Jones Advisory/American Funds
It was very interesting to read this morning that Edward Jones removed Bond Fun of America from it’s Advisory model portfolios. Apparently they are moving away from the corporate bond risk model, and floating more towards MBS and govies, which now has a style too close to the other bond funds it uses in the program, and would create style overlap in it’s portfolios.
It's nice to see even American Funds is not immune to their advisory philosophy.The thing i don’t understand about the advisory program is what are you paying the fee for?
Advisor can’t move assets(without having to redo the whole risk tolerance process). Also i saw the fund list yesterday. And i was under the impression that it wasn’t all preferred funds, but some of the crappy preferred are on there.
Yes, you can move assets by building a custom portfolio vs. using a model. Then you can mix and match any of the funds in the program (we have like 160). And yes, some of the preferred funds are in there, but not that many. The downside is taht it is a pure asset allocation program, so they really only use “style pure” funds. So funds like Capital Income Builder are not in there.
You're basically paying for the overall asset allocation, fund analysis, style/security overlap analysis, and threshold rebalancing that Jones does. Their process for choosing funds is rather rigorous (I won't get into it here, but it's pretty thorough), and they have a definite process. It may not match how some advisors want to manage money (me, for instance), but it's a very, very good program, and matches how most firms would set up a "model" process. One of the things that you CAN do, which a lot of advisors are doing, is splitting their assets betwwen two portfolios. So for example, client X that has 500K, might have 100K in the all-equity portfolio, and 400K in the Income portfolio. The advisor can move money in and out of each model as they see fit, without any paperwork or anything. So if you feel equities are peaking and you want to relax that allocation, you can shift between the two portfolios. Or, it's an easier way to control age/risk tolerance re-balancing for your client. It then takes away the hassle of finding and monitoring funds, preventing overlap, etc. and puts it on Jones' shoulders (which is why they are also compensated).Even if you utilize the models, the majority of the funds aren’t preferred funds. I was just looking at our Core Plus Growth model this morning and the only two preferred funds in the model are GS G&I and VK G&I. Buffalo, Nuveen, Columbia, Keystone, Perkins, Hotchkis & Wiley, Dodge & Cox, Harbor, Virtus, Federated, and JPM are the other names. The Growth and Income model only has 4 preferred funds in it and two of them are bond funds.
We were told at our summer regional meeting that there is a new model coming out that will be a hybrid fund/ETF/Index model. It wouldn't suprise me at all to see those models come out without any preferred funds in them. Now, if they'd just lower the minimum to $25K...But you can’t move assets to cash in times of market collapse? Or can you
But you can’t move assets to cash in times of market collapse? Or can you
Sure you can. You won’t draw the adv fee, which may create that conflict of interest often debated on this forum, but you absolutely can.
No you can't. Here's what I would do, if the cash was part of the overall investment program, and NOT "emergency savings/short term stuff"...I would move it into a C-share short-duration treasury fund (or something similar). No, it's not the same. Yes, it's not ideal. But that's what I would do if I felt I should still be getting paid something on those funds. This is one of the things consider a major weakness in the model...we have little discretion over the investment strategy. I have a feeling that at some point the program will be expanded to include some sort of flexibility like this, but this is obviously Jones' first foray into advisory accounts (outside of SMA's), so I think they needed to tightly control the process in the beginning. We'll see how it evolves.But you can’t move assets to cash in times of market collapse? Or can you
I want a model that warns me that the market will collapse. Basically, I log onto my computer before the market opens and a siren goes off so I can sell everything out. Then that same system will sound the siren telling me exactly when to get back in. Are those out there ?
Clearly a technology issue !
I think Windy is developing that.I want a model that warns me that the market will collapse. Basically, I log onto my computer before the market opens and a siren goes off so I can sell everything out. Then that same system will sound the siren telling me exactly when to get back in. Are those out there ?
Ok…I’ll admit that I am a little buzzed while answering this. But, I would like to tell you what you pay the fee for. I, as an advisor, would like all of my clients to believe that I spend most of my day looking at their portfolio and looking at the money managers that we have used and monitoring them based on their (a) management team (b) management process © performance. But the truth is…I don’t. I spend my day looking for new money.
I personally use the Advisory Solutions and I have seen the Mutual Fund Research department make changes to my portfolio based on factors that I did not know existed. We pay the fee to have a second set of eyes looking at the allocations so I can spend my time (a)actually doing planning for my clients (b) pursuing new clients. Up until I started using this I worried about one thing......the current month and how I was going to make 25-30K gross. Hope this made sense. I guess I will see tomorrow.[quote=B24]Yes, you can move assets by building a custom portfolio vs. using a model. Then you can mix and match any of the funds in the program (we have like 160). And yes, some of the preferred funds are in there, but not that many. The downside is taht it is a pure asset allocation program, so they really only use “style pure” funds. So funds like Capital Income Builder are not in there.
You're basically paying for the overall asset allocation, fund analysis, style/security overlap analysis, and threshold rebalancing that Jones does. Their process for choosing funds is rather rigorous (I won't get into it here, but it's pretty thorough), and they have a definite process. It may not match how some advisors want to manage money (me, for instance), but it's a very, very good program, and matches how most firms would set up a "model" process. One of the things that you CAN do, which a lot of advisors are doing, is splitting their assets betwwen two portfolios. So for example, client X that has 500K, might have 100K in the all-equity portfolio, and 400K in the Income portfolio. The advisor can move money in and out of each model as they see fit, without any paperwork or anything. So if you feel equities are peaking and you want to relax that allocation, you can shift between the two portfolios. Or, it's an easier way to control age/risk tolerance re-balancing for your client. It then takes away the hassle of finding and monitoring funds, preventing overlap, etc. and puts it on Jones' shoulders (which is why they are also compensated).[/quote] B24-- No offense, but from what I've heard from my good friends at EJ, and from what I read here, your advisory program is quite deficient compared to what the wires and indies have. To eliminate CIB from the lineup simply because it's not style pure is a bad move. I'm going out on a limb here, but how about alternative investments? This asset class had some of the only funds that made money for my clients last year, when we needed it most. And I wonder how many FA's at EJ will move clients to any level of cash, when it's appropriate, knowing they will be taking food out of their own family's mouths by going to cash. Nobody would admit it, but there isn't an FA alive that wouldn't at least hesitate before doing so. Especially when buy and hold has been preached to them for so long. Also, your program has 160 funds. Really? That's all? Ours has 3000, and it includes no-load funds as well. 160 is a nice start, but I wouldn't describe your platform as "very, very good" and use that number as evidence. Back to buy and hold-- That works quite well in a secular bull market, but friend, we aren't in a secular bull market right now. Building a style-pure portfolio in this type of market puts your style box equity portfolios on a one way track to "Forty Percent Loss in a Year"ville. One must be tactical in this type of market. And the best way to tactically manage your clients' money is not to have to call all 800 households prior to making a major asset allocation change. By the time you're done, you missed it. Let the fund do it for you. I'm nowhere near a daytrader with client funds, but buy and hold is dead. How about multistrategy bond funds or senior secured bankloan funds? Can you get those yet? In 2009, bankloans have been the no-brainer of the year. Can you get HFLAX? It's a preferred fund family-- you should be allowed to buy it for clients. Especially if they allow you to buy junk bond funds. Just sayin'. Like I said, I don't wish to offend by nitpicking your advisory program. I started at EJ, and I know how it must have felt to finally get an advisory platform other than MAP. But don't fool yourself by thinking that it's anywhere near indies and wires. Just my two cents. LAI've seen the list of EDJ's advisory platform (as it was a while back, it may have changed since) and the issue isn't 160 funds, the issue is what 160 funds they use. The allocations look to be designed in CFA 101 and the program has little flexibility. Just my .02 from the outside. As far as the model that sets off the siren, that information is available, you just have to go get it. More importantly, you have to use it even when it feels wrong.
I guess “Buy & hold is dead,” “secular bear market,” and “you’ve gotta be tactical man!” are the cliche phrases for 2009.
[quote=Lew Ashby][quote=B24]Yes, you can move assets by building a custom portfolio vs. using a model. Then you can mix and match any of the funds in the program (we have like 160). And yes, some of the preferred funds are in there, but not that many. The downside is taht it is a pure asset allocation program, so they really only use “style pure” funds. So funds like Capital Income Builder are not in there.
You're basically paying for the overall asset allocation, fund analysis, style/security overlap analysis, and threshold rebalancing that Jones does. Their process for choosing funds is rather rigorous (I won't get into it here, but it's pretty thorough), and they have a definite process. It may not match how some advisors want to manage money (me, for instance), but it's a very, very good program, and matches how most firms would set up a "model" process. One of the things that you CAN do, which a lot of advisors are doing, is splitting their assets betwwen two portfolios. So for example, client X that has 500K, might have 100K in the all-equity portfolio, and 400K in the Income portfolio. The advisor can move money in and out of each model as they see fit, without any paperwork or anything. So if you feel equities are peaking and you want to relax that allocation, you can shift between the two portfolios. Or, it's an easier way to control age/risk tolerance re-balancing for your client. It then takes away the hassle of finding and monitoring funds, preventing overlap, etc. and puts it on Jones' shoulders (which is why they are also compensated).[/quote] B24-- No offense, but from what I've heard from my good friends at EJ, and from what I read here, your advisory program is quite deficient compared to what the wires and indies have. To eliminate CIB from the lineup simply because it's not style pure is a bad move. I'm going out on a limb here, but how about alternative investments? This asset class had some of the only funds that made money for my clients last year, when we needed it most. And I wonder how many FA's at EJ will move clients to any level of cash, when it's appropriate, knowing they will be taking food out of their own family's mouths by going to cash. Nobody would admit it, but there isn't an FA alive that wouldn't at least hesitate before doing so. Especially when buy and hold has been preached to them for so long. Also, your program has 160 funds. Really? That's all? Ours has 3000, and it includes no-load funds as well. 160 is a nice start, but I wouldn't describe your platform as "very, very good" and use that number as evidence. Back to buy and hold-- That works quite well in a secular bull market, but friend, we aren't in a secular bull market right now. Building a style-pure portfolio in this type of market puts your style box equity portfolios on a one way track to "Forty Percent Loss in a Year"ville. One must be tactical in this type of market. And the best way to tactically manage your clients' money is not to have to call all 800 households prior to making a major asset allocation change. By the time you're done, you missed it. Let the fund do it for you. I'm nowhere near a daytrader with client funds, but buy and hold is dead. How about multistrategy bond funds or senior secured bankloan funds? Can you get those yet? In 2009, bankloans have been the no-brainer of the year. Can you get HFLAX? It's a preferred fund family-- you should be allowed to buy it for clients. Especially if they allow you to buy junk bond funds. Just sayin'. Like I said, I don't wish to offend by nitpicking your advisory program. I started at EJ, and I know how it must have felt to finally get an advisory platform other than MAP. But don't fool yourself by thinking that it's anywhere near indies and wires. Just my two cents. LA[/quote] I agree with all your points. I know it's not the best out there, or even close. As I said in my post, Jones had to start with a tightly controlled program, which is what we got. There are additional modifications coming down the road - we will see how it goes. As far as moving to cash, I already have a work-around (not perfect). I simply set up two portfolios for people, with one being the most conservative. I don't use a model, I do a custom portfolio, and just load it up with the most conservative short-term stuff. When I want to move out of equities, I just shift out of our equity portfolio into the conservative portfolio. Not perfect, but OK. And by the way, Jones is not the only firm (or the only advisors) that use buy-and-hold strategies. If you think that everyone other than Jones sidestepped the market in 2008, you obviously live under a rock. And we do have some alternatives - commodities, real estate, emerging markets. I know, I know, we don't have any non-traded, private Baltic Island real-estate hedge funds. But I guess we're just simple.[quote=Jebediah]
I've seen the list of EDJ's advisory platform (as it was a while back, it may have changed since) and the issue isn't 160 funds, the issue is what 160 funds they use. The allocations look to be designed in CFA 101 and the program has little flexibility. Just my .02 from the outside. As far as the model that sets off the siren, that information is available, you just have to go get it. More importantly, you have to use it even when it feels wrong.
[/quote] THIS, I agree with.Lew - the point of advisory solutions is to NOT have 3000 funds to pick from. Who’s doing the research on those 3000 funds? Who’s making sure, like with ABNDX, that they’re not style drifting. 3000 funds means that whoever put it together isn’t doing any research other than where the fund rep takes him or her for lunch. Ruth’s Chris? You’re in. Taco Bell? Get out of my office. There are lots of funds that didn’t make the cut. The program was designed specifically to only allow a select group of funds in. And it had nothing to do with revenue sharing or preferred status. And it has no loads in it. It’s designed to be a structured, disciplined approach to investing. Not making sector bets or prognosticating based on whatever Money magazine says is coming around the corner. It’s not like the indie guys or the wirehouses. That’s the point.
It kills me that in a few brief years time tested strategies can become so passe. Who said buy and hold is dead? Who said you have to be tactical with your portfolio? At what point did Markowitz retract his previous statements? At what point did the market become inefficient? Who defines a secular bear market? See, I would have sworn that when I got into this biz in the mid 90's the Dow was at like 4000. Doesn't that mean that we have doubled since then? Is that a secular bear or a secular bull? I get them confused. Can't we pretty much say that given a long enough span of time the market has ALWAYS been bullish? Doesn't being tactical simply mean you're betting on something? You're betting that senior loan funds are going to outperform corp bond funds. Or you're betting that emerging markets is going to outperform large cap value. How do you know that for sure? Tea leaves? Thus the Advisory Solutions platform. Asset allocation. Diversify. Rebalance as necessary. No style drift allowed. Simple. Easy. 1.35% Thank you very much. Where's that FAST report?Lew, how many of those 3000 funds do you actually use? And how many of your clients are invested in hedge funds? One last thing, what firm do you work for?
[quote=Spaceman Spiff] Lew - the point of advisory solutions is to NOT have 3000 funds to pick from. Who’s doing the research on those 3000 funds? Who’s making sure, like with ABNDX, that they’re not style drifting. 3000 funds means that whoever put it together isn’t doing any research other than where the fund rep takes him or her for lunch. Ruth’s Chris? You’re in. Taco Bell? Get out of my office. There are lots of funds that didn’t make the cut. The program was designed specifically to only allow a select group of funds in. And it had nothing to do with revenue sharing or preferred status. And it has no loads in it. It’s designed to be a structured, disciplined approach to investing. Not making sector bets or prognosticating based on whatever Money magazine says is coming around the corner. It’s not like the indie guys or the wirehouses. That’s the point.
It kills me that in a few brief years time tested strategies can become so passe. Who said buy and hold is dead? Who said you have to be tactical with your portfolio? At what point did Markowitz retract his previous statements? At what point did the market become inefficient? Who defines a secular bear market?
See, I would have sworn that when I got into this biz in the mid 90’s the Dow was at like 4000. Doesn’t that mean that we have doubled since then? Is that a secular bear or a secular bull? I get them confused. Can’t we pretty much say that given a long enough span of time the market has ALWAYS been bullish?
Doesn’t being tactical simply mean you’re betting on something? You’re betting that senior loan funds are going to outperform corp bond funds. Or you’re betting that emerging markets is going to outperform large cap value. How do you know that for sure? Tea leaves?
Thus the Advisory Solutions platform. Asset allocation. Diversify. Rebalance as necessary. No style drift allowed. Simple. Easy. 1.35% Thank you very much. Where’s that FAST report?[/quote]
I agree that the market has gone up over time but the problem is the concept of “time”…since 1898 the DJIA has increased from around 96 to 9370… However most of my clients down have 100+…
Rydex has an interesting DJIA graph… plots the DJIA growth from 12/1896 to 12/20008. It show the returns for the four bull markets and the four bear markets that have occurred.
I agree buy and hold works in bull markets(1982-2000) but in bears markets (2000- current) it doesn’t…
As far as markowitz, check out DFA funds, and how quickly that fad vanished. The problem with MPT(other than it fails during bear markets) is that is makes assumptions that are skeptical at best. First of all they assume that variance of returns is the best way to measure risk(obviously has issues) and that returns are represented by normal distributions.
Standard deviation says that better-than-expected returns are just as risky as those returns that are worse than expected.
Normal distribution make investment results with more upside than downside returns appear more risky than they are and vice versa.
However most investors(and advisors) think risk does not pertain to returns about the minimum they are looking for. They think risk has to do with losses or returns below what they want(say 8%).
Fundamental analysis, follow a select few equities REALLY closely, buy them when they are cheap, sell them when they are expensive. The problem with buy and hold is the HOLD part.
And MPT is a crock. Not that it’s dead. It’s just a crock. Once again, it is the global warming of the financial world.
People do not become wealthy in the investment world by strictly following MPT and buy and hold.
I want a model that warns me that the market will collapse. Basically, I log onto my computer before the market opens and a siren goes off so I can sell everything out. Then that same system will sound the siren telling me exactly when to get back in. Are those out there ?
I love it!! This is hilarious!!
Looks like I touched nerve. That’s good-- It’s nice to be posting on a topic other than the fact that management at my firm sucks while hypothesizing about when my firm (UBS) will be spun off.
Jebediah is right-- It's not just the fact that we have 3000 funds to choose from in our various advisory platforms, it's which funds we as advisors recommend to our clients. But in order to narrow the list of 3000 funds down to the 40-50 that I actually follow closely, the advisor has to know what he's looking for. And each advisor may want to run his practice in a different manner. Some may want to use more tactical funds that regularly adjust the asset allocation for them, and others may want to do it themselves, via a discretionary trading platform. We have both at UBS, but it doesn't seem like EJ is allowing their FA's to do either. It's buy and hold, all the way. And yes, I know EJ doesn't have the patent on that theory, but it is quite prevalent in the culture. And even in secular bull markets (e.g. 1982-2000 for iceco1d and Ron 14 that don't understand the significance of that "cliche"), buy and hold will only work if the client has the stones to hold or buy when they're down 30%. And I can tell you this, boomers have a hard time with this more than any other segment of our business. Most of my clients are boomers, hence my preference for tactical management and risk control. Space-- This thing about style drift. For the life of me, I don't get why everyone is so married to this Morningstar style purity. Who cares what style the fund is in, as long as they have demonstrated for a long time that they stay within the risk band that they promised, and they generate lots of alpha for our clients. Case in point-- Compare the numbers for two Wellington-managed funds at Hartord-- Capital Appreciation and Stock Fund. Stock fund was indeed style pure. It remained a large cap growth fund, even though the manager knew deep down that LCG was over valued and most likely going to underperform for years. But he stayed style pure and lost a TON of money in the tech crash. Saul Pannell, on the other hand, is a stock picker. He finds great companies trading below their value, and he doesn't give a rip whether it's large value or large growth. He too was down during the tech crash, a lot, but not nearly the disaster that was Stock Fund. Would the manager of stock fund have diversified into large value if he could have? I believe he would have if not for the prospectus which mandated LCG. Why not give a talented manager (who spends every waking hour managing risk and return for a fund and not meeting with clients, looking for new clients, doing financial plans, etc) the latitude to make moves between different asset classes outside of just stocks? Especially since we are most definitely not in a secular bull market. And who cares if ABNDX is drifting a bit, as long as they are making money and controlling risk. I don't use the fund, personally, but that was the fund EJ eliminated for style drift reasons. Like I said in my previous post, I'm very happy for my Jones friends now that they have a mutual fund advisory platform. I believe their clients will be much better off in the long run with that program versus A share commissions. When we discuss our advisory platforms at UBS and other firms, including most indies, they all agree though. The EJ platform still has a very long way to go before they measure up to the rest of the industry. Have a great weekend everyone! LALOLAm I being “called out?” TAG ME IN RON!
How the hell can you possibly say that people can't become wealthy by buy and hold ? You instead think they should spend 3 hours at work "studying a select few stocks" and trade it up in their ETRADE IRA ?Fundamental analysis, follow a select few equities REALLY closely, buy them when they are cheap, sell them when they are expensive. The problem with buy and hold is the HOLD part.
And MPT is a crock. Not that it’s dead. It’s just a crock. Once again, it is the global warming of the financial world.
People do not become wealthy in the investment world by strictly following MPT and buy and hold.
[quote=Moraen]Fundamental analysis, follow a select few equities REALLY closely, buy them when they are cheap, sell them when they are expensive. The problem with buy and hold is the HOLD part.
And MPT is a crock. Not that it’s dead. It’s just a crock. Once again, it is the global warming of the financial world.
People do not become wealthy in the investment world by strictly following MPT and buy and hold.[/quote] Why not sell calls or buy puts until they are cheap again and then buy more? Or would that be considered buy and hold? If you are going to spend that much time researching then you should make money going up and down.
[quote=Moraen]Fundamental analysis, follow a select few equities REALLY closely, buy them when they are cheap, sell them when they are expensive. The problem with buy and hold is the HOLD part. And MPT is a crock. Not that it’s dead. It’s just a crock. Once again, it is the global warming of the financial world. People do not become wealthy in the investment world by strictly following MPT and buy and hold.
How the hell can you possibly say that people can’t become wealthy by buy and hold ? You instead think they should spend 3 hours at work “studying a select few stocks” and trade it up in their ETRADE IRA ? [/quote]
Easily - how many millionaires (who made their money in the market almost exclusively) that you know became that way by owning mutual funds and holding them forever? People who have become WEALTHY own individual stocks. Sorry, that’s a fact. There have been several papers published to the effect (much like MPT - except instead of a theory, they are charting FACTS).
I know more people who have made overall better returns getting LUCKY buying a few individual stocks, maybe losing money on one, but destroying it on others than I know people who had better returns in mutual funds.
No, people who became wealthy started a business, grew it, and sold it. People become wealthy in their investments not because they have a superior strategy (granted there are some out there that do), but because they have a superior discipline. They make their IRA contributions EVERY year. They do those things that most people just simply don’t. Some of my “wealthiest” clients don’t do anything but buy American Funds and do their IRA contributions. Period. No individual equities, no individual bonds, no covered calls or collars, or hedge funds. It’s discipline. Pure and simple.
To think that the average person gets wealthy in the market BECAUSE of the market is just retarded. The problem with stating that there aren't a lot of millionaires that used mutual funds to get there is that mutual funds are a, relatively speaking, new phenomenon. I don't know of very many people that actually put $10K into AIVSX in 1929. Actually I don't know any. It wasn't until probably the 1980's that mutual funds became the primary investment vehicle people used to invest. I think your last paragraph states it best: "I know more people who have made overall better returns getting LUCKY buying a few individual stocks". Luck isn't the way I want to run my practice. I don't want to be lucky with one or two and unlucky with one or two and call it a day. Because for every one person who got lucky, 5 got unlucky. Those aren't good enough odds for me. Not everyone has a Captain Dan buying them stock in that fruit company back in the 70's.[quote=Moraen] [quote=Ron 14] [quote=Moraen]Fundamental analysis, follow a select few equities REALLY closely, buy them when they are cheap, sell them when they are expensive. The problem with buy and hold is the HOLD part. And MPT is a crock. Not that it’s dead. It’s just a crock. Once again, it is the global warming of the financial world. People do not become wealthy in the investment world by strictly following MPT and buy and hold.[/quote]
How the hell can you possibly say that people can't become wealthy by buy and hold ? You instead think they should spend 3 hours at work "studying a select few stocks" and trade it up in their ETRADE IRA ? [/quote]
Easily - how many millionaires (who made their money in the market almost exclusively) that you know became that way by owning mutual funds and holding them forever? People who have become WEALTHY own individual stocks. Sorry, that's a fact. There have been several papers published to the effect (much like MPT - except instead of a theory, they are charting FACTS).
I know more people who have made overall better returns getting LUCKY buying a few individual stocks, maybe losing money on one, but destroying it on others than I know people who had better returns in mutual funds.[/quote] Sorry Spiff, I have to agree with Moraen on this one. Other than my business owner clients, the only clients I have that became truly wealthy through the market are people that have owned individual equities forever. And most of them have owned blue-chip stocks for 20, 30, 40 (one of them 50) years. The double-edged sword in this is that many of them lost their shirts because they were 70 years old and I couldn't pry anything out of their hands. The old "my husband bought these shares in 1956......." story. I have one client that just died at age 90, and she had 115K in Coke stock (among her 18 positions). The cost basis was about 3K. She owned XOM, PG, JNJ, etc. (the saddest part is that this portfolio was built over 50+ years, and her boomer children are now tearing it down in a matter of weeks) I'm not saying people CAN'T become wealthy on funds, I just find that funds are better served for maintaining wealth (which includes growing it moderately). But you are right, in either case, it requires tremendous discipline. And most people that buy individual securities to buy and hold forever have that discipline.
Yes, I know. That’s my point. My clients who have owned stocks forever are wealthy too. But would they have been better off had they purchased AIVSX instead of KO 50 years ago? Unfortunately our hypo system only goes back to 1972 on stocks for some reason, so I’ll have make my case with limited data. I ran a hypo of $10K invested in KO, PG, and AIVSX starting in June of 1972. There’s been one time in the past almost 40 years that the KO would have been worth more than the AIVSX. And PG doesn’t even come close. Now, you throw a stock like WMT in there and it’s not even fair. A $10K investment in Sam Walton in 1972 turns into over $8.6 mil today. That goes back to that Captain Dan comment. How many people do you know of (outside of the rednecks in Bentonville, Arkansas who worked for the man and got shares on accident when he took it public) that would have put $10K into WMT in 1972?
So, I think our viewpoint is skewed. Kind of like it might be 20 years from now when we look back at our clients and say none of them got rich buying ETFs. Same thing.So you guys mean to tell me if you were 25 in 1985 went to work in corporate america, worked your way up, purchased a home, funded IRA's/401k's to the max, used a strict discipline and lived well within your means that the market wouldn't have made you a millionaire ?
I agree with Ron 14(but only on his last point). I think the market can make people money.
I agree with both points of view. However, I think there tends to be a difference between people that buy and hold stocks forever, and other investors. Due to the ease of transacting mutual funds, there tends to be a “trading card” mentality with funds vs. individual securities (I think muni’s tend to fall in this same camp as stocks, although for different reasons).
Yes, buying a good quality grwoth & Income fund and holding it forever will have a similar effect to holding a stock. Yes, there are some tax consequences to funds, but by and large, if you are comparing quality G&I funds to quality blue-chip stocks, the results will essentially be the same. Now, if we are looking at buying a company in it's early growth years, that's a different story. Today's RIMM may be tomorrow's Apple or MSFT. But don't expect to buy P&G today and be a millionaire in 20 years.[quote=Ron 14]
So you guys mean to tell me if you were 25 in 1985 went to work in corporate america, worked your way up, purchased a home, funded IRA's/401k's to the max, used a strict discipline and lived well within your means that the market wouldn't have made you a millionaire ?
[/quote] Would the "market" have made me a millionaire? No. The things I highlighted above would have made me a millionaire. The market would have helped along the way, of course, but it's my discipline, routine, and willingness to tell myself no that would have made the millionaire next door. Anyway, I probably would have worked for AT&T, got spun off to LU, put all my money in company stock, rode it to the ground and then lost my job, my house, and racked up a lot of credit cards debt because I wasn't willing to give up my BMW convertible, 3500 sq foot house,2000 sq ft lake house, and ski boat. I would have then went to work for Citigroup because mortages and real estate were hopping, put all my money again into company stock, rode it to the ground, lost my job, my house, and racked up more credit card debt because I wasn't willing to...well you get the idea. See what the "market" can do to a guy![quote=Spaceman Spiff][quote=Ron 14]
So you guys mean to tell me if you were 25 in 1985 went to work in corporate america, worked your way up, purchased a home, funded IRA's/401k's to the max, used a strict discipline and lived well within your means that the market wouldn't have made you a millionaire ?
[/quote] Would the "market" have made me a millionaire? No. The things I highlighted above would have made me a millionaire. The market would have helped along the way, of course, but it's my discipline, routine, and willingness to tell myself no that would have made the millionaire next door. Anyway, I probably would have worked for AT&T, got spun off to LU, put all my money in company stock, rode it to the ground and then lost my job, my house, and racked up a lot of credit cards debt because I wasn't willing to give up my BMW convertible, 3500 sq foot house,2000 sq ft lake house, and ski boat. I would have then went to work for Citigroup because mortages and real estate were hopping, put all my money again into company stock, rode it to the ground, lost my job, my house, and racked up more credit card debt because I wasn't willing to...well you get the idea. See what the "market" can do to a guy! [/quote] Well actually the market did make you a millionaire because that disciplined approach into savings accounts would have cut your return by 80%.I have a client who inherited a lot of bank stock. His family started the original community banks in the late 19th century and after mergers, buyouts etc, he had over $7mm+ before the financial crash…what is left is now about $2mm. He had a personal attachment to the stock and for most of his life the stock performed very well for him. He doesn’t care so much about the principle, but his dividends went from 400k+ to 50K per year. He is finally willing to listen to a disciplined covered call strategy to supliment his income stream. I don’t know how many times we discussed diversification. And he should know better: top boarding school, GA Tech, Yale MBA and over the years has proven to be a very sharp stock and trend picker.
Sometimes emotion gets in the way of making the correct decision. On the other hand, I have a few clients who were disciplined enough to put money away early and often, live within their means etc and who are now worth 1mm+. Their secret is that they wanted to put it away and forget about it....dealing with money on an ongoing basis scared them.Good points. To speak to that point, I also find that individual investors have a hard time transitioning from wealth “accumulation” to wealth “preservation” (or de-cumulation if they are taking income). I have several clients (and emt many along the way) that are fatalistically attached to their company stock. More often than not, I get the “this company made me rich, I can’t sell this stuff now”, or “if I had invested in the rest of the market, I would have lost a ton of it”. All true, but the problem is, I would have had much of their money out of the stock market. We’re talking millionaire-next-door types that worked at the same company for 30 years, they are now 62 and invested 100% in their company stock. SCARY!!!
Very scary. I have a Caterpillar plant a few miles from my branch and it seems once a month I speak to a guy who got laid off 3-5 years before he wanted to retire, has his entire 401k in CAT stock, won’t sell or reallocate it because “its still a solid company.” Like you say, you cant save them all. NEXT!
Its funny because I normally, in my personal life, convince coworkers not to buy company stock (despite what HR and Leadership says). If it weren't for FINRA, I'd advocate shorting it sometimes.
My reasoning is: My whole income is contingent on this company (if I get fired or the company goes under), do I want to make my savings / retirement that way too? Answer is always no.Yes, yes, yes. One stock forever is bad.
Also, Spiff my point was about people who became WEALTHY in the market.
The majority of wealthy people do in fact have most of their wealth either in real estate, business equity or both.
Also, to Ron’s point. How much of that millionaires money is principal? Isn’t most of it the stuff you got him to add all of the time?
Also Ron, I wonder if you live near me - a lot of CAT people around here. My best friend’s wife in fact. But they know better than to put everything in CAT stock. But they have made a good amount buying it when it is cheap and selling it for a decent profit.
It all boils down to discipline. With discipline (and a little hard work) you can accomplish anything. You can build a Jones business. You can become an astronaut. You can get a Ph.D. These UFC guys - Discipline. Karate - Discipline. Undisciplined people become successful through luck.
Less than 40% of that persons money would be principal.
It absolutely boils down to discipline, but I really do feel that the average 30 year CAT employee who retires with 500k in his 401k and a few other scattered investments will be best served by an FA who can allocate his assets in a way that matches his needs and tolerance for risk. Will keep him from blowing himself up (My house has gone up more than my equity and income fund, I want to take money out and by some land-2006 or my neighbors nephews third cousin made 50k last week trading tech stocks-1999) and get him to stay the course, stay in front of inflation, and leave a bit behind. Now I will be the first to admit, if some dude sold his start up and has 10mil to invest maybe what I do isn't perfect for him and that is fine. I think it will still work, but it probably won't impress him.[quote=Wet_Blanket]
Its funny because I normally, in my personal life, convince coworkers not to buy company stock (despite what HR and Leadership says). If it weren't for FINRA, I'd advocate shorting it sometimes.
My reasoning is: My whole income is contingent on this company (if I get fired or the company goes under), do I want to make my savings / retirement that way too? Answer is always no.[/quote] I don't know how many of you live ina n area like mine, but if one of two major employers were to go belly-up, the following would happen to many people: 1. Lose your job 2. Lose your pension (OK, it's insured, but still) 3. Lose most of what's in your 401K, since you allocate most, if not all, to your company stock 4. Lose tremendous value in your house, since that employer is one of the lynch-pins of our economy, and that many thousands of people losing jobs (that are not replaceable anywhere in our region) would cause a glut of houses. 5. Lose your stock options 6. Lose your deferred stock 7. LOSE YOUR MIND. But people don't want to listen.[quote=Ron 14]
Less than 40% of that persons money would be principal.
It absolutely boils down to discipline, but I really do feel that the average 30 year CAT employee who retires with 500k in his 401k and a few other scattered investments will be best served by an FA who can allocate his assets in a way that matches his needs and tolerance for risk. Will keep him from blowing himself up (My house has gone up more than my equity and income fund, I want to take money out and by some land-2006 or my neighbors nephews third cousin made 50k last week trading tech stocks-1999) and get him to stay the course, stay in front of inflation, and leave a bit behind.
Now I will be the first to admit, if some dude sold his start up and has 10mil to invest maybe what I do isn’t perfect for him and that is fine. I think it will still work, but it probably won’t impress him. [/quote]
Even 35% is considerable. Especially over 30 years.
[quote=Spaceman Spiff] No, people who became wealthy started a business, grew it, and sold it. People become wealthy in their investments not because they have a superior strategy (granted there are some out there that do), but because they have a superior discipline. They make their IRA contributions EVERY year. They do those things that most people just simply don’t. Some of my “wealthiest” clients don’t do anything but buy American Funds and do their IRA contributions. Period. No individual equities, no individual bonds, no covered calls or collars, or hedge funds. It’s discipline. Pure and simple.
To think that the average person gets wealthy in the market BECAUSE of the market is just retarded.
The problem with stating that there aren’t a lot of millionaires that used mutual funds to get there is that mutual funds are a, relatively speaking, new phenomenon. I don’t know of very many people that actually put $10K into AIVSX in 1929. Actually I don’t know any. It wasn’t until probably the 1980’s that mutual funds became the primary investment vehicle people used to invest.
I think your last paragraph states it best: “I know more people who have made overall better returns getting LUCKY buying a few individual stocks”. Luck isn’t the way I want to run my practice. I don’t want to be lucky with one or two and unlucky with one or two and call it a day. Because for every one person who got lucky, 5 got unlucky. Those aren’t good enough odds for me. Not everyone has a Captain Dan buying them stock in that fruit company back in the 70’s. [/quote]
We’re not talking about the “average” person. I don’t want to work with “average” people.
Agree completely about the business people. But I was speaking about people who became wealthy by investing, not by doing the other things that get you wealthy. Also agree about the discipline - we can agree on that. The upside of an individual equity disciplined investor IMHO is more than the upside of a mutual fund disciplined investor.
Also, the whole, “for every one person who got lucky, five got unlucky” I think is bullsh!t (pardon my Eyetalian). That’s what brokerage firms tell their employees to make them think there are a ton of people out there that NEED them.
I want to work with the average person. They are the ones who need the help the most and will respect a professionals viewpoint. In my short experience, those with multiple millions always think they can do it on their own or find a better way. That attitude has prevailed for them over time and made them successful, but it makes for a shi**y client.
[quote=Ron 14]
I want to work with the average person. They are the ones who need the help the most and will respect a professionals viewpoint. In my short experience, those with multiple millions always think they can do it on their own or find a better way. That attitude has prevailed for them over time and made them successful, but it makes for a shi**y client.
[/quote] I disagree. That's an excuse for not having clients with money. I actually find that busy, successful professionals (of a certain age) have the maturity and sophistication to see that they can't be their own financial advisor (or CPA, or attorney), and can't imagine having them time or inclination to do it themselves. As for younger, successful people, well, that's up in the air. Many still think they can do it all. They can design nuclear reactors or develop new chemical compounds, so they MUST be able to manage money.[quote=B24] [quote=Ron 14]
I want to work with the average person. They are the ones who need the help the most and will respect a professionals viewpoint. In my short experience, those with multiple millions always think they can do it on their own or find a better way. That attitude has prevailed for them over time and made them successful, but it makes for a shi**y client.
[/quote]I disagree. That’s an excuse for not having clients with money. I actually find that busy, successful professionals (of a certain age) have the maturity and sophistication to see that they can’t be their own financial advisor (or CPA, or attorney), and can’t imagine having them time or inclination to do it themselves. As for younger, successful people, well, that’s up in the air. Many still think they can do it all. They can design nuclear reactors or develop new chemical compounds, so they MUST be able to manage money.
[/quote]
I agree with B24 (of course). I lost count of how many clients I had with less than $20k at Jones who thought they knew better than everybody. Another good reason to leave - leave those guys behind.
Also, I don’t want to surround myself with average people. Average people = average advisor.
Well I am just going by what has worked for me in my short 3 years. I have many more clients in the 100-500k range than I do 1mil and above. 90% of my clients in that range are 35-45 because the area I am in is fairly young. When I run into a 38 yr old who got a 1mil bonus from the hedge fund he works at or because he is a MBS trader they aren’t interested in help because they have all of the answers.
Ron, there are certainly going to be regional variations to everything we do. In my area, the only people that aer in the 35-45 range that have over $1m either inherited it, inherited a business, or have been very, very lucky. I live in sort of an “old world” New England shoreline town. Lots of old money.
That makes sense. I am in a young suburb where very few homes are older than 15 years. The two closest high schools are 5 and 10 years old. The people with more than a million are hedge fund / trading floor guys who rather swing for the fence than put a plan in place.
With things like fishing boats parked at the marina, a lighthouse, fog horns, and big old houses? Stuff straight out of a Steven King novel. Funny, but you don't sound like you have an accent.Ron, there are certainly going to be regional variations to everything we do. In my area, the only people that aer in the 35-45 range that have over $1m either inherited it, inherited a business, or have been very, very lucky. I live in sort of an “old world” New England shoreline town. Lots of old money.
With things like fishing boats parked at the marina, a lighthouse, fog horns, and big old houses? Stuff straight out of a Steven King novel. Funny, but you don't sound like you have an accent. [/quote] You got it. Except the fishing boats have slowly been replaced by yachts over the years. Although I still have a few friends that are lobstermen. Makes for a nice backyard BBQ! "Hey, will someone PLEASE eat the last few lobsters!" So wea' gonna go get some wicked cold beehz and get wicked f***!n drunk. How 'bout them apples? It's sort of Good Will Hunting meets The Perfect Storm meets Dynasty. All rolled into one.[quote=B24]Ron, there are certainly going to be regional variations to everything we do. In my area, the only people that aer in the 35-45 range that have over $1m either inherited it, inherited a business, or have been very, very lucky. I live in sort of an “old world” New England shoreline town. Lots of old money.
Nice. I’ve not been any farther north than DC, but would love to spend some time up there. I had an invite from a former trainee who lived in Cape Elizabeth, ME to come spend some time with him and his family, but he quit before I got the chance. One of these days we’ll make the trip up to that area.
The ME shoreline is beautiful country. It’s really like a different world if you have not spent much time along the east coast (north of NYC). It’s just like they portray it in movies - you know, those goofy stories that always seem to have some goober like Kevin Costner get tangled up with some beautiful recent divorcee, and he wears gay sweaters and she wears long flowing dresses, and it’s always windy? NOT that my wife has ever made me watch one of those with her. Seriously. Guys. I just saw the commercials. Oh Christ, you’ve all had to watch them with your wives TOO! And NO, I didn’t like them. Well, not really. Well, it was just so touching when she found that message in the bottle.
I digress. If you want to do that kind of trip, you should think about a tour of the Canadian island provinces (NB, NS, Newfoundland, PEI). You'll never want to leave.Hate to revive this but, Jones friend of mine in S.C. said they are increasing the fees on the advisory program by 10%(current and future partcipants) because the preffered funds refuse to pay for revenue sharing on assets in the advisory program… Talk about conflict on interest, I knew there was a reason Goldmansachs Growth and Income was in there…
From day 1 we were refunding revenue sharing back to the client anyway, so it's a moot point.
No but the advisory fees are increasing from 1.15(discounted) to 1.25 because the revenue sharing is not in place to deduct from the fees
Revenue sharing was a very minimal amount of revenue in the program (about .01%, actually about $0.83 on every $100,000). I think the idea is that most clients were getting a net credit on their account, now they will essentially break-even. The largest pieces were shareholder accounting credits and 12b-1’s, which will both continue to be credited back to the client (those added up to about 12 basis points) .
ON a net basis, most clients will still receive net credits on their accounts (outside the program fee of 1.35%), but just much less than before. We now also waive IRA fees and TOD fees for Advisory clients.I love how people seem to be able to twist things around. First, according to the release from Weddle, Jones has made the decision to not accept revenue sharing dollars from Advisory Funds. Wasn’t a huge deal anyway because there wasn’t a large percentage of preferred funds being utilized. Who said that it was the fund companies that are refusing to pay revenue sharing?
Second, this is where you might want to check you're buddy's math skills, there will be a 9 basis point admin fee starting in October. Which isn't anywhere near 10% of the full charge. Even if you are discounting, you have to discount down to 90 bps to get to 10%. As far as I can tell it's a 6.6% charge. At the end of the day they'll still not be paying the whole 1.35%. It comes out to be a net increase of $103 a year on a $100K account. That's 1 basis point. Didn't you folks say that revenue sharing was a bad thing? Wouldn't this be a good turn of events for Jones? How do you spin this for a negative? Oh, I forgot. Everything that Jones does is bad. Never mind.[quote=Spaceman Spiff] I love how people seem to be able to twist things around. First, according to the release from Weddle, Jones has made the decision to not accept revenue sharing dollars from Advisory Funds. Wasn’t a huge deal anyway because there wasn’t a large percentage of preferred funds being utilized. Who said that it was the fund companies that are refusing to pay revenue sharing?
Second, this is where you might want to check you’re buddy’s math skills, there will be a 9 basis point admin fee starting in October. Which isn’t anywhere near 10% of the full charge. Even if you are discounting, you have to discount down to 90 bps to get to 10%. As far as I can tell it’s a 6.6% charge. At the end of the day they’ll still not be paying the whole 1.35%. It comes out to be a net increase of $103 a year on a $100K account. That’s 1 basis point.
Didn’t you folks say that revenue sharing was a bad thing? Wouldn’t this be a good turn of events for Jones? How do you spin this for a negative? Oh, I forgot. Everything that Jones does is bad. Never mind.
[/quote]
We all know I’m not a Jones fan - but I wouldn’t see anything wrong with them raising their prices if they were adding any kind of value in that mutual fund wrap.
I interviewed a guy today who was considering Jones. Just so you Jonesies know - I told him you were a good outfit and that if he wanted to take old ladies money, it was a great place to go!
[quote=Spaceman Spiff]I love how people seem to be able to twist things around. First, according to the release from Weddle, Jones has made the decision to not accept revenue sharing dollars from Advisory Funds. Wasn’t a huge deal anyway because there wasn’t a large percentage of preferred funds being utilized. Who said that it was the fund companies that are refusing to pay revenue sharing?
Second, this is where you might want to check you're buddy's math skills, there will be a 9 basis point admin fee starting in October. Which isn't anywhere near 10% of the full charge. Even if you are discounting, you have to discount down to 90 bps to get to 10%. As far as I can tell it's a 6.6% charge. At the end of the day they'll still not be paying the whole 1.35%. It comes out to be a net increase of $103 a year on a $100K account. That's 1 basis point. Didn't you folks say that revenue sharing was a bad thing? Wouldn't this be a good turn of events for Jones? How do you spin this for a negative? Oh, I forgot. Everything that Jones does is bad. Never mind. [/quote] On a net basis, clients will still pay 135 or less. The 9 bips are being netted against the fund accounting reimbursements we get from fund companies (that ALL firms get, which are the same everywhere), which Jones was rebating back to the client accounts. Now, the client won't see much of any credit, as the 9 bips approximates what we get in shareholder accounting credits. So now instead of the client paying 1.26 (1.35 less credits of .09), the client will pay about 1.35 (actually slightly less because they will still get credited for 12b-1's as long as they are not legislated away).Source URL:https://www.wealthmanagement.com/forums/whats-firms/jones-advisoryamerican-funds