LOAD vs NO LOAD

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Jun 12, 2006 10:44 pm

I'm brand new to the industry and while prospecting, I keep running into people who are turned off by EDJ because we don't offer no load funds.  It seems wherever you look (whether its Suze Orman or the Schwab commercial every 5 minutes) everyone is saying "Say no to loaded funds!".  How have you guys dealt with this, and what input do you have on the topic...

Jun 13, 2006 9:09 am

Stuckatjones - study up on how to overcome this objection!<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />


No loads are distributed to the consumers via magazines, TV, Orman, etc.  Loaded funds are distributed through us financial professionals.  That's why we get a commission to distribute them to our clients.  The commission (or load) is charged to the customer and paid to you - not the fund company.  Both load and no-loads make money via their internal expenses.


People like Orman and Oprah tell people not to pay the 'unnecessary' expense of a commission when they can simply go directly to the fund company (or no-load).  What O & O don't tell them is how they're supposed to make an intelligent decision on what to buy, or how to allocate their dollars between the hundreds of funds that are out there.  That's why financial advisors get paid - not just to distribute mutual funds - but also to actually counsel people on making right decisions.


Remember - I don't sell things to people; I help people buy things and make good decisions about their finances.

Jun 13, 2006 10:21 am

Any body who works for Jones knows all about how to accept "loads"

Jun 13, 2006 10:56 am
apprentice:

 That's why financial advisors get paid - not just to distribute mutual funds - but also to actually counsel people on making right decisions.

Remember - I don't sell things to people; I help people buy things and make good decisions about their finances.



Exactly.  We get paid for advice, for comprehensive financial planning.  If all you do is sling American Funds at everyone that sits down in your office, then you're simply a product pusher, the last rung in the chain of distribution (who is easily replaced by no-load funds).


I usually respond to this objection by asking them if they ask the same question to their doctor, dentist, attorney, etc... and ask if they should be paid for services rendered.  Of course, none of them would treat any of those professionals that way.  If they continue on this course and seem to be "do it yourself" type of clients, then I don't typically pursue their business.  It will be a never ending battle. If you can't sell them on the fact that they are paying for your professional advice and planning, then show them the door before they become a headache client.


Just think if there were widespread advertisements and media propaganda telling the public to stop paying their medical and legal professionals, that they could just "do it themselves" and avoid paying the high cost of seeing those professionals.  It would be an absolute joke. 


We need to stand up for ourselves and address the objection right away in the appointment and establish that we are FULL service advisors who get paid for our time and advise.  They should feel priveledged to have the opportunity to take your time with their questions/concerns about their finances. 


Of course, much of this depends on your presentation and office decor.  If your client rolls into the office wearing shorts and a tshirt, and is still sucking his soda from the Subway shop, you're obviously not getting any respect from that client.  If they show up in business casual or at least slacks/nice shirt (something they'd wear to church), then you're good to go.  I've noticed this with many of my retiree aged clients... they'll come sit down with a tie on, like they would at their attorney's office. 

Jun 13, 2006 11:59 am

Actually there is no such thing as a load fund. There are funds that impose a sales charge to cover marketing and distribution cost. These funds are distributed through professional financial advisors who are compensated by the sales charge. The sales charge is merely a distribution cost option. Yet, some very clever advertising executive, bought and paid for by none other than John Bogle, was employed to come up with a way to elevate Bogle's Vanguard Group. This executive could have come with "Where's the beef?" or "Tastes great, less filling" but instead came up with the word "load" to best describe the competition's funds. Load as in burden. The ad campaign's message was clear; Forget investment process and make the investment decision one dimensional, based only on cost. It was brilliant and no doubt Bogle underpaid the ad agency whiz kid, just as he did his managers and analyst (Yeah, I'm just a little cynical). As for the term "LOAD", that the competition uses this derogatory advertising term to describe its own product is priceless.


A side note, Bogle had a heart transplant about ten years ago. Do you think cost entered into his decision on what surgeon to use?


Load versus no load is a pricing option. It's help versus no help. Only the client can judge whether you're worth the money. It's your job to make sure you are worth the money and not just flinging funds at them.

Jun 13, 2006 2:17 pm

I have always kept a copy of Suze's book, The 9 Steps to Financial Freedom. If clients/prospects bring either her name or Oprah's, I grab the book off the shelve and read them Suze's 'Resume'- located on the inside back panel.


Suze was a waitress in a coffee shop until she got hired at Merrill Lynch as a broker in 1980. She  borrowed money from her mother to 'dress the part of a broker and wear diamonds' so she looked like she 'had money'. She was at Merrill a whopping three years. Then she went to Prudential-Bache in 1983. She spent a whole FOUR years there. She then went Independant and soon after began writing Books. So she doesn't manage anybody's money anymore.


Since she now relies on sale of Books, tapes, calendars, etc. to make money- oh and she is often on Oprah-who also makes alot of side money on books, tapes, etc. where do you think her motivation for no-load funds are?


Total it up. 7 Years working for two firms. Admittedly was a phoney. Now relies on books and talk circuit to make money. If you have a financial advisor you are happy with, you won't buy her books. If Oprah doesn't feature a little controversy on her show, no one watches.


There are roughly 18,000 mutual fund families out there. How do you want to decide where to put your money?

Jun 13, 2006 2:39 pm

Well said, muny...

Jun 13, 2006 2:49 pm

Well said everyone...

Jun 13, 2006 3:31 pm

STL, TJC, and Muny-


great posts....

Jun 13, 2006 4:29 pm

Glad to see a Jones potential customer know the difference between the two.

Jun 13, 2006 4:59 pm

I used a visual aid to get the point accross to the clients on how many mutual funds are out there.


Cut up the mutual funds quote page of the WSJ into columns.  It will take several days worth to be able to do this because the colums are on the backs of the pages to each other.  Tape them end to end alphabetically and when the client questions how hard it is to pick just the right fund......roll that out for them.  You will be surprised at how many FEET of columns you have!!


"So Mr. Client my job is to do the research for you and help pick the most appropriate investment/mutual fund among all the funds out there, to fit into your portfolio and help you meet your goals.  Or you could just call an 800 number and have someone on the other end of the phone who doesn't know you pick a fund for you."  Unroll the column and suggest that they pick one from the list  or......just maybe they should trust that you are worth getting paid to do the work.

Jun 13, 2006 8:12 pm

some excellent responses to no load funds objections. Take note Stuck at Jones. By the way...why do you keep asking questions like these on here when you can call a vet up on the phone and talk with them?

Jun 14, 2006 8:22 am

You could also reminf them that these are the same people who recommend
"index" mutual funds.  Then pull out a hypo of the S&P from
March 2000-2003 and compare with a diversified quality portfolio over
the same period.  I believe the S&P will show a 41%
drop.  Even with AF you can show a very small drop and a HUGE
difference between "managed" and "unmanaged".

Jun 14, 2006 10:10 am
babbling looney:

I used a visual aid to get the point accross to the clients on how many mutual funds are out there.


Cut up the mutual funds quote page of the WSJ into columns.  It will take several days worth to be able to do this because the colums are on the backs of the pages to each other.  Tape them end to end alphabetically and when the client questions how hard it is to pick just the right fund......roll that out for them.  You will be surprised at how many FEET of columns you have!!


"So Mr. Client my job is to do the research for you and help pick the most appropriate investment/mutual fund among all the funds out there, to fit into your portfolio and help you meet your goals.  Or you could just call an 800 number and have someone on the other end of the phone who doesn't know you pick a fund for you."  Unroll the column and suggest that they pick one from the list  or......just maybe they should trust that you are worth getting paid to do the work.



BL, great post. I'm getting my scissors out and trying not to cut myself while I do this.

Jun 14, 2006 1:31 pm

ready2jump, load vs no-load has nothing to do with managed vs. unmanaged.


I just care if my prospective client wants help or not.  They can go with a no-load fund with me.  I just tell them that I'll be charging them a fee instead of a commission.  Whatever they prefer is fine with me.

Jun 14, 2006 6:20 pm

Ano,


I know... my point was to "remind them these are the same people..", not to say no-loa  d is unmanaged.  The S&P 500 index is not managed. 

Jun 15, 2006 1:23 am

A couple ideas:


    -Most of my high net worth clients started out running their own show, but when their portfolio value was high enough, having a second set of eyes on their portfolio made them feel better when they were out of town on vacation.


    -Being cheap doesn’t make it right


    -Who will help your wife when you are gone?

Jun 15, 2006 5:05 pm
rankstocks:

A couple ideas:


    -Most of my high net worth clients started out running their own show, but when their portfolio value was high enough, having a second set of eyes on their portfolio made them feel better when they were out of town on vacation.


They HAD to run their own show, you kept pulling out the Putnam Jelly bean chart... good thing they transfered to me- and you are right- now they feel MUCH better !!!


    -Being cheap doesn’t make it right


That's just what I keep thinking about you!


    -Who will help your wife when you are gone?


Probably the same guy that helps YOUR wife when you are gone...why do you think she's smiling when you come home?


 

Jun 15, 2006 5:10 pm
rankstocks:

A couple ideas:


    -Most of my high net worth clients started out running their own show, but when their portfolio value was high enough, having a second set of eyes on their portfolio made them feel better when they were out of town on vacation.


    -Being cheap doesn’t make it right


    -Who will help your wife when you are gone?



They let you watch their portfolio while they were out of town? Did they leave you the keys to the house and ask you to water the lawn and pick up the dog poop too?

Jun 16, 2006 7:06 pm

I totally agree w/everyone's response. With people like Orman, Bob Brinker etc., they all rip no loads apart NOW, but when they were doing what we do and depending on load funds to eat and have a roof over their head, we all know they were selling them.


If I was being paid 6-7 figures+ per year by a media outlet per year and I wasn't on the selling side, I also might feel different. There are plenty of load funds out there that outperform no-loads.


In the the case of Bob Brinker, we used to be able to go to his website and listen to previous shows for free. Now, one must pay 4.95/month for that service, Moneytalk on-demand. He talks about it all the time. Well, as far as I'm concerned he's now charging a load and making a nice piece of change for making previous shows available for a PRICE. There is your analogy.


Susie Orman cashes in nicely every time one buys her book. They are paying a load. If you go to the store and buy deodorant, you are paying a load.