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Sep 11, 2007 8:59 am

I was reading the posts in the rookies and training section from spaceman regarding Jones and how they do business.  I am a 6 year Jones vet (still there) and can tell you from experience in my town that there are some very crooked Jones brokers out there.  We have 3 guys in my region moving all assets from funds to managed money.  Even if they only held the funds for a year or two, they are still moving the money.  There are crooks at every firm, Jones is just the most hypocritical about it.  I've spoken to compliance about why we let these people move all their assets to managed money when it's obviously done for the money.  They are basically letting these guys hang themselves.  In my opinion they should be terminated.

Sep 11, 2007 10:02 am

SIG:


Managed money is a different animal that the mutual funds that you were taught to sell.  You might have an ICA account around for 20 years but a managed account may only stay around 4.  It looks like easy money but it took me four years to figure it out.


As for cost even at 3% on Managed money, it is very competitive to the cost of running the average G&I Mutual Fund at 3.14%.  The prospectus gives you the management fees but not the trading costs.  I am fortunate to clear 1% on assets after discounts and other fees that are charged against me. 


IndyEDJ

Sep 11, 2007 10:46 am

What managed money are you talking about?  MAP accounts?  You have to have $500K+ to move any money to MAP.  I can't imagine that the 3 other FAs are able to move all of their accounts to MAP.  Maybe some, but not all. 


I don't know who your FSD is, but I can't imagine the wires I would get if I started moving clients into MAP after just paying the load less than 2 years ago.


At the end of the day it doesn't matter what happens in those other Jones offices.  You need to run your office the way you see fit.  Just like investing, you focus on controlling what you can control.  Nothing else. 


Finally, I disagree that Jones is hypocrital about crooked FAs.  In fact I think it's just the opposite.  I think they are hypercritical in most instances of even the most honest FA.  We don't get away with half the stuff people at other firms do.  Case in point, a few months ago I lost a large annuity sale to a bank broker.  He sold the prospect an annuity like I would have done, but it was a B share.  $500K B share annuity.  Tell me that would have happened at Jones.

Sep 11, 2007 10:55 am

" At the end of the day it doesn't matter what happens in those other Jones offices.  You need to run your office the way you see fit.  Just like investing, you focus on controlling what you can control.  Nothing else. "


It can take years of working in this business to really understand what you say here - on many levels. Jones is an ethical outfit that is tightly focused on a market demographic.


The hpocracy always resides with the individual - we're all hypocrites trying to be better people, and my observation about the Jones people I see around is that they think for themselves and the company is doing the right thing for clients in a balanced way, with plenty of choices.

Sep 11, 2007 7:38 pm

Spiff:


My bad.


I was referring to how long it took for me to learn Managed Money in the industry from EDJ to RayJay. 



IndyEDJ

Sep 13, 2007 6:41 pm

Don't believe everything you read as fact.  the Jones threshold for MAP isn't really $500K.  thats the desired size.  $300k is the "publicly stated" bottom line.  I'd heard of guys getting less into it.  However saying that I've also heard that the fees and pitfalls outweigh the positives.  the less money in the account the harder to get the gains.  Also, on the ethics issue, I personally think it has to do with the reigon you are in.  With all the expansion they have pushed more and more responsibility into the field, generally into the hands of people not qualified to manage an ant farm.  As a former EDJ'er, I think Jones is a great concept with "some" great people but they have gotten off track and have spread so thin that that business model cannot be reigned in.  They have created too many fifedoms out there and the leadership roles are populated little war lords trying to get noticed by StL.


Ahhh, I feel better, for venting some of that old rust.

Sep 14, 2007 11:20 am

I've never heard anyone say anything other than $500K or more can go into MAP.  I'm not saying you're wrong, but I've not heard it.  I agree that the fees are high.  I don't know how they compare with similar programs at other firms, but I know they are higher than I feel comfortable with.


There isn't ethical management from anyone in the field.  It's not supposed to be run that way.  Each region has a Field Supervision liason, but his job isn't to mandate ethical standards for each FA in his region.  Even the RL doesn't have that responsibility.  That's up to me in my own office.  If I do something that home office (read FSD) views an unethical they call me,  not my RL.  Nobody manages me on a day to day basis.     


Ethics are relative.  What I view as ethical might not be the same as what you view as ethical.  FSD might not agree with either one of us.  Maybe the guys that SIG reffered to don't think moving the money to MAP is unethical.  That's not SIG's call to make.  It's between those FAs and their clients. 


If you want management, go to a wirehouse.  Let the BOM take care of that.  I don't want to be a part of that environment.        

Sep 14, 2007 11:29 am
Spaceman Spiff:

Ethics are relative.  What I view as ethical might not be the same as what you view as ethical.      





Is this what you tell clients?

Sep 14, 2007 11:52 am

AllREIT:


I have to agree with Spiff on this one.  Ethics are shades of gray.  Is it legal to sell your clients $500,000 of C shares?  Yes.  Is it ethical? maybe.  There are many alternatives that might be a better fit for that client.  Still that is a decision that you have to make and you have to look at yourself in the mirror tomorrow morning.  That is ethics.


IndyEDJ

Sep 14, 2007 1:15 pm

I don't think anyone starts out intending to be "less than" completely ethical.  it just happens to them relative to the circumstances and the environment.  A good example of a "set up" is the Jones model.  On paper its a nice system.  Good training, lots of freedom, emphasis on the lowest common denominator investments.  While your the boss, you only get to operate within a narrow bandwidth.  Stated emphasis "always do what is right for the client". Now put that in the real world. They operate on a transactional commission basis, with probably the highest (per advisor) P/L out there. the perks, trips, LP, all are based on being profitable.  Combine that with the fact that humans are inherently a greedy animal and you now have a recipe for disaster.  they actually have less problems than I would expect (or at least less publicized).  Take two reps I know, one has about $25M and is a seg three in the third year.  The other hs $28M and is seg 5 at 3.5 years. You be the judge of who skirts the rules.  Interestingly enough, the one I question is in a leadership role.  It's not the firm, its the bad apples taking advantage of the system.  You are allowed to be bad, just stay within the system.


I'm running on, blah, blah, blah...

Sep 14, 2007 4:38 pm

Should I Go, Listen I was at Jones 14 years--some other things that might have come up during a conversation with the client:


Was the client getting killed on taxes from the distribution captial gains?


The client had to sign a switch letter at Jones to go to managed money.


Just like someone said, mutual fund fees DO NOT INCLUDE the trading costs!  You must get additional info to find what that is.


Being Indy and leaving Jones--I would be the last person to take up for them--however, people going into managed money came from somewhere else first (Stocks, Bonds, Mutual Funds).

Sep 14, 2007 10:34 pm
IndyEDJ:

AllREIT:


I have to agree with Spiff on this one.  Ethics are shades of
gray.  Is it legal to sell your clients $500,000 of C
shares?  Yes.  Is it ethical? maybe.  There are many
alternatives that might be a better fit for that client.  Still
that is a decision that you have to make and you have to look at
yourself in the mirror tomorrow morning.  That is ethics.


IndyEDJ





That's a meaningless criterion. I could take your example to logical
conclusion by citing the case of Adolf Eichmann, who also felt just
fine in the mirror each morning. Personal feelings and self interest
have nothing to do with ethical decision making.



Whats ethical is what is best for the client; based on your sound
professional judgement. It is the same decision that would make for
yourself if you were in the clients position and had the benefit of
your knowledge.


Anything else is suboptimal to the client, and it is not your best advice. It is also unethical.



The fact the legal framework in which brokers operate allows for a
degree of unethical behavior, and that the compensation system
encourages it, is no excuse unethical behavior.








Sep 14, 2007 10:53 pm

The fact the legal framework in which brokers operate allows for a degree of unethical behavior, and that the compensation system encourages it, is no excuse unethical behavior.


You single out brokers. Why not just admit it, with ethics, it always comes down to individual behaviour? What legal framework takes ethics beyond the individual level?


Sep 17, 2007 11:26 am

So, whose job is it to figure out what's in the best interest of the client?  The advisor's?  The client's? 


You might sell him the C shares and not think twice about it because you feel that C shares are appropriate for anyone wanting to invest in mutual funds.  Or you might build him an ETF portfolio with a 1.25% annual fee on it because that's how you run your biz.  Nothing illegal about either case.  And you're ethics meter hasn't moved.  


I might sell him A shares because he can hit substantial breakpoints and save a ton of money over the years because of the lack of the extra expenses.  Again, my ethics meter didn't move.


Now, if we trying to win each other's clients we would both look at the portfolio's the other built and know that what they did wasn't illegal, but the ethics meter would jump astronomically. 


Neither of us can look the other in the eye and say what they did was illegal, but we sure wouldn't see eye to eye on the ethics.  So, seems to me that ethics, as I stated before, are relative.  

Sep 18, 2007 1:54 pm

Neither of us can look the other in the eye and say what they did was illegal, but we sure wouldn't see eye to eye on the ethics.  So, seems to me that ethics, as I stated before, are relative.  


It would be nice to hear back from Allreit on this one. It seems we were getting hung up on the term "relative".

Sep 18, 2007 3:37 pm

It seems to me that if you state the facts to the client, anything is "ethical".  What do I mean by this?  Take A shares, B shares, C shares, and wrap accounts.  Are any of them "unethical"?  NO.  Would it be unethical to sell one over the other by "hiding" one of the options?  Maybe.  Case in point: client comes to you with $XXX,XXX.  There is nothing wrong with any of these approaches as long as you explain the options, or tell them that THIS is how I do business take it or leave it. 


I work for Jones, but I have NO problem with managed money, wrap accounts, etc.  Just because it is cheapest for the client in hard costs (commission, fees), it does not make it the best or most ethical for all concerned.  If I wanted the cheapest oil change I would go to Jiffy Lube or do it myself.  Instead, I trust my independant mechanic that charges 50% more than Jiffy Lube.  That's what he charges.  And you know what, if I want to do business with HIM, that's what I pay.


"Unethical" is hiding the facts (or lying) about surrender charges, performance, fees, etc. to get a sale.  Choosing to do business under a certain model is not at all unethical. 


I just don't see how anyone can charge an entire way of doing business as unethical.

Sep 18, 2007 3:46 pm

I just don't see how anyone can charge an entire way of doing business as unethical.


I don't see why you should have to defend the way you do business, if there is fair disclosure and ethical behaviour.


Interestingly, ethics basically comes from God, so if you get a legalist definition, or argument, like " the structure of RIA eliminates conflict of interest, without regard to ethics, because you can do no wrong for the client that would benefit you ", well, you are basically getting a secular argument, which is fine, but it has little to do with ethics.

Sep 18, 2007 4:18 pm

Interestingly, ethics basically comes from God,


Hardly.  Ethics are codified in law, cultural norms and are what you learn from your parents.  What would be considered ethical behaviour in Saudi Arabia is much different than that in Podunk Idaho or the Gay Area in California.

Sep 18, 2007 4:45 pm

Nice point, babs. Nice to see you here.

Sep 18, 2007 10:58 pm

so how DO you find out the fund's trading costs if they are not published?