Small account - would like advice

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Dec 16, 2006 1:34 am

First off - I am not a broker and apologize if I am not welcome here.

I recently found out that all the funds my Edward Jones rep has recommended to me were in their "preferred family" of funds and I feel that he has been less than honest with me. He has my Roth IRA ($33,000) and I intend to transfer it, but have no idea where.

I am leaning toward T. Rowe Price, but I wonder if it would be worth my time to go to my local bank and inquire about any financial planning they offer.

I am at a loss as to where to go, and wonder what the professionals would advise a person with a small account.

Thank you very much for your time.

Dec 16, 2006 1:58 am

Avoid the bank, any "advisor" there is just selling mutual funds or fixed annuities. He or she didn't make it somewhere else. TRP is fine if you don't play too much and want to do it on your own for a few years. Get it up to 50k and then get a referral for an advisor.

Dec 16, 2006 8:11 am

I'm guessing that he sold you $33,000 of "A" shares in a fund family like American Funds.


The fact that they were "preferred" is not a bad thing.  It may have been a very appropriate investment for you.  A long term investment in an "A" share mutual fund is a very inexpensive way to invest.  


If he hasn't been honest with you, that is a different issue, but it is probably still not in your best interest to make a change.  Your annual expenses on this account (depending on the exact mix of investments) may be under .6%.


  He is not making any money from your account.  (His ongoing quarterly compensation from this account is probably $33,000 x .0025 x .4 x .25 =$8.25.  Unless you have significantly more money to invest, you most likely won't find an honest broker willing to handle your account.  Why?  It is in your best interest to stay in the same fund family.  An honest broker will tell you this and nobody can afford to open an account for $8 in quarterly compensation.


You could, like you mentioned, move over to a no-load family like T. Rowe, but there is no advantage to you.

Dec 16, 2006 9:04 am

It probably is not a matter of honesty. Those poor chaps don't know any

better. If they don't sell the preferred funds they will feel the heat. Ask to

speak to his branch manager and see what he/she says. Seriously, I would

be surprised if you did not buy American Funds (since 85% go to this one

fund family at Jones) and if so then you are o.k.

Dec 16, 2006 9:36 am

I would pick Fidelity Investments over TRP. They have a better website, more products and better service than TRP. Morever there's a good chance they have a Branch in your area. There sales reps. are not pushy and are not commission based. My .02

Dec 16, 2006 9:42 am

Who cares if they were preferred or not mr. investor. Have they served you well? Who even cares if he told you if they preferred. That doesn't even matter. Have they done. Do you feel is a good honest guy. All firms have "preferred Funds" even on the independent side. Get over that notion.


Btw, it will be tough to find anyone who wants to "manage" your small acct. If he's a goood honest rep, you're lucky he returns your phone calls. Stick with him.

Dec 16, 2006 12:02 pm

Just because the funds are on the EJ preferred list does not mean that they are not good funds.  In fact , my guess is that every fund family on the EJ preferred list is a very solid company.  People on this board gripe about the preferred list because, as professionals, they would like more choices when providing solutions to clients.


It's o.k. if you dont like your advisor but I would tell you to be straight with him and then explore all the options within the fund family that you are already invested in.  To move to a direct fund company (TRP, Fido etc.) you are going to lose the load you already paid just to do an allocation that you most likely could have completed with your present fund company.  You will not incur any charges to re allocate where you are now.

Dec 16, 2006 12:15 pm

Not sure what your gripe is..I work at EDJ's...DON'T drink the Kool aid..and use American funds as my number 2 fund family.  Believe me..the hype of preferreds are WAY over blown.  The person who benefits the most from the preferreds are the GP"S...not the broker.  The GP's are our problem, under educated and overly compensated.  But if your mad about Revenue sharing...you couldn't go very many places and get any better...no load to me means little advice unless you use in a wrap situation.  If I were you, I'd work more on getting more than 33k into my roth and less on the Very small compensation this broker gets on putting you into one of the biggest and most successful fund company's..American Funds.  My .03.  The world would be a better place with larger Roth balances and less GP's!!!

Dec 16, 2006 8:53 pm
williebrown:

First off - I am not a broker and apologize if I am not welcome here.

I recently found out that all the funds my Edward Jones rep has
recommended to me were in their "preferred family" of funds and I feel
that he has been less than honest with me. He has my Roth IRA
($33,000) and I intend to transfer it, but have no idea where.
I am leaning toward T. Rowe Price, but I wonder if it would be
worth my time to go to my local bank and inquire about any financial
planning they offer.
I am at a loss as to where to go, and wonder what the professionals would advise a person with a small account.

Thank you very much for your time.





After the big hit from the sales load, the on going expenses are
usually quite reasonable and dividends are reinvested into new A shares
without the sales load taken out. Chances are the fund(s) chosen are a
good fit for your situation.



Fundamentally stockbrokers are in the business of selling (brokering)
securities. Payment is based upon the sales of securities, and
everything else is purely incidental.



If your relationship with the broker has been hopelessly damaged, but
you still want personal service, you can ask to have your account
transfered to a different broker within the company.



If you transfer your account to T rowe Price, I would suggest
purchasing their target date retirement funds. These are designed to be
a complete investment program in one fund, requiring no further effort
on your part. For 95% of investors, investing for retirement, these
funds are the correct choice.



TROW target date funds tend to be a bit too heavy on stocks for my
taste. So I would probably stick about 5-10% into PRIPX "T. Rowe Price
INFLATION-PROTECTED BOND", and the remainder into the correct target
date fund.



My $0.02




Dec 16, 2006 8:57 pm
derekgaddy:

I would pick Fidelity Investments over TRP. They have
a better website, more products and better service than TRP. Morever
there's a good chance they have a Branch in your area. There
sales reps. are not pushy and are not commission based. My
.02





My guess is that all this man needs is a target date fund, Fidelities funds are as good as any.



Don't the other discount brokers (Scottrade/Ameritrade/Schwab etc) have
non commission reps that could put him into a target fund with a bit of
hand holding?

Dec 16, 2006 11:03 pm
AllREIT:
williebrown:

First off - I am not a broker and apologize if I am not welcome here.

I recently found out that all the funds my Edward Jones rep has
recommended to me were in their "preferred family" of funds and I feel
that he has been less than honest with me. He has my Roth IRA
($33,000) and I intend to transfer it, but have no idea where.
I am leaning toward T. Rowe Price, but I wonder if it would be
worth my time to go to my local bank and inquire about any financial
planning they offer.
I am at a loss as to where to go, and wonder what the professionals would advise a person with a small account.

Thank you very much for your time.





After the big hit from the sales load, the on going expenses are
usually quite reasonable and dividends are reinvested into new A shares
without the sales load taken out. Chances are the fund(s) chosen are a
good fit for your situation.



Fundamentally stockbrokers are in the business of selling (brokering)
securities. Payment is based upon the sales of securities, and
everything else is purely incidental.



If your relationship with the broker has been hopelessly damaged, but
you still want personal service, you can ask to have your account
transfered to a different broker within the company.



If you transfer your account to T rowe Price, I would suggest
purchasing their target date retirement funds. These are designed to be
a complete investment program in one fund, requiring no further effort
on your part. For 95% of investors, investing for retirement, these
funds are the correct choice.



TROW target date funds tend to be a bit too heavy on stocks for my
taste. So I would probably stick about 5-10% into PRIPX "T. Rowe Price
INFLATION-PROTECTED BOND", and the remainder into the correct target
date fund.



My $0.02






All of you should be very careful about rendering any specific advice to a gentleman whom you do not know on a bulletin board that is essentially open to the public.  Food for thought...

Dec 17, 2006 11:38 am

williebrown,



One in three dollars invested in mutual funds in 2005 went into
American Funds. Brokers from all around are using american funds. They
are preferred b/c EDJ and american have had a long standing
relationship and obviously EDJ pushes for their brokers to use them b/c
they are great funds. EDJ has limited choices to make it easier for
their brokers to mess up as least as possible.

Dec 17, 2006 10:06 pm

When the whole revenue sharing fiasco broke, luckily I had used American for about 75% of my book.  After I explained to clients that if I was trying to squeeze an extra buck out of them, I would NOT even mention American Funds. They hit breakpoints earlier, their payout is lower, and they don't pay trails for 13 MONTHS!  And, the revenue sharing number is the lowest of all the preferred funds.


After showing clients that if I had put them in AIM, Columbia, Scudder, Oppenheimer, etc. (ie, any non-preferred fund), the trails the first 13 months would make me more than the stupid revenue sharing from American, the clients usually understood that I wasn't trying to screw them.


To me, the fact that with all those financial negatives to the broker, they are still Jones's #1 fund family, means that the vast majority of Jones is trying to do what is right for the client. 

Dec 18, 2006 1:38 am
now_indy:

To me, the fact that with all those financial negatives
to the broker, they are still Jones's #1 fund family, means that the
vast majority of Jones is trying to do what is right for the
client.





By protecting the client from better fund choices?

Dec 18, 2006 11:38 am

williebrown,


Everyone here is assuming you are in American Funds, because that is the bulk of EDJ business.  If your are, then you are invested with one of the world's premier money managers and your broker did the right thing.  IMO, they are far and away superior to EDJ other preferred funds (and pay the least), and the case can be made that they are the most consistently performing of all fund families (I am looking for a different fund family that I can invest with the same level of confidence, but have yet to find one).


If you are NOT with American Funds, then your broker was probably influence by either the higher preferred family payout, or bought into the EDJ propaganda that brokers should "diversify" their own book of business by using other preferred vendors.       

Dec 18, 2006 12:11 pm
AllREIT:
now_indy:

To me, the fact that with all those financial negatives to the broker, they are still Jones's #1 fund family, means that the vast majority of Jones is trying to do what is right for the client.



By protecting the client from better fund choices?


I didn't say that they ARE doing the right thing for the client, I said they are TRYING to do the right thing for the client.  As for better fund choices, that can be debated. I happen to think American Funds are very good.


I just meant that a lot of people (including some of the press) made it sound like Jones brokers were trying to screw the client to make an extra buck. The fact that American is the #1 fund family at Jones (by far) proves this to be incorrect.

Dec 19, 2006 12:13 am
now_indy:

[quote=AllREIT][quote=now_indy]To me, the fact that
with all those financial negatives to the broker, they are still
Jones's #1 fund family, means that the vast majority of Jones is trying
to do what is right for the client.[/quote]

By protecting the client from better fund choices?
[/quote]

I didn't say that they ARE doing the right thing for the client, I
said they are TRYING to do the right thing for the client.  As for
better fund choices, that can be debated. I happen to think American
Funds are very good.


They are good, but its a limited toolset from which to work off of.
Still, no one is going to too far from wrong with American Funds, but
it is still a limited toolset. Which means that you cannot provide the
best standard of service


Firstly, they don't have target date funds. To me that is a big
turn-off. If you have small accounts these are good because they
require no input from you. This is important cause small accounts can
grow to be large accounts.


They don't have a TIPS/Real Return fund.  Also a big turn
off,  I think TIPS are a critical part of  diversified
portfolio, plenty of good research showing TIPS diversify both stock
and bond risks.


They don't have a REIT fund.


I would say most investors are underexposed to TIPS, junk and REITs.
So when I build portfolio's the core is a target date fund, to which I
add side allocations of TIPS, junk and hand picked REITs. It used to be
that you could just invest in a REIT index, but most REITs are so
dangeriously overvalued, that that is unsafe these days.

Dec 19, 2006 10:35 am

American Funds have great investment options-but they arent the godsend that some FA's claim them to be. I would put any of Tom Marsico's LC Growth funds against Growth Fund anyday. I'll also take Chris Davis versus Washington Mutual or ICA any day. Give me Dan Fuss over Bond Fund or Income Fund.. How about Janus International Growth over Europacific... Blah blah blah...


Point is, there are better options out there but most FA's are lazy and stick with AF's.... I had a 500K producer tell me once that he uses AF's because they "are an easy sell".... Yeah thats great, and they are, but is that truly the best option for the client? Most FA's just plug in AF's and let it go.


I feel the trus value we can bring to the table is being able to sift through the myriad of managers out there and find those managers who consistently add alpha, ultimately ending in higher account values than one would see with AF's......

Dec 19, 2006 10:54 am

I dont know how EdJ is set up. But I will tell you in the past I focused on one or two fund families. After all there are too damn many of them out there . I don't know the broker who you are working with but I can tell you that with the amount of money you brought over , I PROBABLY would have done the same thing as him. Which is allocate you in a nice mix of funds. Keep investing and you will be fine

Dec 19, 2006 10:58 am

No fund is "godsend" they can all turn to s---. I'm not positive but
the funds you named have big min investments. Like the Janus Int Growth
is 500,000. While at American its 250. Yes for the past 5 yrs janus int
has done 18+ %. The europacific is about 15 or 16. The difference also
can be looked at with fees. After you take your fee-based and your
higher trails you are probably not adding alpha like you think. One
reason AF is well liked is b/c they keep their costs down. And for the
record I'm not a big fan of Washington Mutual.  ICA is great
though. I don't understand why someone picking AF is lazy. I've talked
to several brokers from different firms. They like them b/c they know
they are good and have had good success in the past. I could see that
you would like to offer something else to a client though instead of
what everyone else is recommending.