund wrap account, they will have to liquidate their current holdings unless they are in the model, and I assume it will happen without discretion of the advisor. I'd also be interested in seeing how the advisor can control income distributions from this new plan...another advantage to a "real" advisory program.[quote=LuvIndy]Foot-
Regarding the tax mangement benefits of advisory, Jones FA's are not getting this because they are going to be using models diversified across asset class. This eliminates the flexibility of owning domestic stock assets in non-qualified accounts and fixed income or global in qualifed accounts. This certainly is a benefit to advisory fees that I didn't see when I was at Jones, and Jones is not yet there. Another unfortunate part of this is that if someone were to move out of their current taxable portfolio and into the mutual fund wrap account, they will have to liquidate their current holdings unless they are in the model, and I assume it will happen without discretion of the advisor. I'd also be interested in seeing how the advisor can control income distributions from this new plan...another advantage to a "real" advisory program.[/quote] Luv, Couple things: first, we have a tax managed portfolio for every portfolio focus (growth, balanced, income, etc.). They focus on low turnover equity funds, muni funds, etc. There are a total of 24 models. There are also 6 ETF/Index only models. Or you could also build your own. And as far as controlling income distributions, that is the same for all mutual fund advisory programs. We also have separately managed account programs for better controlling individual equity distributions (our "MAP" platform). But you are right - if someone currently holds funds, and they want to go into our MFA program, they would have to liquidate. I see that as a weakness of the program, but I would guess they would address that at some point, once they iron out all the kinks in the program.[quote=Broker24][quote=LuvIndy]Foot-
Regarding the tax mangement benefits of advisory, Jones FA's are not getting this because they are going to be using models diversified across asset class. This eliminates the flexibility of owning domestic stock assets in non-qualified accounts and fixed income or global in qualifed accounts. This certainly is a benefit to advisory fees that I didn't see when I was at Jones, and Jones is not yet there. Another unfortunate part of this is that if someone were to move out of their current taxable portfolio and into the mutual fund wrap account, they will have to liquidate their current holdings unless they are in the model, and I assume it will happen without discretion of the advisor. I'd also be interested in seeing how the advisor can control income distributions from this new plan...another advantage to a "real" advisory program.[/quote] And as far as controlling income distributions, that is the same for all mutual fund advisory programs. We also have separately managed account programs for better controlling individual equity distributions (our "MAP" platform). [/quote] Duplicate post-sorry[quote=Broker24][quote=LuvIndy]Foot-
Regarding the tax mangement benefits of advisory, Jones FA's are not getting this because they are going to be using models diversified across asset class. This eliminates the flexibility of owning domestic stock assets in non-qualified accounts and fixed income or global in qualifed accounts. This certainly is a benefit to advisory fees that I didn't see when I was at Jones, and Jones is not yet there. Another unfortunate part of this is that if someone were to move out of their current taxable portfolio and into the mutual fund wrap account, they will have to liquidate their current holdings unless they are in the model, and I assume it will happen without discretion of the advisor. I'd also be interested in seeing how the advisor can control income distributions from this new plan...another advantage to a "real" advisory program.[/quote] Luv, And as far as controlling income distributions, that is the same for all mutual fund advisory programs. We also have separately managed account programs for better controlling individual equity distributions (our "MAP" platform). [/quote] I'm not sure what you mean. Under an advisory fee program where the client and advisor have control over the investments and timing, they can make the decision on how to draw income, just like you do at Jones now. Maybe you didn't realize that?I don't give a SH1T what your 5 year plan says. What I am talking about it is how MOST of the Vets and all of the training harped continuously that Fee based was of the Devil and A shares were much better for the client. Holier than thou and then some. If you never told this to a client then good for you. If you did and you go back to that same client and try to pitch them on Advisory I hope they call it what it is. I am not one of your major Jones bashers on this site and have applauded Weddle for bringing you guys out of the Dark Ages. I am glad you finally have an advisory program. Many of my friends still there are excited. However you should quit claiming we are mad that Jones get advisory. I am simply mad at the 2 yr rule. I am convinced though that based on the former position of Jones on A shares, that any client who subsequently is swapped into Advisory should not have to pay fees until at LEAST the Sales charge is fully covered. Otherwise Jones IS a screwing the client.
And if you have actually seen our 5-year plan, it is explicitly stated that we rely too much on a single revenue stream. I think far more than MAKING more money for the firm, it is meant to diversify our revenue base. It’s as much a risk management tool as a profit driver. I think the “new guard” saw the light and knows that AMF and revenue sharing are too big a risk to the firm right now (it’s the equivalent of having 65% of your 401K in your company’s stock). They are simply doing what the “old guard” could not or would not do.
[quote=babbling looney]
Another unfortunate part of this is that if someone were to move out of their current taxable portfolio and into the mutual fund wrap account, they will have to liquidate their current holdings unless they are in the model, and I assume it will happen without discretion of the advisor. So....? Wouldn't they have to do that in any fee based platform when going from a mix of investments (stocks bonds mutual funds) to a strictly mutual fund based wrap program? Mutual fund wraps are not managed by the advisor. If you want a managed fee program, I assume you have other choices? Ones where the advisor can choose the investment mix.[/quote]I guess we're getting our terminology crossed. In my not so humble opinion, the way to do this and avoid as much conflict of interest as possible is to charge an advisory fee on the account regardless of what the client owns (already invested or not). This way the advisor does not need to make a move with the investments just to get comped.
I happen to recommend mutual funds almost exclusively, but I guess I wouldn't have to. This is what I think of when I think advisory fee accounts.
I don't give a SH1T what your 5 year plan says. What I am talking about it is how MOST of the Vets and all of the training harped continuously that Fee based was of the Devil and A shares were much better for the client. Holier than thou and then some. If you never told this to a client then good for you. If you did and you go back to that same client and try to pitch them on Advisory I hope they call it what it is. I am not one of your major Jones bashers on this site and have applauded Weddle for bringing you guys out of the Dark Ages. I am glad you finally have an advisory program. Many of my friends still there are excited. However you should quit claiming we are mad that Jones get advisory. I am simply mad at the 2 yr rule. I am convinced though that based on the former position of Jones on A shares, that any client who subsequently is swapped into Advisory should not have to pay fees until at LEAST the Sales charge is fully covered. Otherwise Jones IS a screwing the client.[/quote] ALL of the training? Really. In my history with Jones I've either taught or attended 90% of the training programs out there. I don't EVER recall the "Training" saying anything like you are implying. Your mentor, your Visiting Vet, some GP somewhere probably did say that. However, the "training" never even dealt with it. With that said, I've know that there have been some staunch supporters of John Bachmann's viewpoint that fee based business is not good for the EDJ client. He saw the average EDJ clients as the buy American Funds A shares and forget about it. Buy a muni bond and forget about it. Take the income, but don't worry about anything else. Weddle obviously doesn't believe that way and the folks who sided with Bachmann on the issue are retiring, to be replaced by people who agree with Weddle. Thus Advisory Solutions. I want to ask you how you would handle a couple of clients of mine who would qualify for Advisory solutions, but in your opinion would get shafted if they moved. Both of them invested with me early in 2006. I put both clients in one fund family to hit the $100K breakpoint. One with LA, one with American. The American client is pretty happy. Had a decent 2007 still up a little on their investments despite the bear market. The LA client, not so much. He's down. Not a ton, but still two years with no results makes for an unhappy client. Neither of them are at a breakeven point with the fee on the Advisory Solutions platform. Both, I believe, would benefit from the extra diversification not only in fund families, but also in asset categories. Ever tried to buy a domestic small cap growth fund at American? So, what do I do with them? Do I show the platform to the LA guy, but not the American? Do I show it to neither one? Do I show it to both and let them decide? Do I wait another year to let the fees better align? What if the Advisory Solutions portfolio that I would have used outperforms their current portfolios in the next year? Woudn't they have lost out on some returns?[quote=Broker24]
And if you have actually seen our 5-year plan, it is explicitly stated that we rely too much on a single revenue stream. I think far more than MAKING more money for the firm, it is meant to diversify our revenue base. It’s as much a risk management tool as a profit driver. I think the “new guard” saw the light and knows that AMF and revenue sharing are too big a risk to the firm right now (it’s the equivalent of having 65% of your 401K in your company’s stock). They are simply doing what the “old guard” could not or would not do.
Spiffy-
If the client is your utmost concern, then fight for them. If you feel advisory is better for x,y, or z reasons, then take it to compliance. Get them to buy in ahead of time, you will get the result you want. It is only as difficult as you make it. Go back to my last response to you and use it (for clients). And tell the folks who can't sell what you are doing and why, and I would bet the farm it will all work out. Koombuyah! PS. And remember, soon you will be a true financial advisor rather than an AF rep. BTW. In my 10 years at Jones, LA and Putnam were consistent underperformers in the Jones stable of funds. I know Putnam is out now, and so is Uncle Milty. Any idea what ever happened to him?I want to know how newer guys at Jones, like myself, who were taught to "ask for the order" over the phone and begin relationships with transactions are now supposed to use financial assessment tools and advisory solutions to build our book. I truely believe in advisory solutions, but how the hell do I pay my bills by adding $112.50 to my month for a 100k ticket instead of the $3,000 I would get on an A share order. Then also have to listen to why my rolling average has jumped off a cliff.
Spiff,
Obsiously you'll have clients better off in advisory. I know you'll have no control to do this, but Jones should WAIVE the Advisory fee until the clien'ts upfront charge plus 12b's paid no longer exceed the equivalent amount which would have been paid if Advisory had been done from time of investment. This should be at a minimum or the client is being over charged. In your specific situation since you can't do that, you should discount the fee to the lowest you possibly can. PLEASE don't say how can't you afford to do this. You will still be getting a raise.In fact, since most A share buyers were promised never to pay another sales charge my opinion would be that as general rule A shares moved into Advisory should recieve the maximum discount.
A few days back someone posted it was ok to offer both fee based and commission based accounts–I agree. I left Jones about 16 months ago and most of the folks who came with me today still hold commission based accounts with CL A share funds, stocks and bonds. Most of my new clients are fee based only! I have told all the clients who came with me from Jones about fee based but I only had two folks agee to it. That is ok with me and them. Whatever is best for the client and they agree to!
You know, if this were ONLY about the fee, I’d agree 100% with you. It’s not, so I don’t.
Advisory Solutions will be a FUNDAMENTAL change in the way I do business. Therefore, for some clients who may or may not have invested with me just two years ago, a FUNDAMENTAL change in the way they pay me. I see my clients splitting themselves into two major groups. First, the group that wants me ONLY for my classic EDJ Investment Representative role. I show you how to manage your portfolio, but you're not interested anything else. For those people American Funds A shares or some other variant will be the way to go. For them, the classic commission model will be the best choice. If the only thing I've advising them on is what to buy and when to buy it, then they should either buy or stay in A shares. For them, EDJ won't have changed from 30 years ago. Second would be the group that wants me to be the EDJ Financial Advisor who plans their retirement, their education, manages their money (whether personally or through the CFAs w/ Advisory Solutions), etc. For them I will be spending the majority of our conversations talking less about investments, more about their life, goals, and plans. For them, the fee will be a bargain. I don't sell A shares based on the you'll never have to pay another sales charge again premise. It's flawed. It allows no room for error in the event of an Putnam-like implosion. Instead, I tell my clients that I do the best I can with the information I have at my fingertips right now. Two, three, four years down the road the landscape may change for any one of the funds I'm recommending today. At that point we have a few options. Hold, exchange, or switch. We will always talk about those three options. At the end of the day, it is their money and they need to know what options they have in dealing with it.[quote=GT Key]
I want to know how newer guys at Jones, like myself, who were taught to "ask for the order" over the phone and begin relationships with transactions are now supposed to use financial assessment tools and advisory solutions to build our book. I truely believe in advisory solutions, but how the hell do I pay my bills by adding $112.50 to my month for a 100k ticket instead of the $3,000 I would get on an A share order. Then also have to listen to why my rolling average has jumped off a cliff.
[/quote] There was a suggbox wire on June 9th that Weddle answered asking the same question. His response was "If you open so many that it adversely affects your on-track performance, call me and I'll personally override the tracking system." I thought that was an interesting quote.I think the point is, like anyone starting out, much of your new business will be transactional. Whether you are at Merrill or UBS or Wachovia or EDJ, starting from scratch, you have to figure out how to do business first. The only real way to do that is to learn how to sell stocks, bonds and mutual funds.
[quote=Spaceman Spiff][quote=GT Key]
I want to know how newer guys at Jones, like myself, who were taught to "ask for the order" over the phone and begin relationships with transactions are now supposed to use financial assessment tools and advisory solutions to build our book. I truely believe in advisory solutions, but how the hell do I pay my bills by adding $112.50 to my month for a 100k ticket instead of the $3,000 I would get on an A share order. Then also have to listen to why my rolling average has jumped off a cliff.
[/quote] There was a suggbox wire on June 9th that Weddle answered asking the same question. His response was "If you open so many that it adversely affects your on-track performance, call me and I'll personally override the tracking system." I thought that was an interesting quote. [/quote] Spiff, your responses are starting to sound like what many Indy's were saying on this forum a year ago. You're starting to get it. The above response by Weddle is an indication Jones isn't really committed to this yet, and they don't even really want someone going all-out advisory.CIB-
I think Weddle's point was more "don't put the cart before the horse". This wasn't coming from a veteran advisor. Most guys starting out aren't opening $100K+ advisory accounts out of the gates. His statement was that if your biggest problem is that you're opening too many advisory accounts, they will certainly adjust for that. But ICE was right, as the platform develops, they will likely begin to adjust their goal structure (and possibly compensation) to allow for new FA's to open advisory accounts.That's how I took it too. I think Jones is absolutely committed to this. I've never seen a product launch that has had this much attention or taken this long to develop. I believe they wanted to make this thing as perfect as they possibly could so that it doesn't take 10 years to gather steam like MAP did.
I agree that they'll make some concessions (perhaps some kool aid flavored ones) for people who open a ton of these type of accounts as a new FA. They won't cut off their nose to spite their face.Now that the cult has had some time to readjust to the world of fee based accounts… give us an update. I haven’t dropped by for a few months but would love to hear your life is great, we are the best, we’ve always supported fee based if it was done the “right way” stories. It will give me something to read when I get back from vacation…
I don't have any stories to tell. Our minimum is $100k, and if someone brings that in, I've got to have the upfront pop.
So, no scoop here.Life is great at Jones.
We are the best. I've never told a client fee based biz is bad. John Bachmann and Doug Hill did for many years. Not in my office. The platform is really quite good. I can't imagine Jones ever becoming a fee only machine like some wirehouses would like to be, but we've finally waded in waist deep instead of just sticking a toe in like we were with MAP.You netted $1.42 last month didn’t you…
Actually, you have Spiff confused with me. That was my production.You netted $1.42 last month didn’t you…
sorry 'bout that.
Yeah, I easily doubled that number. Wait, they haven’t taken insurance out of my check yet. Oh well…easy come, easy go.
My region has had it for about a month. I've got transfer papers on just over a mil, plus another $500k of client's that are moving some of their existing assets into it. And I haven't hit it as hard as I plan to in the next coming months. I'd like to have $6-7 MM in it before the end of the year.
They like it. Funny that to a person my clients who have moved have said that they listen to this guy on the radio who says fee based is the way to go. They are thrilled that Jones has taken this step. It's also reopened some conversations with some prospects that told me no a few years ago because they didn't want to pay me commissions. Now that it's a fee based conversation they'll listen again.I haven’t put a penny into it yet, and I haven’t gotten up the nerve to approach existing clients and suggest we “upgrade” their mutual fund portfolios.
I worked too hard touting the virtues of American Funds to go back and tell them there's now something even better, and that I'd appreciate it if they'd also start paying me an annual fee for me to "manage" their new portfolio for them. What a bunch of crooks...C’mon Borker. It’s not about turning new clients into fee-payers. And if you did, they’d get their commission credited back to them anyway.
It's really about looking forward. It's much easier to be able to tell a client that we have several different approaches we can use, here's the options, here's what to consider. I have talked to a few prospects about it, and I basically tell them, "look, you will pay me more with fees over the long term, here's what you get, this is what we can do with a commisioned portfolio, etc., etc." Many people I talk to (not necessarily clients or prospects) have an aversion to commissions, so they are OK with fees. Here's something else to ponder: I have two CPA's that I am close to. I get a few referrals from both. One of them is anti-fee based, the other one only believes in fees (she has all her money invested with an RIA). So, even among the financial community, there is no concensus. It's good to have the flexibility to go either way (or go both ways, in the case of BSpears ). I also know some FA's that have said that some of their clients would rather be paying fees and WANT to switch. Great! But I would not go back to clients and try to convince them to switch unless there is some real compelling reason. Borker, stop looking for the conspiracy theory. It's just business.[quote=Spaceman Spiff]
My region has had it for about a month. I've got transfer papers on just over a mil, plus another $500k of client's that are moving some of their existing assets into it. And I haven't hit it as hard as I plan to in the next coming months. I'd like to have $6-7 MM in it before the end of the year.
They like it. Funny that to a person my clients who have moved have said that they listen to this guy on the radio who says fee based is the way to go. They are thrilled that Jones has taken this step. It's also reopened some conversations with some prospects that told me no a few years ago because they didn't want to pay me commissions. Now that it's a fee based conversation they'll listen again. [/quote] You're right, B24. I completely misunderstood what Spiff was saying.Borker if you told clients you were “managing” their accounts you broke the law. All Indys on this site will tell you that you acted as a broker not an advisor. If you want to act as an “advisor” you ain’t gonna do it on commission basis in a brokerage account. Figure out what is best for your clients and do it. Past costs are important but they are a very distant second to your clients’ current and future best interest.
[quote=Borker Boy]I haven’t put a penny into it yet, and I haven’t gotten up the nerve to approach existing clients and suggest we “upgrade” their mutual fund portfolios.
I worked too hard touting the virtues of American Funds to go back and tell them there's now something even better, and that I'd appreciate it if they'd also start paying me an annual fee for me to "manage" their new portfolio for them. What a bunch of crooks...[/quote]It shouldn't be about your method of compensation, it should be about what you think will help the client going forward. So you lack the "nerve" because you might look bad because of what you may have said in the past, rather than what might be best for your clients ... now, and in the future? It either makes sense for a client or it doesn't. Your nerves or what you thought in the past should have nothing to do with it.
Using that logic you would never have the nerve to sell out of anything you recommended, regardless of the method of compensation. Keep your eye on the ball, not on your nerves.
If what you thought to be true turned out not to be true, how soon would you want to know?
Plenty of FA’s are moving current mutual fund assets into the advisory program and they are doing it aggressively. For new guys obviously their participation will be mostly new money, but no one inside or outside EJ should think for a second that FA’s aren’t “transitioning” current assets into this program. Basically if they paid an A share 3+ years ago you have the go ahead. And B24, before you say it, yes it probably happens at all firms when something attractive is added to the platform.
I was told that 80% of the $$ that has gone into Advisory Solutions is existing money. That should give you an idea what it’s being used for.
I was told that 80% of the $$ that has gone into Advisory Solutions is existing money. That should give you an idea what it’s being used for.
I was told Santa Claus was real.
Borker - if you think Jones did this ONLY to make money, then you're really missing the boat on this one. Sure, this is a fee based account and therefore Jones will make some fees.
Here's the choice with accounts like this. Either learn how they work and adopt them into your existing practice, yes even with existing clients who have already purchased American Funds from you, or make conscious decision right now to not get pissed off when you start losing assets to the Mutual Fund Store, or ML, or MS when they call your clients and ask them if they are still using just one fund family? It's not a matter of how good American Funds is. It's a matter of how good the media machine is at telling your clients that they should avoid commissions at all costs and only pay fees. ALL of the people I've talked with about Advisory Solutions has told me they were wondering if fee based was a better way to go. My first phone call was to a guy who told me 18 months ago that he was considering leaving Jones BECAUSE we didn't do fee based for a guy like him. He loves me, but wants to do fee based. Our clients are going to hear about a program like this. I want it to be from me, not from Ice. A group from my region was having dinner a few weeks ago and a GP named Ray Raley walked into our meeting. He happened to be eating in the same restaurant and they told him we were there. He said without blinking "The days of me sitting down at my desk and calling clients and prospects on a bond or a stock are DEAD. You guys HAVE TO adopt FAST into your businesses. You owe it to your clients and future clients to learn to appreciate Advisory Solutions. If you plan on being competitive in this business for the next 20 years I would strongly advise you get your CFP." This industry is changing. You really need to change with it.Your point?
I'm saying that Jonesies are simply going to use this to "annuitize" existing, nonactive, "non-trading" accounts. I think it's a shame.damn spiff, and it only took him until 2008 to figure that out?
[quote=SayNo2KoolAid]Your point?
I'm saying that Jonesies are simply going to use this to "annuitize" existing, nonactive, "non-trading" accounts. I think it's a shame.[/quote] Why is it a shame to offer clients, who probably only hold one fund family now, the ability to have a more robust, better diversified, better structured platform? You people are amazing. For years the complaint was, and probably one of the reasons some of you left Jones to begin with, that Jones didn't have anything fee based. You also complain that the majority of the money we invest in funds goes to American. I can't tell you how many discussions have been had on this board about how investing works at EDJ. Now that there have been some nice steps taken to change that, you come up with a shallow comment like the one above. You know, I think Weddle could start pooping gold bricks and handing them out to our clients for free and you people would complain about it because the bricks smelled a little. And jamesbond, just because the GP told us that in a meeting a few weeks ago doesn't mean he just now figured it out."You people" Spiff? I should let you know that I am a 12+ year vet with Jones. I never complained that we didn't offer a fee based platform. Maybe it does have its place in the Jones system, but i'm just saying that in my little corner of the Jones world, I know several who are using it as an opportunity to annuitize existing business for their benefit. Just like the folks I used to know who would choose mutual funds for their clients based on what months they paid their trails so as to 'even out" their service income. These weren't the newbies, either. They were some of the big boys. Thank goodness monthly trails have eliminated that.
My apologies for making an assumption that you were something other than a Jones FA based on your screen name and the couple of above posts.
I think that even with the scenario you gave above, where the FAs are looking at it as a way to create more income for themselves, the clients will be better off for it. That's just my personal opinion.Spiff you have evolved. I don’t think you would have made the above comment a year ago.
Additionally, I agree. If you have all of someone's money and they're taking income, you have little to no incentive to do much of anything for them except maintain an automatic reverse-dca and issue their electronic deposit. This eliminates that conflict of finally getting all of someone's money and then being done getting paid.By the way…getting paid on fees lets the advisor keep some money in cash for clients taking income rather than reverse-DCAing them out of ICA like many Jones FA’s do. If history says you pay less to buy when you DCA, you also get less to sell.
I like to think I’m in a constant state of evolution, brought about by insightful and meaningful discussion daily on the RR forums.
[quote=LuvIndy]Spiff you have evolved. I don’t think you would have made the above comment a year ago.
Additionally, I agree. If you have all of someone's money and they're taking income, you have little to no incentive to do much of anything for them except maintain an automatic reverse-dca and issue their electronic deposit. This eliminates that conflict of finally getting all of someone's money and then being done getting paid. [/quote] Not exactly. We're only dealing with mutual funds in the advisory account. It has to be invested if we're going to get paid. No sitting on the sidelines with cash here. It's going into the funds, by golly.Once again Borkers attitude outruns his intelligence. By Golly. Money market is generally held outside of the program so clients are not charged a fee on the money market. There is only enough (approx 2%) money market in the program to facilitate re balancing and the monthly fee. Borker, what you twist in to some evil plot actually saves the client money. I am sure you have enough real things to complain about that you shouldn’t have to resort to making up nonsense.
Forgot. Ice your are right. A full menu of both ETFs and Index Funds for those who are so inclined.
[quote=ytrewq]Once again Borkers attitude outruns his intelligence. By Golly. Money market is generally held outside of the program so clients are not charged a fee on the money market. There is only enough (approx 2%) money market in the program to facilitate re balancing and the monthly fee. Borker, what you twist in to some evil plot actually saves the client money. I am sure you have enough real things to complain about that you shouldn’t have to resort to making up nonsense.
[/quote]
I actually believed Borker to be correct, but I’m only an outsider. I was under the impression that the account either followed the model or didn’t, which is a big weakness in my opinion. It eliminates easing out of large positions, and as I referred to, holding cash when it’s more appropriate. I guess FA’s will have to use separate accounts to manage cash more often now.
You are generally correct in how the program works. We can do all the things you mentioned. Ease out of large positions. Hold more cash when the clients prefers that. The only weakness would be FA compensation which is a client benefit. They are not charged a fee to “manage” cash. They are also not charged a fee on assets we are simply waiting to ease out of. The fee only begins when they ease out of the asset (no commission) and into the program. It is my understanding that is the difference between an advisory account and a fee in lieu of commission. I thought the Regulators expressed their dislike of fee accounts that just held assets and provided little “service” to clients.
You can use research models or you can build your own with custom models. You must follow basic asset allocation percentages (depending on client risk tolerance) and use assets from a select list. Other than that you can customize all you want. A new topic could debate the merits of unlimited security selection vs a closely watched and researched list of 200-300. I am sure many good arguments could be made on both sides.
I believe it's industry standard not to charge a fee on cash. RJ maintains that same standard.
It's unfortunate FA is not paid to transfer in securities and move them into the new plan, because the advisor retains a vested interest in forcing the client to move. If the advisor comp is not impacted either way, it really puts the responsibility on the client to either follow or not follow the advisor's advice. This has been very freeing with advisory accounts for me. No more "pushing" and the clients can sense that, which actually results in them acting quicker, and far less frustration on my part.true but i am sure he has recently come to accept it. Maybe i should ask, when did you figure it out?
JB,
Many people confuse Edward Jones’ position on fee-based with that of all of their advisors. There are many, many advisors that have wanted it all along. Yes, many of the newbies everyone talks to and hear’s on this board are brainwashed. But keep in mind that there are 10,000 advisors out there, all with distinct backgrounds and opinions on the subject.
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