Arbitration and The Green Machine

or Register to post new content in the forum

210 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Feb 4, 2008 6:02 pm

Having just gone through the Arbitration Process with Edward Jones, I wanted to share some of the highlights.

 
First, the Arbitration Panel- which in my case consisted of Three Attorneys, was a very comfortable and beneficial process.
 
At one point , the Panelists were asking questions about Edward Jones' infrastructure.
After the GP representing EDJ explained it- several times- the head Arbitrator said "Let me see if I understand correctly.... an Edward Jones broker is required to work really hard to build their own book of business to a level of profitablility  in order to get an offering of Limited Partnership, then must do EXTRA VOLUNTEER work for the firm in order to  MAYBE get an additional offering and then they end up OWING the firm money for their efforts? This has gone on for HOW long?"
 
 
Feb 4, 2008 6:25 pm
 
                                                                     
Feb 4, 2008 8:09 pm
munytalks:

Having just gone through the Arbitration Process with Edward Jones, I wanted to share some of the highlights.



First, the Arbitration Panel- which in my case consisted of Three Attorneys, was a very comfortable and beneficial process.



At one point , the Panelists were asking questions about Edward Jones' infrastructure.

After the GP representing EDJ explained it- several times- the head Arbitrator said "Let me see if I understand correctly.... an Edward Jones broker is required to work really hard to build their own book of business to a level of profitablility in order to get an offering of Limited Partnership, then must do EXTRA VOLUNTEER work for the firm in order to MAYBE get an additional offering and then they end up OWING the firm money for their efforts? This has gone on for HOW long?"







It works for us.

Feb 4, 2008 8:14 pm

And that's why real brokers are so bemused by it all.

Feb 4, 2008 9:49 pm

As an ex-Jonser that is one of the best ways I've seen it put.  Short and sweet, and true.  The LP is really oversold.  Right before I resigned I was offered about $30,000 of LP and everyone thought I was so lucky.  After all, the average return has been something like 18% per year.  Then I thought about outside of the kool-aid jar:  hmmm... I have to BUY this with money I could be using to invest somewhere else.  If I could average 10% in a good mutual fund over the long haul than really it is only a 8% number (yes I know you can borrow for the LP but there is an interest rate).  So on $30,000, that equates to $2,400 per year in extra income for me.  I was grossing about $400,000 when I left so this equates to about 0.5% of my gross and about 1.5% of my net.  Since going indy, my net net effective payout has gone from about 40% to almost 60%, or about $80,000 raise.  Hmm.... $2,400 or $80,000. 


Any EDJ IR that is doing over $250k gross should go Indy...ANYWAY you cut the numbers you are better off... not to mention you have the ability to use appropriate platforms to run your clients money, own your practice, can hire FA's under you, etc....
Feb 4, 2008 11:11 pm

A few questions for Indy4 life.  How long ago did you make the move? How long before you changed the way you did business (fee based)? Have you hired fa's under you and if so could you elaborate ?   Thanks.

Feb 5, 2008 4:25 pm

I am curious about the arbitration process.  Can you go over what got you there?  Did EDJ properly represent you?  How scared were you?  Did you hire your own attorney?

Feb 6, 2008 12:37 am

I've had one in my career. Jones did send a lawyer down to represent the firm. The fa is not named in the suit. That makes it more likely that the firm will settle. We went before one judge. You had their 2 lawyers, the plaintiff and the "expert" on one side of the table. My lawyer and I on the other side. It was unpleasant day and a half. But, their case was ridiculous and in the closing argument their lawyer was pleading with the judge not to make the plaintiff pay for our expenses. We won and the firm didn't have to pay out a dime But, it shows that none of us are immune to this especially in a bad market. The case stemmed from the client losing 7.5% in 2000. Jones paid for everything and handled it well.doubleb

Feb 6, 2008 7:44 pm
doubleb:

... The case stemmed from the client losing 7.5% in 2000. Jones paid for everything and handled it well.doubleb

 
Geesh, all this over a 7.5% loss? 
 
I hope this ex-client spent 20% of his portfolio just bringing the suit! 
 
What a low-life!
Feb 7, 2008 12:41 pm

"Real Brokers?" What is it that makes you a real broker but not I??

Is it the catchy name Philo Kvetch?



As for the LP - let's take a $10M position purchased for $2500, the rest leveraged. That $10M LP paid out $2200 before interest this year. That's rougly a 70% return after interest. Explain how that's bad?



Hmmm... I've been sucked in again.



I'm going back into hiding.

Feb 7, 2008 12:49 pm

Philo Kvetch chum the waters and caught a Hulk...How about just keeping 90% upfront to start with? 

Feb 7, 2008 12:53 pm

Show me an indy that has an office and an assistant that nets 90% and I'll consider moving... Working out of your mom's basement with her taking your calls doesn't count.

Feb 7, 2008 8:17 pm
Roadhard:

Philo Kvetch chum the waters and caught a Hulk...How about just keeping 90% upfront to start with?





I tell you, if I had the energy or desire to set the whole thing up, move my clients, worry about all that other stuff, I would go indy. I'm just too lazy with all that. I think that's why I like Jones. I KNOW I could net more, even after expenses. I think I have to get to a level where I can hire someone to do it for me and not worry if some of my clients don't come over. Maybe when my kids are older and I have more free time...

Feb 8, 2008 12:08 am

With LPL, my net is about 60% after ALL Expenses (that includes $1000/month for health insurance). I was lucky to net over 35% at Jones after they had deducted office expenses, health insurance, half phone/postage, etc.  I work in a very nice office, and share my rent with a number of other LPL reps, so that helps.

 
And, now I own my business. 
 
And, I don't have to deal with a regional leader asking why I had a bad month.
 
And, I don't have to pretend to recruit for Jones.
 
And, instead of 5 insurance companies, I can now work with over 20. 
 
And, I can offer the client multiple ways to pay for their variable annuity or mutual funds.
 
And, you get the idea.
Feb 8, 2008 12:14 am

all of the above..plus 65%net for me!

Feb 8, 2008 12:41 am

And now I can sell my business when I retire.


And now I can have outside business activities.  (This can be bigger than you realize.)


Those div trips were a lot of fun though.
Feb 8, 2008 1:00 am
Feb 8, 2008 8:39 am
Incredible Hulk:

"Real Brokers?" What is it that makes you a real broker but not I??

Is it the catchy name Philo Kvetch?



As for the LP - let's take a $10M position purchased for $2500, the rest leveraged. That $10M LP paid out $2200 before interest this year. That's rougly a 70% return after interest. Explain how that's bad?



Hmmm... I've been sucked in again.



I'm going back into hiding.





Since you're counting outside investments in your compensation, my Berkshire Hathaway holdings have consistently blown your LP out of the water...and the only limit on how much I can own is how much I can afford.

Feb 8, 2008 8:43 am
Incredible Hulk:

Show me an indy that has an office and an assistant that nets 90% and I'll consider moving... Working out of your mom's basement with her taking your calls doesn't count.





Many indy shops, mine included, net far in excess of 90%. In point of fact, I netted in excess of 100% last year.



Why do you find it so difficult to comprehend?

Feb 8, 2008 8:50 am

I agree with all you guys.  Again, I am just too lazy or comfortable to move yet.  I think I am also not ready to be completely on my own yet (until I am at the point where I could build a team).  I have a great group of guys in my area, and we all get along great, help each other, etc.  I would not enjoy complete solitude as a solo.


I actually find it sort of humorous that all the EDJ guys try to convinve the Indy's that life is better than it is at Jones, and the Indy guys try to convince all the EDJ guys to leave for Indy.
 
Fact is, both channels have merit.  It also depends what stage you are at.  But I still find it funny the way everyone swings their %^#'s around about it.