No Load Fund

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Sep 16, 2009 11:11 pm
 I had a client ask me about a fund today. Did some research, turns out its a great fund. Called market research and he said, "It's a great fund, in fact its in our Advisory solutions. But you can't sell it, because it's no load and we wouldn't make anything off the front end". I know we are in this to make a little money, but thats a bit shady.
 
So if i feel that a no load fund is great for my client....I have to skip that part of the Jones "Philosophy" about doing what is best for my client...just this time? Only for a minute....Love Jones..but man
Sep 16, 2009 11:22 pm

It's catch 22 but at the end of the day you've got to eat. You'd service that client and not make any money.  I guess he could go to the no-load company, buy the fund, and you could transfer that in but that's some leg work and you are still at square one.  Doing the work and not getting paid.

The good news is if you ever leave Jones you can slap that client into a managed account and give them just what they NEED.

Sep 16, 2009 11:28 pm

Well it has a 1.25 Annual Fee. It's not like i won't be making ANYTHING and It's not like I was putting everything in it. I'd be making money the rest of his portfolio, but when I build a portfolio and if i feel that a portion of his money would do well in a no-load, i should have that right. I could understand if it's risky...but not if it doesn't have a load. Maybe it's me i guess. I'll gladly put someone in a fund, if it doesn't have a load if A). I feel it's appropriate and B). I'm being compensated somehow for the work I do. CD's don't pay anything, but they are appropriate for every portfolio. I try not to think of my compensation until after I build a portfolio...Maybe i'm wrong lol hell i dunno.



Hell i'm not sure what the difference in a no-load fund is and hitting the Million Dollar breakpoint with American Funds lol

Sep 17, 2009 12:05 am

The difference at hitting the million dollar breakpoint with american funds is that you still gross 10K, plus the american funds expenses will be half that of the fund you mentioned.  It is not shady that Jones does not offer that fund as a retail fund.  You deserve to be compensated for your work.  If the client comes to you will some no load fund with a great 1, 3 year track record, talk to him about modern portfolio theory and why one fund will not fit his need.  Sell him on your advisory solutions like you mentioned.  Not only can he get that best in class fund but also many others that all play a role in a well diversified portfolio.  Ask him what his plans are if the fund manager takes off for a big bonus check, will he even be alerted to make a change.  What is the long term track record 10, 20 years.  You can bring a lot of value to him, and if you put him in a managed account, you have a team of people monitoring your account. 

Sep 17, 2009 12:23 am

I didn't need advice on selling to a client. The client just asked about it and It sparked a thought. I was just curious why I couldn't use a no-load fund, if i felt it was appropriate. Believe it or not, there are some wonderful no-loads and it's not going to kill me to put a portion of a clients money in a fund, that I feel has great returns, but is a no load. I am in no way saying that I have a situation that i'm doing this. It's all just curiousity.

 
And I know the difference between a no-load and American Funds million dollar breakpoint....It was a joke.
Sep 17, 2009 1:33 am

Congratulations Ronnie.

After 3 years of lurking in read-only mode, I HAD to register to reply to this.
The scenario you posted was actually a question on my AAMS exam. The right answer was to put the client in the no-load fund if you believed it was in their best interest.
Unfortunately, Jones has no model to offer no-load funds outside of Advisory Solutions, and for good reason. No-load funds offer no means of compensation for the broker or his firm.
Fortunately there are plenty of areas where things align properly and we can do what's right for the client while actually getting paid for our service. You mentioned the no-load fund has a 1.25 expense ratio. Thats a bit steep for a product that pays the broker nothing. As a LA Broker stated, take a look at the bigger picture, as one fund does not make a portfolio.
Sep 17, 2009 7:31 am
Ronnie Dobbs:

Well it has a 1.25 Annual Fee. It's not like i won't be making ANYTHING and It's not like I was putting everything in it. I'd be making money the rest of his portfolio, but when I build a portfolio and if i feel that a portion of his money would do well in a no-load, i should have that right. I could understand if it's risky...but not if it doesn't have a load. Maybe it's me i guess. I'll gladly put someone in a fund, if it doesn't have a load if A). I feel it's appropriate and B). I'm being compensated somehow for the work I do. CD's don't pay anything, but they are appropriate for every portfolio. I try not to think of my compensation until after I build a portfolio...Maybe i'm wrong lol hell i dunno.



Hell i'm not sure what the difference in a no-load fund is and hitting the Million Dollar breakpoint with American Funds lol





Not sure, but from your post you think you would makes some of that 1.25%. You won't. There are no 12b-1 fees associated with no-loads.

Sep 17, 2009 10:11 am

We wouldn't have a selling agreement with that fund family, no matter what no load family it is.  My understanding is that you have to have that in order to be able to offer the fund to your clients at the retail level.  It has nothing to do with Jones not wanting you to do what it right for your client, but rather just the way the industry runs. 


If we can hold it in firm name outside of Advisory, just tell him to open a Schwab account or a Scottrade account, buy it there, then transfer it to your office. 
 
What fund is it?
Sep 17, 2009 10:22 am

Ronnie - you should get paid for helping your clients. This is not a not-for-profit business. Advise him to buy a similar fund from a firm that your firm has a selling agreement with.



I would also like to know what fund it is, why you think it is good, and why the expenses are 1.25%.



Also, to parse words with Spiff (because it's been so long since I have ), it isn't the way the financial services industry runs, but the way the brokerage industry runs.

Sep 17, 2009 10:47 am

Nobody provides no-loads for free.  RIA's charge for them.  B/D's charge for them inside wrap accounts, and Jones charges an advisory fee inside their wrap account.  Every firm doesn't offer every fund in the world for a commission, or even for a fee.  I suggest you get over it.

Sep 17, 2009 10:52 am
B24:

Nobody provides no-loads for free. RIA's charge for them. B/D's charge for them inside wrap accounts, and Jones charges an advisory fee inside their wrap account. Every firm doesn't offer every fund in the world for a commission, or even for a fee. I suggest you get over it.





Wind or me?

Sep 17, 2009 11:11 am

Hah!!  No, I was talking about Windy.  I guess I should have "quoted" him.  Sorry to confuse.

Sep 17, 2009 11:14 am

And I agree, there are plenty of great no-loads out there, as well as load funds.  If that one no-load is the only fund that's appropriate, then he's not looking very hard.  It's probably a "boutique" fund family, not a Vanguard/Fidelity/etc.  There are a lot of great no-load small-cap funds out there that I would love to use.  Someday.....

Sep 17, 2009 11:43 am

You guys are all acting like this is a client iwanting this fund, or i'm allowing a client to not pay me, or acting as if i'm throwing some sort of fit over this whole deal. None of those are true. I had a client who wanted some research on a fund, I got it and was told we couldn't offer it. I was just sparking a interesting topic is all. I keep hearing, "You should be paid for your service". I've already said I am. What person in their right mind would offer ONLY no-load funds. I'm just simply stating if i build a portfolio and a small portion fits better in a no-load fund, than a load fund, I should be able to chose that. You are forgeting the Bonds,UIT's,CDS, and other mutual funds that the portfolio might have in it. I guess I don't mind just doing what i feel is best for the client, whether I get paid or not.

Sep 17, 2009 12:25 pm
Ronnie Dobbs:

You guys are all acting like this is a client iwanting this fund, or i'm allowing a client to not pay me, or acting as if i'm throwing some sort of fit over this whole deal. None of those are true. I had a client who wanted some research on a fund, I got it and was told we couldn't offer it. I was just sparking a interesting topic is all. I keep hearing, "You should be paid for your service". I've already said I am. What person in their right mind would offer ONLY no-load funds. I'm just simply stating if i build a portfolio and a small portion fits better in a no-load fund, than a load fund, I should be able to chose that. You are forgeting the Bonds,UIT's,CDS, and other mutual funds that the portfolio might have in it. I guess I don't mind just doing what i feel is best for the client, whether I get paid or not.

 
To me this is more of an argument about platforms.  Jones does what is in the best interests of their clients within their stated model. We are a transactional business model.  Selling no-loads does not generate revenue but it does add cost. 
 
There are of course other models that address your concern.
Sep 17, 2009 12:31 pm
Moraen:
Ronnie Dobbs:

Well it has a 1.25 Annual Fee. It's not like i won't be making ANYTHING and It's not like I was putting everything in it. I'd be making money the rest of his portfolio, but when I build a portfolio and if i feel that a portion of his money would do well in a no-load, i should have that right. I could understand if it's risky...but not if it doesn't have a load. Maybe it's me i guess. I'll gladly put someone in a fund, if it doesn't have a load if A). I feel it's appropriate and B). I'm being compensated somehow for the work I do. CD's don't pay anything, but they are appropriate for every portfolio. I try not to think of my compensation until after I build a portfolio...Maybe i'm wrong lol hell i dunno.

Hell i'm not sure what the difference in a no-load fund is and hitting the Million Dollar breakpoint with American Funds lol



Not sure, but from your post you think you would makes some of that 1.25%. You won't. There are no 12b-1 fees associated with no-loads.

Moraen:

There are several No Load funds that pay 12b-1 fees. According to Morning Star over 700 funds that are No Load that pay 12b-1 fees. Below are two that I know of.


Look at Artio Global Equity (BJGQX) and Artio Total Return Bond (BJBGX).


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Sep 17, 2009 12:36 pm

By the way. The fund that the client wanted research on was the Fairholme Fund. I just looked. I read it wrong, it was 1.02% Annual Fee.

Sep 17, 2009 1:23 pm

Fairholme is a good fund.

 
And Windy, stop being so damn defensive.  You are a like a little girl sometimes.
 
One last thing - you state "I don't mind doing what is best for the client, even if I don't get paid for it".....that's called pro-bono work.  That is not a sustainable business model.  Doing the right thing for the client does not mean working for free.  It means doing what is right for the client and getting paid fairly to do it.  How many CPA's say "you know what, I just want to do the best job I can on your tax return, whether you pay me for it or not."
Sep 17, 2009 1:24 pm
JackBlack:
Moraen:
Ronnie Dobbs:

Well it has a 1.25 Annual Fee. It's not like i won't be making ANYTHING and It's not like I was putting everything in it. I'd be making money the rest of his portfolio, but when I build a portfolio and if i feel that a portion of his money would do well in a no-load, i should have that right. I could understand if it's risky...but not if it doesn't have a load. Maybe it's me i guess. I'll gladly put someone in a fund, if it doesn't have a load if A). I feel it's appropriate and B). I'm being compensated somehow for the work I do. CD's don't pay anything, but they are appropriate for every portfolio. I try not to think of my compensation until after I build a portfolio...Maybe i'm wrong lol hell i dunno. Hell i'm not sure what the difference in a no-load fund is and hitting the Million Dollar breakpoint with American Funds lol

Not sure, but from your post you think you would makes some of that 1.25%. You won't. There are no 12b-1 fees associated with no-loads.

Moraen:



There are several No Load funds that pay 12b-1 fees. According to Morning Star over 700 funds that are No Load that pay 12b-1 fees. Below are two that I know of.



Look at Artio Global Equity (BJGQX) and Artio Total Return Bond (BJBGX).



<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />





I stand corrected. Eating my crow now.

Sep 17, 2009 1:53 pm
Moraen:
JackBlack:
Moraen:
Ronnie Dobbs:

Well it has a 1.25 Annual Fee. It's not like i won't be making ANYTHING and It's not like I was putting everything in it. I'd be making money the rest of his portfolio, but when I build a portfolio and if i feel that a portion of his money would do well in a no-load, i should have that right. I could understand if it's risky...but not if it doesn't have a load. Maybe it's me i guess. I'll gladly put someone in a fund, if it doesn't have a load if A). I feel it's appropriate and B). I'm being compensated somehow for the work I do. CD's don't pay anything, but they are appropriate for every portfolio. I try not to think of my compensation until after I build a portfolio...Maybe i'm wrong lol hell i dunno. Hell i'm not sure what the difference in a no-load fund is and hitting the Million Dollar breakpoint with American Funds lol

Not sure, but from your post you think you would makes some of that 1.25%. You won't. There are no 12b-1 fees associated with no-loads.

Moraen:


There are several No Load funds that pay 12b-1 fees. According to Morning Star over 700 funds that are No Load that pay 12b-1 fees. Below are two that I know of.


Look at Artio Global Equity (BJGQX) and Artio Total Return Bond (BJBGX).


<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" /> 



I stand corrected. Eating my crow now.

 
Still think Drew Barrymore is disgusting?