Future of individual bonds
Edward Jones is very heavy into the individual bond business, and with the impending demise of Citi, I'm curious as to whether they'll change direction.
Like many people at Jones, I went through the hell that was calling Lehman bondholders and telling them their money was gone. Now I'm looking at a list of C bondholders this morning and getting ready to deliver the bad news to them. Several guys I talk to regularly at other firms stopped selling individual bonds years ago. Did they know something Jones didn't? This really, really sucks.No. My buddies at Merrill in town specialize in bonds. Mostly muni’s, but they primarly buy individuals, not funds. You use an SMA and all they are doing is buying individual bonds for a fee. Buy a UIT, and all they are doing is buying individual bonds for a fee.
So I ask, if you do not buy individual bonds, then what do you buy? I can tell you, for higher net worth individuals, bond funds don't always work. It might SOUND old school, but plenty of wirehouses and independant advisors still use individual bonds. Try talking to a 70 year old with $5 million in muni's about a bond fund. Ain't gonna happen. Expenses and turnover just eat away too much at the return in a bond fund (especially muni funds). Most "muni buyers" buy good muni's and hold them to maturity (or death).UIT
Citi or CIT - - - Big difference when you’re notifying your client’s of a “demise”.
I went through the same with Lehman Bonds and because of it pulled people out of CIT bonds on Friday and Monday. 70% of the money was saved. I sweated the whole weekend thinking they were going bk like Lehman. But Tuesday, I started fretting CIT was going to get bailed out and that I had pulled the trigger to soon. So, like you, I think bonds in my book is a thing of the past. Not worth the losses and stress.
Scared the sh*t out of me for a moment until I realized he was actually talking about CIT. Individual bonds are not a big part of my practice, although I did recently take advantage of high yields in short Citi (not CIT) and Merrill Lynch paper. I was finding better than 6% in less than two year maturities and felt like both of those entites were at least that safe. That being said, for the most part, unless it's an insured CD or A underlying muni, I let fund managers pick my bonds for me. Perhaps that means I have exposure to CIT, but at least it's part of a well-diversified bond portfolio.Citi or CIT - - - Big difference when you’re notifying your client’s of a “demise”.
[quote=B24]No. My buddies at Merrill in town specialize in bonds. Mostly muni’s, but they primarly buy individuals, not funds. You use an SMA and all they are doing is buying individual bonds for a fee. Buy a UIT, and all they are doing is buying individual bonds for a fee.
So I ask, if you do not buy individual bonds, then what do you buy? I can tell you, for higher net worth individuals, bond funds don't always work. It might SOUND old school, but plenty of wirehouses and independant advisors still use individual bonds. Try talking to a 70 year old with $5 million in muni's about a bond fund. Ain't gonna happen. Expenses and turnover just eat away too much at the return in a bond fund (especially muni funds). Most "muni buyers" buy good muni's and hold them to maturity (or death).[/quote] Sorry, I'm a tad frazzled this morning. I meant CIT. I'm pretty clear on the concept that fixed income UITs and SMAs are comprised of individual bonds, but last I checked, there are no UITs or SMAs that own just ONE bond. My point is, it makes far more sense to me to use those methods for owing fixed income rather than just rolling the dice on a few companies. I'm planning on today being the last time I call my conservative investors to inform them they'll not be getting back a substantial portion of their conservative investment. By the way, do you sell bonds WITHOUT a fee?Scared the sh*t out of me for a moment until I realized he was actually talking about CIT. Individual bonds are not a big part of my practice, although I did recently take advantage of high yields in short Citi (not CIT) and Merrill Lynch paper. I was finding better than 6% in less than two year maturities and felt like both of those entites were at least that safe. That being said, for the most part, unless it's an insured CD or A underlying muni, I let fund managers pick my bonds for me. Perhaps that means I have exposure to CIT, but at least it's part of a well-diversified bond portfolio.[/quote] I agree completely with you and Spears. Unfortunately, B24 now devotes most of his energy to defending Jones and their philosophy instead of thinking through an issue and giving us his thoughts. He's a sharp guy, but I'm afraid he's too intoxicated on the kool-aid to ever be relevant again.[quote=Christo]Citi or CIT - - - Big difference when you’re notifying your client’s of a “demise”.
Huh? First off, I never said someone should own “just one bond”. I don’t have any clients that own “just one bond”. If I can’t buy at least 8- 10 different bonds for a client, I use a fund (although I’ve also started looking at the UIT’s lately). And WTF did you get the idea that I was defending Jones? Did you not read my post? It has nothing to do with Jones. Sorry to tell you, the entier industry will continue to buy individual bonds.
And yes, clients pay a fee to buy bonds. Once. When you buy a fund, they pay a fee (or commission) once, then twice, three times, four times, five times.......every month those fund expenses eat away at the meager return of the bond (on top of the commission or mgmt fee). Do me a favor, call up a bond buyer and ask him what he thinks of a bond fund. Yes, a "bond buyer". They still exist. They want "individual" bonds. Borker, you need to get your head examined.I think the problem a lot of Jones guys have, myself included, is that we just don't own enough individual holdings in bonds. Fortunately I've only got 4 clients who owned (sold them all this week) CIT group bonds. Unfortunately some of them also own some others that have been pretty scary recently too. I'm leaning towards cutting individual bond holdings out of my business altogether. I'm a little more comfortable with munis because they have the taxing power of the issuer, generally speaking, to rely on, not just the stability of the finances of the corporation. I have a lot of money in bonds that came straight from inv,str a few years ago. All of those scare me right now. I don't care to call one more client and deliver the news that their bond is selling at $.40 on the $1. I had enough of that with LEH, GMAC, CIT, some PRU, and a couple of others.
Individual bond issues will never go away. Seriously, you have probably had more stocks on your firms recommended list go into bankruptcy than you have individual bond issues blow up on you. B24 is correct, in that HNW individuals will choose individual issues over funds 9 times out of 10.
[quote=Spaceman Spiff]
I think the problem a lot of Jones guys have, myself included, is that we just don't own enough individual holdings in bonds. Fortunately I've only got 4 clients who owned (sold them all this week) CIT group bonds. Unfortunately some of them also own some others that have been pretty scary recently too. I'm leaning towards cutting individual bond holdings out of my business altogether. I'm a little more comfortable with munis because they have the taxing power of the issuer, generally speaking, to rely on, not just the stability of the finances of the corporation. I have a lot of money in bonds that came straight from inv,str a few years ago. All of those scare me right now. I don't care to call one more client and deliver the news that their bond is selling at $.40 on the $1. I had enough of that with LEH, GMAC, CIT, some PRU, and a couple of others.
[/quote] "The problem, dear Brutus, is not in the stars but with ourselves." At issue here is the Edward Jones model that encourages you to hold the bonds until they've reached 40 cents. Would any rational investor wait until the value of the stock fell that far? Of course not; that's why you have stop limits. But we've got these stupid little cows on our desks, and field supervision telling us we "buy and hold" bonds. A$$holes. Worse yet, heaven forbid a bond goes up and you harvest the gain. Buying individual bonds is best for the client, because it costs them less. What isn't good for the client is the slavish adherence to a policy that doesn't always fit.I think the problem a lot of Jones guys have, myself included, is that we just don’t own enough individual holdings in bonds. Fortunately I’ve only got 4 clients who owned (sold them all this week) CIT group bonds. Unfortunately some of them also own some others that have been pretty scary recently too. I’m leaning towards cutting individual bond holdings out of my business altogether. I’m a little more comfortable with munis because they have the taxing power of the issuer, generally speaking, to rely on, not just the stability of the finances of the corporation. I have a lot of money in bonds that came straight from inv,str a few years ago. All of those scare me right now. I don’t care to call one more client and deliver the news that their bond is selling at $.40 on the $1. I had enough of that with LEH, GMAC, CIT, some PRU, and a couple of others.
Does anyone else notice the problem that I see.. LEH GMAC CIT... all financials. Why don't you try diversifying out of financials. I think individual bonds are great especially for older clients. You can stagger the payments and they are getting a check a month. But you have to diversify(to you EDJ guys credit, not a whole lot of choices in inventory of non-financials if i remember correctly). My clients who own utility bonds, Pepsi, McDonalds, Walmart, John Deere, seem to be doing ok.
Bond funds are a rip off..
Except for some of my largest clients, I'll gladly recommend that people pay 50 bps to get well diversified and have a pro decide when to cut an issue loose.
I few aer talking about corporate bonds, I tend to agree that bond funds work well due to the yields and diversification. I don’t buy a lot of corporate issues except for clients that are strictly bond buyers. I was referring more to muni’s.
But even on the corp side, I never bought a lot of financials. I basically diversified my bond holdings just like equities. Not one of my clients holds more than one bond in any on industry. I was fortunate (mostly through luck) that I never owned any CIT, Lehman, GMAC, etc. None of my bonds have even come close to BK. Although I will admit to being a little heavily weighted towards utility bonds. But I also own Home Depot, WalMart, Alcoa, AT&T, Kraft, Cisco, HP, John Deere,.....all good stuff. But those advisors at Jones that buy a lot of financials at Jones, simply because they are there, well that's stupid. Use your head. And use some common sense on the sell side. Think for yourself. I've harvested plenty of gains, and sold some losers, with rarely a note from Compliance. The only exception was some exceptional gains I made on muni's over the past year, that my client wanted to sell. I actually encouraged him to keep them, as we had picked up AAA's yielding over 6% (due to the huge discount), and tried to get him to see that this was probably the best opportunity in his (investing) lifetime for muni yields. But he saw the big gains and wanted to cash in. We made close to 25% on some of them.[quote=B24]I few aer talking about corporate bonds, I tend to agree that bond funds work well due to the yields and diversification.
I was fortunate (mostly through luck) that I never owned any CIT, Lehman, GMAC, etc. None of my bonds have even come close to BK. Although I will admit to being a little heavily weighted towards utility bonds. But I also own Home Depot, WalMart, Alcoa, AT&T, Kraft, Cisco, HP, John Deere,.....all good stuff. The only exception was some exceptional gains I made on muni's over the past year, that my client wanted to sell. I actually encouraged him to keep them, as we had picked up AAA's yielding over 6% (due to the huge discount), and tried to get him to see that this was probably the best opportunity in his (investing) lifetime for muni yields. But he saw the big gains and wanted to cash in. We made close to 25% on some of them.[/quote] Amen on that--we made some exceptional purchases in Dec. and Jan. Most of the issues you just named were trading at huge discounts and are now in double digit premiums. Clients have gains in the bonds that look like equities. They are quite pleased with those vs. the folks that had equity-like losses in Bond Fund of America.. I would like to understand how you guys use the UIT issues, though. I havent ever done any, and have just started looking as a shrt term alternative to longer term cd's. Are the yields similar to individuals? Do you see much principle appreciation in the UIT's at maturity? Also--who/what UITs are you using? I recently partnered up w/a guy that has HUGE amounts of CMO and other mortgage-backed debt in his accts. Some are off 50-60%. I'm thinking of possibly using the UITs to help repair some of these losses. What have you guys been using to replace some of these dog issues? thxWe have not had a bear market in bonds in a long time. I would not want to be holding a fixed income portfolio of bonds when we have one again. And there are a lot of reasons to think its coming. Not this year, MAYbe not next, but there sure aint a lot of upside in bond funds at current interest rates
I use bond funds for the tactical piece. But for straight corporates or munis, if i have enough money to divesify, i’ll buy individual credits all day long.
I agree with B24 that High Net Worth Investors generally prefer
individual bonds over Bond Funds. The largest account in my book is
a client who owns 2.1 million in individual muni bonds. He will not
touch a bond fund or a UIT for that matter. I have tried to talk to
him about MAP for muni’s, but he would not do it because of the cost.
I will say that for myself, everysince Lehman Brothers, I have been
talking more about UIT’s than I ever did in the past just because of
the increased diversification and safety that they provide income
investors.
Who said anything about HNW? I'm talking about bonds in a typical Jones client's portfolio.
[quote=Borker Boy]
This really, really sucks. [/quote] [quote=Borker Boy] Who said anything about HNW? [/quote] Sorry your clients got hurt on CIT. (I got a little lucky, sold out of those positions when they got back up to almost 70 cents). That really sucks and I fear for my elderly GMAC holders. They won't sell. Mario DeRose has been banging the drum consistently that you shouldn't have people in individual bonds unless they either have or can see themselves growing to $100K. Using a simple formula of fixed income = 30-40%, then you shouldn't be selling bonds unless the client has a net worth of at least $250,000. N'est pas? At the end of the day, that's not HNW (which I believe to be at least $500K) but you're pretty close to the neighborhood. Personally my average household is <$50K; however, the top 20% of my book is >$400K. They own bonds. And to get back to the original concept, I do believe that piece of business is going away. My presentations revolve around developing income plans, so I sell check-a-month.It does aggravate me that so many of the notes and bonds in inv,str
over the past few years have been the financial companies. I think this
has led to a lot of us being overweight in this sector.
The Lehman and CIT bonds I’ve had to call about were sold by the previous advisor in this office.
I'm making the death notifications for something he got paid on![quote=LockEDJ] [quote=Borker Boy]
[quote=Borker Boy]
Who said anything about HNW?
[/quote]
Sorry your clients got hurt on CIT. (I got a little lucky, sold out of those positions when they got back up to almost 70 cents). That really sucks and I fear for my elderly GMAC holders. They won’t sell.
Mario DeRose has been banging the drum consistently that you shouldn’t have people in individual bonds unless they either have or can see themselves growing to $100K. Using a simple formula of fixed income = 30-40%, then you shouldn’t be selling bonds unless the client has a net worth of at least $250,000. N’est pas?
At the end of the day, that’s not HNW (which I believe to be at least $500K) but you’re pretty close to the neighborhood. Personally my average household is <$50K; however, the top 20% of my book is >$400K. They own bonds.
And to get back to the original concept, I do believe that piece of business is going away. My presentations revolve around developing income plans, so I sell check-a-month. [/quote]
You should never listen to Mario DeRose. He’s an idiot. Never listen to him.
I'm obviously a slow learner.
It took me several years to realize that he and Onion Head are both complete morons.I've got a little over 200k in CIT bonds on my book (not bad considering over 140 million in assets). Sold around 50k on Thursday at .42 cents on the dollar and another 50k on Friday at around .49 cents on the dollar. Considering the clients had these around 3-5 years, these clients took around a 30% loss on the bonds, about what a stock would have taken. Never a fun call to make, but it had to be done. Had only 30k in Lehman, but I do have a couple hundred k in GMAC's, most of which I have transfered in. GMAC values have skyrocketed with the recent infusion of government cash, which may make for a good opportunity to trim some paper.
Borker, I would never sell an individual bond to a client with under 50K, probably not even under 100K. I think your problem is that you take everything you hear as gospel at Jones. Just because someone says "hey, these bonds look attractive, that does not mean for everyone in your book. You REALLY need to learn to think for yourself. I am starting to get the impression that it is not Jones that’s the problem…
Depending on what the minimum is, I think individual bonds are the best way to go for almost any client. Although 50k is getting pretty small.
… I am starting to get the impression that it is not Jones that’s the problem…
Look at the way we are trained; consider Eval/Grad. Mr. Client, there are three things I like about this bond -
On how many different levels is that wrong? Most times, the noobie doesn't really know the client. He's like to be pitching a 30 year bond, which on the whole is the most volatile of fixed income placements. If he gets the sale and especially if he hits it big, it's going to be a huge position in the clients portfolio. And from what my bass ackward FS tells me, heaven forbid if the investment is going to be in a self-directed IRA.
Do you really think it's not Jones that's the problem?
We've met the enemy, and he is us.
Yeah....Jonesies are the only brokers selling long term corporates....please...At eval/grad and the early part of a Jones broker's career we are basically selling $5-25k in these bonds. Very rarely does a Seg 1 broker (other than Windy lol)...hit a jackpot and get a HNW client to put large sums of money into an account at their branch. Hopefully, by the time they hit the higher segments, they learn how to properly ladder bonds and properly diversify a portfolio.[quote=B24] … I am starting to get the impression that it is not Jones that’s the problem…[/quote]
Look at the way we are trained; consider Eval/Grad. Mr. Client, there are three things I like about this bond -
On how many different levels is that wrong? Most times, the noobie doesn’t really know the client. He’s like to be pitching a 30 year bond, which on the whole is the most volatile of fixed income placements. If he gets the sale and especially if he hits it big, it’s going to be a huge position in the clients portfolio. And from what my bass ackward FS tells me, heaven forbid if the investment is going to be in a self-directed IRA.
Do you really think it’s not Jones that’s the problem?
We’ve met the enemy, and he is us.
Sorry - you can’t be a Kool-aid drinker, talk sh*t about how great the training is, then say “we’re not alone in selling the wrong things to the wrong people”.
I don’t know how it works someplace else. I don’t need to. I only need to know that it’s wrong and Edward Jones does it. Don’t be an apologist by saying, “they do it too.” Our corporate culture tells brand new reps “everyone can use a 30 year bond” and then the chief fixed income strategist says, "sell bonds only when somebody has $100K to invest."
If you don’t see the disconnect here, yeah, you’ve had too much kool-aid.
600 households. My goal isn’t how much I can manage at the end of the year (market you can’t control), it’s how much I bring in monthly. I have been averaging a little over 1 million a month for the last several years, but I did have a big slowdown from Oct. last year until recently. I’m noticing a pick up in business, but money is still frozen, more so than I’ve seen ever, although a 6 month stretch in 2002 was similar. Keep in mind that a week like we had last week where the market is up 7% translates to around a 4% hike in my book. You can do the quick math and find that’s around a 5-6 million jump in a week, plus I transfered in another 500k. It adds up quick. My book will absolutely skyrocket over the next 5 years as this thing turns around. And as you can read in my previous posts, I’ve been allocating more aggressively for the last 8 months and it is paying off.
I used to believe that the training we got as EDJ guys was extraordinary. However, after my third week in the field with my the first statement on my desk, I realized that I was well trained to knock on doors and call people and ask them for money, but ill equipped to structure a portfolio. Jones does a phenomenal job of teaching us how to attract and get clients, but then there is this HUGE disconnect between that point and actually handling the client's assets. OK, so the portfolio bar chart is a great visual aid, but it does nothing to help us explain why it might not be in a clients best interest to have 100% of their money in CEF's yielding 12%. If there happen to be any GPs on here reading, here's my suggestion: Scrap PDP - it's been watered down so much with product partners presentations that it's a complete waste of time. Acceleration - really? These new folks have like 3 clients. Then you spend half of the week having the new FAs do call sessions. News flash - if they haven't figure out how to do that by PDP, then they're screwed and we're wasting partnership dollars on them. Instead - create a class called Theories - something cheesy like that - that is strictly investment focused. Go ahead, bring in the product partners and have them talk about their product (annuities, LI, funds, etc), but lunch only. If you can't understand an annuity over an hour lunch presentation, you're too stupid to offer it to your clients anyway. No call sessions. It needs to be intense asset allocation, MPT, bond laddering, diversification, etc type stuff. Show of hands from the Jones guys on here - how many of you were taught what beta or alpha is by someone in a Jones training program? (...crickets chirping...) Teach the new guys how to get a statement from their prospects and rip it apart to see how it works. Then teach them how to put it back together and make it work better. Teach them how to create a bond ladder AND a monthly check for a client. Teach them what overlap is and that if you use ONLY American Funds you'll get a ton of it. Teach them where an annuity makes sense and how to figure out how much to use. Teach them about the efficient frontier and why that top left quadrant is the best place to be. Those Morningstar reports are great, but most Jones rookies don't understand anything past the returns. Teach them why Advisory Solutions is built the way it is and why it should be a part of their business. Teach them SOMETHING about investing before you throw them to the wolves. What if we were not only the best SALES force in the business, but also the best INVESTING force in the business. All week long you need to give these folks case studies to work on. Teach them to use the FAST tools to break it down. Teach them to use the Morningstar reports. Teach them that while large cap value is a great place to be, there are other asset classes out there and they should be using them. Teach them these things so that they don't have to learn them by trial and error on their clients like I have. Teach them to use the tools we already have that can make us an investing force that can compete with anyone in the business. Now, will our folks be CFAs at the end of the week? Nope. They won't even be able to pass the AAMS yet. But, they'll be much better equipped to handle that first statement and be armed with some knowledge of what to actually do with it. If you are one of those GPs that read this, PM me. I'll give up my branch here in the shadow of the home office to build and run a program like that. And I'd be happy to do it. No GP title necessary for me (yet). OK, rant over.[quote=B24] … I am starting to get the impression that it is not Jones that’s the problem…[/quote]
Look at the way we are trained; consider Eval/Grad. Mr. Client, there are three things I like about this bond -
On how many different levels is that wrong? Most times, the noobie doesn’t really know the client. He’s like to be pitching a 30 year bond, which on the whole is the most volatile of fixed income placements. If he gets the sale and especially if he hits it big, it’s going to be a huge position in the clients portfolio. And from what my bass ackward FS tells me, heaven forbid if the investment is going to be in a self-directed IRA.
Do you really think it’s not Jones that’s the problem?
We’ve met the enemy, and he is us.
[quote=LockEDJ] [quote=B24] … I am starting to get the impression that it is not Jones that’s the problem…[/quote] Look at the way we are trained; consider Eval/Grad. Mr. Client, there are three things I like about this bond - On how many different levels is that wrong? Most times, the noobie doesn’t really know the client. He’s like to be pitching a 30 year bond, which on the whole is the most volatile of fixed income placements. If he gets the sale and especially if he hits it big, it’s going to be a huge position in the clients portfolio. And from what my bass ackward FS tells me, heaven forbid if the investment is going to be in a self-directed IRA. Do you really think it’s not Jones that’s the problem? We’ve met the enemy, and he is us.
I used to believe that the training we got as EDJ guys was extraordinary. However, after my third week in the field with my the first statement on my desk, I realized that I was well trained to knock on doors and call people and ask them for money, but ill equipped to structure a portfolio. Jones does a phenomenal job of teaching us how to attract and get clients, but then there is this HUGE disconnect between that point and actually handling the client’s assets. OK, so the portfolio bar chart is a great visual aid, but it does nothing to help us explain why it might not be in a clients best interest to have 100% of their money in CEF’s yielding 12%.
If there happen to be any GPs on here reading, here’s my suggestion: Scrap PDP - it’s been watered down so much with product partners presentations that it’s a complete waste of time. Acceleration - really? These new folks have like 3 clients. Then you spend half of the week having the new FAs do call sessions. News flash - if they haven’t figure out how to do that by PDP, then they’re screwed and we’re wasting partnership dollars on them.
Instead - create a class called Theories - something cheesy like that - that is strictly investment focused. Go ahead, bring in the product partners and have them talk about their product (annuities, LI, funds, etc), but lunch only. If you can’t understand an annuity over an hour lunch presentation, you’re too stupid to offer it to your clients anyway. No call sessions. It needs to be intense asset allocation, MPT, bond laddering, diversification, etc type stuff. Show of hands from the Jones guys on here - how many of you were taught what beta or alpha is by someone in a Jones training program? (…crickets chirping…)
Teach the new guys how to get a statement from their prospects and rip it apart to see how it works. Then teach them how to put it back together and make it work better. Teach them how to create a bond ladder AND a monthly check for a client. Teach them what overlap is and that if you use ONLY American Funds you’ll get a ton of it. Teach them where an annuity makes sense and how to figure out how much to use. Teach them about the efficient frontier and why that top left quadrant is the best place to be. Those Morningstar reports are great, but most Jones rookies don’t understand anything past the returns. Teach them why Advisory Solutions is built the way it is and why it should be a part of their business. Teach them SOMETHING about investing before you throw them to the wolves. What if we were not only the best SALES force in the business, but also the best INVESTING force in the business.
All week long you need to give these folks case studies to work on. Teach them to use the FAST tools to break it down. Teach them to use the Morningstar reports. Teach them that while large cap value is a great place to be, there are other asset classes out there and they should be using them. Teach them these things so that they don’t have to learn them by trial and error on their clients like I have. Teach them to use the tools we already have that can make us an investing force that can compete with anyone in the business.
Now, will our folks be CFAs at the end of the week? Nope. They won’t even be able to pass the AAMS yet. But, they’ll be much better equipped to handle that first statement and be armed with some knowledge of what to actually do with it.
If you are one of those GPs that read this, PM me. I’ll give up my branch here in the shadow of the home office to build and run a program like that. And I’d be happy to do it. No GP title necessary for me (yet).
OK, rant over.
[/quote]
Spiff, there’s a guy named Weddle Me you can ask…What about suggestion box wire? Or ask Weddle?
That’s a great idea. One I suggested while I was at Jones. I’m sure I wasn’t the only one.
What I was told was this: that is stuff you can learn on your own, on your own time. There is no need to teach those things here.
That guy “Weddle Me” is a troll trying to drum up anti-Jones spew. Was that not obvious?
Anyway, has anyone actually READ the Jones guidance on bonds vs. bond funds?: "If investors don’t anticipate building over time a portfolio of 10 or more bonds totaling at least $100,000, we generally recommend considering bond funds instead of, or in addition to, individual bonds. It would be difficult to achieve sufficient diversification by maturity and industry type with fewer than 10 individual bonds if those are the only fixed income investments in a portfolio. Of course, the number of bonds that is appropriate depends on the allocation of an investor’s overall fixed-income portfolio, the credit quality of the bonds owned and an investor’s acceptable level of risk. For example, if an investor owns individual bonds and bond funds in a portfolio, fewer than 10 bonds may provide adequate diversification as long as no single bond makes up more than 5% of the overall portfolio." This was just one small excerpt. Makes sense. Problem is, most guys just go out "bond slingin' " without regard to peoples' needs. This is OK when you are just starting out selling 5K bonds at a time. But c'mon, can't Jones people open their eyes and see that even JONES has good bond guidance to follow? Sometimes I can't believe how dumb some people can be.[quote=B24] That guy “Weddle Me” is a troll trying to drum up anti-Jones spew. Was that not obvious?
Anyway, has anyone actually READ the Jones guidance on bonds vs. bond funds?:
“If investors don’t anticipate building over time a portfolio of 10 or more bonds totaling at least $100,000, we generally recommend considering bond funds instead of, or in addition to, individual bonds. It would be difficult to achieve sufficient diversification by maturity and industry type with fewer than 10 individual bonds if those are the only fixed income investments in a portfolio. Of course, the number of bonds that is appropriate depends on the allocation of an investor’s overall fixed-income portfolio, the credit quality of the bonds owned and an investor’s acceptable level of risk. For example, if an investor owns individual bonds and bond funds in a portfolio, fewer than 10 bonds may provide adequate diversification as long as no single bond makes up more than 5% of the overall portfolio.”
Makes sense.[/quote]
You thought I was serious about “Weddle Me”?
OK, I take it back.
[quote=B24]That guy “Weddle Me” is a troll trying to drum up anti-Jones spew. Was that not obvious?
Anyway, has anyone actually READ the Jones guidance on bonds vs. bond funds?: "If investors don’t anticipate building over time a portfolio of 10 or more bonds totaling at least $100,000, we generally recommend considering bond funds instead of, or in addition to, individual bonds. It would be difficult to achieve sufficient diversification by maturity and industry type with fewer than 10 individual bonds if those are the only fixed income investments in a portfolio. Of course, the number of bonds that is appropriate depends on the allocation of an investor’s overall fixed-income portfolio, the credit quality of the bonds owned and an investor’s acceptable level of risk. For example, if an investor owns individual bonds and bond funds in a portfolio, fewer than 10 bonds may provide adequate diversification as long as no single bond makes up more than 5% of the overall portfolio." This was just one small excerpt. Makes sense. Problem is, most guys just go out "bond slingin' " without regard to peoples' needs. This is OK when you are just starting out selling 5K bonds at a time. But c'mon, can't Jones people open their eyes and see that even JONES has good bond guidance to follow? Sometimes I can't believe how dumb some people can be.[/quote] I think that's crap - they say one thing and do something different. Why are we trained to pitch bonds and ask for the order. Why not bond funds? I asked this question during eval/grad and was told "why wouldn't a good bond help someone, it's not going to hurt them" .. That was the extent of our product training. Most people do what they are trained to do. (follow the recipie) I can't belive how DUMB some companies can be. That is CYA guidence if I've ever seen it.For what it’s worth … I’ve brought this concern to GP’s at the corporate level. The solutions they have planned really are extraordinary. I won’t suggest more because this is an open forum and I don’t know the level where I’m giving away information I shouldn’t.
But I’ll say this: I can tell you no other independent firm offers anything even vaguely like it. It represents a quantum leap in technology meeting compliance and portfolio management. Probably a year away.
Holy crap - we are getting streaming video and DVD players!!!For what it’s worth … I’ve brought this concern to GP’s at the corporate level. The solutions they have planned really are extraordinary. I won’t suggest more because this is an open forum and I don’t know the level where I’m giving away information I shouldn’t.
But I’ll say this: I can tell you no other independent firm offers anything even vaguely like it. It represents a quantum leap in technology meeting compliance and portfolio management. Probably a year away.
… … what … alpha is
... Alpha is one of the Chipmunks, right?
[quote=Moraen]
You should never listen to Mario DeRose. He’s an idiot. Never listen to him.[/quote]
OK. I’ve been wondering about this post, so I’ll bite.
What’s so bad about Mario DeRose?
[quote=B24]That guy “Weddle Me” is a troll trying to drum up anti-Jones spew. Was that not obvious?
Anyway, has anyone actually READ the Jones guidance on bonds vs. bond funds?: "If investors don’t anticipate building over time a portfolio of 10 or more bonds totaling at least $100,000, we generally recommend considering bond funds instead of, or in addition to, individual bonds. It would be difficult to achieve sufficient diversification by maturity and industry type with fewer than 10 individual bonds if those are the only fixed income investments in a portfolio. Of course, the number of bonds that is appropriate depends on the allocation of an investor’s overall fixed-income portfolio, the credit quality of the bonds owned and an investor’s acceptable level of risk. For example, if an investor owns individual bonds and bond funds in a portfolio, fewer than 10 bonds may provide adequate diversification as long as no single bond makes up more than 5% of the overall portfolio." This was just one small excerpt. Makes sense. Problem is, most guys just go out "bond slingin' " without regard to peoples' needs. This is OK when you are just starting out selling 5K bonds at a time. But c'mon, can't Jones people open their eyes and see that even JONES has good bond guidance to follow? Sometimes I can't believe how dumb some people can be.[/quote] B24 you cannot be serious. They may have good guidance in writing but you know that's not what is taught anywhere, anytime. Take JoSchmo from his teaching gig, show him how to get names and talk to prospects on the door step. Go home and send him a thank you note (handwritten of course), follow up in two weeks with a phone call. Goes a little like this. Mr. Johnson, this is JoSchmo with Ed Jones how are you doing today? Good, well you remember me I knocked on your door and mentioned I was opening a business in the area and told you that if I saw anything you might be interested in I'd give you a call. Well, we just got some bonds issued by Lehman bros, they're one of the oldest, largest banks in the world, been around for 130 years. Well, they're paying a rate of 5.4% for 30 years. That's a very good rate in these times and with the money you have available today I'd recommend you buy 20,000 of them today. This is how you're taught to build a business at Jones and for the record pretty much everywhere. Before Advisory Solutions came in to being it was hunting for new money every month. New guys didn't have the time or knowledge to correctly build a portfolio, mostly because they're trying to survive.It's very easy to have a strong financial background before coming to the brokerage industry and then say those who do things differently than you are stupid.
Can you imagine being handed a uniform, bullet proof vest, pistol, shotgun, AR-15, pepper spray, ASP baton, hand cuffs, police radio, a stack of reports and the keys to a patrol car and being told to go to work? It's one thing to be able to identify these items, it's another to know how to use them appropriately and safely without having been properly trained with them. I'd love to see the look on your face, B24, if you were put in the above situation. I'd imagine you'd look pretty dumb, too. And that's exactly what Jones does to its new advisors. I graduated from a top-tier school and came to Jones from law enforcement. I did not know the first thing about investing, and since I received ZERO investment training from Jones, I had to learn by trial and error on clients. I think that is reckless and negligent at best. Actually, I did receive some investment training from Jones: "You'll never hurt anyone with American Funds." (My clients would disagree.) "You'll never hurt anyone with a Jones-vetted individual bond." (More disagreement.) "Your job is not to question the quality of the bonds in inventory, your job is to sell the bonds in inventory." (Oops.) "If your client is looking for income, they need individual bonds, not bond funds." "Fee-based accounts are a rip off." (Oh well, everyone else is doing it, and look at the additional revenue it will generate with even LESS work. ALL ABOARD!)I used to believe that the training we got as EDJ guys was extraordinary. However, after my third week in the field with my the first statement on my desk, I realized that I was well trained to knock on doors and call people and ask them for money, but ill equipped to structure a portfolio. Jones does a phenomenal job of teaching us how to attract and get clients, but then there is this HUGE disconnect between that point and actually handling the client's assets. OK, so the portfolio bar chart is a great visual aid, but it does nothing to help us explain why it might not be in a clients best interest to have 100% of their money in CEF's yielding 12%. If there happen to be any GPs on here reading, here's my suggestion: Scrap PDP - it's been watered down so much with product partners presentations that it's a complete waste of time. Acceleration - really? These new folks have like 3 clients. Then you spend half of the week having the new FAs do call sessions. News flash - if they haven't figure out how to do that by PDP, then they're screwed and we're wasting partnership dollars on them. Instead - create a class called Theories - something cheesy like that - that is strictly investment focused. Go ahead, bring in the product partners and have them talk about their product (annuities, LI, funds, etc), but lunch only. If you can't understand an annuity over an hour lunch presentation, you're too stupid to offer it to your clients anyway. No call sessions. It needs to be intense asset allocation, MPT, bond laddering, diversification, etc type stuff. Show of hands from the Jones guys on here - how many of you were taught what beta or alpha is by someone in a Jones training program? (...crickets chirping...) Teach the new guys how to get a statement from their prospects and rip it apart to see how it works. Then teach them how to put it back together and make it work better. Teach them how to create a bond ladder AND a monthly check for a client. Teach them what overlap is and that if you use ONLY American Funds you'll get a ton of it. Teach them where an annuity makes sense and how to figure out how much to use. Teach them about the efficient frontier and why that top left quadrant is the best place to be. Those Morningstar reports are great, but most Jones rookies don't understand anything past the returns. Teach them why Advisory Solutions is built the way it is and why it should be a part of their business. Teach them SOMETHING about investing before you throw them to the wolves. What if we were not only the best SALES force in the business, but also the best INVESTING force in the business. All week long you need to give these folks case studies to work on. Teach them to use the FAST tools to break it down. Teach them to use the Morningstar reports. Teach them that while large cap value is a great place to be, there are other asset classes out there and they should be using them. Teach them these things so that they don't have to learn them by trial and error on their clients like I have. Teach them to use the tools we already have that can make us an investing force that can compete with anyone in the business. Now, will our folks be CFAs at the end of the week? Nope. They won't even be able to pass the AAMS yet. But, they'll be much better equipped to handle that first statement and be armed with some knowledge of what to actually do with it. If you are one of those GPs that read this, PM me. I'll give up my branch here in the shadow of the home office to build and run a program like that. And I'd be happy to do it. No GP title necessary for me (yet). OK, rant over. [/quote] I could not agree with you more. Thanks for your rant and sharing.[quote=LockEDJ] [quote=B24] … I am starting to get the impression that it is not Jones that’s the problem…[/quote]
Look at the way we are trained; consider Eval/Grad. Mr. Client, there are three things I like about this bond -
On how many different levels is that wrong? Most times, the noobie doesn’t really know the client. He’s like to be pitching a 30 year bond, which on the whole is the most volatile of fixed income placements. If he gets the sale and especially if he hits it big, it’s going to be a huge position in the clients portfolio. And from what my bass ackward FS tells me, heaven forbid if the investment is going to be in a self-directed IRA.
Do you really think it’s not Jones that’s the problem?
We’ve met the enemy, and he is us.
I feel for you borker. If you pull back from the situation, I bet you're brighter than most who are giving you advise from Corporate. I think we need to take anything we are told in this INDUSTRY, not just Jones corproate, but the industry as a whole with a grain of salt. I will never sell another non insured individual bond in my practice. The rating agencys' business plan is flawed and the future of the individual company can change on a dime.
The B/D's will never be early with their thoughts, always after the fact. Just like you and I can do..amazing.[quote=LockEDJ] [quote=Moraen]
You should never listen to Mario DeRose. He’s an idiot. Never listen to him.[/quote]
OK. I’ve been wondering about this post, so I’ll bite.
What’s so bad about Mario DeRose?[/quote]
Ask him why the Friday before Lehman went bankrupt he told advisors that “we’ve been keeping a close eye on Lehman, there is no problem there. If you sell your clients out of the bonds now, they are going to lose 30% of their principal”.
Then, the day after they went bankrupt said, “well, it wasn’t a liquidity problem”. First of all, he was (and is) wrong. Second, who CARES what the problem was. People were looking to the leadership of the firm (the analysts) to tell them what they should do for their clients.
So, he’s an idiot. When clients can see that there is maybe a problem with Lehman, and he misses it?
OK, well I guess I lit a firestorm. My point WAS…think for yourself. No firm can teach new FA’s everything. Ever LOOK at a portfolio that you bring over from a wirehouse?? I don’t BLAME the wirehouse. I blame the FA. WHY? Because I know many REALLY GOOD FA’s at wirehouses, and they didn’t learn what they learned from their firm. They learned it from…LEARNING! They are students of the game. And that’s why my ACAT’s are for crappy portfolios, not the good one’s. It’s not about the FIRM, it’s about the FA and their own practice. When Merrill gives you the keys to the cubicle, you think their giving them all kinds of world-class portfolio training? I think not. Does that mean nobody at Merrill is any good? I also think not. Most firms give minimal training and then you have to ease into the business, learning as you go.
And for those that commented about me coming in with all kinds of experience - I had ZERO portfolio management experience. Borker - do you seriously follow every stupid little axiom that you hear at work from other brokers and those nit-wit trainers? C'mon. And if you think that every firm other than Jones is giving top-notch investment training, think again. Just ask around. I stand by comments. And one more thing, the thing about me being given a gun and thrown into law enforcement? You're right. I'd look pretty dumb in uniform with poo-poo running down my leg.Borker - do you seriously follow every stupid little axiom that you hear at work from other brokers and those nit-wit trainers? C’mon
Hey, wasn't Spiff a trainer? Just askin...[quote=bspears]Borker - do you seriously follow every stupid little axiom that you hear at work from other brokers and those nit-wit trainers? C’mon
Hey, wasn't Spiff a trainer? Just askin...[/quote] Yep. I was a great trainer. I could train people to doorknock and call all day long. Thus my frustration when I got out here into the real world and realized that I didn't know what the heck I was really doing. Sure I could muddle through with the portfolio bar chart and show people how whatever portfolio I was building at the time was a better performer than theirs, but I didn't have a clue as to why. It wasn't until I started having a series of lunches with one of my wholesalers who was a CMFA that I realized that I needed to know a lot more than I did. Jones does a great job of telling you that you know more about the market and managing a portfolio than 90% of the people out there. Well, that's true. But that just means that you're a little bit less of a danger to them than they are to themselves. Take this whole individual bond thread. NONE of my portfolios are out of balance. But, I realized recently that I did quite a few of my client a disservice by selling them not just one individual bond, but three or four from the same inventory. That was where the best rates were being had with the best credit ratings. Heck, who was going to get hurt by a BAC or a LEH or CIT or C or...you get the point. Well, evidently about a dozen of my best clients, that's who. That's the reason for the rant before. If Jones is good enough to teach a farmer or a police officer or a school teacher how to do something like doorknock or AFTO on the phone, then why not put in a little bit of effort and teach them something that can make them even better?[quote=bspears]Borker - do you seriously follow every stupid little axiom that you hear at work from other brokers and those nit-wit trainers? C’mon
Hey, wasn't Spiff a trainer? Just askin...[/quote] Spears with the quick wit! Yeah, that was pretty good.[quote=Spaceman Spiff] [quote=bspears]Borker - do you seriously follow every stupid little axiom that you hear at work from other brokers and those nit-wit trainers? C’mon
Hey, wasn’t Spiff a trainer? Just askin…[/quote]
Yep. I was a great trainer. I could train people to doorknock and call all day long.
Thus my frustration when I got out here into the real world and realized that I didn’t know what the heck I was really doing. Sure I could muddle through with the portfolio bar chart and show people how whatever portfolio I was building at the time was a better performer than theirs, but I didn’t have a clue as to why. It wasn’t until I started having a series of lunches with one of my wholesalers who was a CMFA that I realized that I needed to know a lot more than I did.
Jones does a great job of telling you that you know more about the market and managing a portfolio than 90% of the people out there. Well, that’s true. But that just means that you’re a little bit less of a danger to them than they are to themselves.
Take this whole individual bond thread. NONE of my portfolios are out of balance. But, I realized recently that I did quite a few of my client a disservice by selling them not just one individual bond, but three or four from the same inventory. That was where the best rates were being had with the best credit ratings. Heck, who was going to get hurt by a BAC or a LEH or CIT or C or…you get the point. Well, evidently about a dozen of my best clients, that’s who.
That’s the reason for the rant before. If Jones is good enough to teach a farmer or a police officer or a school teacher how to do something like doorknock or AFTO on the phone, then why not put in a little bit of effort and teach them something that can make them even better? [/quote]
Spiff - an honest answer. But what’s a CMFA?
Anyway, Jones is good enough to teach selling, but not investment management, portfolio construction. That would require hiring qualified people. Those qualified people demand higher salaries. What does the median analyst make at Jones?
You are asking them to put in too much “effort and teach them something that can make them even better”. It’s just not going to happen. Their model is working, and you know old people, “if it ain’t broke, don’t fix it”.
When I was in the security business, I lost out on this huge job (director of security for a major software firm) because some old retired sheriff’s deputy said “if it ain’t broke, don’t fix it”. The CEO and the head of global security looked as if this guy was the second coming. They had asked the different measures we would take to improve security at the campus facility.
Actually, to Spiff’s comments, I think the analyst-types at Jones know what they are doing. I think they do a poor job of translating that into training. For example, you can get all kinds of great guidance on Jones Link about developing portfolios, diversifying holdings (i.e. the bond fund vs. indiv bond guidance), etc. But I never heard about most of that during training - I found it all by digging through Joneslink. Even today, most of it just comes to you through online methodsm, which is fine, but I think they need to be more explicit about it. Make it required online training or something. He!! knows we don’t need to get this stuff by flying out to STL. There should be progressive training on portfolio development, asset allocation, etc. It’s all there, they just don’t force us to look at it. Doesn’t bother me, but it sounds like there are some people that should have it spoon fed to them.
I think what Spiff is asking is for a less salesey focus from Jones and a more mature attitude. I made a post many moons ago about being overwhelmed with LPL’s platform and choices when I move over. But when you have advisory practices managing millions and billions, you need more depth in product choices, and the training to go with it.
Agreed.
Actually, to Spiff’s comments, I think the analyst-types at Jones know what they are doing. I think they do a poor job of translating that into training. For example, you can get all kinds of great guidance on Jones Link about developing portfolios, diversifying holdings (i.e. the bond fund vs. indiv bond guidance), etc. But I never heard about most of that during training - I found it all by digging through Joneslink. Even today, most of it just comes to you through online methodsm, which is fine, but I think they need to be more explicit about it. Make it required online training or something. He!! knows we don’t need to get this stuff by flying out to STL. There should be progressive training on portfolio development, asset allocation, etc. It’s all there, they just don’t force us to look at it. Doesn’t bother me, but it sounds like there are some people that should have it spoon fed to them.
It bothers me B. You spoke about Merrill and MS and SB tarnishing our industry's rep. It's the same thing. This lack of education by firms (not just Jones - it's just Jones I have experience with) is making a mockery of the industry.
And I'll agree to disagree with you about analyst-types at Jones.
I noticed that a TON of our analysts are from the St. Louis area.
Should I read anything into that or just accept that the really smart people all grow up in MO? (Hey Spiff, has Dan Timm lost a ton of weight or is that his picture from '83?)The Jones model works for the vast majority of the investing public. If you are under 60 and working you need a balanced portfolio of quality mutual funds. Are you smarter than Warren Buffet? NO! Help your clients, do the right thing, and make a nice living.
What is so difficult to understand about that? Why do you think you are better than the experts? If you were you’d be running a hedge fund.
[quote=Weddle Me] The Jones model works for the vast majority of the investing public. If you are under 60 and working you need a balanced portfolio of quality mutual funds. Are you smarter than Warren Buffet? NO! Help your clients, do the right thing, and make a nice living. What is so difficult to understand about that? Why do you think you are better than the experts? If you were you’d be running a hedge fund.
[/quote]
Of course it does Windy. Come down off that ledge now. Please. It’s gonna be all right Wendle… I mean Windy.
Yes. Talk to the experts. They are correct. It’s ok.
I’m not DJ, promise you that. He’s a proven liar from what I’ve heard.
However, my point is still the same. The Jones model is what it is. You can accept that or move on. There are other ways to serve clients and I have no issue with those but stop banging the drum you are an idiot if you stay with Jones. It’s a great company with alot of advantages. The same could be said about any channel.
[quote=Spaceman Spiff]
CMFA - I think that's what it was. I don't have the guy's biz card in front of me. He's moved on in the company, but he was a Goldman wholesaler when I started. I know it wasn't CFA. Whatever it was, it meant he knew more about MPT than I did. Of course at that time I thought beta was either a fraternity or a fish. [/quote] "CIMA" stands for Certified Investment Management Analyst. In my opinion it is much more practical and useful than the CFP. At least it was for me, as I am very hands on in portfolio design for clients. "CMFA" is what you you when you sold a Lehman bond to a client, or what Mario DeRosa did on Monday morning--that is "Cover My F&%43*ing Ass!"[quote=Soothsayer] [quote=Spaceman Spiff]
[/quote]
“CIMA” stands for Certified Investment Management Analyst. In my opinion it is much more practical and useful than the CFP. At least it was for me, as I am very hands on in portfolio design for clients.
“CMFA” is what you you when you sold a Lehman bond to a client, or what Mario DeRosa did on Monday morning–that is “Cover My F&%43*ing Ass!”[/quote]
Nice.
Regarding CIMA…
Isn’t that from either Wharton or Haas Schools of business?
[quote=Soothsayer][quote=Spaceman Spiff]
CMFA - I think that's what it was. I don't have the guy's biz card in front of me. He's moved on in the company, but he was a Goldman wholesaler when I started. I know it wasn't CFA. Whatever it was, it meant he knew more about MPT than I did. Of course at that time I thought beta was either a fraternity or a fish. [/quote] "CIMA" stands for Certified Investment Management Analyst. In my opinion it is much more practical and useful than the CFP. At least it was for me, as I am very hands on in portfolio design for clients. "CMFA" is what you you when you sold a Lehman bond to a client, or what Mario DeRosa did on Monday morning--that is "Cover My F&%43*ing Ass!"[/quote] CIMA sounds right. CMFA is what I'm doing today. Sometime I'd like for Jones just to come right out and say SELL THEM NOW!!! It would make my life so much easier. If any of you ever get the opportunity to hear Mario DeRose speak in person...don't. That guy knows a ton of stuff, but he's no orator. At least when Alan talks he's entertaining. Mario will flat put you to sleep.Interesting thread. Here are my 2 cents, both CIT and GMAC for over a year had both been identified as having a cash crunch (GMAC even longer) and had their ratings downgraded. In both cases you had the oportunity to sell out of your positions but chose not to for one reason or the other. I have never had CIT nor Lehman in my portfilios but i did have GMAC. The last time i did was in 2006 i believe and was out of them at 92 after watching them drop to 76. Could i have held them to maturity (2011) and gambled , hell yes, but i took the money off the table then and put it to work elsewhere. I guess i am a little different then most except for maybe rank and bondguy in that i will trade in and out of my bond positions. We all do things differently , which doesnt make it right or wrong, we all have to be comfortable with our own process.
Training is an interesting topic. A firm will screen a thousand applicants, interview a hundred, and make an offer to 10. Five of those will wash out in the first year. Of the five remaining, maybe one will make the firm a lot of money. The others will be working for a competitor. With these realities, it is difficult to spend a lot of money training newbees on portfolio construction and theory. Face it, the few who become big producers either are connected, lucky, or they’re one hard working sumbitch.
The bond info on Joneslink is good info that should be heeded. Unfortunately, the informal training from mentors, and friends in the region is much more powerful and more likely followed. Many times the big boys in the region would come to me and say; "Coop, your problem is you need to ask for bigger orders. Your a hard worker, and your smart and good with people. You should be making more money. SLM is a good outfit. You won't blow anybody up with them. When you AFTO, ask for 100K. I did. Much to the detriment of those who took me up on the offer. Jones newbes should think bond fund or fixed income UIT. If you are talking Grampa out of his 1.3% CD at the bank, a bond fund yielding 5% should be attractive. Beware of the Vet simpliying the training down to "Ask for bigger orders". Joners would be shocked to see the inventory available elsewhere. What is available to the rest of us is akin to the number of stocks that are available to you. What they offer is a crime, stick to funds.Joners would be shocked to see the inventory available elsewhere. What is available to the rest of us is akin to the number of stocks that are available to you. What they offer is a crime, stick to funds.
Give some specifics as to what EDJ offers in it's bond inventory vs
what is available at other firms. I find it hard to believe that there
would be a lot of difference. All of the large brokerages have the
same access to the bond market, correct? I can see there being
differences when we are talking about new issues and syndicate offerings
, but is there a lot of difference in the inventory at say, Morgan
Keegan, Merryl Lynch, and Edward Jones in regards to the bonds we
have available to sell. I know there have been several times where
a client talked to me about a bond, and maybe they also had another
broker at another firm that they talked with about what they had
available, and it seems that more times than not they bought the
bond from me.
By the way, I do agree with you about there being some advisors at
EDJ, who are too quick to put a large amount of money in one bond
just to get a sale. That's bad for the client!
In ten seconds, I went to Zionsdirect. I asked for the list of investment grade bonds, that would come due in 2025.
There were 1724 hits. Narrow the search to only A or better? 1200. How about A or better, due in 3 years or less? Only 400.
Congratulations on having committed clients though.
The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
I understand that at EDJ we sell bonds out of our inventory. The bonds
in our inventory are brought in from the market. Based on past
experiences, it doesn't appear to me that the bonds (especially munis)
we have in inventory are inferior to what investors are able to find
with other brokerages (whether from the open market or out of another
firms inventory). In the past when I have had a client take a look
at what I could offer vs say what the broker at Raymond James offers,
I have usually had the best bond. Maybe that was coincidence, but it
has been my experience.
[quote=DB Cooper] The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
I understand that at EDJ we sell bonds out of our inventory. The bonds
in our inventory are brought in from the market. Based on past
experiences, it doesn't appear to me that the bonds (especially munis)
we have in inventory are inferior to what investors are able to find
with other brokerages (whether from the open market or out of another
firms inventory). In the past when I have had a client take a look
at what I could offer vs say what the broker at Raymond James offers,
I have usually had the best bond. Maybe that was coincidence, but it
has been my experience.[/quote] There is always a cost to having an inventory system that you have to supply. There will always be one more hand in the pie. The inventory supply that Jones has in Munis is quite a bit different from what those who have access to the Street's inventory can show. If the bonds that are in Jones inventory are better than what is on the street, why are they moving away from the green screens?
[quote=Advisor238] [quote=DB Cooper] The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
I understand that at EDJ we sell bonds out of our inventory. The bonds
in our inventory are brought in from the market. Based on past
experiences, it doesn't appear to me that the bonds (especially munis)
we have in inventory are inferior to what investors are able to find
with other brokerages (whether from the open market or out of another
firms inventory). In the past when I have had a client take a look
at what I could offer vs say what the broker at Raymond James offers,
I have usually had the best bond. Maybe that was coincidence, but it
has been my experience.[/quote] There is always a cost to having an inventory system that you have to supply. There will always be one more hand in the pie. The inventory supply that Jones has in Munis is quite a bit different from what those who have access to the Street's inventory can show. If the bonds that are in Jones inventory are better than what is on the street, why are they moving away from the green screens?[/quote] We are moving away from the green screens because it is very inefficient to have 2 systems. Eventually, green screens, as a whole will disappear. It has nothing to do with inventory. One thing I like about Jones (under Weddle at least) is that they are always looking for ways to make our lives easier. While we are certainly not the leader in Technology, we have come a helluva long way under Jim! Even as short a time since you left noggin, we have new state of the art phonesystems, check scanners...and lots more changes on the way. Bondnet is one of them!
Fact: our inventory is no worse than at Merrill. I have compared with friends. I have also compared our prices to EMMA transactions and there is little difference (in both directions). We also don’t compete with our own bond traders for inventory. At Merrill, their traders would rather sell $5mm to Edward Jones than to their brokers’ own clients. And this is not Jones “lore”. This comes from my own research and conversations with Merrill reps. In addition, I have two clients that also have bond portfolios at Wachovia and MSSB, and they actually SHOW ME what they are being offered from inventory, and it’s nothing more than what we have. And often we have something better.
In addition, sometimes FA's forget that they can call the bond desk about a specific issue and get them to go buy some. I do that a few times a month on in-state bonds when I have a client that wants some bonds with specific criteria. I will go out to EMMA or MunicipalBonds.com and find them, then ask my guy to go get them (if they are of acceptable cerdit rating to Jones, which IS a problem for us sometimes).[quote=B24]Fact: our inventory is no worse than at Merrill. I have compared with friends. I have also compared our prices to EMMA transactions and there is little difference (in both directions). We also don’t compete with our own bond traders for inventory. At Merrill, their traders would rather sell $5mm to Edward Jones than to their brokers’ own clients. And this is not Jones “lore”. This comes from my own research and conversations with Merrill reps. In addition, I have two clients that also have bond portfolios at Wachovia and MSSB, and they actually SHOW ME what they are being offered from inventory, and it’s nothing more than what we have. And often we have something better.
In addition, sometimes FA's forget that they can call the bond desk about a specific issue and get them to go buy some. I do that a few times a month on in-state bonds when I have a client that wants some bonds with specific criteria. I will go out to EMMA or MunicipalBonds.com and find them, then ask my guy to go get them (if they are of acceptable cerdit rating to Jones, which IS a problem for us sometimes).[/quote] I wouldn't know what the inventory is at Merrill Lynch. I do talk to friends that are still at jones and when we compare inventory it is not even a fair discussion. That may be for a variety of reasons,i.e. not as much issuance in the state..... I know that your main competitor in your area is Merrill Lynch so you are wise to compare to what they have. Being independent the inventory for fixed income is far superior to what Jones has........ BTW, I call our Bond desk when I am looking for specific GNMA that we need for a client. I use municipalbonds. com also and find many of the offerings that are listed in there are sitting waiting to be purchased by my client without ever having to call a trading desk to get them. It stands to reason that IF you have to buy something and place in inventory for brokers to sell that there is an implicit cost to do that.[quote=noggin][quote=B24]Fact: our inventory is no worse than at Merrill. I have compared with friends. I have also compared our prices to EMMA transactions and there is little difference (in both directions). We also don’t compete with our own bond traders for inventory. At Merrill, their traders would rather sell $5mm to Edward Jones than to their brokers’ own clients. And this is not Jones “lore”. This comes from my own research and conversations with Merrill reps. In addition, I have two clients that also have bond portfolios at Wachovia and MSSB, and they actually SHOW ME what they are being offered from inventory, and it’s nothing more than what we have. And often we have something better.
In addition, sometimes FA's forget that they can call the bond desk about a specific issue and get them to go buy some. I do that a few times a month on in-state bonds when I have a client that wants some bonds with specific criteria. I will go out to EMMA or MunicipalBonds.com and find them, then ask my guy to go get them (if they are of acceptable cerdit rating to Jones, which IS a problem for us sometimes).[/quote] I wouldn't know what the inventory is at Merrill Lynch. I do talk to friends that are still at jones and when we compare inventory it is not even a fair discussion. That may be for a variety of reasons,i.e. not as much issuance in the state..... I know that your main competitor in your area is Merrill Lynch so you are wise to compare to what they have. Being independent the inventory for fixed income is far superior to what Jones has........ BTW, I call our Bond desk when I am looking for specific GNMA that we need for a client. I use municipalbonds. com also and find many of the offerings that are listed in there are sitting waiting to be purchased by my client without ever having to call a trading desk to get them. It stands to reason that IF you have to buy something and place in inventory for brokers to sell that there is an implicit cost to do that. [/quote] Noggin, I think you're right. From what I understand, most wirehouses, regionals, etc. manage their bond inventories in simlar fashion, so the difference in inventory will just be a matter of symantics. But with certain independant firms, I think you essentially buy from the "street" inventory. In other words, they don't really maintain an "inventory" for the firm. In any case, there will be a cost to transact either way. Whoever you buy them from for your client is going to charge a markup, and you are going to charge a markup so that YOU can make money (or you pu it in a fee account, so they still get charged either way). This is a simplistic explanation, but the bottom line is, we are both buying them from someone that wants to make money, and selling to our clients in order to make money. When I review transactions from EMMA, and compare to our inventory, the markups are no different.The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough.[quote=Greenbacks]The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough. [/quote]You don't like the fact that you'd have to buy $10k at least of a specific bond? That's too much juice for your clients? How small a buy are you looking to make? Do you do the same thing with equities and find yourself always buying 32 shares of Apple?
The way you explained things to your client sounds like you're the one confused. Even as an indie you MUST have some access to bonds, right? Perhaps BondDesk or the like? That's not an inventory you have to hold, you simply are looking at what's out there at different bond desks in the business.
I can't speak for WA, whoever that is, but not everyone keeps inventory. They can pull down bonds as needed from elsewhere. If a BD does keep an inventory for retail, there's not a natural conflict of interest there. There’s a place for proprietary trading and a place for retail brokerage. You misinformed your client to cover for your lack of access.
[quote=Greenbacks] The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks.
I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer.
He understands now and will be carefull of anything his WA broker is pushing.
Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a
sh!#y investment they could not unload it fast enough. [/quote]
WA, I assume you are referring to Wachovia, is trying to sell the bond because they like other wirehouse or regionals do not buy the bonds as an investment for the company to hold, but bring them in so their brokers can sell them on the retail side. You are misinforming your client in my opinion.
[quote=Greenbacks]The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough. [/quote] you're acting in an unethical manner and you are uneducated in the operations of the industry. you should not work with the general public.[quote=go_huskies][quote=Greenbacks]The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough. [/quote] you're acting in an unethical manner and you are uneducated in the operations of the industry. you should not work with the general public.[/quote]If you've read this guy's posts for any length of time it becomes clear that he not only doesn't understand the business, he lacks some really basic understanding of ethical behavior. How’d you like to have compliance or OSJ responsibility for someone like him?<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />
[quote=Greenbacks]The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough. [/quote] Why would the firm be trying to get rid of a good investment? Seriously? Do you really think that, or is that just a line you feed prospective clients? That's like saying "hey, why would XYZ Realtors want to sell you a really good house when they could keep it as an investment? If they want to sell it, it must be a sh*tty house!" Hey, I'm all for casting doubt on the "other firm" in the clients' eyes, but let's use something legitimate. Every B/D firm is in the business of brokering securities.[quote=B24][quote=Greenbacks]The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough. [/quote] Why would the firm be trying to get rid of a good investment? Seriously? Do you really think that, or is that just a line you feed prospective clients? That's like saying "hey, why would XYZ Realtors want to sell you a really good house when they could keep it as an investment? If they want to sell it, it must be a sh*tty house!" Hey, I'm all for casting doubt on the "other firm" in the clients' eyes, but let's use something legitimate. Every B/D firm is in the business of brokering securities.[/quote] Greenbacks- Cmon on man......You really need to taper off that medication not take more of it.Noggin, I like the new tagline. The guy in that commercial sort of reminds me of me. OK, I’m not Latin, I’m not that interesting or cool, I don’t have nearly as many women as him, and I don’t dress quite as well, oh and I don’t have facial hair, and I’m much younger than him. But other than that, we’re like brothers (In a Schwarzenegger/DeVito sort of way).
So you do not think selling bonds out of your inventory is a conflict of interest.
Get real. As far as the realtor goes, if your realtor would show you homes that he had listed and no others would you keep him or look for another realtor?[quote=Greenbacks]So you do not think selling bonds out of your inventory is a conflict of interest.
No, I don't. They aren't proprietary products, there is no benefit for us to sell one bond over another other than the benefit for the client. We all mark them up and sell them at a profit, you are no different. We just buy them differently (apparently).
By your logic, there is as much conflict for you as for us.
Green, you're stretching here. First off, your argument about the realtor would be valid if firms only sold the bonds that they underwrite. Since the firms go out and fill their inventory with all different bonds, it's an invalid argument. And Somewhere is right, it makes no difference whether we sell a 15 year Kentucky GO bond or a 15 year Florida hospital bond. 1.5pts, 2pts, whatever the markup, it would be the same on both.
Bottom line, as has been discussed ad nauseum, is that every channel has conflicts of interest, even "fee only financial planners" just tryng to sell you a plan. Sell a stock you don't need, a plan that takes "8 hours" to complete (really? that long?), keep you invested in that wrap account or RIA fee account instead of paying down your mortgage or credit cards, buying LT bonds instead of CD's, buying whole life instead of term (if terms all you need), whatever your "product", there is a potential conflict of interest.I cannot believe you do not think a company that holds bonds say 200 million dollars worth in inventory,that it does not effect the company’s balance sheet.
Imagine what a small change in interest rates can do to it! Tell me your stand up company will not push them if they are loosing money. A realtor does not recieve income from house he has listed, they will not change the realtors balance sheet. As emploees you guy's look at the company and do not see the effect they have good or bad on the earnings. When you become an owner (indy) of your own firm you will look at things differently.Actually, you’re wrong. I follow Jones’ financial every month and quarter. Holding bonds in inventory has been part of the business for 70 years, and the model has essentially not changed. Financing inventory is jsut a cost of doing business, it does not DRIVE the direction of the business.
Get off your pompous high-horse.[quote=Greenbacks] I cannot believe you do not think a company that holds bonds say 200 million dollars worth in inventory,that it does not effect the company’s balance sheet.
Tell me your stand up company will not push them if they are loosing money.
A realtor does not recieve income from house he has listed, they will not change the realtors balance sheet.
As emploees you guy’s look at the company and do not see the effect they have good or bad on the earnings.
When you become an owner (indy) of your own firm you will look at things differently.
[/quote]
That is why we hedge our bond positions.
Are you seriously in charge of your own company?
[quote=Greenbacks]I cannot believe you do not think a company that holds bonds say 200 million dollars worth in inventory,that it does not effect the company’s balance sheet.
Imagine what a small change in interest rates can do to it! Tell me your stand up company will not push them if they are loosing money. A realtor does not recieve income from house he has listed, they will not change the realtors balance sheet. As emploees you guy's look at the company and do not see the effect they have good or bad on the earnings. When you become an owner (indy) of your own firm you will look at things differently. [/quote]You're either too stupid or too drunk to be running your own business. You’re a piker and a liar.
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